	Background

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. 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. 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. 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. 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? There is also  the question of whether changes will focus on current or future  beneficiaries. Deciding on the  criteria that would initiate change in benefits might require developing  benchmarks. 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. 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. Federal Employees’ Compensation Act: Issues Associated With Changing  Benefits for Older Beneficiaries.
Why GAO Did This Study

This testimony discusses 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. 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. 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. This statement 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..

What GAO Found

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?