Federal Employees’ Compensation Act reform

The Federal Employees’ Compensation Act program, administered by the Office of Workers’ Compensation Programs, is the largest self-insured workers’ compensation system in the world – covering about 2.7 million workers. The program has not been significantly amended in more than 40 years. At a May 20 House hearing, lawmakers and stakeholders discussed how to modernize it and make the act more efficient, as well as improve its integrity.

FECA, enacted in 1916, provides benefits to federal employees and their survivors for disability or death stemming from a work-related injury or illness. In 2014, nearly $3 billion in benefits and medical costs were paid out.

During the hearing, which took place before the House Workforce Protections Subcommittee, Rep. Tim Walberg (R-MI) said some stakeholders have raised concerns that the program’s benefits are too generous and discourage injured workers from returning to work.

“Our challenge will be reforming the program in a way that will use taxpayer dollars more wisely, while ensuring the program continues to support those it was set up to assist,” said Walberg, who is the subcommittee chair.

Several witnesses and subcommittee members stressed the importance of a fundamental principle of the program: No worker should be worse off, nor better off, as a result of suffering an on-the-job injury. But those same stakeholders were divided over whether the proposed revisions would hurt injured workers and their families.

The proposal and controversy

The Department of Labor, which oversees OWCP, is seeking statutory amendments to revise three areas of FECA:

• Enhance return-to-work and rehabilitation by addressing disincentives that adversely affect injured workers returning to the job.
• Update benefit structures by creating a single rate for all new claims. Current recipients with dependents receive a higher rate than those with no dependents.
• Modernize and improve the program by allowing easier data sharing among government agencies, and increase incentives for agencies that lower their injury and lost time rates.

OWCP Director Leonard Howie III said the proposal is well thought out and incorporates recommendations from the Government Accountability Office and the Department of Labor Office of Inspector General.

However, Rep. Frederica Wilson (D-FL), the subcommittee’s ranking member, claimed during the hearing that the proposal cuts benefits for injured workers and their families. Of particular concern to her is the proposal to create a universal benefit rate. Although beneficiaries with no dependents would receive more funds, injured workers with a spouse or children as dependents would receive less.

“This is not a family-friendly policy,” Wilson said. “We cannot make budget cuts on the backs of injured federal workers. We cannot make budget cuts on the backs of the widows.”

She summed up the proposal by alleging it mirrors benefit cuts that some states have undertaken in recent years, amounting to a “race to the bottom.”

Howie disagreed. Some state workers’ comp programs have elements that FECA hopes to never have, he said, including a cap on compensation amounts, limits to the duration of benefits paid and the ability to enter into settlements. “Our proposal is not even in the same ballpark,” Howie said, adding that the changes would not affect current program beneficiaries.

Another area of contention was benefits for injured workers at retirement age. Ron Watson, director of retired members at the National Association of Letter Carriers, said some FECA proposals to reduce wage-loss compensation at retirement age would result in injured employees receiving fewer benefits than if they worked a full career and collected a benefits package under the Federal Employees Retirement System.

Watson encouraged the subcommittee to pass reform legislation similar to what the House signed off on in 2011. That bipartisan bill (H.R. 2465) stalled in the Senate.