Workers’ comp reform bill would hurt injured feds, witnesses say

A bill that would convert federal employees on workers' compensation to the appropriate retirement system when they reach retirement age would result in a loss of income for many of those employees, witnesses at a Senate subcommittee hearing said Tuesday.

Under the 1916 Federal Employees' Compensation Act, employees disabled as a result of an injury on the job can receive 66 2/3 percent -- or 75 percent for those with dependents -- of their basic salary tax-free, plus medical-related expenses. The 66 2/3 percent rate is comparable to most state systems, but many federal recipients, including those past retirement age, receive the 75 percent compensation rate.

The 2011 Federal Employees' Compensation Reform Act (S. 261), introduced earlier this year by Sen. Susan Collins, R-Maine, would move FECA recipients into either the Civil Service Retirement System or the Federal Employees Retirement System when they become eligible, providing benefits only for employment before the worker's injury. Critics say former FECA recipients would lose money as a result of that provision and the computation would not take into account the employee's loss in higher wages and promotions due to the on-the-job injury.

In addition, the legislation would apply only to those former FECA recipients who would be covered under CSRS and FERS. While the majority of employees fall under CSRS or FERS, some workers are covered under different retirement systems.

FECA recipients do not receive or make contributions to the Thrift Savings Plan or Social Security while they are receiving workers' comp, another complication to conversion, opponents argue.

"While differences would depend upon circumstances, it would be plausible that a $4,000 per month beneficiary could be converted to a $300 per month annuitant with no health benefits," Office of Personnel Management Deputy Director Christine Griffin told the Senate Homeland Security and Governmental Affairs' Federal Workforce Subcommittee.

Collins, ranking member of the full committee, has complained that the FECA program has no time limits or caps on payments, and can result in a retirement income as much as 27 percent higher than what federal workers receive under the Civil Service Retirement System. "These FECA benefits are supposed to tide over employees who are injured and make sure they receive income while they recuperate pending their return to work. It is not intended to be a secondary, and more generous, retirement system," E.R. Anderson, press secretary for committee Republicans, wrote in an email. "The question isn't who is losing money," Anderson said. "It is: Why are some getting a more generous formula when they have no intention of returning to work?"

At an April hearing, witnesses told House lawmakers that the workers' compensation program is too generous and should be reformed so that employees receive fewer benefits and return to work faster. There is no age limit to receiving FECA benefits. At the U.S. Postal Service, for instance, more than 2,000 employees currently receiving federal workers' compensation are 70 years or older.

Witnesses before the Senate panel acknowledged that the program, which hasn't been updated in nearly 40 years, needs reform. The Labor Department, which administers FECA, is recommending a uniform compensation rate of 70 percent for all claimants. "A single rate would be simpler and more equitable," said Gary Steinberg, acting director of the department's Office of Workers' Compensation. Steinberg also said Labor is proposing a "conversion entitlement benefit" for FECA recipients when they reach Social Security retirement age that would reduce their wage-loss benefits to 50 percent of their gross salary at the time of injury, but keep it tax-free.

Earlier this month, Rep. John Kline, R-Minn., introduced legislation that would streamline FECA's claims process, update the benefits available to government employees and improve accountability for federal agencies. It would not address retirement issues as Collins' bill does.

Griffin also said OPM would need more staff and resources to handle the administrative changes that would result from shifting FECA recipients into CSRS and FERS. "It would create a fair amount of difficulty and a great amount of resources to implement," she said.

FECA provides basic compensation and medical rehabilitation for government workers who are hurt on the job and benefits for surviving dependents in cases of work-related deaths. It covers 2.7 million federal employees and postal workers and from July 1, 2009, to June 30, 2010, paid out $2.78 billion in benefits.