Federal Employees' Compensation Act: Comparisons of Benefits in Retirement and Actions Needed to Help Injured Workers Choose Best Option
Fast Facts
The Federal Employees' Compensation Act program pays for wages lost due to injury. Employees with lasting disabilities may choose federal retirement benefits when eligible, instead of FECA. However, they may not be aware of their options.
We analyzed how income from FECA would compare with federal retirement income for those without disabling injuries. We 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.
We recommended that the Department of Labor help injured workers compare benefits options at retirement.
Highlights
What GAO Found
Factors such as the timing of an injury in a career affect how Federal Employees' Compensation Act (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 the Federal Employees Retirement System (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 (see figure).
Median FECA Benefits as a Percentage of FERS Benefits by Career Length Absent an Injury
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, 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. These challenges hinder recipients' ability to accurately compare their options and may result in some recipients not choosing their best option at retirement.
Why GAO Did This Study
The President's budgets for fiscal years 2019-2021 have proposed several FECA reforms, including reducing disability compensation at retirement age. 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 FERS benefit comparisons.
This report examines (1) how FERS and total disability FECA benefits at retirement age compare under current and previously proposed reduced FECA compensation rates, and (2) the extent to which FECA recipients have access to information to compare their FECA and FERS benefits options. GAO compared the FERS benefits selected retirees received in 2018 with the hypothetical total disability FECA benefits they would have received from simulated injuries. GAO reviewed agency documents and interviewed officials from DOL, SSA, and other federal agencies.
Recommendations
GAO is 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 and SSA concurred with all three recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Labor | The Director of the Office of Workers' Compensation Programs should direct the Division of Federal Employees' Compensation to send a reminder to all FECA recipients as they approach retirement that they may want to obtain FERS retirement benefits estimates for comparisons with FECA, including annuity estimates from their employing agencies and estimates of their Thrift Savings Plan and Social Security benefits. (Recommendation 1) |
DOL agreed with this recommendation. DOL updated its letter to all claimants receiving disability compensation who are approaching age 62, which notifies them that their benefits may be reduced if they begin to receive Social Security Administration (SSA) retirement benefits. DOL's updated letter reminds claimants that they may want to consider obtaining estimates of their federal retirement benefits as they approach normal retirement age.
|
| Department of Labor | The Director of the Office of Workers' Compensation Programs should direct the Division of Federal Employees' Compensation to coordinate with the Social Security Administration to take steps to modernize and improve the process of manually generating benefit amounts with and without federal earnings and exchanging information between the agencies to enable the provision of offset estimates to FECA recipients upon request and to reduce the potential for human error in applying offsets. (Recommendation 2) |
DOL agreed with this recommendation. As of July 2023, DOL and SSA established a process where DOL is sending benefit amount requests to SSA through an electronic FAX server that automatically uploads the information to SSA's system for processing. The requests reach SSA's system, pertinent information is added, and then they are assigned to a technician for processing, all within the electronic system. This reduces processing and response time, the potential for human error, and the number of pending requests.
|
| Social Security Administration | The Commissioner of Social Security should direct the Office of Earnings and International Operations to coordinate with the Division of Federal Employees' Compensation to take steps to modernize and improve the process of manually generating benefit amounts with and without federal earnings and exchanging information between the agencies to enable the provision of offset estimates to FECA recipients upon request and to reduce the potential for human error in applying offsets. (Recommendation 3) |
SSA agreed with this recommendation. As of July 2023, SSA and the Department of Labor (DOL) established a process where SSA is receiving benefit amount requests from DOL through an electronic FAX server that automatically uploads the information to SSA's system for processing. The requests reach SSA's system, pertinent information is added, and then they are assigned to a technician for processing, all within the electronic system. This reduces processing and response time, the potential for human error, and the number of pending requests.
|