[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                    REVIEWING WORKERS' COMPENSATION
                         FOR FEDERAL EMPLOYEES

=======================================================================



                                HEARING

                               before the

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

              HEARING HELD IN WASHINGTON, DC, MAY 12, 2011

                               __________

                           Serial No. 112-22

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California            Lynn C. Woolsey, California
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Carolyn McCarthy, New York
Tim Walberg, Michigan                John F. Tierney, Massachusetts
Scott DesJarlais, Tennessee          Dennis J. Kucinich, Ohio
Richard L. Hanna, New York           David Wu, Oregon
Todd Rokita, Indiana                 Rush D. Holt, New Jersey
Larry Bucshon, Indiana               Susan A. Davis, California
Trey Gowdy, South Carolina           Raul M. Grijalva, Arizona
Lou Barletta, Pennsylvania           Timothy H. Bishop, New York
Kristi L. Noem, South Dakota         David Loebsack, Iowa
Martha Roby, Alabama                 Mazie K. Hirono, Hawaii
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania
[Vacant]

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                    TIM WALBERG, Michigan, Chairman

John Kline, Minnesota                Lynn C. Woolsey, California, 
Todd Rokita, Indiana                     Ranking
Larry Bucshon, Indiana               Donald M. Payne, New Jersey
Trey Gowdy, South Carolina           Dennis J. Kucinich, Ohio
Kristi L. Noem, South Dakota         Timothy H. Bishop, New York
Dennis A. Ross, Florida              Mazie K. Hirono, Hawaii
Mike Kelly, Pennsylvania             George Miller, California
[Vacant]


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on May 12, 2011.....................................     1

Statement of Members:
    Walberg, Hon. Tim, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     3
    Woolsey, Hon. Lynn, ranking minority member, Subcommittee on 
      Workforce Protections......................................     3
        Prepared statement of....................................     4
        Additional submissions:
            Kelley, Colleen M., national president, National 
              Treasury Employees Union:
                Prepared statement of............................    56
                Table: Periodic Roll Breakdown by Weekly Salary 
                  and Age (a)....................................    58
                Table: Periodic Roll Breakdown by Weekly Salary 
                  and Age (b)....................................    59
                List: Appropriated Fund Agencies in FECA Which Do 
                  Not Reimburse for Administrative Costs.........    59
                List: ``Fair Share'' Agencies Which Reimburse DOL 
                  for Administrative Costs Under FECA............    61
                List: Mixed ``Fair Share'' and Appropriated Fund 
                  Agencies.......................................    61
            Beaudoin, Joseph A., president, National Active and 
              Retired Federal Employees Association, prepared 
              statement of.......................................    61
            Rodriguez, Milagro, occupational health and safety 
              specialist, American Federation of Government 
              Employees..........................................    63

Statement of Witnesses:
    Bertoni, Daniel, Director, Education, Workforce, and Income 
      Security Issues, Government Accountability Office..........    18
        Prepared statement of....................................    20
    Carney, Sue, national human relations director, American 
      Postal Workers Union (AFL-CIO).............................    32
        Prepared statement of....................................    34
    Lewis, Elliot P., Assistant Inspector General for Audit, 
      Office of Inspector General, U.S. Department of Labor......    40
        Prepared statement of....................................    42
    Steinberg, Gary, Acting Director, Office of Workers' 
      Compensation Programs, U.S. Department of Labor............    25
        Prepared statement of....................................    27
    Szymendera, Scott, analyst in disability policy, 
      Congressional Research Service.............................     7
        Prepared statement of....................................     8


                    REVIEWING WORKERS' COMPENSATION
                         FOR FEDERAL EMPLOYEES

                              ----------                              


                         Thursday, May 12, 2011

                     U.S. House of Representatives

                 Subcommittee on Workforce Protections

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 10:06 a.m., in 
room 2175, Rayburn House Office Building, Hon. Tim Walberg 
[chairman of the subcommittee] presiding.
    Present: Representatives Walberg, Kline, Rokita, Bucshon, 
Woolsey, Payne, Kucinich, and Bishop.
    Staff present: Katherine Bathgate, Press Assistant; Casey 
Buboltz, Coalitions and Member Services Coordinator; Ed Gilroy, 
Director of Workforce Policy; Barrett Karr, Staff Director; 
Ryan Kearney, Legislative Assistant; Donald McIntosh, 
Professional Staff Member; Krisann Pearce, General Counsel; 
Molly McLaughlin Salmi, Deputy Director of Workforce Policy; 
Linda Stevens, Chief Clerk/Assistant to the General Counsel; 
Alissa Strawcutter, Deputy Clerk; Joseph Wheeler, Professional 
Staff Member; Kate Ahlgren, Minority Investigative Counsel; 
Aaron Albright, Minority Communications Director for Labor; 
Tylease Alli, Minority Hearing Clerk; Daniel Brown, Minority 
Junior Legislative Assistant; Brian Levin, Minority New Media 
Press Assistant; Jerrica Mathis, Minority Legislative Fellow, 
Labor; Richard Miller, Minority Senior Labor Policy Advisor; 
Megan O'Reilly, Minority General Counsel; and Michele 
Varnhagen, Minority Chief Policy Advisor and Labor Policy 
Director.
    Chairman Walberg. Good morning. A quorum being present, the 
subcommittee will come to order.
    Welcome to our witnesses, and thank you for taking the time 
to be with us today. We appreciate you sharing your thoughts 
and expertise on federal workers' compensation.
    It has been nearly 100 years since the Federal Employees' 
Compensation Act was signed into law by President Woodrow 
Wilson. The law establishes a program for federal workers to 
receive compensation for lost wages, medical care and 
rehabilitation services resulting from injury or illness 
incurred in a work-related activity.
    In the event of a death from a work-related injury or 
illness, survivor benefits are provided to the worker's 
immediate family and loved ones. The law reflects our 
commitment to support the men and women who serve our nation in 
the federal workforce.
    The program is administered by the Department of Labor's 
Office of Workers' Compensation Programs. Claims for 
compensation are received, processed and reviewed by OWCP 
staff. While several avenues for appeal are available to 
employees, decisions rendered by the Department of Labor are 
final and not subject to review by any federal agency or court.
    Today, roughly three million federal workers are eligible 
to participate in the program. During fiscal year 2010, an 
estimated $2.8 billion in compensation was paid to 
beneficiaries. Yet, despite the size and cost of the program, 
it has not been significantly updated or reformed in nearly 40 
years.
    As with any federal program left unchecked, waste and 
inefficiencies often emerge and can result in a program that 
serves neither workers nor taxpayers well. This is 
unacceptable. In recent years, the challenges facing the FECA 
program have become more and more evident.
    Workers in rural areas can have limited access to medical 
care, undermining their ability to file a claim. The level of 
compensation in many ways is outdated, such as providing 
assistance for funeral expenses based on average costs that 
existed in 1949. The law limits access to rehabilitation 
services designed to help an employee return to work.
    We have also seen some cases where employees can receive 
compensation in excess of their total wages, creating a strong 
disincentive for those employees to return to work. These are 
just a few of the deficiencies that must be addressed. Toward 
that end, the administration is to be commended for putting 
together and forward a number of ideas to reform the FECA 
program.
    The administration's proposal includes streamlining 
compensation for lost wages for all beneficiaries and allowing 
physician assistants and nurse practitioners to sign off on a 
worker's initial claim. To address the accuracy of the program, 
the administration's proposes allowing greater access to wage 
information housed at the Social Security Administration.
    The administration's proposals build upon the efforts of 
previous administrations to modernize federal workers' 
compensation. However, these ideas are not without question or 
concerns, and that is why we are here today--to ask the tough 
questions, discuss the concerns of members and interested 
stakeholders and begin moving forward in a responsible way.
    Especially during times of economic uncertainty and 
trillion-dollar deficits, it is critical policymakers work to 
ensure every taxpayer dollar is being well spent. Any 
opportunity to better serve workers in need of assistance and 
spend taxpayer dollars more efficiently should be encouraged.
    I look forward to working with all of my colleagues in 
advancing this shared goal.
    And so, at this time, I would like to recognize my 
colleague from California, Ms. Lynn Woolsey, the senior 
Democrat member of the subcommittee, for her opening remarks.
    [The statement of Mr. Walberg follows:]

           Prepared Statement of Hon. Tim Walberg, Chairman,
                 Subcommittee on Workforce Protections

    Good morning. Welcome to our witnesses, and thank you for taking 
the time to be with us today. We appreciate you sharing your thoughts 
and expertise on federal workers' compensation.
    It has been nearly 100 years since the Federal Employees' 
Compensation Act was signed into law by President Woodrow Wilson. The 
law establishes a program for federal workers to receive compensation 
for lost wages, medical care, and rehabilitation services resulting 
from an injury or illness incurred in a work-related activity. In the 
event of a death from a work-related injury or illness, survivor 
benefits are provided to the worker's immediate family and loved ones. 
The law reflects our commitment to support the men and women who serve 
our nation in the federal workforce.
    The program is administered by the Department of Labor's Office of 
Workers' Compensation Programs. Claims for compensation are received, 
processed, and reviewed by OWCP staff. While several avenues for appeal 
are available to employees, decisions rendered by the Department of 
Labor are final and not subject to review by any federal agency or 
court.
    Today, roughly three million federal workers are eligible to 
participate in the program. During fiscal year 2010, an estimated $2.8 
billion in compensation was paid to beneficiaries. Yet, despite the 
size and cost of the program, it has not been significantly updated or 
reformed in nearly forty years.
    As with any federal program left unchecked, waste and 
inefficiencies often emerge and can result in a program that serves 
neither workers nor taxpayers well. This is unacceptable. In recent 
years, the challenges facing the FECA program have become more and more 
evident.
    Workers in rural areas can have limited access to medical care, 
undermining their ability to file a claim. The level of compensation in 
many ways is outdated, such as providing assistance for funeral 
expenses based on average costs that existed in 1949. The law limits 
access to rehabilitation services designed to help an employee return 
to work. We have also seen some cases where employees can receive 
compensation in excess of their total wages, creating a strong 
disincentive for those employees to return to work.
    These are just a few of the deficiencies that must be addressed. 
Toward that end, the administration is to be commended for putting 
forward a number of ideas to reform the FECA program.
    The administration's proposal includes streamlining compensation 
for lost wages for all beneficiaries and allowing physician assistants 
and nurse practitioners to sign off on a worker's initial claim. To 
address the accuracy of the program, the administration's proposes 
allowing greater access to wage information housed at the Social 
Security Administration.
    The administration's proposals build upon the efforts of previous 
administrations to modernize federal workers' compensation. However, 
these ideas are not without questions or concerns, and that's why we 
are here today: to ask the tough questions, discuss the concerns of 
members and interested stakeholders, and begin moving forward in a 
responsible way.
    Especially during times of economic uncertainty and trillion-dollar 
deficits, it is critical policymakers work to ensure every taxpayer 
dollar is being well-spent. Any opportunity to better serve workers in 
need of assistance and spend taxpayer dollars more efficiently should 
be encouraged. I look forward to working with all of my colleagues in 
advancing this shared goal.
    At this time, I would like to recognize my colleague from 
California, Ms. Lynn Woolsey, the senior Democrat member of the 
subcommittee, for her opening remarks.
                                 ______
                                 
    Ms. Woolsey. Thank you, Mr. Chairman, and thank you for 
calling this hearing today to discuss the Federal Employees' 
Compensation Act, or FECA.
    This committee has primary jurisdiction over workers' 
compensation laws and has overseen and repeatedly improved FECA 
since 1949. FECA has been the governing statute providing 
benefits for federal civilian workers injured or killed on the 
job since 1916.
    Some of the key principles that underpin this law include 
FECA benefits being made available to ensure that workers and 
their families are no better off or no worse off than if the 
worker had not been injured. Secondly, all federal civilian 
workers, regardless of their employer, are eligible for the 
same benefit.
    Another underpinning is that claims for benefits are 
administered on a no-fault basis. If workers give up the right 
to bring tort claims for injuries, they need to be fairly 
compensated in a timely manner with benefits administered in a 
non-adversarial way.
    Consistent with these principles, Mr. Chairman, FECA 
benefits include compensation for lost wages, medical care and 
vocational rehabilitation. FECA ensures that injured workers 
are not impoverished while they are claims are being processed 
by providing their current income for 45 days following an 
injury. FECA also provides a cost of living adjustment.
    Today, we will be reviewing the administration's 
legislative proposal. Some parts of it are straightforward. For 
example, the proposal increases payments for funeral costs, 
which have not been adjusted since 1949. It provides the 
Department of Labor permanent authority to access Social 
Security wage information in order to improve program 
integrity.
    However, other aspects of the administration's proposal 
warrant scrutiny, and that is what we should be talking about 
today. For example, it cuts wage loss payments for injured 
workers with dependents and reduces the maximum survivor's 
death benefit. While these changes may simplify the FECA 
program, we have to assess the impact on federal workers who 
have been permanently disabled on the job.
    The administration also argues that FECA unfairly allows 
some injured workers to receive more from FECA after they reach 
retirement age than if they had earned a retirement on the job. 
The Inspector General has called for a redesign, but has not 
actually specified what that redesign would be.
    The administration's redesign cuts FECA benefits for 
permanently disabled workers with dependents from 75 percent of 
the average wage to 50 percent when they reach normal social 
security eligibility age. Perhaps this decision was made on the 
assumption that individuals leave the workforce and don't 
pursue employment after age 66 but, you know, that is not true 
anymore. So we have to take that into consideration.
    Furthermore, this one-size-fits-all approach could result 
in unfair treatment of injured workers whose wages were low in 
the first place, and possibly violate a core principle of FECA 
that no one should be economically worse off because of a work-
related injury.
    Before we make an across-the-board change, Mr. Chairman, we 
will need to really better understand how the proposed changes 
will impact the diverse pool of federal employees covered by 
FECA. So I hope today's hearing will help us begin to answer 
these questions, and I too, look forward to working with you on 
this.
    I yield back.
    [The statement of Ms. Woolsey follows:]

   Prepared Statement of Hon. Lynn Woolsey, Ranking Minority Member,
                 Subcommittee on Workforce Protections

    Chairman Walberg, thank you for calling this hearing today to 
discuss the Federal Employees Compensation Act, or FECA. This Committee 
has primary jurisdiction over workers' compensation laws, and has 
overseen and repeatedly improved FECA since 1949. FECA has been the 
governing statute providing benefits to federal civilian workers 
injured or killed on the job since 1916.
    I think it's important to list some of the key principles that 
underpin this law:
     FECA benefits are made available to ensure that workers 
and their families are no better off, and no worse off, than if the 
worker had not been injured.
     All federal civilian workers, regardless of their 
employer, are eligible for the same benefit.
     Claims for benefits are administered on a no-fault basis. 
If workers give up their right to bring tort claims for injuries, they 
need to be fairly compensated in a timely manner, with benefits 
administered in a non-adversarial way.
    Consistent with these principles, FECA benefits include 
compensation for lost wages, medical care, and vocational 
rehabilitation. FECA ensures that injured workers are not impoverished 
while their claims are being processed by providing their current 
income for 45 days following an injury. FECA also provides a cost of 
living adjustment.
    Today we will be reviewing the Administration's legislative 
proposal.
    Some parts of it are straightforward: for example, the proposal 
increases payments for funeral costs which have not been adjusted since 
1949. It provides the Department of Labor permanent authority to access 
Social Security wage information in order to improve program integrity.
    However, other aspects of the Administration's proposal warrant 
scrutiny. For example, it cuts wage loss payments for injured workers 
with dependents, and reduces the maximum survivor's death benefit. 
While these changes may simplify the FECA program, we need to assess 
the impact on federal workers who have been permanently disabled on the 
job.
    The Administration also argues that FECA unfairly allows some 
injured workers to receive more from FECA after they reach retirement 
age than if they had earned a retirement. The Inspector General has 
called for a redesign, but has not specified how.
    The Administration's ``redesign'' cuts FECA benefits for 
permanently disabled workers with dependents from 75 percent of the 
average wage to 50 percent when they reach ``normal'' social security 
eligibility age. Perhaps this decision was made on the assumption that 
individuals leave the workforce and don't pursue employment after age 
66, which we know is not true anymore.
    Furthermore, this one-size-fits-all approach could result in unfair 
treatment of injured workers whose wages were low, and possibly violate 
a core principal of FECA that no one should be economically worse off 
because of a work related injury.
    Before we make an across-the-board-change, we will need to better 
understand how the proposed changes will impact the diverse pool of 
federal employees covered by FECA.
    I hope today's hearing can help us begin to answer these questions.
                                 ______
                                 
    Chairman Walberg. I thank the gentlelady.
    Pursuant to committee rule 7(c), all members will be 
permitted to submit written statements to include in the 
permanent record--hearing record, and without objection, the 
hearing record will remain open for 14 days to allow questions 
for the record, statements and extraneous material referenced 
during the hearing to be submitted for the official hearing 
record.
    It is now my pleasure to introduce our distinguished panel 
of witnesses. Mr. Scott Szymendera is an analyst in disability 
policy with the Congressional Research Service. Mr. 
Szymendera's primary responsibilities with CRS include federal 
workers safety and compensation programs.
    Prior to his service with CRS, Mr. Szymendera was an 
analyst for the Rutgers University Program for Disability 
Research. Mr. Szymendera holds an MA and a Ph.D. in political 
science from Michigan State University. Go green. Go white. 
That is a paid commercial for Michigan. An undergraduate degree 
in government and politics from the University of Maryland. 
Welcome.
    Mr. Daniel Bertoni is the director of Education, Workforce 
and Income Security with the U.S. Government Accountability 
Office in Washington, D.C.
    Mr. Bertoni began his career with GAO in 1989 and, over the 
course of his career, has led numerous management, operational 
and program integrity reviews of the Department of Labor, the 
Social Security Administration, the Internal Revenue Service, 
and other federal agencies.
    Mr. Bertoni holds a master's degree in political science 
from the Rockefeller School of Public Affairs & Policy in 
Albany, New York. Welcome.
    Mr. Gary Steinberg is acting director of the Office of 
Workers' Compensation Programs at the U.S. Department of Labor. 
Mr. Steinberg has served the federal government in a variety of 
positions throughout his career, including roles with the 
Department of Health and Human Services, the Department of 
Veteran's Affairs, and NASA.
    Mr. Steinberg holds an undergraduate degree from the 
University of Connecticut, and he received his MBA from the 
University of Hartford.
    Ms. Susan Carney is the director of Human Relations 
Department with the American Postal Workers Union. Ms. Carney 
has 22 years of experience serving the American Postal Workers 
Union. In her current position as director of Human Relations, 
Ms. Carney addresses inquiries related to community activities, 
civil rights, employee assistance, and equal opportunity 
employment, workplace violence and workplace injury 
compensation. Welcome.
    And, finally, Mr. Elliot Lewis is the assistant inspector 
general for the audit with the U.S. Department of Labor's 
Office of Inspector General. Mr. Lewis has been with the Office 
of Inspector General since 1991, serving in a variety of 
positions within the Office of Financial Management Audits.
    Before joining the federal government, Mr. Lewis was a 
partner at T.R. McConnell & Company, an accounting firm in 
Columbia, South Carolina. Mr. Lewis holds an undergraduate 
degree in accounting from the University of South Carolina. 
Welcome.
    Before I recognize each of you to provide your testimony, 
let me briefly explain our lighting system. You will each have 
approximately 5 minutes. Let's try to keep it under that if at 
all possible to present your testimony.
    When you begin, the light in front of you will turn green. 
When one minute is left, the light will turn yellow, and when 
your time has expired, the light will turn red, at which point, 
if I am not excessively interested in what you have to say, 
which is a problem for me, and I have a ranking member who will 
help me on that--but nonetheless, your time will have expired, 
and I will ask you to wrap it up. After everyone has testified, 
members will each have 5 minutes to ask questions of the panel.
    And so we will begin by recognizing Mr. Szymendera for your 
testimony. Thank you.

STATEMENT OF SCOTT SZYMENDERA, CONGRESSIONAL RESEARCH SERVICE, 
                    U.S. LIBRARY OF CONGRESS

    Mr. Szymendera. Thank you. Chairman Walberg, Ranking Member 
Woolsey, and members of the subcommittee, my name is Scott 
Szymendera, and I am an analyst at the Congressional Research 
Service. Thank you for inviting me to testify before the 
Subcommittee on Workforce Protections on the Federal Employees' 
Compensation Act, or FECA, and a complete statement has been 
provided for the record.
    This year marks the 100th anniversary of the grand bargain 
of workers' compensation in the United States, in which 
employees receive no-fault compensation for economic losses 
associated with employment-related injuries, illnesses and 
deaths while giving up their right to sue their employers for 
damages associated with employment-related accidents and 
illnesses.
    One of the general principles of workers' compensation is 
universal or near-universal coverage. Today, nearly 97 percent 
of all workers covered by the unemployment insurance system are 
also covered by workers' compensation. Workers' compensation 
provides medical care for covered injuries and disability 
benefits which are intended to replace a portion of a worker's 
wages or wage-earning capacity lost due to a covered condition.
    In most systems, disability benefits are based on a 
standard benefit of two-thirds of the worker's pre-disability 
wage. If a worker dies on the job, his or her survivors are 
entitled to benefits to partially replace his or her capacity 
to provide for the family. Pursuant to the Internal Revenue 
Code, workers' compensation benefits are not subject to the 
federal income tax.
    The first workers' compensation laws for federal employees 
were enacted in 1882 and 1908, did not provide for medical 
coverage and only applied to the United States Lifesaving 
Service and other hazardous activities, such as construction of 
the Panama Canal.
    In 1908, President Theodore Roosevelt called the lack of a 
workers' compensation program for all federal employees quote--
``a matter of humiliation to the nation.'' The original FECA 
act was enacted in 1916 and created a modern workers' 
compensation system for nearly all federal employees. The 1916 
legislation remains the basis for the workers' compensation 
system for federal employees.
    Amendments passed in 1949 created a schedule of benefits 
for permanent partial disabilities and provided for augmenting 
compensation in cases in which an injured worker had at least 
one dependent. This augmented compensation brought the level of 
FECA benefits for workers with dependents up to the current 
level of 75 percent of the worker's pre-disability wage. The 
benefit level for survivors was similarly increased.
    The 1949 amendments also provided for a reduction of 
benefits when employees reached the age of 70 to account for 
age-related loss of earning capacity and establish that the 
FECA program would be the exclusive remedy against the federal 
government for federal workers with employment-related 
conditions.
    Amendments passed in 1966 made two significant changes to 
FECA that remain part of the program today. The use of the GS 
scale as the basis for the maximum and minimum FECA benefit 
levels with the maximum level set at 75 percent of the highest 
rate of basic pay at the GS-15 level, and an annual cost of 
living adjustment for FECA benefits.
    The most recent major amendments to the FECA program came 
in 1974 and provided for up to 45 days of continuation of pay 
from a worker's employing agency in cases of traumatic 
injuries, authorized employees to select their own treating 
physicians rather than use doctors employed or selected by the 
federal government, and removed the reduction of benefits at 
age 70.
    Today's FECA program covers all civilians employed by the 
federal government including employees in the executive, 
legislative and judicial branches of the government and 
provides full medical coverage from the employees chosen 
doctor, up to 45 days of continuation of pay after traumatic 
injuries, disability benefits of up to 75 percent of an 
employees pre-disability wage, and benefits for the survivors 
of a deceased employee. Benefits continue for the duration of 
disability or until death.
    Additional benefits are paid if attendant care is needed, 
and an employee killed while working with the armed forces in a 
contingency operation is entitled to an additional death 
gratuity of up to $100,000. Vocational rehabilitation services 
paid by the government are also available to assist FECA 
beneficiary's return to the workforce. The FECA program is 
administered by the Office of Workers' Compensation Programs at 
the Department of Labor, and the cost of FECA benefits are 
charged back to each beneficiary's host agency.
    This concludes the testimony, and I welcome any questions 
from the subcommittee.
    [The statement of Mr. Szymendera follows:]

 Prepared Statement of Scott Szymendera, Analyst in Disability Policy,
                     Congressional Research Service

    Chairman Walberg, Ranking Member Woolsey, and Members of the 
subcommittee, my name is Scott Szymendera and I am an analyst at the 
Congressional Research Service. Thank you for inviting me to testify 
before the Subcommittee on Workforce Protections on workers' 
compensation for federal employees.
    For nearly 100 years, members of America's civil service have been 
protected from economic losses associated with employment-related 
injuries and illnesses, and their families have been protected in cases 
of employment-related deaths, by the Federal Employees' Compensation 
Act, or FECA, a workers' compensation program administered by the 
Department of Labor. In my testimony today, I will provide an overview 
of workers' compensation in the United States, the original intent of 
Congress when creating FECA, a legislative history of the FECA program, 
and a plain-language summary of the features of the FECA program that 
serves federal employees today.
Overview of Workers' Compensation
            Origins of Workers' Compensation
    This year marks the 100th anniversary of workers' compensation in 
the United States.\1\ Prior to the advent of the modern workers' 
compensation system, workers who were injured, became ill, or died on 
the job could bring lawsuits against their employers to recover 
economic and non-economic losses. However, while employers could be 
held legally liable for losses associated with employment-related 
injuries, illnesses, and deaths, they were armed with the common-law 
defenses of ``contributory negligence,'' ``assumption of risk,'' and 
the ``fellow-servant doctrine'' which often made it difficult for 
workers to prevail in employment injury and illnesses cases.\2\ While 
this system generally favored employers, employees who were successful 
in suits against their employers could be awarded non-economic damages 
that could prove costly to employers. In addition employers had to bear 
the legal costs of defending themselves against suits from workers, 
even if these suits ultimately proved unsuccessful.
            The Grand Bargain
    Workers' compensation is commonly referred to as ``the grand 
bargain'' between employees and employers. Employees receive 
compensation for economic losses associated with employment-related 
injuries, illnesses, and deaths, without regard to fault. In exchange 
for this no-fault coverage, workers are prohibited from suing their 
employers for damages related to covered injuries, illnesses, or 
deaths, giving employers protection from large judgments for non-
economic losses such as pain and suffering or punitive damages.
Principles of Workers' Compensation
            No-Fault Coverage
    Workers' compensation in the United States, including workers' 
compensation provided to federal employees under FECA, is a no-fault 
system. As a no-fault system, employees are compensated for covered 
injuries, illnesses, and deaths regardless of who is at fault or 
whether or not fault can be determined.\3\
            Exclusive Remedy
    Workers' compensation is an exclusive remedy for workplace 
injuries, illnesses, and deaths. Employees are generally not permitted 
to sue their employers for compensatory or punitive damages relating to 
covered injuries, illnesses, and deaths. In some cases, suits by 
employees may be brought against employers for intentional harms and 
against third parties who may share in the liability for the covered 
injury, illness, or death.
    The exclusive remedy and no-fault coverage principles are intended 
to create a workers' compensation system that is largely non-
adversarial. Many workers' compensation systems, including FECA, use 
administrative rather than judicial proceedings to resolve disputes 
over claims and benefits. However, despite the desire of the creators 
of workers' compensation to remove cases involving work injuries from 
the courts, the 100-year history of workers' compensation in the United 
States has been marked by what historian Edward Berkowitz has termed a 
``persistence of litigation'' as both employees and employers dispute 
workers' compensation claims decisions or appeal the decisions of 
administrative bodies to the courts.\4\ In nearly all states, but not 
the FECA system, workers' compensation disputes and litigation can 
result in lump-sum settlements that release employers from all future 
responsibilities related to settled cases.
            Universal Coverage of Employees
    Workers' compensation systems generally do not exclude certain 
classes of employees because of the dangerous nature of their jobs or 
their increased risk of injury, illness, or death. While state workers' 
compensation laws vary in exactly who is covered, one of the general 
principles of workers' compensation systems is universal, or near-
universal, coverage. For example, several of the recommendations issued 
in 1972 by the National Commission on State Workmen's Compensation Laws 
created by the 1970 Occupational Safety and Health Act relate to 
bringing states towards universal workers' compensation coverage of 
public and private-sector employees, regardless of risk or size of 
employer.\5\ The National Academy of Social Insurance estimates that 
nearly 97% of all workers covered by the unemployment insurance system 
are also covered by workers' compensation.\6\
            Coverage of Employment-Related Injuries, Illnesses, and 
                    Deaths Only
    Workers' compensation only provides compensation for injuries, 
illnesses, and deaths that occur in the course of employment. 
Generally, this means that an employee must be at a work site when the 
injury, illness, or death was caused and the injury, illness, or death 
must have been caused by a situation related to the employee's job. 
Injuries, illnesses, and deaths that occur outside of work hours or 
while commuting to or from work, or that are caused by acts unrelated 
to employment, such as working on personal projects in the workplace, 
are generally not covered by workers' compensation.\7\
            Compensation for Medical Care
    Workers' compensation provides all of the costs of medical care 
associated with a covered injury or illness. Covered medical costs 
include necessary treatments, procedures, and medications and in some 
states and under FECA, certain costs associated with travelling to 
receive medical services. Employees are not required to contribute to 
the cost of this care through their own private insurance or through 
deductibles or coinsurance. Medical coverage under workers' 
compensation is limited only to the covered injury or illness and is 
not intended to provide for the general healthcare needs of the worker. 
Workers' compensation systems vary on the rights of workers to choose 
their treating physicians.
            Compensation for Disability and Death
    Workers' compensation is intended to compensate workers for 
economic losses associated with employment-related injuries and 
illnesses and their families for economic losses associated with 
employment-related deaths. This compensation is provided in the form of 
cash disability benefits which are intended to replace a portion of a 
worker's wages, or wage-earning capacity, lost due to a covered injury, 
illness, or death. Total disability benefits are paid when a worker is 
unable to work or otherwise totally disabled and in most systems are 
based on a standard benefit of two-thirds of the worker's pre-
disability wage.
    Benefits for partial disabilities may be based on statutory or 
regulatory schedules which assign benefit amounts to specific 
conditions, such as the loss of a limb, or on other measures of partial 
disability such as wage-earning capacity, functional capacity, or 
overall level of impairment.\8\ Disability benefits are generally 
subject to system-specific minimum and maximum levels which are often 
based on average wages in a state. Benefits generally last for the 
duration of disability, however, some systems do limit the duration of 
benefits or have age limits for the receipt of disability benefits.
    If a worker dies on the job or from an employment-related injury or 
illness, his or her survivors are entitled to benefits to partially 
replace his or her capacity to provide for the family. Workers' 
compensation systems often also provide benefits to partially cover the 
costs of a workers' funeral.
    Pursuant to Section 104(a)(1) of the Internal Revenue Code, 
workers' compensation benefits are not subject to the federal income 
tax.
Legislative History of FECA
    The FECA program has its origins in a law from the late 1800's that 
covered only the employees of a federal agency that has long since 
ceased to exist on its own. The modern FECA system has its roots in 
legislation enacted in 1916, and many of the basic provisions of this 
original law, such as the basic rate of compensation, are still in 
effect today. Congress passed major amendments to the 1916 legislation 
in 1949, 1960, 1966, and most recently in 1974.\9\ While these 
amendments made significant changes to the FECA program, the basic 
framework of the program endures as does the overall intent of Congress 
through the years to maintain a workers' compensation system for 
federal employees that is in-line with the basic principles that have 
governed workers' compensation in this country for a century.
            Limited Workers' Compensation for the United States Life 
                    Saving Service and Other Hazardous Federal 
                    Occupations
    The first workers' compensation law for federal employees was 
enacted in 1882 and provided up to two years of salary to any member of 
the federal United States Life Saving Service disabled in the line of 
duty and two years of salary to his or her survivors in case of a line 
of duty death.\10\ In 1908, Congress passed a more comprehensive 
workers' compensation law for federal employees engaged in certain 
hazardous occupations such as laborers at federal manufacturing 
facilities and arsenals or working on the construction of the Panama 
Canal. This law provided workers with up to one year of salary, after a 
15-day waiting period, if disabled due to an employment-related injury 
and their survivors with up to a year of salary in case of death.
    The 1882 and 1908 federal workers' compensation laws did not 
provide universal coverage for all federal employees. It is estimated 
that only one-fourth of the federal workforce was covered by the 1908 
law and the law was clearly designed only to provide coverage for what 
were seen to be the most hazardous jobs in the civil service.\11\ 
President Theodore Roosevelt recognized this shortcoming of the law he 
would eventually sign as before the 1908 law's passage, he called on 
Congress to pass a workers' compensation bill that would cover ``all 
employees injured in the government service'' and stated that the lack 
of such a comprehensive workers' compensation law was ``a matter of 
humiliation to the nation.'' \12\
    In addition to only covering a small portion of the federal 
workforce, the 1882 and 1908 laws did not provide for medical benefits 
for disabled workers, and the 1908 law only applied in cases of 
disability or death arising from injuries and not illnesses.
            The Federal Employees' Compensation Act of 1916
    President Woodrow Wilson singed the Federal Employees' Compensation 
Act, P.L. 64-267, into law on September 7, 1916, and in so doing 
extended the protections of the modern workers' compensation system to 
nearly all federal employees. This original FECA act remains the basis 
for the workers' compensation system for the federal civil service.
    The FECA act provided coverage for nearly all civilian employees of 
the federal government injured or killed in line of duty. Coverage was 
not provided for occupational illnesses.\13\ The law provided full 
medical coverage for covered injuries provided by government physicians 
and hospitals or private providers selected by the government. 
Disability compensation was provided, after a three-day waiting period, 
at a rate of two-thirds of the worker's wage for total disability, with 
adjustments for partial disabilities. Disability benefits were subject 
to minimum and maximum levels specified in the law and neither benefits 
nor these levels were subject to any cost-of-living or other annual 
adjustments. The survivors of an employee killed on the job were 
entitled to cash benefits based on the worker's wage and were also 
entitled to a benefit to help offset funeral costs.
    The 1916 legislation created the Federal Employees' Compensation 
Commission, with three members appointed by the President with the 
advice and consent of the Senate, to administer the FECA program. 
Benefit and administrative costs associated with the program were paid 
out of the Employees' Compensation Fund created by the law and financed 
with permanently authorized appropriations.
Congressional Intent
            Bringing the federal system in line with the states
    Congress had several clear intentions when drafting the FECA act in 
1916. One such intention was to bring the protections offered to 
federal employees in line with those being offered by a majority of the 
states at the time, with the House Judiciary Committee reporting that 
such state laws were ``working with most excellent results.'' \14\ In 
addition, the committee reported that the schedule of compensation for 
disability in the FECA act was ``in line with the best precedents found 
in State compensation acts'' especially those in Massachusetts, New 
York, and Ohio.\15\
            Providing coverage to all federal employees
    An additional intention of Congress was to provide workers' 
compensation coverage to all federal employees regardless of 
occupation, thus correcting what was seen as a shortcoming of the 1908 
act. The House Judiciary Committee's report on the 1916 FECA 
legislation criticizes the limited coverage of the 1908 law and states:
    The present law, in denying compensation to an injured employee if 
his occupation was not ``hazardous'' goes counter to the theory on 
which all compensation acts are based, viz, that the industry shall 
bear the burden of injuries caused by it.\16\
    This criticism of the limited coverage provided by the 1908 act and 
the intention of the FECA legislation to correct this shortcoming, was 
echoed by the FECA legislation's sponsor in the Senate, Senator George 
Sutherland. Senator Sutherland, in a Senate Judiciary Committee hearing 
on the legislation, stated:
    The theory upon which compensation laws are drawn is that you are 
to compensate for the injury, not for the risk that the man ran in 
bringing about the injury; and under modern thought there is no logical 
reason for making distinction between what is hazardous and non-
hazardous employment.\17\
    Senator Sutherland reinforced his point with a rather graphic 
example stating ``the clerk who has his leg cut off in his work about a 
store is just as effectively deprived of his leg as if it was cut off 
by a machine.'' \18\
            Major FECA Amendments
    Congress has passed major amendments to the FECA program in 1949, 
1960, 1966, and most recently in 1974.
            1949 Amendments
    The Federal Employees' Compensation Act Amendments of 1949, P.L. 
81-357, brought about the first set of significant changes to the FECA 
program since its inception in 1916. The 1949 amendments, in the words 
of the House Committee on Education and Labor, sought to ``modernize 
and liberalize'' the FECA program, which, according to the Senate 
Committee on Labor and Public Welfare provided ``only illusory security 
for most workers or their families.'' \19\
            Increased FECA coverage
    The 1949 amendments expanded the scope of workers covered by the 
FECA program to include those classified as ``officers'' of the United 
States. The amendments also doubled the maximum disability benefit 
level thus essentially providing FECA coverage to a larger portion of 
federal employee wages.
    In addition to better meeting the goal of universal coverage of all 
employees, the inclusion of federal government officers was intended to 
provide FECA protections to previously-excluded employees, such as 
Foreign Service Officers, who may serve in dangerous overseas areas. 
The increase in the maximum benefit level was necessary since, at the 
time, it was estimated by the Department of Labor that 90% of FECA 
cases involved workers with wages that were essentially not covered by 
the program because of the low maximum benefit level.\20\
            Increased FECA benefits
    Several provisions of the 1949 amendments effectively increased 
FECA benefits for workers and their survivors. The three-day waiting 
period was eliminated in cases of disability lasting more than 21 days. 
A schedule of benefits for permanent partial disabilities was created 
for the first time which permitted partial disability benefits to be 
paid without regard to actual impairment or wage loss. The elimination 
of the waiting period and creation of a benefits schedule were intended 
to bring the FECA program in line with state workers' compensation 
programs and the federal Longshore and Harbor Workers' Compensation Act 
program.
    The 1949 amendments provided for augmented compensation, in the 
amount of 8.33% of a workers' pre-disability wage, in cases in which an 
injured worker had at least one dependent. This augmented compensation, 
along with the standard compensation rate of two-thirds of the workers' 
wage brought the level of FECA benefits for workers with dependents up 
to the current level of 75% of the worker's pre-disability wage. The 
benefit level for survivors was similarly increased. The intent of the 
augmented compensation provision was to better insure that disabled 
workers and the survivors of workers killed on the job could provide 
economically for their dependents. The two-thirds benefit level for 
dependents was criticized by the House and Senate Committees which 
reported the bill as ``not sufficient as to ensure reasonable economic 
security to a family of a deceased worker where there is a large 
family.'' \21\ Similar concerns over the adequacy of the two-thirds 
benefit level were expressed at a House Committee on Education and 
Labor hearing on the 1949 amendments.\22\
            Reduced benefits at age 70
    While the 1949 amendments generally increased the level of FECA 
benefits, the amendments also required the FECA administrator to review 
the amount of compensation paid to any person aged 70 or older. The 
administrator was provided the authority to reduce the amount of such 
benefits if it was determined that the worker's wage-earning capacity 
had been reduced because of age, independent of his or her disability. 
This provision was opposed by several representatives from federal 
employee organizations who testified before the House Education and 
Labor Committee that such a provision was inconsistent with the 
mandatory federal employee retirement age of 70 in place at the time 
and could cause undue hardships to workers who, because of their 
disabilities, had not been able to reach their full earning potential 
or who had reduced pensions because of many years of limited or no 
earnings.\23\
            Provisions for vocational rehabilitation
    The 1949 amendments permitted the FECA program administrator to 
send beneficiaries to receive vocational rehabilitation services at the 
government's expense. The amendments also created a special 
supplemental benefit for workers participating in vocational 
rehabilitation programs. These provisions were intended to improve the 
return-to-work prospects of FECA claimants which, it was thought, would 
ultimately benefit both the employee through a return to earning wages 
and the government through a reduction in FECA benefit costs.\24\
            The exclusive remedy rule
    The 1949 amendments established that the FECA program would be the 
exclusive remedy against the federal government for federal workers 
with employment-related injuries, illnesses, and deaths. This provision 
prohibited employees from seeking to recover economic or non-economic 
damages from the government for injuries, illnesses, and deaths covered 
by FECA and brought the FECA program in line with one of the general 
principles of workers' compensation which was already written into the 
workers' compensation laws in the states.
    When the FECA program was created, an exclusive remedy rule was 
seen as unnecessary because of the general prohibition against suits 
against the federal government. However, by 1949 three factors had 
combined to result in significant numbers of federal employees choosing 
to bring lawsuits against the federal government rather than file for 
FECA benefits. First, the passage after 1916 of laws such as the 
Federal Tort Claims Act which permitted some suits against the 
government. Second, some injuries to federal employees occurred while 
they worked for government corporations subject to lawsuits. Finally, 
because FECA benefits are limited by statute to partial wage 
replacement and medical benefits, employees felt that they could secure 
greater financial benefits from the courts than from the FECA 
program.\25\
1960 Amendments
            The chargeback process
    The Federal Employees' Compensation Act Amendments of 1960, P.L. 
86-767, created the chargeback process in which the Secretary of Labor 
is required to bill each federal agency for the costs of FECA benefits 
provided to their employees in the previous fiscal year so that these 
agency may reimburse the Employees' Compensation Fund. In addition, 
these amendments required that government corporations also pay their 
``fair share'' of FECA administrative costs to the government. The 
chargeback process was intended by Congress to ``further the promotion 
of safety'' among federal agencies by making the agencies ultimately 
responsible for the costs of injuries, illnesses, and deaths of their 
employees.\26\
1966 Amendments
    The Federal Employees' Compensation Act Amendments of 1966, P.L. 
89-488, made two significant changes to the FECA program. These changes 
continue to be in effect today.
            Use of the GS scale to set minimum and maximum benefit 
                    levels
    Prior to the enactment of the 1966 amendments, the maximum and 
minimum levels of FECA benefits were set by statute and not subject to 
any automatic adjustments. In 1966 FECA benefits were still subject to 
levels enacted as part of the 1949 amendments. According to the Senate 
Committee on Labor and Public Welfare, the statutory maximum provided 
for full benefits for over 99% of claimants in 1949, but only 85% of 
claimants by 1966.\27\ To address the difficulty inherent in using 
statutory changes to keep pace with the growth in federal employees' 
wages, the 1966 amendments provide for use of the general schedule (GS) 
scale as the basis for the maximum and minimum FECA benefit levels with 
the maximum level set at 75% of the highest rate of basic pay at the 
GS-15 level.
            Cost-of-living adjustment for benefits
    The 1966 amendments provided for an annual cost-of-living 
adjustment for FECA benefits.\28\ This annual adjustment is a unique 
feature of the FECA program not found in other workers' compensation 
systems.
1974 Amendments
    The Federal Employees' Compensation Act Amendments of 1974, P.L. 
93-416, made three major changes to the FECA program. These three 
changes remain key elements of the program today.
            Continuation of pay
    The 1974 amendments provided for up to 45 days of continuation of 
pay from a worker's employing agency in cases of traumatic injuries 
covered by FECA. During this period, an injured employee may receive 
his or her full pay rather than FECA compensation. Because continuation 
of pay is considered income rather than a benefit, it is subject to the 
federal income tax and is reduced by all standard payroll deductions.
    Congress felt that 45 days of continuation of pay were needed 
because of the time it often took for FECA claims to be processed and 
compensation benefits to begin. In its report on the 1974 amendments, 
the Senate Committee on Labor and Public Welfare cited a General 
Accounting Office report that stated that the average processing time 
for FECA claims was between 49 and 70 days, a delay that the committee 
found ``creates economic hardship on the injured employee and his or 
her family and causes difficult administrative problems for the 
Secretary of Labor and the employing agencies.'' \29\
            Employee choice of physician
    The 1974 amendments authorized employees to select their own 
treating physicians rather than use doctors employed or selected by the 
federal government. The right of employees to have free choice over who 
provides their medical care was one of the recommendations of the 
National Commission on State Workmen's Compensation Laws in 1972 and 
the this provision brought the FECA program in line with that 
recommendation as well as some other workers' compensation systems.
            Elimination of reduced benefits after age 70
    The 1974 amendments removed the provision, enacted as part of the 
1949 amendments, requiring that FECA benefits be reviewed and 
permitting FECA benefits to be reduced after a claimant reached age 70 
to account for the reduced earning capacity that may come with age 
independent of any disability. In its report on the 1974 amendments, 
the Senate Committee on Labor and Public Welfare provided the following 
justification for eliminating the reduced benefit provision:
    The Committee finds that such a review places an unnecessary burden 
on both the employees receiving compensation and the Secretary. 
Further, the fact that an employee reaches 70 has no bearing on his or 
her entitlement to benefits and is considered discriminatory in the 
Committee's opinion.\30\
Recent FECA Amendments
    There have been no major amendments to the FECA program since 1974. 
However, the 109th and 110th Congresses did make changes to FECA that 
partially address two of the issues currently facing the program.
            Change to the FECA Waiting Period for Postal Employees
    Section 901 of the Postal Accountability and Enhancement Act, P.L. 
109-435, changed the way the FECA three-day waiting period for 
compensation is applied to employees of the United States Postal 
Service. This provision requires that postal employees satisfy the 
three-day waiting period before the continuation of pay period can 
begin. All other federal employees continue to serve the three-day 
waiting period after the conclusion of the continuation of pay period 
and before FECA compensation benefits begin.
    This provision was based on a recommendation of the President's 
Commission on the United States Postal Service. The commission's 
recommendation was part of a larger package of FECA reforms for postal 
employees intended to reduce the Postal Service's workers' compensation 
costs. Because of what the commission termed the ``unique businesslike 
charter'' of the Postal Service, the commission recommended that the 
service's workers' compensation system become more in line with the 
state workers' compensation systems that provide coverage for most 
private-sector businesses.\31\
            Death Gratuity for Federal Employees Killed While Serving 
                    Alongside the Armed Forces
    American military operations in Iraq and Afghanistan have been 
supported by an unprecedented number of civilian employees, some of 
whom are serving in hostile areas alongside the armed forces. These 
deployed civilian employees are covered by FECA, but concerns have been 
raised about the adequacy of FECA benefits for those injured or killed 
while serving in areas of combat, especially when compared to the 
benefits available to members of the armed forces from the Departments 
of Defense and Veterans Affairs.\32\
    Section 1105 of the National Defense Authorization Act for Fiscal 
Year 2008, P.L. 110-181, provides for a death gratuity of up to 
$100,000 to be paid to the survivors of any federal employee, or 
employee of a non-appropriated fund instrumentality, who ``dies of 
injuries incurred in connection with the employee's service with an 
Armed Force in a contingency operation.'' This death gratuity is paid 
in addition to the regular FECA compensation for survivors, but is 
offset by any other death gratuities paid by the federal government.
Overview of the FECA Program Today
    This section of my testimony provides a plain-language overview of 
the major features of the FECA program in effect today.
            Statutory and Regulatory Authorities
    The FECA program is authorized in statute at 5 U.S.C. Sec. Sec.  
8101 et seq. Regulations implementing the FECA are provided at 20 
C.F.R. Sec. Sec.  10.00-10.826. The FECA program is administered by the 
Department of Labor, Office of Workers Compensation Programs (OWCP).
            Program Financing
    Benefits under FECA are paid out of the federal Employees' 
Compensation Fund. This fund is financed by appropriations from 
Congress which are used to pay current FECA benefits and which are 
ultimately reimbursed by federal agencies through the chargeback 
process.
    Each quarter OWCP provides to all federal agencies with employees 
receiving FECA benefits an estimate of the cost of these benefits to 
assist these agencies in preparing their budget requests. By August 15 
of each year, OWCP sends each agency a statement of their FECA costs 
for the previous fiscal year. Each agency must include in its next 
budget request an appropriation to cover its FECA costs for the 
previous fiscal year. Upon receiving this appropriation, or if a non-
appropriated entity of the government, by October 15, the agency must 
reimburse the Employees' Compensation Fund for the costs of the FECA 
benefits provided to its employees.
    The administrative costs associated with the FECA program are 
provided to the Department of Labor through the appropriations process. 
In addition, the United States Postal Service and certain other 
government corporations are required to pay for the ``fair share'' of 
the costs of administering benefits for their employees.
            Employees Covered by FECA
    The FECA program covers all civilians employed by the federal 
government, including employees in the executive, legislative, and 
judicial branches of the government. Both full-time and part-time 
workers are covered as are most volunteers and all persons serving on 
federal juries. Coverage is also extended to certain groups including 
state and local law enforcement officers acting in a federal capacity, 
Peace Corps volunteers, students participating in Reserve Officer 
Training Corps programs, and members of the Coast Guard Auxiliary and 
Civil Air Patrol.
            Conditions Covered by FECA
    Under FECA, workers' compensation benefits are paid to any covered 
employee for any disability or death caused by any injury or illness 
sustained during the employee's work for the federal government. There 
is no list of covered conditions nor is there a list of conditions that 
are not covered. However, no injury, illness, or death may be 
compensation by FECA if the condition was:
     caused by the willful misconduct of the employee;
     caused by the employee's intention to bring about the 
injury or death of himself or another person; or
     proximately caused by the intoxication of the employee.
    In addition, any person convicted of a felony related to the 
fraudulent application for or receipt of FECA benefits forfeits his or 
her rights to all FECA benefits for any injury that occurred on or 
before the date of conviction. The benefits of any person confined in 
jail, prison, or an institution pursuant to a felony conviction are 
suspended for the duration of the incarceration and may not be 
recovered.
            FECA Claims Process
    All FECA claims are processed and adjudicated by OWCP. Initial 
decisions on claims are made by OWCP staff based on evidence submitted 
by the claimant and his or her treating physician. The law also permits 
OWCP to order a claimant or beneficiary to submit to a medical 
examination from a doctor contracted to the federal government. An 
employee dissatisfied with a claims decision may request a hearing 
before OWCP or that OWCP review the record of its decision. A final 
appeal can be made to the Employees' Compensation Appeals Board (ECAB). 
The decision of the ECAB is final, cannot be appealed, and is not 
subject to judicial review.
            Time Limit for Filing a FECA Claim
    In general, a claim for disability or death benefits under FECA 
must be made within three years of the date of the injury or death. In 
the case of a latent disability, such as a condition caused by exposure 
to a toxic substance over time, the three-year time limit does not 
begin until the employee is disabled and is aware, or reasonably should 
be aware, that the disability was caused by his or her employment.
FECA Compensation Benefits
            Continuation of Pay
    In the case of a traumatic injury, an employee is eligible for 
Continuation of Pay.\33\ Continuation of pay is paid by the employing 
agency and is equal to 100% of the employee's rate of pay at the time 
of the traumatic injury. Since continuation of pay is considered salary 
and not compensation, it is taxed and subject to any deductions 
normally made against the employee's salary. Any lost work time beyond 
45 days, or lost time due to a latent condition, is considered either a 
partial or total disability under FECA.
    Employees of the United States Postal Service must satisfy a three-
day waiting period before becoming eligible for continuation of pay.
            Partial Disability
    If an employee is unable to work full-time at his or her previous 
job, but is able to work either part-time or at a job in a lower pay 
category, then he or she is considered partially disabled and eligible 
for the following compensation benefits:
     if the employee is single, a monthly benefit equal to two-
thirds of the difference between the employee's pre-disability and 
post-disability monthly wage; or
     if the employee has at least one dependent, a monthly 
benefit equal to 75% of the difference between the employee's pre-
disability and post-disability monthly wage.
    The compensation benefits paid for partial disability are capped at 
75% of the maximum basic pay at rate GS-15, are not subject to federal 
taxation, and are subject to an annual cost-of-living adjustment.
    If an employee's actual wages do not accurately represent his or 
her true wage-earning capacity, or if he or she has no wages, then his 
or her partial disability benefit is based on his or her wage-earning 
capacity as determined by OWCP using a combination of vocational 
factors and ``degree of physical impairment.''
            Scheduled awards
    In cases in which an employee suffers a permanent partial 
disability, such as the loss of a limb, he or she is entitled to a 
scheduled benefit. The scheduled benefit is in addition to any other 
partial or total disability benefits received and an employee may 
receive a scheduled award even if he or she has returned to full-time 
work.\34\ If an employee suffers a disfigurement of the face, head or 
neck that is of such severity that it may limit his or her ability to 
secure or retain employment, the employee is entitled to up to $3,500 
in additional compensation.
            Total Disability
    If an employee is unable to work at all, then he or she is 
considered totally disabled and eligible for the following compensation 
benefits:
     if the employee is single, a monthly benefit equal to two-
thirds of the employee's pre-disability monthly wage; or
     if the employee has at least one dependent, a monthly 
benefit equal to 75% of the employee's pre-disability monthly wage.
    The compensation benefits paid for total disability are capped at 
75% of the maximum basic pay at rate GS-15, are not subject to federal 
taxation, and are subject to an annual cost-of-living adjustment. 
Benefits are payable until it is determined that the employee is no 
longer totally disabled and may continue until the employee's death.
            Death
    If an employee dies on the job or from a latent condition caused by 
his or her employment, the employee's survivors are eligible for the 
following compensation benefits:
     if the employee's spouse has no children, then the spouse 
is eligible for a monthly benefit equal to 50% of the employee's 
monthly wage at the time of death;
     if the employee's spouse has one or more children, then 
the spouse is eligible for a monthly benefit equal to 45% of the 
employee's monthly wage at the time of death and each child is eligible 
for a monthly benefit equal to 15% of the employee's monthly wage at 
the time of death, up to a maximum family benefit of 75% of the 
employee's monthly wage at the time of death.
    Special rules apply in cases in which an employee dies without a 
spouse or children or with only children.
    If a spouse remarries before age 55, then he or she is entitled to 
a lump-sum payment equal to 24 months of benefits, after which all 
benefits cease. If a spouse remarries at age 55 or older, benefits 
continue for life. A child's benefits end at age 18, or age 23 if the 
child is still in school. A child's benefits continue for life if the 
child is disabled and incapable of self-support.
    The compensation benefits paid for death are capped at 75% of the 
maximum basic pay at rate GS-15, are not subject to federal taxation, 
and are subject to an annual cost-of-living adjustment.
            Additional death benefits
    The personal representative of the deceased employee is entitled to 
reimbursement, up to $200, of any costs associated with terminating the 
deceased employee's formal relationship with the federal government. 
The personal representative of the deceased employee is also entitled 
to a reimbursement of funeral costs up to $800 and the federal 
government will pay any costs associated with shipping a body from the 
place of death to the employee's home. An employee killed while working 
with the military in a contingency operation is also entitled to a 
special gratuity payment of up to $100,000 payable to his or her 
designated survivors.
            FECA Medical Benefits
    Under FECA, all medical costs, including medical devices, therapies 
and medications, associated with the treatment of a covered injury or 
illness are paid for, in full, by the federal government. A FECA 
beneficiary is not responsible for any coinsurance or any other costs 
associated with his or her medical treatment and does not have to use 
any personal insurance for any covered medical costs. Generally, a 
beneficiary may select his or her own medical provider and is 
reimbursed for the costs associated with transportation to receive 
medical services.
    A FECA beneficiary who is blind, paralyzed, or otherwise disabled 
such that he or she needs constant personal attendant care may receive 
an additional benefit of up to $1,500 per month.
            Vocational Rehabilitation
    The Secretary of Labor may direct any FECA beneficiary to 
participate in vocational rehabilitation, the costs of which are paid 
by the federal government. While participating in vocational 
rehabilitation, the beneficiary may receive an additional benefit of up 
to $200 per month. However, any beneficiary who is directed to 
participate in vocational rehabilitation and fails to do so may have 
his or her benefit reduced to a level consistent with the increased 
wage earning capacity that likely would have resulted from 
participation in vocational rehabilitation.
                                endnotes
    \1\ The first general workers' compensation law in the United 
States was the Federal Employers' Compensation Act, P.L. 16-176, 
enacted in 1908. This law will be discussed later in my testimony. New 
York passed a workers' compensation law in 1910, but it was ruled 
unconstitutional by the state's courts in 1911. In 1911, Wisconsin 
enacted a workers' compensation law that is now generally considered to 
be the first such law in the United States.
    \2\ For a detailed discussion of these common-law defenses see 
Edward M. Welch, Employer's Guide to Workers' Compensation (Washington: 
Bureau of National Affairs, Inc., 1994), pp. 30-31.
    \3\ Employees are covered even if they are at fault in the 
accident. However, if the injury, illness, or death was caused by the 
willful misconduct of the employee or if the employee was under the 
influence of drugs or alcohol at the time of the incident, then the 
injury, illness, or death may not be covered by workers' compensation.
    \4\ Edward D. Berkowitz, Disabled Policy: America's Programs for 
the Handicapped (New York: Cambridge University Press, 1987), pp. 21-
27.
    \5\ National Commission on State Workmen's Compensation Laws, The 
Report of the National Commission on State Workmen's Compensation Laws, 
Washington, DC, July 1972, Chapter 2.
    \6\ Ishita Sengupta, Virginia Reno, and John F. Burton, Jr., 
Workers' Compensation: Benefits Coverage, and Costs, 2008, National 
Academy of Social Insurance, Washington, DC, September 2010, p. 8.
    \7\ Employees travelling for the purposes of work, such as driving 
a delivery truck or attending a conference, are covered by workers' 
compensation.
    \8\ How workers' compensation systems determine levels of partial 
disability benefits and specifically the use of the sixth edition of 
the American Medical Association's Guides to the Evaluation of 
Impairment, was the subject of a hearing before this subcommittee on 
November 17, 2010 (U.S. Congress, House Committee on Education and 
Labor, Subcommittee on Workforce Protections, Developments in State 
Workers' Compensation Systems, hearing, 111th Cong., 2nd sess., 
November 17, 2010 (Washington: GPO, 2010)).
    \9\ This section of my testimony does not discuss minor, technical, 
or administrative amendments.
    \10\ Act of May 4, 1882, ch. 117, 22 Stat. 55 (1882). In 1915 the 
United States Life Saving Service was merged with the Revenue Cutter 
Service to form the United States Coast Guard.
    \11\ Willis J. Nordlund, ``The Federal Employees' Compensation 
Act,'' Monthly Labor Review, September 1991, p. 5, hereafter cited as 
Nordlund 1991.
    \12\ U.S. Congress, House Committee on Education and Labor, 
Subcommittee on Safety and Compensation, Amendments to Federal 
Employees' Compensation Act, hearings on H.R. 1196 and other bills to 
amend the Federal Employees' Compensation Act, 86th Cong., 2nd sess., 
February 10, 23, 24 and March 8, 23, 24, 1960 (Washington: GPO, 1960), 
p. 124.
    \13\ Coverage for occupational illnesses was added to the FECA 
program in 1924 by P.L. 68-195.
    \14\ U.S. Congress, House Committee on the Judiciary, Compensation 
of Government Employees Suffering Injuries While on Duty, report to 
accompany H.R. 15316, 64th Cong., 2nd sess., May 11, 1916, H. Rept. 64-
678 (Washington: GPO, 1916), p. 7.
    \15\ Ibid., p. 9.
    \16\ Ibid., p. 8.
    \17\ U.S. Congress, Senate Committee on the Judiciary, Accident 
Compensation to Government Employees, hearing on S. 2846, 64th Cong., 
1st sess., February 26, 1916 (Washington: GPO, 1916), p. 27.
    \18\ Ibid.
    \19\ U.S. Congress, House Committee on Education and Labor, 
Amendments to Federal Employees' Compensation Act, report to accompany 
H.R. 3141, 81st Cong., 1st sess., June 6, 1949, H. Rept. 81-729 
(Washington: GPO, 1949), p. 23, hereafter cited as H. Rept. 81-729; and 
U.S. Congress, Senate Labor and Public Welfare, Amendments to Federal 
Employees' Compensation Act, report to accompany H.R. 3141, 81st Cong., 
1st sess., August 4, 1949, S. Rept. 81-836 (Washington: GPO, 1949), p. 
29, hereafter cited as S. Rept. 81-836.
    \20\ Nordlund 1991, p. 10.
    \21\ H. Rept. 81-279, p. 11; and S. Rept. 81-836, p. 20.
    \22\ U.S. Congress, House Committee on Education and Labor, Special 
Subcommittee, Federal Employees' Compensation Act Amendments of 1949, 
hearing on H.R. 3191 and companion bills, 81st Cong., 1st sess., April 
11-13 and May 2, 1949.
    \23\ Ibid.
    \24\ H. Rept. 81-279, p. 16; and S. Rept. 81-836, p. 24.
    \25\ H. Rept. 81-279, p. 14; and S. Rept. 81-836, p. 23.
    \26\ U.S. Congress, House Committee on Education and Labor, Federal 
Employees' Compensation Act Amendments of 1960, report to accompany 
H.R. 12383, 86th Cong., 2nd sess., June 2, 1960, H. Rept. 86-1743 
(Washington: GPO, 1960), p. 3; and U.S. Congress, Senate Committee on 
Labor and Public Welfare, Federal Employees' Compensation Act 
Amendments of 1960, report to accompany H.R. 12383, 86th Cong., 2nd 
sess., August 27, 1960, S. Rept. 86-1924 (Washington: GPO, 1960), p. 3.
    \27\ U.S. Congress, Senate Committee on Labor and Public Welfare, 
Federal Employees' Compensation Act Amendments of 1966, report to 
accompany H.R. 10721, 89th Cong., 2nd sess., June 16, 1966, S. Rept. 
89-1285, p. 3.
    \28\ The current cost-of-living adjustment is based on changes in 
the Consumer Price Index (all items-United States city average).
    \29\ U.S. Congress, Senate Committee on Labor and Public Welfare, 
Federal Employees' Compensation Act of 1970, report to accompany H.R. 
13781, 93rd Cong., 2nd sess., August 8, 1974, S. Rept. 93-1081 
(Washington: GPO, 1974), pp. 3-4, hereafter cited as S. Rept. 93-1081; 
and U.S. General Accounting Office, Need for a Faster Way to Pay 
Compensation Claims to Disabled Federal Employees, B-157593, November 
21, 1973, p. 1.
    \30\ S. Rept. 93-1081, p. 7.
    \31\ President's Commission on the United States Postal Service, 
Embracing the Future: Making the Tough Choices to Preserve Universal 
Mail Service, Report of the President's Commission on the United States 
Postal Service, July 31, 2003, p. 134.
    \32\ See for example: U.S. Congress, House Committee on Oversight 
and Government Reform, Subcommittee on Federal Workforce, Post Office, 
and the District of Columbia, A Call to Arms: A Review of Benefits for 
Deployed Federal Employees, hearing, 111th Cong., 1st sess., September 
16, 2009; and U.S. Congress, Senate Committee on Homeland Security and 
Governmental Affairs, Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia, 
Deployed Federal Civilians: Advancing Security and Opportunity in 
Afghanistan, hearing, 111th Cong., 2nd sess., April 14, 2010.
    \33\ Certain groups, including federal jurors, Peace Corps 
volunteers, and Civil Air Patrol members, are not eligible for 
continuation of pay.
    \34\ The list of FECA scheduled benefits are provided in statute at 
5 U.S.C. Sec.  8107(c) and in regulation at 20 C.F.R. Sec.  10.40(a).
                                 ______
                                 
    Chairman Walberg. Thank you, Mr. Szymendera, and thank you 
for the promptness. I appreciate that.
    I recognize Mr. Bertoni.

STATEMENT OF DANIEL BERTONI, DIRECTOR OF EDUCATION, WORKFORCE, 
     AND INCOME SECURITY, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Bertoni. Mr. Chairman, Ranking Member Woolsey, members 
of the subcommittee, good morning.
    I am pleased to discuss issues related to potential changes 
to the Federal Employees' Compensation Act, or FECA, which 
provides critical wage loss compensation and other benefits to 
federal employees who are unable to work due to injuries 
sustained on the job.
    Concerns have been raised that federal employees on FECA 
receive benefits that can be more generous than under the 
traditional federal retirement system, and that the program may 
incentivize individuals to remain on the rolls well beyond 
retirement age.
    Over the past 30 years, there have bee numerous proposals 
to change FECA, and more recent options for revising the 
program for older beneficiaries are similar to those that we 
have discussed in prior work.
    My statement discusses stakeholder views surrounding 
previous proposals for change and policy questions and issues 
that still merit consideration today in crafting legislation to 
change benefits for older beneficiaries.
    In 1996, we reported that a perception among many that 
older FECA beneficiaries were receiving overly generous 
benefits generated two proposals to change benefits once 
individuals reach retirement age. The first would convert FECA 
benefits to federal retirement benefits at age 65 with certain 
protections, such as making adjustments for regular pay 
increases over time.
    A bill recently introduced in the Congress includes a 
similar approach requiring FECA recipients to retire upon 
reaching social security retirement age. A second proposal we 
reviewed involved converting FECA wage loss benefits to an 
annuity and reducing benefits 2 years after a beneficiary reach 
civil service retirement age.
    More recently, the Department of Labor proposed a similar 
change that would reduce FECA benefits for retirement age 
recipients to 50 percent of their salary at the time of injury. 
In our past work, we have noted that proponents for change felt 
that reforms were necessary to control escalating costs and 
ensure benefit equity.
    Those in opposition were concerned that benefit reductions 
would cause economic hardships and reduce incentives for 
employers to manage claims or develop safer work environments. 
In soliciting views from various experts and stakeholders, we 
identified a number of issues that merit consideration in 
crafting legislation to change benefits for older FECA 
beneficiaries.
    And going forward, Congress may wish to consider the 
following questions as it assesses current reform proposals: 
First, how would benefits be computed? For some proposals, as 
in the annuity option, calculating this FECA benefit may be 
fairly simple. For others, consideration of more complex 
adjustments may be necessary to address expended time out of 
the workforce and other variables.
    Second, which FECA beneficiaries would be affected and 
should some workers be exempt under some proposals, such as 
those already on the rolls or those who are ineligible for 
federal retirement. Third, what criteria would initiate a 
benefit change? Would age or retirement eligibility alone 
trigger events, or would secondary criteria be needed such as a 
delayed transition period for those at or near retirement age 
at the time of enactment.
    And fourth, how would other benefits be treated, such as 
survivor and medical benefits under a reformed system? And 
lastly, the critical question of how will benefits be funded? 
Depending on the proposal, funding alternatives may be needed.
    In particular, we note in our 1996 report that if 
beneficiaries were converted to federal retirement, 
alternatives may be necessary. While the annuity option would 
likely remain funded under the traditional FECA charge back 
system.
    In conclusion, FECA continues to play a vital role in 
providing compensation to federal employees who are unable to 
work because of injuries sustained while performing their 
duties. Prior and current reform proposals continue to raise a 
number of important issues with implications for both 
beneficiaries and federal agencies responsible for 
administering the program.
    While not exhaustive, the analytical framework in questions 
posed in our prior work are still relevant today and can help 
all stakeholders and interested parties better understand 
program complexities and key issues to consider as they move 
forward in assessing specific proposals for change.
    As you may know, we have recently begun a new review of the 
FECA program, which will include an analysis of the 
characteristics of the beneficiary population as well as how 
potential changes to the program could impact cost and 
benefits, and we look forward to working with Labor as we move 
forward with this analysis.
    Mr. Chairman, this concludes my statement. I am happy to 
answer any questions that you or other members of the 
subcommittee may have. Thank you, very much.
    [The statement of Mr. Bertoni follows:]

 Prepared Statement of Daniel Bertoni, Director, Education, Workforce, 
                                  and
        Income Security Issues, Government Accountability Office

    Chairman Walberg, Ranking Member Woolsey and Members of the 
Committee: I am pleased to be here today to comment on issues related 
to possible changes to the Federal Employees' Compensation Act (FECA) 
program, a topic that we have reported on in the past. At the end of 
chargeback year 2010, the FECA program, administered by the Department 
of Labor (Labor) paid more than $1.88 billion in wage-loss 
compensation, impairment, and death benefits, and another $898.1 
million for medical and rehabilitation services and supplies.\1\ 
Currently, FECA benefits are paid to federal employees who are unable 
to work because of injuries sustained while performing their federal 
duties, including those who are at or older than retirement age. 
Concerns have been raised that federal employees on FECA receive 
benefits that could be more generous than under the traditional federal 
retirement system and that the program may have unintended incentives 
for beneficiaries to remain on the FECA program beyond the traditional 
retirement age. Over the past 30 years, there have been various 
proposals to change the FECA program to address this concern. Recent 
policy proposals to change the way FECA is administered for older 
beneficiaries share characteristics with past proposals we have 
discussed in prior work. In August 1996, we reported on the issues 
associated with changing benefits for older beneficiaries.\2\ Because 
FECA's benefit structure has not been significantly amended in more 
than 35 years, the policy questions raised in our 1996 report are still 
relevant and important today.
    My statement today will focus on (1) previous proposals for 
changing FECA benefits for older beneficiaries and (2) questions and 
associated issues that merit consideration in crafting legislation to 
change benefits for older beneficiaries. This statement is drawn 
primarily from our 1996 report in which we solicited views from 
selected federal agencies and employee groups to identify questions and 
associated issues with crafting benefit changes. In that report, we 
also reviewed relevant laws and analyzed previous studies and 
legislative proposals that would have changed benefits for older FECA 
beneficiaries. For purposes of this testimony, we did not conduct a 
legal analysis to update the results of our prior work, but instead 
relied upon secondary sources such as the Congressional Research 
Service (CRS). The work on which this testimony was based was conducted 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives.
    In summary, we have reported that the perception that many 
retirement-age beneficiaries were receiving more generous benefits on 
FECA had generated two alternative proposals to change benefits once 
beneficiaries reach the age at which retirement typically occurs: (1) 
converting FECA benefits to retirement benefits and, (2) changing FECA 
wage-loss benefits by establishing a new FECA annuity. We also 
discussed a number of issues to be considered in crafting legislation 
to change benefits for older beneficiaries. Going forward, Congress may 
wish to consider the following questions in assessing current proposals 
for change: (1) How would benefits be computed? (2) Which beneficiaries 
would be affected? (3) What criteria, such as age or retirement 
eligibility, would initiate changed benefits? (4) How would other 
benefits, such as FECA medical and survivor benefits, be treated and 
administered? (5) How would benefits, particularly retirement benefits, 
be funded?
Background: FECA
    FECA is administered by Labor's Office of Workers' Compensation 
Programs (OWCP) and currently covers more than 2.7 million civilian 
federal employees from more than 70 different agencies. FECA benefits 
are paid to federal employees who are unable to work because of 
injuries sustained while performing their federal duties. Under FECA, 
workers' compensation benefits are authorized for employees who suffer 
temporary or permanent disabilities resulting from work-related 
injuries or diseases. FECA benefits include payments for (1) loss of 
wages when employees cannot work because of work-related disabilities 
due to traumatic injuries or occupational diseases; (2) schedule awards 
for loss of, or loss of use of, a body part or function; (3) vocational 
rehabilitation; (4) death benefits for survivors; (5) burial 
allowances; and (6) medical care for injured workers. Wage-loss 
benefits for eligible workers with temporary or permanent total 
disabilities are generally equal to either 66\2/3\ percent of salary 
for a worker with no spouse or dependent, or 75 percent of salary for a 
worker with a spouse or dependent. Wage-loss benefits can be reduced 
based on employees' wage-earning capacities when they are capable of 
working again. OWCP provides wage-loss compensation until claimants can 
return to work in either their original positions or other suitable 
positions that meet medical work restrictions.\3\ Each year, most 
federal agencies reimburse OWCP for wage-loss compensation payments 
made to their employees from their annual appropriations. If claimants 
return to work but do not receive wages equal to that of their prior 
positions--such as claimants who return to work part-time--FECA 
benefits cover the difference between their current and previous 
salaries.\4\ Currently, there are no time or age limits placed on the 
receipt of FECA benefits.
    With the passage of the Federal Employees' Compensation Act of 
1916, members of Congress raised concerns about levels of benefits and 
potential costs of establishing a program for injured federal 
employees.\5\ As Congress debated the act's provisions in 1916 and 
again in 1923, some congressional members were concerned that a broad 
interpretation threatened to make the workers' compensation program, in 
effect, a general pension. The 1916 act granted benefits to federal 
workers for work-related injuries. These benefits were not necessarily 
granted for a lifetime; they could be suspended or terminated under 
certain conditions. Nevertheless, the act placed no age or time 
limitations on injured workers' receipt of wage compensation. The act 
did contain a provision allowing benefits to be reduced for older 
beneficiaries. The provision stated that compensation benefits could be 
adjusted when the wage-earning capacity of the disabled employee would 
probably have decreased on account of old age, irrespective of the 
injury.
    While the 1916 act did not specify the age at which compensation 
benefits could be reduced, the 1949 FECA amendments established 70 as 
the age at which a review could occur to determine if a reduction were 
warranted.\6\ In 1974, Congress again eliminated the age provision.\7\
Federal Retirement Systems
    Typically, federal workers participate in one of two retirement 
systems which are administered by the Office of Personnel Management 
(OPM): the Civil Service Retirement System (CSRS), or the Federal 
Employees' Retirement System (FERS). Most civilian federal employees 
who were hired before 1984 are covered by CSRS. Under CSRS, employees 
generally do not pay Social Security taxes or earn Social Security 
benefits. Federal employees first hired in 1984 or later are covered by 
FERS. All federal employees who are enrolled in FERS pay Social 
Security taxes and earn Social Security benefits. Federal employees 
enrolled in either CSRS or FERS also may contribute to the Thrift 
Savings Plan (TSP); however, only employees enrolled in FERS are 
eligible for employer matching contributions to the TSP.
    Under both CSRS and FERS, the date of an employee's eligibility to 
retire with an annuity depends on his or her age and years of service. 
The amount of the retirement annuity is determined by three factors: 
the number of years of service, the accrual rate at which benefits are 
earned for each year of service, and the salary base to which the 
accrual rate is applied.\8\ In both CSRS and FERS, the salary base is 
the average of the highest three consecutive years of basic pay. This 
is often called ``high-3'' pay.
    According to CRS, an injured employee cannot contribute to Social 
Security or to the TSP while receiving workers' compensation because 
Social Security taxes and TSP contributions must be paid from earnings, 
and workers' compensation payments are not classified as earnings under 
either the Social Security Act or the Internal Revenue Code. As a 
result, the employee's future retirement income from Social Security 
and the TSP may be reduced. Legislation passed in 2003 increased the 
FERS basic annuity from 1 percent of the individual's high-3 average 
pay to 2 percent of high-3 average pay while an individual receives 
workers' compensation, which would help replace income that may have 
been lost from lower Social Security benefits and reduced income from 
TSP.\9\
Proposals to Change Benefits for Older Beneficiaries
    Concerns that beneficiaries remain in the FECA program past 
retirement age have led to several proposals to change the program. 
Under current rules, an age-eligible employee with 30 years of service 
covered by FERS could accrue pension benefits that are 30 percent of 
their average high-3 pay and under CSRS could accrue almost 60 percent 
of their high-3 average pay. Under both systems benefits can be taxed. 
\10\ FECA beneficiaries can receive up to 75 percent of their preinjury 
income, tax-free, if they have dependents and 66\2/3\ percent without 
dependents. Because returning to work could mean giving up a FECA 
benefit for a reduced pension amount, concerns have been raised by some 
that the program may provide incentives for beneficiaries to continue 
on the program beyond retirement age.
    In 1996, we reported on two alternative proposals to change FECA 
benefits once beneficiaries reach the age at which retirement typically 
occurs: (1) converting FECA benefits to retirement benefits, and (2) 
changing FECA wage-loss benefits to a newly established FECA annuity.
    The first proposal would convert FECA benefits for workers who are 
injured or become ill to regular federal employee retirement benefits 
at retirement age. In 1981, the Reagan administration proposed 
comprehensive FECA reform, including a provision to convert FECA 
benefits to retirement benefits at age 65. The proposal included 
certain employee protections, one of which was calculating retirement 
benefits on the basis of the employee's pay at time of injury (with 
adjustments for regular federal pay increases). According to 
proponents, this change would improve agencies' operations because 
their discretionary budgets would be decreased by FECA costs, and, by 
reducing caseload, it would allow Labor to better manage new and 
existing cases for younger injured workers. A bill recently introduced 
in Congress includes a similar provision, requiring FECA recipients to 
retire upon reaching retirement age as defined by the Social Security 
Act.\11\
    The second proposal, based on proposals that several agencies 
developed in the early 1990s, would convert FECA wage-loss compensation 
benefits to a FECA annuity benefit. These agency proposals would have 
reduced FECA benefits by a set percentage two years after beneficiaries 
reached civil service retirement eligibility. Proponents of this 
alternative noted that changing to a FECA annuity would be simpler than 
converting FECA beneficiaries to the retirement system, would result in 
consistent benefits, and would allow benefits to remain tax-free. 
Proponents also argued that a FECA annuity would keep the changed 
benefit within the FECA program, thereby avoiding complexities 
associated with converting FECA benefits under CSRS and FERS. For 
example, converting to retirement benefits could be difficult for some 
employees who currently are not participating in a federal retirement 
plan. Also, funding future retirement benefits could be a problem if 
the FECA recipient has not been making retirement contributions. Labor 
recently suggested a change to the FECA program that would reduce wage-
loss benefits for Social Security retirement-aged recipients to 50 
percent of their gross salary at the date of injury, but would still be 
tax-free. \12\ Labor's proposal would still keep the changed benefit 
within the FECA program.
    In our 1996 report, however, we identified a number of issues with 
both alternative proposals. For example, some experts and other 
stakeholders we interviewed noted that age discrimination posed a 
possible legal challenge and that some provisions in the law would need 
to be addressed with new statutory language.\13\ Others noted that 
benefit reductions would cause economic hardships for older 
beneficiaries. Some noted that without the protections of the workers' 
compensation program, injured employees who have few years of service 
or are ineligible for retirement might suffer large reductions in 
benefits. Moreover, opponents to change also viewed reduced benefits as 
breaking the workers' compensation promise. Another concern was that 
agencies' anticipation of reduced costs for workers' compensation could 
result in fewer incentives to manage claims or to develop safer working 
environments.
Questions and Issues to Consider if Crafting FECA Changes
    We also discussed in our 1996 report a number of issues that merit 
consideration in crafting legislation to change benefits for older 
beneficiaries. Going forward, Congress may wish to consider the 
following questions as it assesses and considers current reform 
proposals: (1) How would benefits be computed? (2) Which beneficiaries 
would be affected? (3) What criteria, such as age or retirement 
eligibility, would initiate changed benefits? (4) How would other 
benefits, such as FECA medical and survivor benefits, be treated and 
administered? (5) How would benefits, particularly retirement benefits, 
be funded?
            How Would Benefits Be Computed?
    The retirement conversion alternative raises complex issues, 
arising in part from the fact that conversion could result in varying 
retirement benefits, depending on conversion provisions, retirement 
systems, and individual circumstances. A key issue is whether or not 
benefits would be adjusted. The unadjusted option would allow for 
retirement benefits as provided by current law. The adjusted option 
would typically ensure that time on the FECA rolls was treated as if 
the beneficiary had continued to work. This adjustment could (1) credit 
time on FECA for years of service or (2) increase the salary base (for 
example, increasing salary from the time of injury by either an index 
of wage increases or inflation, assigning the current pay of the 
position, or providing for merit increases and possible promotions 
missed due to the injury).
    Determining the FECA annuity would require deciding what percentage 
of FECA benefits the annuity would represent. Under previous proposals 
benefits would be two-thirds of the previous FECA compensation 
benefits. Provisions to adjust calculations for certain categories of 
beneficiaries also have been proposed. Under previous proposals, 
partially disabled individuals receiving reduced compensation would 
receive the lesser of the FECA annuity or the current reduced benefit. 
FECA annuity computations could also be devised to achieve certain 
benchmarks. For example, the formula for a FECA annuity could be 
designed to approximate a taxable retirement annuity. One issue 
concerning a FECA annuity is whether it would be permanent once set, or 
whether it would be subject to adjustments based on continuing OWCP 
reviews of the beneficiary's workers' compensation claim.
            Which Beneficiaries Would Be Affected?
    Currently most federal employees are covered by FERS, but 
conversion proposals might have to consider differences between FERS 
and CSRS participants, and participants in any specialized retirement 
systems. \14\ Other groups that might be uniquely affected include 
injured workers who are not eligible for federal retirement benefits, 
individuals eligible for retirement conversion benefits, but not 
vested; and individuals who are partially disabled FECA recipients but 
active federal employees. With regard to vesting, those who have 
insufficient years of service to be vested might be given credit for 
time on the FECA rolls until vested. There is also the question of 
whether changes will focus on current or future beneficiaries. 
Exempting current beneficiaries delays receipt of full savings from 
FECA cost reductions to the future. One option might be a transition 
period for current beneficiaries. For example, current beneficiaries 
could be given notice that their benefits would be changed after a 
certain number of years.
            What Criteria Would Initiate Changed Benefits?
    Past proposals have used either age or retirement eligibility as 
the primary criterion for changing benefits. If retirement eligibility 
is used, consideration must be given to establishing eligibility for 
those who might otherwise not become retirement eligible. This would be 
true for either the retirement conversion or the annuity option. At 
least for purposes of initiating the changed benefit, time on the FECA 
rolls might be treated as if it counted for service time toward 
retirement eligibility. Deciding on the criteria that would initiate 
change in benefits might require developing benchmarks. For example, if 
age were the criteria, it might be benchmarked against the average age 
of retirement for federal employees, or the average age of retirement 
for all employees. Another question is whether to use secondary 
criteria to delay changed benefits in certain cases. The amount of time 
one has received FECA benefits is one possible example of secondary 
criteria. Secondary criteria might prove important in cases where an 
older, injured worker may face retirement under the retirement 
conversion option even when recovery and return to work is almost 
assured.
            How Would Other Benefits, Such As FECA Medical Benefits Or 
                    Survivor Benefits, Be Treated and Administered?
    In addition to changing FECA compensation benefits, consideration 
should be given to whether to change other FECA benefits, such as 
medical benefits or survivor benefits. For example, the 1981 Reagan 
administration proposal would have ended survivor benefits under FECA 
for those beneficiaries whose benefits were converted to the retirement 
system. Another issue to consider is who will administer benefits if 
program changes shift responsibilities--OPM administers retirement 
annuity benefits for federal employees, and Labor currently administers 
FECA benefits. Although it may be advantageous to consolidate case 
management in one agency, such as OPM, if the retirement conversion 
alternative were selected, the agency chosen to manage the case might 
have to develop an expertise that it does not currently possess. For 
example, OPM might have to develop expertise in medical fee schedules 
to control workers' compensation medical costs.
            How Would Benefits, Particularly Retirement Benefits, Be 
                    Funded?
    For the retirement conversion alternative, another issue is the 
funding of any retirement benefit shortfall. Currently, agencies and 
individuals do not make retirement contributions if an individual 
receives FECA benefits; thus, if retirement benefits exceed those for 
which contributions have been made, retirement funding shortfalls would 
occur. Retirement fund shortfalls can be funded through payments made 
by agencies at the time of conversion or prior to conversion. First, 
lump-sum payment could be made by agencies at the time of the 
conversion. This option has been criticized because the start-up cost 
was considered too high. Second, shortfalls could be covered on a pay-
as-you-go basis after conversion. In this approach, agencies might make 
annual payments to cover the shortfall resulting from the conversions. 
Third, agencies' and employees' contributions to the retirement fund 
could continue before conversion, preventing shortfalls at conversion. 
Proposals for the FECA annuity alternative typically keep funding under 
the current FECA chargeback system. This is an annual pay-as-you-go 
system with agencies paying for the previous year's FECA costs.
    In total, these five questions provide a framework for considering 
proposals to change the program.
Concluding Remarks
    In conclusion, FECA continues to play a vital role in providing 
compensation to federal employees who are unable to work because of 
injuries sustained while performing their duties. However, continued 
concerns that the program provides incentives for beneficiaries to 
remain on the program at, and beyond, retirement age have led to calls 
for the program to be reformed. Although FECA's basic structure has not 
significantly been amended for many years, there continues to be 
interest in reforming the program. Proposals to change benefits for 
older beneficiaries raise a number of important issues, with 
implications for both beneficiaries and federal agencies. These 
implications warrant careful attention to outcomes that could result 
from any changes.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to respond to any questions that you or other members of the 
committee may have at this time.
                                endnotes
    \1\ FECA benefits are paid out of the Employees' Compensation Fund 
and most are charged back to the employee's agency. Labor's chargeback 
year for FECA agency billing purposes ends June 30, 2010.
    \2\ GAO, Federal Employees' Compensation Act: Issues Associated 
With Changing Benefits for Older Beneficiaries, [hyperlink, http://
www.gao.gov/products/GGD-96-138BR (Washington, D.C.: Aug. 14, 1996).
    \3\ Employees eligible for FECA benefits could also be eligible for 
retirement disability benefits from the Office of Personnel Management 
or Social Security Disability Insurance benefits from the Social 
Security Administration. Depending on which benefits employees are 
entitled to, employees might have to make an election between them. In 
many cases in which individuals receive benefits from different 
programs simultaneously, one benefit would likely be offset against the 
other.
    \4\ The maximum monthly FECA compensation payment cannot exceed 75 
percent of the basic monthly pay for a GS-15, step 10 employee ($129, 
517 per year as of Jan. 2, 2011). In general, OWCP continues to pay 
claimants the difference between their current salary and the salary 
they were earning at the time of their injury for as long as this 
difference exists and their medical work restrictions remains the same. 
(FECA benefits are indexed to the cost of living.) OWCP would not 
continue to pay this difference for claimants who quit their job 
without good cause (for example, if they quit because they did not like 
their work hours).
    \5\ 39 Stat. 742.
    \6\ 63 Stat. 854.
    \7\ Public Law No. 93-416. 88 Stat. 1143. According to Senate 
Report 93-1081, the Committee on Labor and Public Welfare stated that 
(1) the provision requiring the review of compensation was an 
unnecessary burden on both the injured employees and the Secretary of 
Labor (who had the authority to conduct the review); (2) age 70 had no 
bearing on one's entitlement to benefits; and (3) such a provision was 
discriminatory. FECA currently does not include a provision to change 
benefits based on retirement age.
    \8\ Under CSRS, a worker with at least 30 years of service can 
retire at the age of 55; a worker with at least 20 years of service can 
retire at the age of 60; and a worker with 5 or more years of service 
can retire at the age of 62. The FERS minimum retirement age for an 
employee with 30 or more years of service is 55 for workers born before 
1948. A worker who has reached the minimum retirement age and has 
completed at least 30 years of service can retire with an immediate, 
unreduced annuity. A worker with 20 or more years of service can retire 
with an unreduced annuity at age 60, and a worker with at least 5 years 
of service can retire at age 62 with an unreduced annuity.
    \9\ Pub. L. No. 108-92, 117 Stat. 1160 (2003).
    \10\ The replacement rate for a federal worker who retires with 30 
years of service under CSRS is 56.25 percent. FERS accrual rates are 
lower than the accrual rates under CSRS because employees under FERS 
pay Social Security payroll taxes and earn Social Security retirement 
benefits. Estimating replacement rates under FERS is complicated by the 
fact that income from two of its components--Social Security and the 
TSP--will vary depending on the individual's work history, 
contributions to the TSP, and the investment performance of his or her 
TSP account.
    \11\ Federal Employees' Compensation Reform Act of 2011, S. 261, 
112TH Cong. (2011).
    \12\ According to CRS, an injured employee cannot contribute to 
Social Security or to the TSP while receiving workers' compensation 
because Social Security taxes and TSP contributions must be paid from 
earnings, and workers' compensation payments are not classified as 
earnings under either the Social Security Act or the Internal Revenue 
Code.
    \13\ Some argued that changing benefits for older beneficiaries 
violates protections against age discrimination contained in federal 
law by forcing them into accepting retirement benefits or a reduced 
annuity at a certain age.
    \14\ One conversion decision concerns whether to exempt injured 
workers who are ineligible for federal retirement benefits. Ineligible 
workers include, for instance, those without 5 years of federal service 
under CSRS, those who have withdrawn retirement contributions, 
temporary workers, and state and local police covered under special 
FECA provisions.
                                 ______
                                 
    Chairman Walberg. Mr. Bertoni, thank you.
    Now I recognize Mr. Steinberg for your testimony.

 STATEMENT OF GARY A. STEINBERG, ACTING DIRECTOR OF THE OFFICE 
  OF WORKERS' COMPENSATION PROGRAMS, U.S. DEPARTMENT OF LABOR

    Mr. Steinberg. Thank you, Chairman Walberg, Ranking Member 
Woolsey, and committee members.
    I appreciate the opportunity to discuss the Federal 
Employees' Compensation Act today. On behalf of Secretary 
Solis, I would like to share a set of balanced proposals that 
would enhance our ability to assist beneficiaries to return to 
work, provide a more equitable array of benefits, and generally 
modernize the program.
    Almost 95 years ago, Congress enacted FECA to provide 
workers' compensation coverage to all federal employees and 
their survivors for disabilities or death due to work-related 
injuries or illnesses.
    The faces of FECA include the postal worker who is hurt 
when his truck is hit while delivering the mail; the FBI agent 
who is killed or injured in the line of duty; and the VA nurse 
who hurts her back while lifting a patient.
    DOL's Office of Workers' Compensation Programs works hard 
to administer the program fairly, objectively and efficiently. 
We seek to continuously improve the quality and service 
delivery to our customers, enhance internal and external 
communication, and reduce costs to the taxpayer.
    We have made major strides in disability management that 
have resulted in significant reduction in the average number of 
days lost from the most serious injuries. Over the last 10 
years, the average number of days lost due to serious injuries 
has declined 20 percent, producing an annual savings of $53 
million.
    Our administrative costs are only 5 percent of total 
program costs, far below the average of all state self-
insurance programs, which is over 11 percent. To further 
improve FECA, we have made comprehensive recommendations to 
Congress, and I wish to highlight some of the major 
recommendations now.
    To help injured employees return to work, we request 
authority to start vocational rehabilitation activities without 
waiting until an injury is deemed permanent in nature. We seek 
a mandate to develop a return to work plan with the claimants 
early in the rehabilitation process and the authority to deploy 
an assisted re-employment program with the federal agencies 
similar to the program that we have successfully implemented 
with the private sector.
    The proposed changes will also have a positive impact on 
the government's ability to achieve the president's executive 
order on hiring individuals with disabilities, which we believe 
is extremely important.
    We also suggest changes to the benefit structure. For 
example, the payment of schedule awards for loss or loss of the 
use of a limb, one's sight, one's hearing, is often very 
complicated and that is often delayed. Although not intended to 
replace economic loss, payments are based on the individual 
salary.
    So a letter carrier's knee injury is compensated at less 
than half the rate of her GS-15 manager with the same injury. 
We think these awards should be paid by DOL concurrently with 
wage loss compensation, made more rapidly, and to be fair, they 
should be calculated at a uniform level for all employees.
    We also propose increases to the benefit levels for burial 
expenses and for facial disfigurement. Under current law, the 
majority of injured workers receive wage replacement at 75 
percent of their salary, tax free and COLA. This rate is higher 
than the take-home pay for many federal workers and can serve 
as an obstacle to the department's effort to encourage every 
worker to make the hard and sometimes painful effort to 
overcome their injuries and go back to work.
    We, therefore, recommending shifting the benefit for the 
majority of claimants to 70 percent rather than 75 percent. To 
provide equity for other federal employees, we also recommend 
establishing a lower conversion rate for beneficiaries beyond 
retirement age, which would more closely mirror OPM's 
retirement rates.
    Both of these changes we propose as prospective in nature. 
In addition, elements of the statute need to be simplified to 
enable us to further reduce processing time. For example, the 
current statute increases the compensation rate for anyone with 
a dependent from the standard 66 and two-thirds wage loss rate 
to 75 percent. Paying all non-retirement age beneficiaries at 
70 percent would simplify the process by eliminating the 
continuing need to obtain and validate documentation regarding 
dependent eligibility.
    A single rate would be simpler, more equitable, and would 
produce a significant savings to the taxpayer. This change 
alone would yield a 10-year savings of over $500 million. My 
testimony also outlines other important provisions that would 
streamline and improve the program.
    In summary, while FECA is a model workers' compensation 
system and 95 years old, it has limitations that need to be 
addressed. The reforms that we suggest today, they are not new. 
They have been proposed by both the current and previous 
administrations. They are careful. They are balanced. We 
believe that they are reflective of good government, and they 
will help bring the program into the 21st century.
    Thank you again for the opportunity to meet with you today 
to discuss FECA reform, and I will be pleased to answer any 
questions as we continue on.
    [The statement of Mr. Steinberg follows:]

         Prepared Statement of Gary Steinberg, Acting Director,
   Office of Workers' Compensation Programs, U.S. Department of Labor

    Chairman Tim Walberg, Ranking Member Lynn Woolsey, and Members of 
the Subcommittee: My name is Gary Steinberg, and I am the Acting 
Director of the Department of Labor's (DOL) Office of Workers' 
Compensation Programs (OWCP). OWCP administers a number of workers' 
compensation programs, including the Federal Employees' Compensation 
Act (FECA), which covers 2.7 million Federal and Postal workers and is 
one of the largest self-insured workers' compensation systems in the 
world.
    I appreciate the opportunity to discuss legislative reforms to FECA 
that would enhance our ability to assist FECA beneficiaries to return 
to work, provide a more equitable array of FECA benefits, and generally 
modernize the program and update the statute. Almost 95 years ago, on 
September 7, 1916, Congress enacted FECA to provide comprehensive 
Federal workers' compensation coverage to all Federal employees and 
their survivors for disability or death due to an employment injury or 
illness. FECA's fundamental purpose is to provide compensation for wage 
loss and medical care, facilitate return to work for employees who have 
recovered from their injuries, and pay benefits to survivors. The faces 
of FECA include the Postal worker whose mail truck is hit while 
delivering mail, the Federal Bureau of Investigation (FBI) agent 
injured or killed in the line of duty, the Department of Veterans' 
Affairs nurse who hurts her back while lifting patients, and the 
Federal employee injured in the recovery efforts in Japan. All of these 
employees will receive benefits provided by this Act.
    Since FECA has not been significantly amended in over 35 years, 
there are areas where the statute could be improved. Thus we have 
developed a number of proposals to reform and maintain FECA as the 
model workers' compensation program for the twenty-first century. In 
the 2012 Budget we estimated 10-year savings of around $400 million, 
but we think the potential savings are likely higher. After briefly 
discussing the current status of the FECA program, I am pleased to 
outline possible changes to the statute for consideration.
    Many of the proposals are based on the results of studies by the 
program, the Government Accountability Office (GAO), the Inspectors 
General, as well as discussions with stakeholder organizations over the 
past 20 years. Recently, we have shared these proposed changes with 
staff of this and other Congressional committees and various outside 
parties such as representatives of Federal employee unions and members 
of the disability community.
FECA Today
    Benefits under the FECA are payable for both traumatic injuries 
(injuries sustained during the course of a single work shift) and 
occupational disease due to sustained injurious exposure in the 
workplace. If OWCP's review of the evidence determines that a covered 
employee has sustained a work-related medical condition, the FECA 
program provides a wide variety of benefits including payment for all 
reasonable and necessary medical treatment; compensation to the injured 
worker to replace partial or total lost wages (paid at two-thirds of 
the employees' salary or at three-fourths if there is at least one 
dependent); a monetary award in cases of permanent impairment of limbs 
or other parts of the body; medical and vocational rehabilitation 
assistance in returning to work as necessary; and benefits to survivors 
in the event of a work related death.
    FECA benefits are based upon an employee's inability to earn pre-
injury wages with no time limit on wage loss benefit duration as long 
as the work-related condition or disability continues; the amount of 
compensation is based upon the employee's salary up to a maximum of GS-
15 Step 10. More than 70% of FECA claimants are paid at the augmented 
(three-fourths) level. As workers' compensation benefits, they are tax 
free; long-term benefits are escalated for inflation after the first 
year of receipt.
    FECA is a non adversarial system administered by OWCP. While 
employing agencies play a significant role in providing information to 
OWCP and assisting their employees in returning to work, the 
adjudication of FECA claims is exclusively within the discretion given 
to the Secretary of Labor by statute and is statutorily exempt from 
court review. Claimants are provided avenues of review within OWCP 
through reconsideration and hearing as well as an appellate forum, the 
Employees' Compensation Appeals Board (ECAB), a quasi-judicial 
appellate board within the DOL, completely independent of OWCP.
    FECA benefits are paid out of the Employees' Compensation Fund and 
most are charged back to the employee's agency. During the 2010 
chargeback year, which ended on June 30, 2010, the Fund paid more than 
$1.88 billion in wage-loss compensation, impairment, and death benefits 
and another $898.1 million to cover medical and rehabilitation services 
and supplies. (These totals include outlays for non-chargeable costs 
for war risk hazards that total $86.2 million, primarily for overseas 
Federal contractor coverage under the War Hazards Compensation Act 
(WHCA). Benefits paid have remained relatively stable at these levels 
for the past 10 years, with the exception of war risk hazard payments. 
In addition, the administrative costs to manage the program have 
consistently averaged a very modest 5% of total outlays.
    Although the program is almost 95 years old, OWCP's administration 
of FECA is by no means antiquated. All new claims are electronically 
imaged into a sophisticated paperless claims management system. Video 
and teleconferencing options are available to claimants to expedite the 
OWCP appeals process. Electronic Data Interchange capabilities are 
utilized by many of the program's agency partners. A secure, web-based 
electronic document-filing portal is currently under development; this 
new access will be deployed later this year and for the first time will 
be available to all system stakeholders, including injured workers and 
their physicians. This new tool will further reduce reliance on paper 
documents and shrink data input and imaging costs while speeding claim 
processing and reducing administrative costs.
Maintaining Program Integrity
    OWCP actively manages the FECA program so that benefits are 
properly paid. After a case is accepted as covered, OWCP monitors 
medical treatment for consistency with the accepted condition--if more 
than a very brief disability is involved, OWCP often assigns a nurse as 
part of our early nurse intervention program to assist with the 
worker's recovery and facilitate the return-to-work effort. If 
disability is long-term, but the claimant can work in some capacity, a 
vocational rehabilitation counselor may be assigned to the case.
    Once a claim is accepted for ongoing, periodic payments, injured 
workers are required to submit medical evidence to substantiate 
continued disability (either annually or on a two or three year 
schedule for those less likely to regain the ability to work). Injured 
workers must cooperate with OWCP-directed medical examinations and 
vocational rehabilitation, accept suitable employment if offered and 
annually report earnings and employment (including volunteer work) as 
well as the status of their dependents and any other government 
benefits. OWCP claims staff carefully review these submissions and can 
require claimants to be examined by outside medical physicians to 
resolve questions on the extent of disability or appropriateness of 
medical treatment such as surgery. OWCP also conducts monthly computer 
matches with the Social Security Administration (SSA) to identify FECA 
claimants who have died so that payments can be terminated to avoid 
overpayments.
    In addition, OWCP has conducted program evaluation studies to 
identify areas for process and policy improvements. I noted earlier 
some of our case processing improvements. Based on the resulting 
recommendations and our claims experience, we have also improved how 
the program approaches disability management and return to work. The 
program's early nurse intervention and quality case management 
initiatives are particularly noteworthy as the program evolves to 
reflect a renewed focus on return to work We have partnered with the 
Occupational Safety and Health Administration (OSHA) and our federal 
agencies to improve timely filing of claims and reduce lost production 
days. As result of these efforts, the average number of days lost as a 
result of the most serious injuries each year has declined from 195 
days in 1996 to 156 in 2010. By speeding the average time to return to 
work in these cases, OWCP saves the government millions of dollars just 
in the first year of the injury; this also helps to avoid long term 
disability that can last for years thereafter.
A History of Performance
    Under most circumstances FECA claims are submitted by employees to 
their employing agency, which completes the agency information required 
on the form and forwards the claim to OWCP. Over the past 5 years, an 
average of 133,000 new injury and illness claims were filed annually 
and processed by OWCP. The acceptance rate for new injury claims was 
85%. Eighty-four percent (84%) were submitted within program timeliness 
standards of 10 working days and approximately 95% were processed by 
OWCP within program timeliness standards which vary depending on the 
complexity of the injury. Fewer than 15,000 of the accepted claims per 
year involve a significant period of disability. Eighty-five percent 
(85%) of claimants return to work within the first year of injury and a 
total of 89% return to work by the end of the second year. Due in part 
to OWCP's efforts to return injured employees to work, less than 2% of 
all new injury cases remain on the long-term compensation rolls two 
years after the date of injury. Currently, approximately 45,000 injured 
workers have long term ongoing disability benefits for partial or total 
wage loss, which they receive every 4 weeks. Some 15,000 are 66 years 
of age or older. (It should be noted however, that of this 15,000, over 
7,000 have been determined to have no return-to-work potential, largely 
because of the substantial nature of their disability.)
FECA Reform
    As I have discussed, OWCP has made significant administrative and 
technical changes to improve the administration of FECA. These changes 
were legally permissible within the existing statutory framework and 
had a demonstrable effect in advancing our progress. The current FECA 
reform proposal embodies certain reforms that can only be gained 
through statutory amendment that transforms FECA into a model twenty-
first century workers' compensation program, increasing equity and 
efficiency while reducing costs. These amendments fall within three 
categories:
     Return to Work and Rehabilitation
     Updating Benefit Structures
     Modernizing and Improving FECA
Return to Work and Rehabilitation
    The proposal that we have crafted for consideration would provide 
OWCP with enhanced opportunities to facilitate rehabilitation and 
return-to-work while simultaneously addressing several disincentives 
that may impact timely return to work by applying a new set of benefit 
rates prospectively to new injuries and new claims for disability 
occurring after enactment of the FECA amendments.
    We propose additional statutory tools that would enhance OWCP's 
ability to return injured workers to productive employment. While FECA 
currently has the authority to provide vocational rehabilitation 
services and to direct permanently injured employees to participate in 
vocational rehabilitation, we suggest removing the permanency 
limitation in the statute to make clear that such services are 
available to all injured workers and that participation in such an 
effort is required. It is generally accepted and consistent with our 
experience that the earlier the claimant is involved in a vocational 
rehabilitation and a Return-to-Work program, the greater likelihood of 
a successful and sustained return to work post injury.
    The proposal would amend FECA to explicitly allow for vocational 
rehabilitation, where appropriate, as early as six months after injury. 
It provides OWCP the authority to require injured claimants unable to 
return to work within six months of their injury to participate with 
OWCP in creating a Return--to-Work Plan where appropriate. The Return-
to-Work Plan would generally be implemented within a two-year period. 
This provision would send a strong signal to all Federal workers, 
whether injured or not, that the Federal government as a model employer 
is committed to doing everything it can to return employees to work as 
early as possible.
    Our proposal would also amend FECA to provide permanent authority 
for what we call Assisted Reemployment. Assisted Reemployment is a 
subsidy designed to encourage employers to choose qualified 
rehabilitated workers whom they might otherwise not hire. As disabled 
Federal workers with skills transferable to jobs within the general 
labor market may prove difficult to place due to economic factors, 
Assisted Reemployment is designed to increase the number of disabled 
employees who successfully return to the labor force by providing wage 
reimbursement to potential employers. Recent DOL appropriations bills 
gave OWCP the authority to provide up to three years of salary 
reimbursement to private employers who provide suitable employment for 
injured federal workers. Our data from our currently limited private 
sector program shows that when we enter into an Assisted Reemployment 
agreement with a private employer, the employee is permanently hired by 
that employer at or beyond the 3 year period over 55% of the time. Of 
the employees not working for the same employer, approximately half are 
working with other employers. Because most Federal employees desire 
continued employment with the Federal government, our proposal to 
expand this program to the Federal sector would significantly increase 
its appeal and effectiveness. We are working closely with OPM and our 
partner agencies to actively seek re-employment opportunities for 
Federal workers who become disabled as a result of work related 
injuries or illnesses. These provisions would assist with that effort 
and comport with and support the President's Executive Order 13548 to 
increase hiring of individuals with disability in the Federal 
government. Under this proposal, OWCP would reimburse in part the 
salaries paid by Federal agencies that hire workers with work-related 
injuries.
    Return to work following an injury is often a difficult, painful 
process, requiring physical, mental and emotional adjustments and 
accommodations. If a workers' compensation system contains 
disincentives to return to work, that difficult transition back to work 
will occur more slowly, or in some cases, not at all. Where the medical 
evidence of ability to work is ambiguous and returning to work would 
require an employee to overcome actual physical limitations, these 
disincentives will exact a high price. That high price means a more 
costly program, lost productivity to the employing agency, and, for the 
workers themselves, disrupted lives and diminished self-esteem.
    As currently structured, FECA creates direct disincentives to 
return-to-work in two significant ways. The first and most far-reaching 
is that while the basic rate of FECA compensation, 66\2/3\%, is 
comparable to most state systems, many Federal employees receive an 
augmented benefit, 75%, if they have at least one dependent. Computed 
at 75% tax free, FECA benefits often exceed the employee's pre-injury 
take home pay. Few state systems provide any augmentation for 
dependents, and none approaches the Federal level.
    Since the 75% compensation rate can result in benefits greater than 
the injured worker's usual take home pay, we also suggest amending FECA 
to provide that all claimants receive compensation at one uniform level 
of 70%. This compensation adjustment would remove disincentive to 
return to work, respond to equity concerns, and significantly simplify 
administration by greatly reducing documentation requirements for 
claimants and eliminating potential overpayments that can occur due to 
changes in dependency status. At this level compensation would remain 
quite adequate. A similar rate reduction is also proposed in death 
claims.
    A second significant disincentive to return to work is created by 
the disparity that exists between the level of retirement benefits, 
provided by the OPM, received by most Federal employees and the level 
of long-term FECA benefits for retirement age FECA recipients. Under 
current law, the thousands of long-term FECA beneficiaries who are over 
normal retirement age have a choice between Federal retirement system 
benefits and FECA benefits, but they overwhelmingly elect the latter 
because FECA benefits are typically far more generous. OPM informs us 
that the average Federal employee retiring optionally on an immediate 
annuity under the Civil Service Retirement System will receive about 
60% of their ``high-three'' average salary, most of which is taxable, 
compared to a tax free 75% or 66.66% FECA benefit. The newer Federal 
Employees' Retirement System is designed to provide a comparable level 
of retirement replacement income from the three parts of its structure. 
Because returning to work could mean giving up a FECA benefit in favor 
of a lower OPM pension amount at eventual retirement, injured workers 
may have an incentive to consciously or unconsciously resist 
rehabilitation and instead, in certain cases, may cling to the self-
perception of being ``permanently disabled.'' In any event, the 
considerable difference between FECA benefits and OPM retirement 
benefits results in certain FECA claimants receiving far more 
compensation in their post retirement years than if they had completed 
their Federal careers and received normal retirement benefits like 
their colleagues. This disparity also suggests that a statutory remedy 
is needed.
    This proposal provides claimants with a ``Conversion Entitlement 
Benefit'' upon reaching regular Social Security retirement age (and 
after receiving full benefits for at least one year) that would reduce 
their wage-loss benefits to 50% of their gross salary at date of injury 
(with cost of living adjustments), but would still be tax free. This 
benefit more closely parallels a regular retirement benefit, as opposed 
to a full wage-loss benefit, so that FECA recipients are not overly 
advantaged in their retirement years compared to their non-injured 
counterparts on OPM retirement. An injured worker receiving this 
retirement level conversion benefit would no longer be subject to 
several of the sanction provisions outlined in the FECA, such as 
forfeiture for failure to report earnings or the requirement to seek/
accept suitable employment or participate in vocational rehabilitation. 
Even at this reduced rate, however, an injured worker would still be 
required to substantiate continuing injury-related disability or face 
suspension of compensation benefits.
Updating Benefit Structures
    We also propose a number of changes to the current FECA benefit 
structure. One relates to the schedule award provision, which is 
designed to address the impact of impairment on an individual's life 
function, such as the loss of vision, hearing, or a limb. Impairment is 
permanent, assessed when an individual reaches maximum medical 
improvement, and is based upon medical evidence that demonstrates a 
percentage of loss of the affected member. Each member, extremity or 
function is assigned a specific number of weeks of compensation and the 
employee's salary is used to compute his or her entitlement to a 
schedule award. This payment structure results in considerable 
disparities in compensation: for example, a manager is paid far more 
than a letter carrier for loss of a leg even though the impact on the 
letter carrier may in reality be far more severe. In that instance, a 
GS-15 would receive twice what a GS-7 receives for the same loss of 
ability to get around, engage in recreational activities, etc., for 
this permanent impairment. Paying all schedule awards at the rate of 
70% of $53,630 (the equivalent of the annual base salary of a GS 11 
step 3) adjusted annually for inflation would certainly be more 
equitable.
    Similarly, allowing injured workers to receive FECA schedule award 
benefits in a lump sum concurrently with FECA wage loss benefits for 
total or partial disability would provide a more equitable benefits 
structure for claimants. The current process is complicated and 
convoluted, often leaving injured workers frustrated and confused. It 
also can generate substantial unnecessary administrative burdens, as 
schedule award payments cannot be paid concurrently with FECA wage-loss 
benefits. To avoid the concurrent receipt prohibition some eligible 
claimants may elect OPM disability or retirement benefits, which they 
are allowed to receive for the duration of a schedule award. When the 
schedule award expires, they may elect to return to the more 
advantageous FECA wage-loss benefits. While they are collecting OPM 
benefits, OWCP and employing agency efforts to assist the employee in 
returning to work are stymied. In addition to switching to OPM benefits 
during the period of a schedule award, claimants can also switch back 
and forth between benefit programs over the life of a claim. As a 
result of these overly complex provisions and benefit streams, 
claimants sometimes do not return to work as early or as often as they 
could. By allowing concurrent receipt of these benefits, the claimant 
is timely compensated for the loss to the scheduled member and 
switching back and forth between OPM and OWCP benefits for this reason 
is eliminated. This allows a return-to-work or vocational 
rehabilitation effort to continue uninterrupted, thereby improving the 
chances of a successful return to employment.
    Finally, this proposal increases benefit levels for funeral 
expenses and facial disfigurement, both of which have not been 
significantly updated since 1949, to bring FECA in line with increases 
in other workers' compensation statutes.
Modernizing and Improving FECA
    Because FECA has not been amended in over 35 years, updates are 
needed to modernize and improve several provisions of the statute. One 
such change was made several years ago but only applied to workers 
employed by the U. S. Postal Service (USPS). In order to discourage the 
filing of claims for minor injuries that resolve very quickly, state 
workers' compensation programs generally impose a waiting period before 
an injured worker is entitled to wage-loss compensation. Because of the 
way in which the 1974 amendments to FECA adding the ``Continuation of 
Pay'' provisions were drafted, the waiting period under FECA for 
traumatic injuries was effectively moved after the worker has received 
45 days of ``Continuation of Pay,'' thus defeating the purpose of a 
waiting period. The Postal Enhancement and Accountability Act of 2006 
amended the waiting period for Postal employees by placing the three-
day waiting period immediately after an employment injury; we suggest 
placing the three-day waiting period immediately after an employment 
injury for all covered employees.
    Another longstanding concern addressed by the proposal relates to 
the application of FECA subrogation provisions to claims. Workers' 
compensation systems generally provide that when a work-related injury 
is caused by a negligent third party the worker who seeks damages from 
that third party must make an appropriate refund to the workers' 
compensation system. As a result of the way in which the 1974 
``Continuation of Pay'' provision was drafted, OWCP cannot include 
amounts paid for Continuation of Pay in calculating the total refund to 
OWCP when a recovery is received by a FECA beneficiary from a third 
party.
    OWCP also seeks the authority to match Social Security wage data 
with FECA files. While the SSA collects employment and wage information 
for workers, OWCP presently does not have authority to match that data 
to identify individuals who may be working while drawing FECA benefits. 
OWCP currently is required to ask each individual recipient to sign a 
voluntary release to obtain such wage information. Direct authority 
would allow automated screening to ensure that claimants are not 
receiving salary, pay, or remuneration prohibited by the statute or 
receiving an inappropriately high level of benefits.
    This proposal would also increase the incentive for employing 
agencies to reduce their injury and lost time rates. Currently the USPS 
and other agencies not funded by appropriations must pay their ``Fair 
Share'' of OWCP administrative expenses, but agencies funded by 
appropriations are not required to do so. Amending FECA to allow for 
administrative expenses to be paid out of the Employees' Compensation 
Fund and included in the agency chargeback bill, would increase Federal 
agencies' incentive to reduce injuries and more actively manage return 
to work when injuries do occur.
    To improve access to medical care, we suggest a provision that 
would increase the authority and use of Physicians' Assistants or Nurse 
Practitioners. We suggest amending FECA to allow Physicians' Assistants 
and Nurse Practitioners to certify disability during the Continuation 
of Pay period so that case adjudication is not delayed and treatment 
can be provided more rapidly. The provision allowing Physicians' 
Assistants and Nurse Practitioners to certify disability during the 
Continuation of Pay period would also reduce the burden of disability 
certifications in war zone areas because access to a physician may be 
even more limited in these circumstances.
    To further address injuries sustained in a designated zone of armed 
conflict, FECA should be amended to provide Continuation of Pay for 
wage loss up to 135 days for such injuries. This increase from the 
standard 45 days would allow additional flexibility for claims handling 
in these challenging areas and is an outgrowth of a cooperative effort 
with OPM, the Department of State and the Department of Defense to 
address the needs of deployed civilian employees.
Conclusion
    This proposal provides a fair and reasonable resolution to the 
disincentives and inadequacies that have arisen within the current FECA 
statute. Since any FECA reform should be prospective only, it would 
apply to new injuries and new claims of disability after enactment. 
Injured workers currently in receipt of disability benefits would see 
no changes in their benefit level. This will allow all federal 
employees and federal agencies to embrace and adopt a more pro-active 
and progressive attitude about return to work and disability 
employment, and avoid any unfair interruption of benefits. Even with 
this prospective approach, the ten-year cost savings are estimated to 
be around $400 million, or potentially even higher.
    We believe that our proposals, if adopted, would allow all Federal 
employees and Federal agencies to embrace and adopt a more pro-active 
and progressive attitude about return to work and disability 
employment, and avoid any unfair interruption of existing benefit 
streams.
    The FECA program is at a critical juncture. We have done our best 
to keep the program current and responsive to the changing world we 
live in through administrative, technological and procedural 
innovations and investments. Without these statutory reforms, OWCP's 
best efforts may yield some further gains. However, we cannot overcome 
the fundamental disincentives in the current law and achieve the 
breakthrough improvements that we know are possible within the FECA 
program which will allow FECA to maintain its status as a model of 
workers' compensation programs.
    The federal workforce comprises dedicated, hard working women and 
men that are committed to serving the public. OWCP is fully committed 
to ensuring that all injured workers receive the medical care and 
compensation they deserve, as well as the assistance needed to return 
to work when able to do so. FECA reform will enable OWCP to achieve 
those goals more effectively.
    Mr. Chairman, I would be pleased to answer any questions that you 
or the other members of the Committee may have.
                                 ______
                                 
    Chairman Walberg. Thank you, Mr. Steinberg.
    Now I recognize Ms. Carney for your testimony.

 STATEMENT OF SUSAN CARNEY, HUMAN RELATIONS DIRECTOR, AMERICAN 
                      POSTAL WORKERS UNION

    Ms. Carney. Mr. Chairman, Madam Woolsey, and members of the 
subcommittee, we appreciate the opportunity to share our views 
regarding the Federal Employees' Compensation Act and its 
reform.
    If we are to achieve the true objective of FECA, we must 
acknowledge there are various facets of the Act that need 
improvement. The reform proposals being suggested address a 
small portion of them. Sadly, however, there are many aspects 
of this reform that will negatively affect public servants and 
their families.
    Injured workers do not lack motivation to return to work, 
nor do they reap greater benefits. To the contrary, their 
losses are monumental. They suffer losses to leave, to TSP, to 
their Family Medical Leave balances. They miss out on pay 
increases. They are separated for disability, lose credible 
service time, and in some cases, health benefits and life 
insurance.
    Vocational rehabilitation efforts cause a loss or reduction 
to compensation even when workers are unable to obtain other 
employment. This enables employers to escape a large portion of 
their chargeback and motivates them to refuse or withdraw 
suitable work. This has happened in cataclysmic proportions 
within the Postal Service.
    Thousands of injured workers ready, willing and able to 
work who are injured on the job, many of whom are veterans, 
have been refused work or have had their work withdrawn. FECA's 
supposed to be non-adversarial, yet many workers and their 
physicians would disagree.
    These proposals, in many ways, will compound the adversity 
forcing employees with temporary medical restrictions into voc-
rehab programs and creates additional disincentives for 
employers to return employees to work, and would interfere with 
employees' prescribed recovery processes, or force employees to 
exceed, or feel the need to exceed, their physical capacities.
    With only 2 percent of new claimants remaining on the 
compensation rolls beyond 2 years, which often is a normal 
recovery period for a given injury, there is little need to add 
additional expensive rehabilitation costs to the program.
    We are gravely concerned that re-employment efforts would 
result in a reduction of compensation benefits because there is 
no mechanism to reinstate compensation when subsidized 
employment ends, and a reduction or a loss in compensation 
would occur even when the worker is unsuccessful in procuring 
one of these positions.
    Since federal jobs can't be used as a basis to determine 
wage earning capacities, the Division of Federal Employees' 
Compensation has advised it will look to comparable private 
sector positions for this purpose. As has happened in the 
Postal Service, employers would be motivated to refuse their 
employees rather than to restore them.
    To support their continuing work-related disabilities, 
compensationers are required to provide medical documentation 
on a fairly regular basis in order to remain on the OWCP rolls. 
Regardless of their age, they are subjected to OWCP-directed 
medical examinations, and if their medical documentation 
illustrates they are able to work, they too are subject to voc-
rehab programs, which means an employee is not staying on 
workers' comp because they have self-certified themselves to be 
there.
    It is a flawed comparison to measure annuitants who are 
able to achieve a 30-year career and obtain a true high three 
against compensationers whose wage loss is not augmented with 
employer pay increases. Fifty-six percent of a high versus 50 
percent of a low--employees who are the greater majority are 
barred from building their retirement savings. Compensationers 
cannot contribute to social security and cannot receive credit 
for substantial earnings. Unlike their coworker annuitants, 
compensationers can't supplement their income if they are 
totally disabled.
    Under these circumstances, any reduction would be an unfair 
reduction and discriminatory. Of all of the proposed changes, 
this is one of our top priorities. Changing wage loss 
compensation to 70 percent in our opinion lacks equity. Wage 
earners with dependents net more than single earners. Wage 
earners are able to recoup tax withholdings by filing annual 
tax returns. Compensationers cannot.
    APWU is opposed to any change that would burden families or 
penalize workers because they are married or have children. 
Shrouding harmful changes as modernization, return to work and 
administration simplification is simply and, frankly, 
disingenuous.
    We have enumerated our additional concerns in our written 
testimony and have provided for your review viable reasonable 
alternatives which are conducive to the President's executive 
order, improving workplace safety, restoring injured workers to 
their place of employment, and significantly reducing costs.
    Although we are disappointed with the Offices recent 
actions, most specifically its apparent desire to appease 
agencies while stripping workers of benefits as demonstrated 
through these proposals and its recent proposed rule changes, 
APWU still believes the Department of Labor remains the best 
means available to handle the claims process for all federal 
and postal workers; although, there is vast room for 
improvement.
    We would implore the committee to carefully consider our 
recommendations and exhaust all options and avenues to avoid 
bringing harm to injured workers and their families. We further 
recommend taking legislative measures to prevent the Office 
from making rule changes without legislative review.
    In closing, as we examine our options, we should be mindful 
not to regress, but progress. Before we consider passing 
legislative changes, we must ensure they are meaningful changes 
and examine how the consequences of our actions will impact 
workers and their families.
    Thank you, and I am available for questions to the 
committee.
    [The statement of Ms. Carney follows:]

  Prepared Statement of Sue Carney, National Human Relations Director,
                American Postal Workers Union (AFL-CIO)

    Mr. Chairman and Members of the Subcommittee, my name is Sue 
Carney, and I am the National Human Relations Director for the American 
Postal Workers Union, AFL-CIO. The American Postal Workers Union is the 
world's largest postal union, representing more than 220,000 postal 
employees in the clerk, maintenance, and motor vehicle divisions and in 
support services; 50, 000 of which are veterans. We are employed in 
approximately 32,000 sites throughout the country, providing a public 
service in every city, town and community in our nation.
    Workplace injuries, illnesses and deaths negatively impact a 
significant number of postal employees so we appreciate the opportunity 
to share our views regarding the Federal Employees Compensation Act 
(FECA) and the Department of Labor's proposed Federal Injured Employees 
Re-employment Act (FIERA). We believe various aspects of FECA and 
FIERA, if adopted as written, are disparaging and will negatively 
affect public servants and their families.
    Furthermore, we would like to add that during a DOL briefing, the 
unions were adamantly advised that our concerns and objections would 
not be considered. Seemingly DOL used the occasion to gauge our 
response, rather than consider the validity of our concerns, 
consequently amending some of their ``marketing strategies'' to make 
the proposal appear more equitable. Additionally, they claim their 
reform proposals will ``produce potential cost savings of approximately 
$400 million over a 10-year period for the American taxpayer.'' To our 
understanding the Office has not shared how it derived this figure, nor 
produced documentation to support it. It's noteworthy to point out that 
not all of the costs related to workplace injuries are borne by 
taxpayers. Also significant, wage loss compensation and death benefit 
costs have remained stable since 2001; however war risk hazard payments 
and escalating costs for medical and rehabilitation services and 
supplies brought a combined $367.3 million increase to the program.\1\ 
It's our understanding that this figure includes all OWCP directed 
medical exams.
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    \1\ War risk hazard payment $86.2 million(WHCA); increase cost for 
medical services $281.1 million
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    The FECA represents a longstanding covenant that our government 
made with federal workers. Each side gave up something to make it 
equitable and fair to both parties. Its primary purpose is to shield 
injured federal employees and their families from loss while limiting 
the employers' liabilities. ``The employer relinquished the defenses 
enjoyed under the common law, but this loss was offset by a known level 
of liability for work-place injuries and deaths. The employee gave up 
the opportunity for large settlements provided under the common law, 
but receives the advantage of prompt payment of compensation and 
medical bills. These tradeoffs make the federal workers' compensation 
system fair and equitable to both parties. However, where either party 
does not receive the benefits of this covenant, the system becomes 
unacceptable. When FECA was amended in 1974, Congress stated it is 
essential that injured or disabled employees of all covered departments 
and agencies, including those of the United States Postal Service, be 
treated in a fair and equitable manner. The Federal Government should 
strive to attain the position of being a model employer''.\2\
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    \2\ Excerpt from Joseph Perez's statement when appearing before The 
House Government Reform and Oversight Committee Government Management, 
Information and Technology Subcommittee on July 6, 1998. Perez is a 
former OWCP DFEC Claims Examiner and currently practices law.
---------------------------------------------------------------------------
    As we begin, it is important to point out that postal and federal 
workers are injured on the job because of the circumstances they 
encounter in performing a public service. These employees are victims 
of traumatic injuries such as slips and falls, muscle tears and 
herniated disc injuries. They are victims of poor ergonomic working 
conditions, like those that cause repetitive stress disease, making it 
difficult to perform simple tasks that involve grasping, holding and 
reaching. They suffer motor vehicle accidents, sustain injuries caused 
by faulty equipment and are innocent victims of unforeseeable, heinous 
crimes. Workplace injuries and diseases change lives; in many cases 
forever. No one ever goes to work wanting it to be the day they are 
injured or the day they will not return home to their family.
    Injured workers do not reap greater benefits, nor do they lack 
motivation to return to work when capable, as some have wrongfully 
implied. In addition to the physical, mental and emotional pain that 
workplace injuries bring, it is important to understand the losses 
compensationers presently suffer before we consider asking more of 
these workers. They do not earn annual or sick leave. They are not able 
to contribute to the Thrift Savings Plan nor can they receive matching 
funds; this, in and of itself, causes a substantial loss for injured 
federal workers.\3\ Their compensation rate remains locked at their 
date of injury (or first disability) pay rate. These employees do not 
receive the ``employer pay increases'' they would otherwise be entitled 
to had it not been for their injury; only a COLA based on the Consumer 
Price Index (CPI), which has averaged just 2.1% annually over the last 
decade. Their lost workdays erode their Family Medical Leave balance, 
and they are often separated because of their disabilities. If 
separated prior to achieving the retention of health benefits and life 
insurance, these benefits are lost. When placed in the OWCP's 
vocational rehabilitation program they can expect to have their wage 
loss compensation reduced whether they are successful in obtaining 
employment or not.\4\ In our opinion, these Division of Federal 
Employees Compensation (DFEC) procedures motivate and enable employers 
to refuse or withdrawal medically suitable work in order to escape a 
large portion of their chargeback liabilities; leaving injured workers 
with a significantly reduced or eliminated source of income.
---------------------------------------------------------------------------
    \3\ The TSP Calculator illustrates that an employee who is earning 
$40,000 annually, contributing 10% and receiving the employer's maximum 
5% contribution over the span of a 30 year career, and who is earning 
an average of 5% interest is estimated to realize more than$416,000 
towards his/her retirement savings
    \4\ Division of Federal Employees Compensation Procedure Manual 
Part 2 Chapter 0814 Sections 7 and 8. These actions are known as loss 
wage earning capacity (LWEC) determinations. In basic terms, a LWEC is 
a comparison between wages of actual or potential earnings against 
wages at the time of injury. The difference is what the claimant is 
entitled to receive in wage loss compensation. For example, a worker 
was making $20 hr when injured. They normally would receive $15 in WLC 
if they have dependents, but if the Office finds a potential job that 
pays $18 hourly, the employee is then only entitled to receive 75% of 
the difference, which in this scenario would be $1.50 hourly, even when 
the employee was an unsuccessful applicant. And if the employee 
procured the job but subsequently the job was withdrawn, the employee 
would still only be entitled to $1.50 per hour in WLC.
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    FECA is supposed to be a non-adversarial, yet many workers and 
their physicians would disagree. In addition to the losses that were 
previously presented, let me share just a few examples of the 
adversarial scrutiny they are often subjected to. Physicians are 
frustrated. OWCP requires an extraordinary amount of paperwork from 
them and pays poorly for medical services; just 5% over the Medicare 
fee schedule. It is not enough for treating physicians to give their 
expert-medical opinion, confirming that a condition is work-related 
based on their examinations, testing and findings; their medical 
narratives are often rejected by claims examiners who have no medical 
background stating the doctor's opinion is not good enough because the 
doctor failed to share his or her reasoning. Prescribed medical 
treatment is often delayed or denied. In recent testimony presented by 
OWCP, the Acting Director stated ``overcoming actual physical 
limitations exact a high price'', which ``means a more costly 
program''. Taken in context, he seemed to imply that the Program will 
forgo the expense of medical treatment if it won't clearly result in a 
return-to-work.
    Additionally, claimants are subjected to second opinions, and 
independent medical examinations, rather than trusting the opinion of 
the claimant's treating physician who understands the extent of the 
disability and is responsible for prescribing medical treatment. All of 
this needlessly adds to the cost of the program. These factors have 
made it difficult for claimants to find and keep doctors. When 
claimants do find doctors that are willing to treat them, claimants 
have been barred from using them if they are located further than 25 
miles away. To the contrary, the Office regularly finds it acceptable 
to send claimants more than 100 miles away for their directed exams. 
DFEC also refuses to adjudicate questionable job offers for 
suitability; rather a claimant is required to refuse a job offer and 
risk going without income while the program takes months to make a 
suitability determination. These factors, coupled with the Office's 
recent and sweeping Proposed Rulemaking changes\5\ and portions of the 
FIERA, all bring additional favor to employing agencies; cause 
unnecessary harm, in some cases irreparable harm, to injured workers 
and their families and do little to promote the non-adversarial program 
FECA is intended to be. They should not be permitted to stand.
---------------------------------------------------------------------------
    \5\ RIN 1240-AA03
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Examining FIERA Proposals
            Vocational Rehabilitation
    We agree measures should be taken to help all injured workers 
return to suitable employment when their treating physician states that 
they are physically capable; however, granting authority to place 
employees with temporary medical restrictions into OWCP's vocational 
rehabilitation program is an objectionable approach. It would serve as 
further disincentive to employers who believe workers with disabilities 
are crippling their production. Currently, only employees with 
permanent medical restrictions can be voc-rehabbed. It's been our 
experience that employers regularly refuse work to these employees 
because they can escape chargeback through OWCP's vocational 
rehabilitation program due to loss wage earning capacity 
determinations. Comparatively, employers are more compelled to return 
employees with temporary restrictions to employment because they cannot 
be voc-rehabbed. In addition, premature vocational rehabilitation could 
interfere with the employees' prescribed recovery process or force 
employees to exceed their physical capacities. Recently, a Jacksonville 
OWCP District Office rehab counselor required a worker, who was only 
capable of working four hours a day, to interview for fifty jobs by the 
end of the week.
    Additionally, the Office has not disclosed the specifics of its new 
Return-To-Work Plan for employees who are physically unable to be voc-
rehabbed, nor has it shared if the employee's treating physician will 
be partnered into the process. According to figures provided by OWCP, 
only a mere 2% of all new injury claims remain on the long-term 
compensation rolls for more than two years. This demonstrates there is 
little need to compound the Program with additional rehabilitation 
costs.
    To accomplish the goal of returning injured workers more readily to 
employment, we recommend that OWCP be more prompt in authorizing all 
recommended medical treatment, including physical therapy and surgeries 
which are often denied or delayed for extended periods of time.
            Assisted Reemployment Program
    The APWU can appreciate the Office's efforts to subsidize federal 
employment opportunities where suitable work does not actually exist 
within the worker's own employing agency; however, we are gravely 
concerned that such efforts would result in a reduction of compensation 
benefits. Again, the problem lies within the Office's LWEC procedures. 
DFEC procedure permits a reduction to wage loss compensation based on 
actual earnings. This alone is not objectionable, but, when the 
subsidized employment ends and residual disabilities remain there is no 
mechanism to reinstate the compensation that was eliminated. Another 
DFEC procedure permits LWECs based on constructed positions. 
Essentially, this permits a reduction in compensation even when the 
worker is unsuccessful in procuring a position. How is this fair and 
equitable?
    We recognize that federal work cannot be used as a basis for making 
LWEC determinations, but the reality is, DFEC has advised it will look 
to comparable private sector positions to LWEC these employees. The 
Office has offered its Private-Sector Assisted Reemployment Program as 
an indicator of potential success for its Federal Assisted Reemployment 
Program. Interestingly, the Office has not disclosed how many private-
sector program candidates they successfully placed in the program, nor 
has it advised how many LWEC's were issued as a result of the program, 
but we do know, based on figures provided by OWCP, that 45% of the 
employees who secured private--sector subsidized employment were not 
hired at or beyond the 3 year agreement period; consequently leaving 
many injured workers and their families at a deficit.
    We recommend employers be required to provide compelling evidence 
when they assert that do not have medically suitable work for partially 
recovered employees and prove that they have taken all mandated 
measures to make reasonable accommodations for their disabled workers, 
before these workers are sent looking for work with other employers. In 
our opinion, the ``Federal'' Assisted Reemployment Program would only 
be favorable if changes were made to reinstate lost compensation when 
employment stops and if constructed LWECs were eliminated. These 
actions would aid in facilitating employer cooperation, they are 
conducive to the President's Executive Order 13548, and would compel 
employers to retain their injured employees. On the surface, this 
proposal with all of its employer incentives could appear to inspire 
employers to hire injured workers; however, when you examine the 
existing procedures it would trigger, failure to incorporate our 
recommended changes creates the potential to bring irreparable harm to 
workers.
            Conversion to Reduced Benefits for Total and Partial 
                    Disability at Retirement Age
    To put matters into proper perspective, we should point out that 
regulations and procedures are so stringent it is virtually impossible 
to ``milk'' the system as is often implied. This is evidenced in OIG's 
recent Semiannual Report to Congress where only twenty-three 
convictions for medical provider and claimant fraud were reported.\6\ 
Compensationers are required to provide medical documentation on a 
fairly regular basis to support their disabilities in order to remain 
on the OWCP rolls. Compensationers aren't permitted to self-certify so 
it is meaningless for anyone to assert that injured workers may have an 
incentive ``to cling to the self-perception of being permanently 
disabled.'' Even if they had that perception, it wouldn't be enough to 
keep them on the rolls. Furthermore, compensationers are regularly 
subjected to OWCP directed second opinion and independent medical 
examinations. Additionally, there is the existing and unforgiving OWCP 
Vocational Rehabilitation Program, so we must presume that many of the 
long-term compensationers are permanently and totally disabled; 
otherwise regardless of age, they would have been placed in OWCP's 
Vocational Rehabilitation Program to seek alternate employment.
---------------------------------------------------------------------------
    \6\ April 1--September 30, 2010
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    It is wrong to infer that OWCP is a lucrative retirement program 
marked by disincentives that preclude employees from returning-to-work, 
as some have stated. It is also misleading and inequitable to compare 
annuitants who are able to achieve a 30 year career and obtain a true 
high three to compensationers who stop earning creditable service when 
they are separated for disability.\7\ Compensationers do not receive 
the same salary increases their uninjured coworkers do. As we 
previously mentioned, their compensation is locked at their date of 
injury pay rate. It is disingenuous to cite CSRS as comparable. The 
federal retirement system converted to FERS in 1983. Since that was 28 
years ago, and since FIERA is supposed to be prospective, the greatest 
majority of workers will fall under FERS. In either case, 
compensationers are not able to TSP, and are ineligible to receive 
matching contributions. Compensationers cannot contribute to Social 
Security and cannot receive credit for substantial earnings. Unlike 
their uninjured coworkers who can work after retirement to supplement 
their income, totally disabled compensationers are incapable of 
performing any work. The loss injured workers sustain by comparison is 
monumental. To reduce their compensation to 50% at a pre-selected and 
arbitrary age on the basis that CSRS annuitants receive a slightly 
higher but taxable percentage than that which is being proposed, is 
unfounded. To assume any age a ``normal'' retirement age would be 
unjust, age discriminatory and presumptive. To the contrary, the Bureau 
of Labor Statistics reports more senior employees are opting to work 
well into their golden years to stay active and because they cannot 
afford to retire.\8\ Do we really want to penalize seniors with work-
related medical restrictions because of their age?
---------------------------------------------------------------------------
    \7\ Employers are permitted and generally do separate employees who 
are collecting wage loss compensation for one continuous year.
    \8\ The Bureau of Labor Statistics indicates that as of 2007, 56.3% 
of workers age 65 and older have opted for fulltime employment over 
part-time employment. That employment of workers ages 65 and over has 
increased 101 % between 1977 and 2007: men rose by 75%; women climbed 
by 147%; while workers 75 and over had the most dramatic gain, 
increasing by 172%. There is also an apparent failure to acknowledge 
that projected growth in the labor force for workers between the ages 
of 65 and 74 is predicted to soar by 83.4 percent between 2006 and 
2016. The number of workers age 55-64 is expected to climb by 36.5 
percent. By 2016, workers age 65 and over are expected nearly double 
its participation in the total labor force from that of 2006.
---------------------------------------------------------------------------
    We would be remiss in assuming that our senior compensationers 
would have retired had they not been injured. We have to presume, based 
on existing OWCP procedures, that these employees are incapable of 
working otherwise OWCP would be derelict in performing its duties. For 
those who have temporary medical restrictions, it's important that we 
recognize they may be capable of working in the future once OWCP 
approves all prescribed treatment and the employee is given appropriate 
recovery time consistent with the nature of their injury. It would be 
punitive to reduce their wage loss compensation based on age and the 
time spent on the rolls. Recovery for extensive injuries can often take 
longer than a year.
    Several measures can be taken to make FECA more fair and equitable. 
Laws could be changed to allow TSP withholdings and matching 
contributions; or a retirement fund, comparable to TSP could be created 
for compensationers that would permit employee withholdings and mandate 
employer contributions. Compensationers could be afforded the option to 
elect retirement based on an estimation of what their high-three would 
have been had they been able to continue their federal career. As it 
currently stands, employing agencies are the only benefactor.
            Augmentation
    Currently workers with dependents receive 75% of their pay, while 
workers without dependents receive 66\2/3\%. DOL originally offered its 
proposal to convert all compensationers to 70% on the premise that 
workers with dependents do not earn more than those without. They also 
state the change would ease entitlement calculations for its claims 
examiners. Although it is true that workers with dependents do not earn 
more, tax deductions for these workers are less. This creates a larger 
net check to better support their families; workers without dependents 
net less. As to DOL's newer argument that FECA benefits frequently 
exceed the employee's pre-injury tax-home pay; there is no equity in 
being locked in at a rate that does not allow your usual pay increases. 
Additionally, uninjured coworkers are able to recoup tax withholdings 
by filing annual tax returns to add to their income; compensationers 
cannot. It is a ridiculous notion that claims examiners are being 
challenged by wage loss calculations with the technology that is 
available. The installation of a computer program or the use of a 
calculator would resolve the nuisance without going to the extreme of 
reducing benefits of worker families. APWU is opposed to any change 
that would burden families, or penalize workers because they are 
married and /or have children.
            Scheduled Awards
    Our primary objection to this proposal is based upon the change in 
pay rate percentages. It is our opinion that claimants should continue 
to receive their benefits based on their dependent status (75% 
dependents, 66\2/3\% no dependents) for reasons we offered under 
augmentation. Moreover, we object to the GS 11 Step 3 rate ($53, 
639.00) being used to calculate the value of scheduled awards. 
Historically, the employee's actual pay rate, at time of injury or 
first disability, whichever is greater, has been used to calculate 
scheduled awards. Today, this change would result in an increase for 
some claimants but a decrease for others. In the future however, it is 
likely that the GS-11 Step 3 rate would be even less reflective of the 
actual pay rates for some workers. Coupled with the DOL's recent 
adoption of the AMA Guide Sixth Edition, which significantly reduces 
impairment ratings and in turn considerably reduces the value of 
scheduled awards, the utilization of the GS 11 Step 3 rate would be a 
double-blow to compensationers who suffer a permanent loss of use.
    In order to be equitable and fair the APWU recommends that 
scheduled awards remain based on the employee's pay rate. We strongly 
urge the DOL to convert back to using the AMA Guide Fifth Edition, in 
order to facilitate a more accurate means to rate impairments. There 
are no regulations that require DOL to use the latest edition of the 
AMA. In fact, AMA Guides Task Force Member, Matthew Dake, reports the 
AMA Sixth Edition is a flawed process that produces flawed results.
            Death Benefits
    Our objection to this proposal is based upon the change in pay rate 
percentages. It is our opinion that survivors should continue to 
receive their benefits based on the historic compensatory rate of 75%. 
A reduction does little more than swipe income from the spouses and 
children of federal workers who died providing a public service to our 
country.
            Definition of New Claim for Disability
    APWU has strong objections to this proposal. This is a veiled 
attempt to corral all compensationers, even those with existing 
approved claims into the FIERA. Passage would gather individuals 
submitting short-lived disability claims caused by a need to recover 
from physical therapy, spinal injection, surgery or other intermittent 
medical treatment. It would net claimants that experience a spontaneous 
worsening of an already accepted medical condition, and would also 
capture claimants who have medically suitable job offers withdrawn by 
employers, as is happening within the Postal Service in cataclysmic 
proportion. This is perhaps the slyest of all the DOL proposals. The 
DOL leaves many with the impression that FIERA is prospective as it 
will only affect individuals with ``new'' claims, but in reality DOL is 
attempting to change the understood definition of what is ``new''. 
Passage of this proposal would afford employing agencies even greater 
favor by burdening a significantly greater number of injured workers 
and their families. All Compensation Act submissions require 
adjudication but traditionally only two are considered new claims. The 
definition of a new claim should remain limited to traumatic injuries 
and occupational disease.
            Burial Expenses
    This update is long overdue; however APWU would suggest the benefit 
be more reflective of actual final expenses. According to the National 
Funeral Directors Association, the average cost in 2009 was $7,755.00.
            Computation of Pay
    Workplace injuries are not supposed to cause loss to workers. 
Therefore, compensation is purposeful in including all of the pay 
factors that an employee would have been entitled to had they not been 
injured. Traditionally, compensation is based on an employee's salary, 
including night differential, Sunday premium pay and holiday pay, and 
for some workers includes overtime. Quite simply, APWU objects to 
compensation being paid at any rate other than the employee's actual 
pay rate at time of injury or first disability, inclusive of all usual 
entitlements to Sunday premium, night differential, holiday pay and 
where appropriate overtime pay. It should not be based or capped on an 
arbitrarily selected GS rating, which would create a pay increase for 
some employees and a decrease for others. It is neither fair nor 
equitable to generate savings for employers off the backs of injured 
workers. Furthermore, we will restate that it is a ridiculous notion 
that claims examiners are being challenged by wage loss calculations 
with the technology that is available.
            Waiting Period
    Continuation of Pay, its very spirit is stated in its name. It is 
in place to ensure employees and their families have an income while 
OWCP adjudicates their claim. Despite OWCP's testimony, it often takes 
60--120 days for claims to be approved and for wage loss compensation 
to begin. The APWU is opposed to federal employees being subjected to a 
three-day waiting period. All workplace injuries are real; even minor 
ones. This fact does not make them frivolous. Employees are subjected 
to the same scrutiny and requirements for minor injuries. They still 
need to meet the same five requirements to achieve claim approval, one 
of which includes a medical narrative with medical reasoning. A three 
day waiting period has been unjustly imposed upon Postal Workers in 
order to save money for the employer. The same should not be imposed 
upon federal workers. APWU would request the three day waiting period 
be removed from COP for postal workers. This action would satisfy the 
stated goal of uniformity and enable COP to fulfill its intended 
purpose.
            Sanction for Non-Cooperation with Nurses
    To impose sanctions for non-cooperation with nurses means to 
eliminate eligibility for wage loss compensation and scheduled awards. 
The nurse intervention program is already fraught with overzealous 
nurses who attempt to impede or redirect the prescribed medical 
treatment of the claimant's treating physician, and who impose 
themselves in private examinations and doctor patient discussions. APWU 
is opposed to giving these nurses the authority to have sanctions 
initiated without first giving claimants access to due process.
            Compensation for Foreign Nationals
    Upgrades to this provision are long overdue. However, since these 
foreign nationals are performing a public service for our country, APWU 
believes they should be compensated using the same percentage ratings 
that apply to our claimants (75% dependents, 66\2/3\% no dependents).
Conclusion
    Although we are very disappointed with portions of FECA, many of 
the FIERA proposals, and some of the Office's action, we still believe 
the Department of Labor is the best means available to handle the 
claims process for all federal and postal workers. APWU feels strongly 
that the Federal Workers Compensation Program (OWCP DFEC) should 
continue to strive to be a model program, not work to be comparable to 
insufficient state programs. To help OWCP meet its burden, it is our 
opinion that more claims examiners are needed. To eliminate some of the 
erratic decisions claimants are receiving all claims examiners should 
be required to receive, on a regular basis, more comprehensive training 
regarding regulations, procedures and precedent setting Employees 
Compensation Appeals Board decisions.
    We also believe efforts should be made to recreate the non-
adversarial atmosphere that the Program is intended to be. To help 
accomplish this we recommend more substantive outreach to employee 
representatives and more meaningful technical assistance to treating 
physicians and claimants who are often confused by the processes. 
Efforts should be made to make the Program more palatable for doctors.
    Many forgo treating claimants because of the extraordinary 
reporting requirements and low reimbursement rate for services. It is 
our opinion that OWCP should be granted moderate enforcement authority 
to compel employers, who have been skirting return-to-work obligations 
and other responsibilities to comply. We would also implore the 
Committee to work to create more meaningful safety and health mandates 
to protect workers, and provide better mechanisms to enforce them. 
These initiatives alone could reduce the overall cost of workplace 
injuries and disease.
    Bending policy and recreating procedures to favor agencies do 
little to maintain a fair and equitable atmosphere. Shrouding them as 
``modernization, return-to-work and administration simplification'' is 
disingenuous. As we examine the history presented by the Congressional 
Research Service, we would request that we be mindful not to regress 
but rather progress. Before we consider passing legislative changes, we 
must ensure they are meaningful changes and examine how the 
consequences of our actions will impact workers and their families.
    We thank you for your time and consideration regarding this 
paramount issue. I am available to answer any questions you may have to 
further clarify your understanding of the compensation processes and of 
our concerns.
                                 ______
                                 
    Chairman Walberg. Thank you, Ms. Carney.
    I recognize Mr. Lewis for your testimony. Thank you.

 STATEMENT OF ELLIOT P. LEWIS, ASSISTANT INSPECTOR GENERAL FOR 
   AUDIT, U.S. DEPARTMENT OF LABOR'S OFFICE OF THE INSPECTOR 
                            GENERAL

    Mr. Lewis. Good morning, Mr. Chairman, and members of the 
subcommittee. Thank you for inviting me to testify on the work 
of the Department of Labor Office of Inspector General 
regarding the FECA program.
    Over the years, the OIG has conducted numerous audits and 
investigations related to the FECA program. Our audits have 
identified opportunities for program administration 
improvements related to eligibility, determination of re-
employment status and customer service.
    Moreover, our investigations have focused on FECA claimants 
who work while continuing to receive benefits and all medical 
or other service providers who bill the program for services 
not rendered.
    As a result of our work and observations, for more than a 
decade, the OIG has been recommending changes to strengthen the 
FECA program with respect to the 3-day waiting period, benefit 
payments beyond the federal or social security retirement age, 
and access to federal data basis to aid in fraud detection.
    The OIG has recommended that the benefit structure be 
examined to determine whether a change in benefit rate should 
occur at some point at or near the normal federal or social 
security retirement age. FECA program benefits currently do not 
change once a beneficiary reaches the federal or social 
security retirement age.
    While the overwhelming majority of beneficiaries return to 
work within the first couple of years of their injury, a small 
percentage remain on FECA for life. According to OWCP, tax-free 
FECA benefits, which are set at 66 and two-thirds percent or 75 
percent, are typically more generous in federal retirement.
    We are aware the administration is considering a proposal 
to reduce tax-free FECA wage loss benefits to 50 percent at the 
normal social security retirement age. As the department begins 
to consider changes, careful consideration is needed to ensure 
that the percent of benefits that may ultimately be established 
will have the desired effect, while ensuring fairness to 
injured workers, especially those who will never be able to 
return to work.
    We have also recommended that the department be granted 
statutory access to social security wage information in a 
national directory of new hires. Information from these wage 
and employment data bases would enable the department to 
identify FECA beneficiaries who are working while receiving 
wage loss benefits.
    In addition to our recommendations, Mr. Chairman, there are 
a couple of related issues under review by the administration 
that are of interest given OIG's prior work. The department is 
considering a proposal to set a 70 percent level of benefits 
for all claimants regardless of whether they have dependents.
    The department indicates that this change will reduce over 
payments and documentation requirements. While we defer to OWCP 
as to the benefits structure level and what it should be, it is 
important to note that our prior audit work found that 
obtaining documentation on dependents has been a challenge for 
OWCP.
    For example, in 13 percent of FECA claims we reviewed 
during a 2007 audit, we found that compensation payments were 
continued even though claimants had provided--had not provided 
required evidence of dependent's continued eligibility. We also 
found that compensation payments had not been reduced for 
claimants who had provided evidence indicating a reduction was 
warranted.
    Therefore, as reforms are considered, it is important to 
examine the challenges posed by dependent eligibility 
documentation requirements given that FECA's a wage loss 
compensation program. The department is also planning 
improvements in its return-to-work process, another area which 
we have previously identified weaknesses.
    In 2009, we looked at FECA's claimants on the period roll 
whose re-employment or wage-earning capacity had not yet been 
determined. In other words, these claimants were receiving 
regular monthly wage loss compensation but OWCP had not 
determined whether these claimants could return to work in some 
capacity.
    At the time of our audit, their re-employment status had 
not been determined for more than 20,000 claimants, and almost 
3,000 had been in the temporary status for 15 years or longer.
    Thank you for the opportunity to testify on our work. I 
would be pleased to answer any questions that you or members of 
the subcommittee may have.
    [The statement of Mr. Lewis follows:]

 Prepared Statement of Elliot P. Lewis, Assistant Inspector General for
      Audit, Office of Inspector General, U.S. Department of Labor

    Good morning, Mr. Chairman and Members of the Subcommittee. Thank 
you for inviting me to testify on the work of the Office of Inspector 
General (OIG), U.S. Department of Labor (DOL), in the Federal 
Employees' Compensation Act (FECA) program. My name is Elliot Lewis, 
and I am the Assistant Inspector General for Audit in the OIG. Today I 
will discuss the OIG's recommendations for improvement in this 
important program. As you know, the OIG is an independent agency within 
the Department of Labor, and the views expressed in my testimony are 
based upon the independent observations and recommendations of the OIG, 
and are not intended to reflect the Department's position.
    DOL administers several programs and statutes designed to provide 
and protect the benefits of workers. FECA is a comprehensive workers' 
compensation law covering some three million Federal and Postal workers 
around the world with work-related injuries or occupational diseases. 
FECA benefits include payment of medical expenses and compensation for 
lost wages. In the case of work-related deaths, survivor benefits are 
payable to family members.
    The Office of Workers' Compensation Programs (OWCP) is responsible 
for administering the FECA program and ensuring that it serves injured 
workers in an efficient and effective manner. It is important to note 
that FECA benefits constitute Federal workers' sole remedy for a work-
related injury or death, as employees or surviving dependents are not 
entitled to sue the government to recover damages. Therefore, it is 
incumbent on OWCP to promptly adjudicate claims, pay medical bills and 
compensation in accepted cases, and do everything possible to help 
employees return to work. It is also important to note that the 
overwhelming majority of injured workers return to work within the 
first year of injury.
    FECA benefits are paid from the Employees' Compensation Fund, which 
is principally funded through chargebacks to the Federal agency that 
employs the injured or ill worker. Therefore, the FECA program affects 
the budgets of all Federal agencies and quasi-Federal agencies such as 
the United States Postal Service. For the Chargeback Year ending June 
30, 2010, the FECA program provided almost $2.8 billion in compensation 
to approximately 250,000 workers and survivors for work-related 
injuries or illnesses.
    Over the years, the OIG has conducted numerous audits and 
investigations related to the FECA program. Our audits have identified 
opportunities for program administration improvements related to 
eligibility, determination of reemployment status, and customer 
service. Moreover, our investigations have focused on FECA claimants 
who work while continuing to receive benefits, and on medical or other 
service providers who bill the program for services not rendered. We 
also process hundreds of complaints through our hotline from 
dissatisfied claimants. These complaints generally involve 
disagreements with OWCP's adjudication of claims. As a result of our 
work and observations, for more than a decade the OIG has been 
recommending changes to strengthen the FECA program with respect to: 
the 3-day waiting period, benefit payments beyond the Federal or Social 
Security retirement age, and access to Federal databases to aid in 
fraud detection.
Recommendations to Improve the FECA Program
            Changing the 3-Day Waiting Period
    FECA currently has a provision that allows employees who sustain 
work-related injuries to receive continuation of pay (COP) for a period 
not to exceed 45 calendar days. The intent of this provision is to 
eliminate interruption of the employee's income while OWCP is 
processing the claim. The FECA legislation provides for a 3-day waiting 
period which is intended to discourage frivolous claims. However, as 
currently written, the legislation places the 3-day waiting period at 
the end of the 45-day COP period; therefore negating the purpose of the 
3-day waiting period. In 2006, the legislation was amended to require 
that the 3-day waiting period for Postal workers precede the 45-day 
continuation of pay period. We continue to recommend moving the 3-day 
waiting period to the beginning of the 45-day continuation of pay 
period for all injured Federal employees.
            Reviewing the Benefit Structure for Retirement Age 
                    Beneficiaries
    As currently designed, FECA program benefits do not change once a 
beneficiary reaches the Federal or Social Security retirement age. 
While the overwhelming majority of FECA beneficiaries return to work 
within the first couple of years of their injury, a small percentage 
remain on FECA for life. According to OWCP, tax-free FECA benefits 
which are set at 66\2/3\ percent (or 75 percent if the claimant has 
dependents) are typically more generous than Federal retirement. The 
OIG recommends that this benefit structure be examined to determine 
whether a change in benefit rate(s) should occur at some point at or 
near the normal Federal or Social Security retirement age.
    We are aware that the Administration is considering a proposal to 
reduce tax-free FECA wage loss benefits to 50 percent at the normal 
Social Security retirement age. As the Department begins to consider a 
change to the benefit structure, careful consideration is needed to 
ensure that the percent of benefits ultimately established will have 
the desired effect while ensuring fairness to injured workers, 
especially those who have been determined to be permanently impaired 
and thus unable to return to work.
            Accessing Earnings Information
    Our third recommendation has been for the Department to be granted 
statutory authority to access Social Security wage information and the 
National Directory of New Hires (New Hire Directory), which is 
maintained by the Department of Health and Human Services. Information 
from these wage and employment databases would enable the Department of 
Labor to identify FECA beneficiaries who are working while receiving 
wage loss benefits. If it is determined that a claimant has unreported 
outside employment or income, any inappropriately paid benefits can be 
reduced or withdrawn, and criminal remedies may be pursued. Currently, 
the Department can only access Social Security wage information if the 
claimant gives it permission to do so. Obviously Mr. Chairman, 
claimants who are defrauding the FECA program are unlikely to willingly 
grant OWCP or the OIG the authority to access information about their 
earnings. Likewise, access to the New Hire Directory, which contains 
employer-reported information on newly hired individuals, is not 
available to OWCP or the OIG. Congressional action would be required 
for OWCP and OIG to have access to Social Security data and the New 
Hire Directory.
    As previously indicated, Mr. Chairman, the OIG investigates FECA 
claimant fraud, as well as fraud committed against the program by 
medical and other service providers. Whether it is a mechanic for the 
Navy who receives total disability benefits while operating his own 
business, or a Smithsonian security guard who fails to disclose his 
employment with a private security firm, our case work demonstrates the 
need for OWCP and OIG to have access to these databases.
Related Issues
    In addition to our recommendations, Mr. Chairman, there are a 
couple of related issues under review by the Administration that are of 
interest to the OIG based on our prior audit work. As you know, 
currently OWCP requires that claimants receiving payments at the 75 
percent rate periodically verify their marital status and the 
eligibility of dependent children. Beneficiaries in death cases are 
required to annually submit a report regarding their marital status and 
continuing eligibility of dependent children. A beneficiary is required 
to submit proof of continuing eligibility for children over the age of 
18 who are students or who are physically or mentally incapable of self 
support. We are aware that the Department is considering a proposal to 
set a 70 percent level of benefits for all claimants regardless of 
whether they have dependents. The Department indicates that this change 
will reduce overpayments and documentation requirements. While we defer 
to OWCP as to what the benefit structure and level should be, it is 
important to note that prior audit work found that obtaining 
documentation on dependents has been a challenge for OWCP. For example, 
in 13 percent of FECA claims we reviewed during our 2007 audit of 
OWCP's largest FECA district office in Jacksonville, Florida, we found 
that compensation payments were continued even though claimants had not 
provided required evidence of their continuing eligibility. We also 
found that compensation payments had not been reduced on claims for 
which claimants had provided evidence indicating a reduction was 
warranted. Therefore, as reforms are considered, it is important to 
examine the challenges posed by dependent eligibility documentation 
requirements given that FECA is a wage-loss compensation program.
    The Department is also planning improvements in its return-to-work 
processes and incentives that do not require legislative action. This 
is another area for which we believe improvements are needed based on 
our prior-audit findings. Specifically, in 2009 we looked at FECA 
claimants whose reemployment or wage-earning capacity had not yet been 
determined. The audit, which examined cases from OWCP's Jacksonville 
and New York District Offices, found that in 11 percent of the cases 
reviewed, claims examiners did not perform critical required activities 
such as referring claimants for nursing and vocational rehabilitation 
to determine if claimants could return to work in some capacity. We 
also found lax monitoring of cases. For example, in 34 percent of cases 
reviewed, claims examiners did not take timely actions on referrals for 
second opinions or independent medical examinations, and/or had not 
acted on completed medical examinations. Furthermore, we noted at the 
time that the reemployment status had not been determined for 37 
percent of claimants (20,236 out of 54,674) and that 2,860 claimants 
had been in this temporary status for 15 years or longer.
Conclusion
    In conclusion, Mr. Chairman, our work and recommendations have 
focused on improving the operation and integrity of the program. Our 
work continues to this end. For example, we are currently looking at 
the Department's efforts to comply with recently-enacted improper 
payments legislation, as well as whether OWCP has adequate controls to 
prevent improper durable medical equipment and medical travel payments. 
Mr. Chairman, this concludes my written statement; I would be pleased 
to answer any questions you or the other members of the Subcommittee 
may have.
                                 ______
                                 
    Chairman Walberg. Thank you, Mr. Lewis.
    And we thank the full panel.
    And, members of the subcommittee, I think we have a high 
standard to reach up to in the brevity efficiency of their 
testimonies in keeping, generally, to the time limit and 
underneath that.
    Let me begin the questioning. Asking Mr. Steinberg, one of 
the challenges associated with modernizing workers' 
compensation is transitioning individuals from collecting FECA 
benefits to retirement benefits.
    Many long-term beneficiaries may find themselves in 
situations where they have substantial gaps in contributions to 
retirement plans. Has there been any discussion on allowing 
individuals receiving workers' compensation benefits to 
contribute a portion of these funds to a retirement account?
    Mr. Steinberg. No, sir. There have not been those 
discussions. We have been in the discussions with OPM with 
regards to the proposal to move individuals to the OPM 
retirement program, if you will. We see complications 
associated with that, both from a management as well as from an 
administration perspective.
    I think it has been pointed out. One of our key tenets is 
to try to ensure opportunities for return to work, and if we 
are able to keep individuals on the FECA program, then even 
after retirement age, we do have the opportunity to find work 
positions for them and return them to work.
    So, again, we have not had discussions about that type of 
contribution. That is something that would be complicated and 
an unfunded mandate at this point.
    Chairman Walberg. Would be complicated, but if there were 
provisions that--even voluntarily with the compensated 
individual to be able to contribute a portion to a retirement 
account and not be caught in a trap at the end of their 
compensation period and in retirement years with nothing to 
show for it, nothing available wouldn't that be a direction 
that would be good to go?
    Mr. Steinberg. That is certainly, sir, something that can 
be complicated--contemplated. It is an issue that should also 
be discussed with OPM, who really is the expert in terms of 
retirement compensation and pensions.
    Chairman Walberg. Okay. Thank you.
    Mr. Lewis? In your testimony, you recommended the OWCP be 
granted access to social security wage information and the 
national directory for new hires. How would access to this 
information benefit FECA, and is this in the Department of 
Labor's proposal?
    Mr. Lewis. Yes, I believe it is their proposal--access to 
the social security records. I am not sure that the National 
Directory of New Hires is in the proposal. It would be a more 
efficient way for them to focus in on claimants who may have 
underreported or not reported earnings--claimants we find in 
our investigations that have returned to work that they have 
not reported that to OWCP. Currently, that is a self-
certification.
    OWCP really has no way to verify if what the claimants are 
reporting is correct. An automated match would allow them to 
more efficiently focus in on the claimants that they need to 
investigate further.
    Chairman Walberg. Okay. Thank you.
    Mr. Bertoni, in 1996, the GAO reported two proposals for 
addressing benefit changes for current FECA beneficiaries once 
they reach retirement age. How would reforms safeguard 
employees' retirement? Secondly, what types of calculations and 
considerations would be used to determine retirement benefits?
    And then, finally, what affects would this have on 
agencies' budgets in regards to paying FECA costs? I would be 
glad to go through those three questions again.
    Mr. Bertoni. How would reform help? The second one was?
    Chairman Walberg. Reform safeguard employee's retirement. 
What types of calculations and considerations would be used to 
determine retirement benefits, and then, thirdly, what affects 
would this have on agencies' budgets in regards to paying FECA 
costs?
    Mr. Bertoni. I think the short answer is, we don't know. 
Based on the prior work that we did--I guess the questions that 
we surfaced with that is exactly what you really want to do 
when you are starting to go down the road of thinking about 
implementation.
    We tried to tease out the issues that you need to consider 
as you develop these proposals and you think about 
implementation. So how would it help? I think, from just a 
strictly budgetary standpoint, the agency has to look at if we 
cut benefits by 50 percent, what is the upside in terms of cost 
savings.
    But I do believe an important issue or consideration is to 
know where the inequities might occur also to assess the data, 
look at where at some point who may be worse off--how big that 
population is, and then it is a policy question as to what you 
want to do about that.
    Chairman Walberg. Thank you.
    I recognize the gentlelady from California, Ranking Member 
Woolsey.
    Ms. Woolsey. Thank you, Mr. Chairman.
    Mr. Steinberg? Just following on the question between the 
chairman and Mr. Bertoni, you and we are going to stay on, I 
believe, this recommendation in your testimony that FECA 
benefits are cut from 75 to 50 percent at retirement age 
providing that the average worker is the comparable.
    You don't address what happens to the lower income workers 
under this scenario. I am wondering did you work that out? Do 
you know who wins and who loses? Mr. Bertoni said they weren't 
sure about that. I mean, what happens to the lower income 
worker?
    Mr. Steinberg. It is difficult to segregate between the 
lower income worker, the average income worker, the high income 
worker. What we look at is, in essence, the way that the 
program is implemented and, I think, has been discussed. The 
program has an annual increase. I would suggest that this year 
reflects the advantage of the program, where using the CPI 
index, an individual is receiving a cost of living increase, 
whereas the normal federal employee is not receiving an 
increase this year.
    Ms. Woolsey. Well, I would like to suggest that there is 
modern 21st century technology. I would think there could be a 
program set up easy pie and figure out who wins and who loses 
when you make a cut to that degree. I mean, that is 25 percent.
    So I hope we can do that before we can buy into a program 
that saves a lot of money for the federal government, but on 
whose back is our question.
    Mr. Steinberg. You make a very good point, and we will 
research that further.
    Ms. Woolsey. Thank you, very much.
    Ms. Carney. The department's testimony implies that workers 
have a disincentive to return to work once they are healed, and 
that we should cut the replacement benefits to encourage return 
to work.
    One, I would like you to comment on do you see this as 
being something that actually happens with the workforce? And, 
two, they also have a great recommendation, I believe, but you 
comment on it also, to put in place a plan to help workers re-
enter the workforce and be, you know, with them throughout the 
incidents of their injury.
    So would you respond to both of those?
    Ms. Carney. Yes, and you might have to help me with the 
reminder on the second part----
    Ms. Woolsey. Okay.
    Ms. Carney [continuing]. When I get through with the 
first----
    Ms. Woolsey. I will.
    Ms. Carney [continuing]. Part, but as I mentioned, you 
know, I think the losses that I have listed out already 
demonstrate that there isn't a disincentive for employees not 
to return to work. To the contrary, if they return to work, 
they would be getting, you know--kick in their pay increases 
again. It would start bringing up their family medical leave, 
and they would be able to contribute since the greatest 
majority are FERS employees in TSP.
    And let me just say on the TSP, you know, the average 
worker giving 10 percent with a matching contribution from the 
employer of 5 percent over a course of 30 years--these folks 
that are out on compensation extended periods: $416,000 in 
retirement savings lost. So there is a great incentive for them 
to get back to work.
    I also spoke on the national reassessment programs that the 
Postal Service has. When I said thousands, I mean thousands of 
postal workers have come back to work following compensable 
injury, and thousands of them were put back out of work under 
these programs. So I think that is----
    Ms. Woolsey. Explain to me what you mean by that.
    Ms. Carney. It is a complicated program, but----
    Ms. Woolsey [continuing]. And then what happens.
    Ms. Carney. But basically, the national reassessment 
program--you know, there is job offers when you come back to 
work. That happens before the NRP was in place, and then the 
employer decided, well, you know, we need to look and see if we 
really have work for these workers.
    And while the work still existed--and that was the premise 
of the program--they actually took those workers that were 
offered those job offers--that were conducive to their medical 
restrictions and said, sorry, that is not there anymore and 
they have got other workers, you know, working in behind them.
    So the work was withdrawn, or if somebody was newly 
injured, it was just not offered, but there is work there. So, 
okay, so to answer the second part of the question, and you 
will have to remind me.
    Ms. Woolsey. Well, the department's suggesting a plan where 
the manager works with the employee, I would assume, the 
manager.
    Ms. Carney. You are talking about the federal 
reemployment--our concern with the subsidy really lies wholly 
with procedures that are called loss wage earning capacity 
determinations. And this is where, you know, an employee who is 
collecting wage loss compensation--if they are employed--would 
have their wage loss compensation reduced.
    We have no objection with that, but when the subsidized 
employment ends, there is no mechanism--and it is likely to 
end, because it is subsidized--there is no mechanism to 
reinstate that wage loss compensation, and we have to assume 
those jobs are going to be available, and if they don't get one 
of those positions, they also can have their wage loss 
compensation reduced because the job was available but the 
employee didn't obtain it through no fault of their own.
    Now, the department will tell you can't use federal jobs to 
do wage earning capacity determinations, but as I said in my 
earlier testimony, they will look to private sector jobs for 
that purpose to reduce the wages, and this is how they will 
achieve savings on the back of injured workers for their 
program.
    And while I think it is a great idea to get workers back 
into employment, I think we have to make this favorable by 
eliminating the LWEC procedures first.
    Ms. Woolsey. Thank you.
    Chairman Walberg. Thank you.
    And I want to recognize the chairman of the full committee, 
gentleman from Minnesota, and especially today since you 
finished up our markup at 2:30 this morning in another 
committee, and ended up being the first one to arrive to this 
committee. I am delighted to introduce you before you fall 
asleep.
    Mr. Kline. You know me too well. Thank you, Mr. Chairman.
    Thank all of the witnesses for being here today, for your 
testimony, for engaging in this issue, and educating us in this 
issue.
    Mr. Steinberg, the administration has a plan, which you 
have been talking about. Are you going to formally introduce 
legislation to the Congress. And, if so, when might we expect 
that?
    Mr. Steinberg. No, sir.
    Mr. Kline. No.
    Mr. Steinberg. We are here to provide technical assistance. 
We have a number of proposals that we are anxious to talk with 
you about, but a formal legislative proposal will not be 
submitted.
    Mr. Kline. Okay. Thank you.
    I want to pick up on a couple of things we have already 
talked about. One, let's go to the--and I guess I will stay 
with you, Mr. Steinberg, since you have the plan out there and 
you are dealing with this all the time--on the issue of social 
security records, which was discussed earlier, you would like 
the ability to have direct access to those records.
    As I understand, it would simplify your ability to process 
claims and make the job easier if you had direct access.
    Mr. Steinberg. Yes, sir. That is correct.
    Mr. Kline. So what is happening now? You can ask for the 
information, correct, on a routine basis, or do you have OWCP 
going up to employees and they are refusing to give the 
information--what happens now?
    Mr. Steinberg. You characterized it correctly. On an annual 
basis, we ask for information about medical, about wages, about 
dependent status and so forth. If we don't receive the 
information, or if we believe that there are issues associated 
with the information, on a case-by-case basis, we contact 
Social Security, and obviously, it is a time-consuming process 
in terms of interacting with the individuals, getting the 
information, making sure that the information is complete.
    What we would like to be able to do is to have, if you 
will, ongoing access to all files associated with our claimants 
so that any point of time, we can access the information, and 
we can verify the accuracy of the information.
    Or, if we see that there are issues, then we will share it 
with the IG or with the IG of the employing organization. So, 
again, it is a matter of increased efficiency for us.
    Mr. Kline. I am not at all sure that I am opposed to that, 
but I am just trying to understand the scale of--or scope of 
the problem. Is this something that happens two or three times 
a year, hundreds of times a year, thousands of times a year 
where you are just having difficulty getting the information.
    Mr. Steinberg. It happens hundreds of times a year. So, 
again, it is time consuming for our claims examiners. It delays 
the process at times and, again, we think that this would 
improve the situation both for the claimants as well as for us 
so that we can reinvest our time into reemployment type of 
activities.
    Mr. Kline. Okay. Thank you. I want to stay with you, if I 
might, because I, like Ms. Woolsey, am interested in this 
putting people back to work part of the program.
    Right now, according to your testimony, there are 
limitations in the areas of vocational rehabilitation and the 
return to work process. And you touched on that in testimony, 
but can you take a little bit of time here and expand on what 
is in the way here?
    Mr. Steinberg. Certainly. There are a few different aspect 
of this. One is the timing. As we know--and I worked at the 
Department of Veterans Affairs for 9 years and worked closely 
with the medical community and learned from them the earlier 
that we can get an individual diagnosed and into 
rehabilitation, the more likely it is that we are going to have 
a timely opportunity for return to work.
    So being able to accelerate that process when we know that 
an individual is most likely permanently disabled, we would 
like to begin that process. The next stage is working with the 
claimant and working with their physicians to develop a 
rehabilitation plan, and that is a plan that would look at the 
issue, the injury--look at the opportunities for employment and 
then work through, if you will, the rehabilitation process.
    The last phase of that is the assisted reemployment where 
right now we work with private sector firms and, granted, the 
universe of claims that we have actually placed is less than 
200. But in this circumstance, we would be able to subsidize 
the payment and, again, this is cost neutral, because we 
already collect the information in terms of chargeback.
    This is the wage replacement, and it would be used to 
subsidize the employment. It is a great opportunity for us to 
help people get back to work, and I have to emphasize that that 
is really our primary issue and focus is returning people to 
work.
    Mr. Kline. The light has turned yellow here, and I want to 
just make sure I understand this assisted reemployment piece. 
So far, you have only been able to place the individual with 
the private sector, or can you--have you been able--only to the 
private sector not another federal agency?
    Mr. Steinberg. That is correct. We only have permission to 
do it in the private sector. We are asking for the ability to 
do it in the federal government. We think it is very promising.
    Mr. Kline. Okay. Thank you, very much.
    I will yield back, Mr. Chairman.
    Chairman Walberg. Thank you.
    I recognize the gentleman from New Jersey, Mr. Payne?
    Mr. Payne. Thank you, very much.
    Ms. Carney, the DOL testimony implies that workers lack 
motivation, sort of, as the other questioners--to return to 
work when capable and, thus, wage replacement benefits should 
be cut to create incentives to force them to return to work. 
Could you address this or give me your opinion on this matter?
    Ms. Carney. On the motivation?
    Mr. Payne. Yes, or do you agree with the DOL that----
    Ms. Carney [continuing]. Partially addressed it with 
Ranking Member Woolsey, but let me suggest--because we talked 
about the national reassessment process and the Postal Service 
not letting those employees come in and those losses, but one 
of the points I didn't get to--so I can build on what we have 
already spoke about is my recommendations on how to correct 
that.
    And I would recommend that legislation be considered to 
eliminate the loss wage earning capacities on those constructed 
positions, which is what we talked about--constructed positions 
is when it is--you didn't actually get it. You know, because 
that is what motivates the employers--hey, if I can get 
people--you know, not take them back to work and rather dump 
them on another employing agency, I don't get hit with the 
chargeback. In the meantime, it is on the back of the injured 
worker.
    So those wage earning capacity determinations really 
motivate employers not to return their injured workers--at 
least in the case of the Postal Service, and it was, like I 
said, cataclysmic in that case, not to return their injured 
workers to employment. Or when they did, it was just for a 
brief period of time, because the regulation says if you have 
been returned back to work for 60 days and they put you out, 
you know, then they can LWEC you too, because you no longer 
have a loss in wage earning capacity.
    So I think we really have to spend some time--I know I am 
getting a little into the weeds--but as we look at this 
focusing on that. The other thing, I think, that would be 
helpful is when an employing agency says there is no work 
available--right now, there is no measures in place for the 
Department of Labor to challenge that.
    They have to take them at their word, and I think there 
should be mechanisms put in place where the employing agencies 
would actually have to prove that, you know, they truly don't 
have work available before these employees are pushed off onto 
another agency and, you know, subsidy's going to cost 
something. You don't want to burden the program with anything 
else. I hope that addresses part of your concerns.
    Mr. Payne. Yes. I have another question in regard--in 1998 
OSHA became involved in the Postal Service, and since OSHA 
coverage began at that time, do you have any kind of 
verification that there has been a noticeable reduction in 
workplace injuries since OSHA has come in and, I assume, makes 
suggestions and so forth?
    Ms. Carney. Since OSHA came in, there has been a huge 
reduction with postal employee claims being filed. You know, 
that was in 1998. I came into office in 2000--I know, one, the 
reports had said there were like 84,000 postal workers that 
filed claims. We are now at 40,500.
    Now, part of that, obviously, is because we have had a 
reduction in employee population, but it is not that vast 
considering the cut in half. And also, there is people that are 
just scared to death to file claims at this point because of 
the national reassessment process. But you can't discount OSHA 
has had a very positive impact on safety on the workforce, 
whether it is because of their programs or because of 
enforcement.
    And where we see the best progress is when there is these 
voluntary programs where management and unions can participate. 
And, of course, you have got to get management to, you know, 
buy into that program. But, yes, it has been successful.
    Mr. Payne. Thank you. Thank you, very much.
    Mr. Lewis, in your testimony, you said ``careful 
consideration'' needs to be given to DOL proposal to reduce 
FECA benefits at retirement age from 75 percent to 50 percent. 
What are the questions that should be asked, in your opinion, 
to ensure ``careful consideration'' is given as this is being 
moved forward?
    Mr. Lewis. Well, I think a lot of those have been raised 
this morning through Ms. Carney's testimony and GAO's but, we 
would advise to look at, you know, are you paying a benefit 
that is fair and equitable and that you are not--you don't have 
an adverse impact that you are putting someone in a worse 
situation than they would have been in.
    So to look at those issues of where were they at their 
career when they became injured. You know, what has happened to 
them since then? What would have happened to them? What 
position would they have been in that kind of analysis.
    So I think it is, you know, it is certainly worthwhile to 
look at this and reassess it, but I think as GAO, particularly, 
has brought out in their report there, there are a lot of 
issues that need to be addressed to make sure you don't have an 
unintended consequence.
    Mr. Payne. Thank you, very much.
    Yield back the balance of my time.
    Chairman Walberg. Thank the gentleman.
    Now I turn to recognize the gentleman from Indiana. Dr. 
Bucshon?
    Mr. Bucshon. Good morning, and thank you for testifying in 
front of our committee.
    Thank you, Mr. Chairman.
    I was a practicing physician prior to being in Congress. So 
I have some questions related to the assessment of the 
disability in the first place and ongoing disability. In 
circumstances that are not otherwise obvious--there is obvious 
disabilities and--so, Mr. Steinberg, do you think we have an 
adequate program for the federal government to assess the 
disability of our workers initially or as an ongoing process?
    Mr. Steinberg. Yes, sir, I believe we do. Again, one of the 
key components, I believe, of the program is the right to first 
choice, if you will, for our patients to choose their 
physician.
    We think this is core. We think it is extremely important 
in terms of having a comfortable dialogue, and so forth. We 
believe that the physicians provide a good and reasonable 
assessment of the circumstance.
    As I talk about in terms of the rehabilitation plan, I 
think, again, that provides a forum--an opportunity for 
continued dialogue between the department, the claimant and the 
physician in terms of the progress that is being made and when 
the individual will be ready to return to work and in what 
capacity they can return to work.
    So, again, I think we have a good program, and I think we 
have an opportunity to improve the interaction with the 
physicians.
    Mr. Bucshon. Great. That is good to know because, as a 
physician, I can tell you the subjectivity involved in 
assessing a worker's ongoing disability is very, very 
difficult. And I was in cardiovascular surgery, but if you are 
in a special that deals with back injuries, for example, like 
orthopedics or neurosurgery, it is very difficult and partially 
subjective process, and I am glad to hear that you feel that 
the government has an adequate program to assess that.
    Ms. Carney, I am interested in just a--would you be opposed 
to a reduction in benefits or compensation that the DOL's 
proposing in any circumstance? Because it seems like that with 
your testimony under whatever circumstance that might be in-
place that would decrease any reimbursement for anyone, you 
would be opposed to.
    And, if not, I would like to know under which circumstances 
that you feel would be appropriate that might result in 
decreasing compensation even though that compensation would 
bring these folks in line with what is fair and--in regards to 
the rest of our federal workers who are not disabled.
    Ms. Carney. Well, first let me say, if something is fair 
and equitable, certainly receptive to embracing it. The problem 
I am having with these proposals isn't I am being contrary for 
the sake of being contrary, it is because I don't believe in my 
heart of hearts that it is fair and equitable.
    You know, when these employees--you are saying 70 percent--
--
    Mr. Bucshon. Let me say, for example, the proposal that 
would bring in line where people who are disabled are--continue 
to get disability benefits after retirement age when those are 
clearly exceeding what if they were--if they had continued to 
work as a federal worker and then retired, their benefits would 
be slightly less than that.
    Ms. Carney. Okay, you are making the comparison with the 56 
percent of the----
    Mr. Bucshon. Well, I mean, I am just trying to determine 
the circumstances which you have--which you feel like that a 
decrease in compensation would be--under their proposal----
    Ms. Carney. It would be favorable if and when we could put 
something in place to substitute the fact that these folks have 
no means to contribute to their Thrift Savings Plan or receive 
matching funds. Now, I am not--you know, that is one way. We 
could create another type retirement fund but, again, you know, 
you got to remember under TSP, and the majority of these folks 
are actually FERS not CSRS.
    You know, it was put in place in, what, 1983 or 1984, so 
you are talking 27 or 28 years ago. So at this point, and if we 
are being prospective, we are going to be talking about FERS in 
place.
    And then we also have to keep in mind--because you brought 
up, like, wage loss compensation--that those folks aren't 
getting their pay increases. I mean, so these things as they 
are currently--the 75 percent--is comparable as far as the 
retirement.
    We would be amenable to, you know, but you have got to make 
up for the loss somehow, and the way it is just a reduction 
just because of your age--I don't think it is a very fair and 
an equitable comparison. Fifty-six percent of somebody that 
actually got to go through the Postal Service for 30 years or 
the federal government for 30 years, and they get, you know, 
granted, you get the COLAs, the CPI COLAs, which have only 
averaged 2.1 percent over the last 10 years, but what happened 
to their step increases and all the other increases that they 
were supposed to be getting along the years.
    The annuitants have gotten that, and that is, that makes it 
a true high three, where the compensationers don't. They 
haven't gotten those pay increases. They don't have a true high 
three. They are still down here. So 50 percent to 56 percent 
really isn't even a equitable comparison, and that is a CSRS 
thing anyway, and we really should be looking at FERS at this 
point, because that is where we are at or going.
    Mr. Bucshon. Thank you.
    I yield back.
    Chairman Walberg. I thank the gentleman.
    And I recognize the gentleman from Indiana. Mr. Rokita?
    Mr. Rokita. Thank you, Mr. Chairman.
    I appreciate the witnesses as well.
    My first question is to Mr. Szymendera. Am I pronouncing 
that right?
    Mr. Szymendera. Szymendera.
    Mr. Rokita. Szymendera?
    Mr. Szymendera. Yes.
    Mr. Rokita. You are not Polish, are you?
    Mr. Szymendera. I am.
    Mr. Rokita. Okay. With a name like Rokita, I get to ask 
those kind of questions, okay? And anytime you see a ``z'' and 
a ``y'' together, you start wondering if you are a member of my 
tribe. So welcome.
    You testified that under the Internal Revenue Code, 
workers' compensation benefits are not subject to federal 
income tax. Is this true with state plans as well?
    Mr. Szymendera. Yes. The federal income tax does not apply 
to any workers' compensation benefits paid whether it is under 
a state plan, whether it is under FECA, or whether it is under 
the other federal workers' compensation plan, which is 
Longshore and Harbor Workers' Compensation Act.
    Mr. Rokita. What is the rationale?
    Mr. Szymendera. Workers' compensation benefits have never 
been treated as earnings or income. And so if you go all the 
way back, as I said, this is--we are in the 100th year of 
workers' compensation--there has always been a sense that 
workers' compensation benefits are different than income, and 
because they are different, they are treated differently--not 
taxed, as I think Ms. Carney has said, for example, you know, 
not eligible for TSP and things like, things of that nature.
    Mr. Rokita. Fair enough. Thank you, very much.
    Mr. Bertoni, your testimony stated that if FECA 
beneficiaries at retirement age are converted to the federal 
retirement system, an agency such as OPM would have to develop 
an expertise that it currently doesn't have. Can you elaborate 
on that, and why is that such a hurdle?
    Mr. Bertoni. Just both FECA and OPM have done different 
things for many years. So if you start putting--melding two 
systems, I am not--not to say that it is not possible, but you 
are now asking an organization that, perhaps, has dealt with 
the retirement and--and benefits side of retirement to become 
case managers and case workers involved in the rehabilitation 
of the recipient.
    So it is not impossible. It is just consideration when you 
meld the two systems together, they are going--who is going to 
do what and when?
    Mr. Rokita. That doesn't sound that difficult.
    Mr. Bertoni. It is not impossible. It is just----
    Mr. Rokita. Okay.
    Mr. Bertoni [continuing]. Consideration as we throw that 
out there, there are simpler ways to do things and there are 
more complex ways to do things. And it is just--on the 
continuum, it is somewhere in the middle.
    Mr. Rokita. Okay. Thank you. Appreciate that.
    And then, Ms. Carney, in your written testimony, you 
mentioned a number of factors that make it difficult for 
claimants to find and keep doctors. And you talked about the 
rule example and how you--that person might be limited to a 
physician's assistant or nurse practitioner.
    Have you reviewed the administration's proposal to allow 
for the limited utilization of physician's assistants and nurse 
practitioners, and do you have a----
    Ms. Carney. No objection there. We think it is long over 
due, especially because it is so difficult, you know, because 
of a lot of other reasons, but it is so difficult to find 
physicians that are willing to participate in the plan.
    It may look like a lot, you know, on paper, but if you 
are----
    Mr. Rokita. Right.
    Ms. Carney. To answer your question, no. No problem.
    Mr. Rokita. Okay. Maybe I misunderstood your testimony. I 
just wanted to clear that up.
    Ms. Carney. Okay.
    Mr. Rokita. I yield back, Mr. Chairman. Thank you.
    Chairman Walberg. I thank the gentleman.
    And I think the panel for shedding on this subject.
    And before making closing remarks, I would turn to the 
ranking member, Ms. Woolsey, for closing remarks.
    Ms. Woolsey. Thank you, Mr. Chairman. I would like to 
submit two statements for the record. One is from the National 
Treasury Employees' Union. The other is from the National 
Active and Retired Federal Employees' Association.
    Chairman Walberg. Without objection, so ordered, and I 
believe we have copies already and additional ones now, thank 
you.
    Ms. Woolsey. Now you have two.
    Chairman Walberg. We always can use more, huh?
    Ms. Woolsey. Mr. Chairman, I want to be very clear that 
when I was supporting the Department of Labor's--what I 
thought--effort in assisting in returning employees, I meant 
returning to their original or comparable to their original 
employment. I am not talking about sending them off to some 
school to give them start over employment after they have 
become experts in what they were doing for the federal 
government.
    I mean, there is a way to do this. It really does make a 
difference in employees feeling welcome back, getting back 
sooner, maybe restrictive duties--absolutely, but not punished 
for it. And I just would like to see us work together it sounds 
like we have got a system that in the long run doesn't work out 
so well.
    Thank you, witnesses. I think you have been very 
informative. There are many, many questions, I think, that 
still remain about the impacts to beneficiaries, whether 
employing agencies can do more to hire injured workers, whether 
there are opportunities to prevent accidents that cause 
workplace injuries in the first place.
    , I was a human resources professional for 20 years, and I 
am telling you, anytime we worked with workers' comp, brought 
them into the plant and they gave us ideas and suggestions, our 
workers' comp claims went way down, because they knew what was 
going wrong. And I think that is something we ought to be 
thinking about and then training our managers and training the 
employees. Prevent workers' comp claims in the first place.
    The testimony from the Government Accountability Office, 
Mr. Chairman, identified a list of questions that merit more 
consideration before we legislate any changes, I believe, to 
this very, very complex program. Because it impacts so many 
workers, and once we change something in our lifetime, it won't 
get changed again.
    So I would like to suggest if we could that we would--and I 
would welcome the opportunity to work with you to gain 
assistance in securing more information from GAO in a valid way 
and assessing these administrative proposals and how it 
impacts--permanently impacts injured workers and have some case 
studies, maybe, involved.
    So thank you for today, and thank all of you.
    Chairman Walberg. I thank the gentlelady.
    And, again, thank you to the panel. This is a subject of 
great importance in a time of economic challenge in this 
country, in a time when there is a, in some sense, a general 
feeling that government employees don't earn their pay, should 
be challenged and castigated.
    Ms. Carney, you are smiling, and I appreciate the fact when 
I talked to you earlier saying it would be terrible if nobody 
came to the party when we hosted one, and you said, there is 
only a party when I am here. And I appreciate your input today.
    But, you know, I think whether we be Democrat or 
Republican, we must admit that employees of federal government, 
when asked to do the job--a job that has been offered to them--
do that job and deserve the respect, consideration as they 
perform that job, and the respect and consideration when 
unexpected and undesired injuries take place or other 
subsequent problems that bring on a need for compensation.
    And so, if we are going to have that in place--which we 
ought to--it ought to be a program that works for both sides 
and for the taxpayer.
    And so, Ms. Woolsey, I would tend to agree with you that 
probably one of the next steps in going further with the taste-
testing this morning--the teaser on information, there is 
plenty more to come up with, and a GAO study may be the 
direction we need to go.
    I would encourage the Department of Labor to continue to be 
part of the solution here. I guess I was under a lack of 
understanding in thinking that you had some proposals that you 
were going to be putting forward for legislation.
    I think it is something we ought to consider to make sure 
that it works. This subcommittee is certainly open and desirous 
of caring through that process. So we will be looking toward 
that and--in the coming days, and I think sooner rather than 
later.
    So thank you. We do want to applaud the work that is done 
by our federal employees. We want to not only suggest that we 
do all do consideration to make sure that they are provided for 
but the deficiencies that can be built on the whole system 
including this, that ultimately produces quality of care, is 
something that we must consider with due diligence.
    So having nothing more to present in this subcommittee 
hearing, I call the committee to adjournment.
    [Additional submissions of Ms. Woolsey follow:]

      Prepared Statement of Colleen M. Kelley, National President,
                   National Treasury Employees Union

    Chairman Walberg, Ranking Member Woolsey and Members of the 
Subcommittee on Workforce Protections, the National Treasury Employees 
Union (NTEU) appreciates the opportunity to offer this statement to the 
Subcommittee as it considers the important matter of Workers' 
Compensation in the federal sector. NTEU represents over 155,000 
federal employees at 31 agencies. Our members perform every type of 
work for the American public from Customs and Border Protection 
Officers, to Transportation Security Officers, and Food and Drug 
Administration scientists working in laboratories at home or on 
assignment inspecting products in India and Mainland China. These 
public servants show up for work each day expecting to perform their 
important duties diligently and professionally in service to their 
country and then safely return home to their families. Nevertheless, 
some will suffer workplace injuries that make it impossible for them to 
return to work for short or long periods of time and, regrettably, in 
some cases to never be able to return to work at all due to permanent 
injury or even death.
    This year, the nation celebrates the centennial of Workers' 
Compensation laws. One hundred years ago this month (May, 1911) the 
first Workers Compensation program was enacted into law by the state of 
Wisconsin, following on workplace injury insurance programs adopted in 
Germany and Great Britain. Nine other states followed this progressive 
initiative that same year and by 1948 all states had laws covering 
private and state workers. Workers' Compensation insurance is a 
recognition of the responsibility of employers and society to take care 
of those injured in the workplace. It was our nation's first social 
insurance program. Today, Workers' Compensation stands as an important 
protection for the benefit of all Americans. Almost 98% of the 
workforce is covered by workers' compensation insurance.
    Five years after Wisconsin led the nation on this, Congress moved 
to insure the federal government's own employees as well as railway, 
longshoremen and other harbor workers. The Kern-McGillicudy Act 
developed the program we now know as the Federal Employees Compensation 
Act (FECA).
    FECA is one of the most important programs for federal workers. 
This program provides federal employees with workers' compensation 
coverage for injuries and diseases sustained while performing their 
duties. The program seeks to provide adequate benefits to injured 
federal workers while at the same time limiting the government's 
liability strictly to workers compensation payments. Payments are to be 
prompt and predetermined to relieve employees and agencies from 
uncertainty over the outcome of court cases and to eliminate wasteful 
litigation. Efficient government is advanced by a civil service that is 
expected to have the highest levels of professionalism and competency 
and in turn is fairly compensated and treated with dignity and respect. 
There is no greater disrespect to human dignity than to have to suffer 
injury from an unsafe workplace or from employer negligence.
    NTEU welcomes a review of the FECA program, while always keeping in 
mind this is an issue of human dignity. We believe such a review should 
be broad and comprehensive. By that, we mean that it should never start 
or be rigidly limited to benefit payments. Instead the first principle 
should be making the federal workplace safe by actions to move us 
towards the goal where no worker need come to work with the possibility 
it will be his last day on the job because of a workplace injury. NTEU 
has worked with Republican and Democratic administrations on this goal 
and we are ready to continue those efforts.
    However, I want to state our strong opposition to insurance benefit 
cuts, particularly for those employees who came to work one day ready 
to serve their country but suffered a workplace injury that resulted in 
them never being able to return. We are most concerned about proposals 
for a forced retirement provision. An employee who is injured on the 
job and unable to work receives FECA payments equal to 67% of wages at 
the time of injury (a slightly higher amount if he has family 
obligations). This reduction in income makes it impossible for an 
injured employee to fund a retirement plan. Once workplace injured 
workers are on FECA, they receive no further retirement credits or 
contribution matches, nor are they able to make elective contributions 
to the Thrift Savings Plan. This holds true for Social Security as well 
as the federal retirement programs. Forcing a worker at retirement age 
to give up regular FECA benefits and live on the income from retirement 
savings put aside up until his or her worklife was interrupted by an on 
the job injury would cause grave economic hardship to many disabled 
employees.
    NTEU would also oppose elimination of the family benefit that is 
now a feature of FECA. Because FECA benefits are not taxed, the family 
allowance does little more than create some equity between the after 
tax income a worker with dependents and one without would have if not 
injured.
    Let me close by stating that NTEU very much wants to work with this 
subcommittee or any other policymaker to find ways to reduce the costs 
of the FECA program. As I have said, our belief is the best way to do 
so is not by reducing benefits or denying claims but by preventing the 
occurrence of injuries. NTEU is committed to a safe and healthy federal 
workplace where employees are less likely to ever suffer the injuries 
that lead to FECA claims. Our union has also been one of the strongest 
forces for innovation in the federal workplace, often working with 
management on bold new programs and sometimes dragging management 
forward over their reluctance. We have received reports from our 
members about management resistance or disinterest in light duty 
assignments, alternative worksites, disability accommodations and other 
actions that could allow FECA recipients to return to work. A change in 
management practices and culture is needed. I don't expect this is 
something Congress can legislate, but the first step is to end the myth 
that able bodied workers are receiving FECA payments and accept the 
fact that many injured workers would like to return to work and could 
do so with opened minded and innovative agency practices. Further, NTEU 
is willing to work with policymakers to improve program integrity 
methods. For example, the Office of Worker Compensation Programs (OWCP) 
currently matches FECA claimants with Social Security Administration 
(SSA) data to determine if claimants have died. However, they do not 
match with SSA data to see if they are receiving wages that would make 
them ineligible for FECA benefits. We strongly believe these are the 
types of reforms that should be explored before Congress moves to cut 
these social insurance benefits to injured federal workers.
    Thank you for this opportunity to present NTEU's views.
                                 ______
                                 

                                                                      PERIODIC ROLL BREAKDOWN BY WEEKLY SALARY AND AGE (a)
                      [Based upon 4/9/2011 check cycle; excludes fatal cases; including only cases with DOI in calendar year 2008 in order to get current weekly wage data]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   WEEKLY SALARY
                                                               ---------------------------------------------------------------------------------------------------------------------
                                                                               $500 to      $1000 to     $1500 to     $2000 to     $2500 to     $3000 to     $3500 to     $4000 to
                                                                 Under $500    $999.99      $1499.99     $1999.99     $2499.99     $2999.99     $3499.99     $3999.99     $4499.99
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            ANNUAL SALARY
                                                               ---------------------------------------------------------------------------------------------------------------------------------

                                                                      up to   $26,000 to   $52,000 to   $78,000 to  $104,000 to  $130,000 to  $156,000 to  $182,000 to  $208,000 to
                                                                  $25,999      $51,999      $77,999      $103,999     $129,999     $155,999     $181,999     $207,999     $233,999
                                                               ---------------------------------------------------------------------------------------------------------------------------------
Age group:                                                                                                                                                                                   All
    0-20......................................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........            0
    21-25.....................................................            2            4  ...........  ...........  ...........  ...........  ...........  ...........  ...........            6
    26-30.....................................................           11           20            2            2  ...........  ...........  ...........  ...........  ...........           35
    31-35.....................................................           15           61           10            3  ...........  ...........  ...........  ...........  ...........           89
    36-40.....................................................           14           81           34            2            1  ...........  ...........  ...........  ...........          132
    41-45.....................................................           25           87           62            5            2            4  ...........  ...........  ...........          185
    46-50.....................................................           30          128          145           12            5            4            1            1  ...........          326
    51-55.....................................................           30          132          174           15            5  ...........            1            2  ...........          359
    56-60.....................................................           25           96          134           10            7            5  ...........  ...........  ...........          277
    61-65.....................................................           14           65           92           12            1            1  ...........            1  ...........          186
    66-70.....................................................            4           15           20            3            4  ...........  ...........  ...........  ...........           46
    71-75.....................................................            3            4            7            1  ...........  ...........  ...........  ...........  ...........           15
    76+.......................................................            2            2  ...........  ...........  ...........  ...........  ...........  ...........  ...........            4
                                                               ---------------------------------------------------------------------------------------------------------------------------------
      Totals..................................................          175          695          680           65           25           14            2            4            0         1660
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Although the weekly salaries listed include income over $182,000, the 1966 amendments to the FECA provide that compensation can not exceed 75% of the monthly salary of a GS-15, step 10.
Proposed Average Schedule Award Rate = $53,639 (GS11/3 in FY11).
Approx. number of people with annual salaries BELOW the new SA rate: 870.
Approx. number of people with annual salaries ABOVE the new SA rate: 790.

Source: U.S. DOL.


                              PERIODIC ROLL BREAKDOWN BY WEEKLY SALARY AND AGE (b)
                             [Based upon 4/9/2011 check cycle; excludes fatal cases]
----------------------------------------------------------------------------------------------------------------
                                                                                 Case status
                         Age group                         -----------------------------------------------------
                                                               OP       PN       PR       PS       PW      All
----------------------------------------------------------------------------------------------------------------
0-20......................................................        0        0        6        0        0        6
21-25.....................................................        0        2       47        3        5       57
26-30.....................................................        1        3      153       16       32      205
31-35.....................................................        5        9      387       41       91      533
36-40.....................................................       10       55      854       69      237     1225
41-45.....................................................       28       98     1546      125      457     2254
46-50.....................................................       67      309     3127      224     1018     4745
51-55.....................................................       79      641     4304      388     1586     6998
56-60.....................................................      102     1026     4382      464     2001     7975
61-65.....................................................      115     1561     3581      434     1825     7516
66-70.....................................................      118     1339     1813      149     1131     4550
71-75.....................................................       61     1528     1005       49      788     3431
76+.......................................................       52     4332      964       41     1264     6653
                                                           -----------------------------------------------------
      Totals:.............................................      638    10903    22169     2003    10435    46148
----------------------------------------------------------------------------------------------------------------
PR: Entitled to payment on periodic roll.
PN: Entitled to payment on periodic roll; determined to have no wage earning-capacity or re-employment potential
  for indefinite future.
PW: Entitled to payment on periodic roll at a reduced rate, reflecting a partial wage-earning capacity or actual
  earnings.
PS: Entitled to payment for schedule award.
OP: On the Periodic Roll, but an overpayment exists and is being deducted from compensation

Source: U.S. DOL

                Appropriated Fund Agencies in FECA Which
               Do Not Reimburse for Administrative Costs

Department of Labor
Department of Health & Human Services
Department of State
Department of Housing & Urban Development
Department of Defense Agencies
Department of the Army
Department of the Air Force
Department of the Navy
Department of Homeland Security
Department of Education
Department of the Interior
Executive Office of the President
Social Security Administration
Smithsonian Institution
Federal Judiciary
Peace Corps
Corporation for National & Community Service
American Battle Monuments Commission
African Development Foundation
Inter-American Foundation
Architect of the Capitol
U.S. Commission of Fine Arts
Presidio Trust
Federal Communications Commission
Farm Credit Administration
Federal Mine Safety & Health Review Commission
Federal Trade Commission
Government Accountability Office
U.S. Government Printing Office
Federal Mediation & Conciliation Service
Library of Congress
Federal Labor Relations Authority
Institute of Museum & Library Services
Office of Special Counsel
National Archives & Records Administration
National Capital Planning Commission
National Labor Relations Board
National Mediation Board
National Science Foundation
Railroad Retirement Board
Office of Government Ethics
Securities & Exchange Commission
Selective Service System
Federal Energy Regulatory Commission
Office of Personnel Management
Broadcasting Board of Governors
International Trade Commission
Panama Canal Commission
Commission on Civil Rights
U.S. House of Representatives
U.S. Senate
Int'l Boundary & Water Commission/US & Mexico
Armed Forces Retirement Home
Consumer Product Safety Commission
Equal Employment Opportunity Commission
U.S. Tax Court
Office of Navajo & Hopi Indian Relocation
Merit Systems Protection Board
National Endowment for the Arts
National Endowment for the Humanities
Occupational Safety & Health Review Commission
U.S. Holocaust Memorial Council
National Transportation Safety Board
Nuclear Regulatory Commission
Commodity Futures Trading Commission
Congressional Budget Office
Federal Election Commission
U.S. Institute of Peace
U.S. Botanic Garden
Federal Maritime Commission
U.S. Arms Control & Disarmament Agency
Postal Regulatory Commission
U.S. Agency for International Development
Legal Services Corporation
U.S. Court of Veterans' Appeals
U.S. Capitol Police
General Services Administration
National Aeronautics & Space Administration
Environmental Protection Agency
Government Printing Office
Central Intelligence Agency
William Howard Taft Memorial Site
Valles Caldera Trust
State Justice Institute
Public Defender Service for the District of Columbia
National Indian Gaming Commission
Marine Mammal Commission
Morris K. Udall Foundation
Millennium Challenge Corporation
Interagency Council on Homelessness
Institute of American Indian Arts
Defense Nuclear Safety Facility Board
US Election Assistance Commission
Denali Commission
US Chemical Safety Hazard Investigation Board
Committee for Purchase/Blind or Severely Disabled
Appalachian Regional Commission
Administrative Conference of the United States
US Access Board
Court Services & Offender Supervision Agency

    Source: U.S.DOL.
                                 ______
                                 

            ``Fair Share'' Agencies Which Reimburse DOL for
                    Administrative Costs Under FECA

United States Postal Service
Export-Import Bank
Federal Home Loan Bank Board
Small Business Administration
Overseas Private Investment Corporation
Board of Governors/Federal Reserve System
Federal Housing Finance Agency
Federal Deposit Insurance Corporation
Federal Retirement Thrift Investment Board
National Credit Union Administration
Resolution Trust Corporation
Pension Benefit Guaranty Corporation
                                 ______
                                 

          Mixed ``Fair Share'' and Appropriated Fund Agencies

Department of Agriculture
Department of Commerce
Department of Energy
Department of Transportation
Department of Treasury
Department of Veterans Affairs
Department of Justice
Tennessee Valley Authority

    Source: US DOL.
                                 ______
                                 

          Prepared Statement of Joseph A. Beaudoin, President,
       National Active and Retired Federal Employees Association

    Mr. Chairman and members of the Committee, I am Joseph A. Beaudoin, 
President of the National Active and Retired Federal Employees 
Association (NARFE). NARFE, one of America's oldest and largest 
associations, was founded in 1921 with the mission of protecting the 
earned rights and benefits of America's active and retired federal 
workers. The largest federal employee/retiree organization, NARFE 
represents the retirement interests of approximately 4.6 million 
current and future federal annuitants, spouses, and survivors.
    I am submitting testimony today, for the record, on behalf of those 
4.6 million federal workers and annuitants. I appreciate the 
opportunity to share our concerns about legislative proposals that 
would reduce Federal Employees' Compensation Act (FECA) benefits for 
retirement age recipients.
    FECA reforms should focus on saving money by improving the workers' 
compensation process and structure and not by reducing benefits 
available to employees injured or made ill by their jobs. There have 
been numerous proposals to reform FECA by improving the number of 
employees rehabilitated who can return to work to changing the 
structure of payments for schedule awards to establishing waiting 
periods and more, none of which reduce the basic compensation paid to 
FECA recipients.
    Unfortunately, both the Administration and Senator Susan Collins 
have made specific proposals which would reduce benefits paid to FECA 
recipients at retirement age. These proposals do not adequately take 
into account the disadvantages faced by those employees unfortunate 
enough to suffer a debilitating injury or illness as a result of their 
public service.
Administration Proposal
    The Administration proposes to reduce FECA recipients' basic 
compensation benefit to 50 percent of their gross salary at the date of 
injury, still tax-free, when they reach full Social Security retirement 
age. While this proposal provides a retirement level income much closer 
to that of current retirees,\1\ it still does not fully account for 
disadvantages faced by FECA recipients. Notably, FECA recipients (1) 
lose the ability to increase their salary through raises and 
promotions, (2) they have a reduced ability to save because (a) they 
are not receiving a full replacement of income pre-retirement, and (b) 
FERS-covered employees are not able to contribute to the Thrift Savings 
Plan and receive matching contributions, and (3) they may have a 
reduced Social Security benefit because FERS employees covered by 
Social Security are unable to earn credit for and increase monthly 
earnings used to calculate those benefit payments.
---------------------------------------------------------------------------
    \1\ According to OPM, the average federal employee retiring 
optionally on an immediate annuity under CSRS will receive about 60% of 
their ``high-three'' average salary.
---------------------------------------------------------------------------
    While the framework of the Administration's proposal offers more 
economic security than S. 261's, it still short-changes FECA 
recipients.
S. 261, Federal Employees' Compensation Reform Act
    Senator Collins' bill would move FECA recipients to the retirement 
system at full Social Security retirement age (between 65 and 67, 
depending on year of birth). Instead of receiving 66.67 percent of 
monthly pay (or 75% for recipients with dependents) tax-free, former 
FECA recipients would receive a taxable annuity computed by multiplying 
the average of their highest three years of salary times years of 
service times an accrual rate (1 or 1.1% for FERS-covered employees or 
1.5 to 2% for CSRS-covered employees). This presents multiple issues.
    First, there is no provision to adjust upwards the average highest 
three years of salary to account for wage inflation. FECA recipients 
will also have lost the ability to increase their salary through raises 
and promotions. At the very least, they should receive an adjustment 
based on the Employment Cost Index or other wage inflation indicator to 
the average highest three years of salary for purposes of computing 
their annuity.
    Second, unless the FECA recipient is covered by FERS and applied 
for a disability retirement annuity within 12 months of their injury or 
illness, s/he likely would not receive credit for years of service for 
the time between when s/he became injured or ill and when s/he turns 62 
years of age.\2\
---------------------------------------------------------------------------
    \2\ Under CSRS, a disability retirement annuitant, someone unable 
to perform their job due to a injury or illness that is not necessarily 
work related, is guaranteed a minimum benefit that equals the lesser of 
40 percent of the high-three average salary or the regular annuity 
obtained after increasing years of service for the time between the 
disability and age 60. Thus, credit for years of service actually acts 
to reduce the minimum annuity under CSRS. Under FERS, disability 
retirement annuitants receive credit for years of service for the years 
between the injury or illness and age 62.
---------------------------------------------------------------------------
    Third, FERS-covered FECA recipients lose the ability to invest a 
portion of their payments into the Thrift Savings Plan (TSP) and 
receive matching contributions from their agencies.
    Finally, FERS-covered employees may have a reduced Social Security 
benefit because they are unable to earn credit for and increase monthly 
earnings used to calculate those benefit payments.
    The net effect of the transition to the retirement system would be 
a substantial and unfair reduction in benefits for many FECA 
recipients. However, Senator Collins has consulted NARFE on S. 261 and 
we are working with her to improve the legislation.
Conclusion
    Other FECA reform proposals save money by helping bring FECA 
recipients back into the work force, eliminating inefficiencies in the 
process, allowing for full reimbursement from liable third parties, or 
reducing improper payments and fraud. But unlike those proposals, 
reductions in retirement age benefits will take money away from 
individuals who are irrefutably unable to work because they were 
injured or became ill as a result of their service for the federal 
government. If they had the choice, they would be healthy and working 
and preparing for a retirement of choice rather than necessity.
    Thus, I urge you to seriously consider the significant financial 
implications that proposed reductions to FECA benefits could have on 
disabled public servants who have lost the ability to earn income to 
adjust their financial situation to new circumstances. These federal 
employees include FBI agents who have been shot in the line of duty, or 
federal firefighters injured while saving someone's life. We need to 
treat these public servants with respect and gratitude, not 
indifference.
    Mr. Chairman and subcommittee members, I urge you to do so, and 
thank you for receiving this testimony.
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    [Whereupon, at 11:20 a.m., the subcommittee was adjourned.]

                                 
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