GAO Says Federal Employees May Not Be Aware of Retirement Compensation Options

The President’s budgets for fiscal years 2019-2021 have proposed several reforms for the Federal Employees’ Compensation Act (FECA), including reducing disability compensation at retirement age.

FECA pays for wages lost due to injury, and employees with lasting disabilities may choose federal retirement benefits when eligible, instead of FECA. However, a new Government Accountability Office (GAO) report says they may not be aware of their options.

In a series of reports published in 2012, GAO analyzed the effects of similar proposed revisions to FECA compensation. GAO was asked to update its FECA and Federal Employees Retirement System (FERS) benefit comparisons and has analyzed how income from FECA would compare with federal retirement income for those without disabling injuries. GAO found, for example, that FECA may be lower if an injury occurs early on in what would have been a long career because retirement benefits increase substantially the longer employees work.

Factors such as the timing of an injury in a career affect how FECA total disability benefits compare to income security from typical federal retirement. The FECA program compensates federal employees for lost wages from work-related injuries, among other benefits. FECA recipients can receive this compensation for as long as their disability continues. At retirement age, they can remain on FECA or, instead, choose to receive their benefits from FERS. Thus, FECA benefits represent a significant portion of retirement income for some injured federal employees. Through simulations, GAO found that factors such as the length of retirees’ careers absent injury affected how similar their hypothetical FECA benefits packages were to their FERS packages in 2018. FERS benefits increase substantially the longer a federal employee works. As a result, median current and reduced FECA packages were greater than the FERS median for retirees with shorter careers absent injury. However, median FECA packages were similar to or less than FERS for retirees with longer careers.

For FECA recipients who choose to compare their FECA and FERS benefit options at retirement, estimates for most components of those benefits packages are available. However, GAO found the Department of Labor (DOL) does not routinely remind recipients to compare benefits, so they may be unaware of their options or how to consider them. In addition, DOL and the Social Security Administration (SSA) use a manual and highly complex process to calculate one key component of a FECA recipient’s compensation in retirement related to Social Security benefits. As a result, estimates of FECA benefits in retirement that include this component are not readily available prior to retirement. GAO says these challenges hinder recipients’ ability to accurately compare their options and may result in some recipients not choosing their best option at retirement.

GAO is therefore recommending that DOL remind FECA recipients as they approach retirement to obtain FERS benefit estimates for comparisons with FECA, and that DOL and SSA take steps to modernize and improve their process for calculating and providing information on certain FECA benefits in retirement that would enable recipients to make complete comparisons of retirement options. 

DOL agreed with both recommendations addressed to it, stating that its Office of Workers’ Compensation Programs will update its existing election letter to all disabled claimants approaching age 62 to include additional language to remind FECA recipients that they may want to consider obtaining estimates of their federal retirement benefits. To modernize and improve the process of generating and providing offset estimates to FECA recipients, DOL plans to continue its ongoing discussions with SSA on the feasibility of a data match agreement and the potential to streamline and electronically provide to DOL the information SSA currently produces manually. 

SSA also agreed with GAO’s recommendation to modernize and improve the process of generating and providing offset estimates to FECA recipients. SSA stated that the agency will work with DOL on options for improving the current process and disclosing appropriate data to DOL.

It is worth noting that DOL told GAO in April 2020 that the FECA reduction mentioned in the President’s recent budgets would be on a sliding scale, based on an individual’s age at injury. This latest report does not include an analysis of the effects of this sliding scale reduction.

Read the full report at GAO

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