Following are excerpts from a recent Congressional Research Service report that examined issues regarding the FECA injury compensation program that have produced several reform bills in Congress, including the continued payment of those benefits once a recipient has passed regular retirement eligibility and how its benefit levels compare with similar programs from other levels of government.

FECA and Retirement Age

Both FECA compensation and medical benefits are payable for the duration of a person’s disability. There is no maximum duration of benefits and no maximum age at which benefits must be terminated. Beneficiaries who are eligible for CSRS or FERS retirement or disability annuities may chose to remain in the FECA program. Given the level of benefits, which can be as high as 75 percent of a worker’s pre-disability wage; the annual cost-of-living adjustment to benefits; and the fact that FECA benefits are not taxed, in some cases the monthly FECA benefit is higher than what would be paid by a CSRS or FERS annuity. In addition, because FECA beneficiaries who are not working do not pay into either the Social Security system or the TSP, they may be unable to rely on these programs as a significant source of retirement income.

The Department of Labor reports that although less than 2 percent of new injury cases stay on the FECA rolls for more than two years, approximately 45,000 cases currently receive long-term disability benefits and 15,000, or one-third of these cases involve beneficiaries aged 66 or older.

The U.S. Postal Service Office of Inspector General reports that the FECA rolls include 9,554 postal workers aged 55 or older; 3,389 aged 65 or older; and 928 aged 80 or older, including one aged 99.

The provision of FECA compensation benefits to workers after retirement age has changed during the history of the FECA program. Although FECA benefits have always been paid for the duration of disability, between 1949 and 1974, the administrator of the FECA program was required to review the amount of benefits paid to each beneficiary at the age of 70 and was authorized to reduce the amount of such benefits if it was determined that the beneficiary’s wageearning capacity had been reduced by his or her age, independent of his or her disability. This provision was repealed in 1974 with the Senate Committee on Labor and Public Welfare calling the reduction of benefits at the age of 70 “discriminatory.”

Policy Considerations

The question of whether FECA benefits should continue past retirement age depends somewhat on the intent of these benefits. If FECA disability benefits are intended solely to replace income lost by a worker because of an injury or illness, then one can reasonably argue that these benefits should stop at retirement age, when the worker would likely voluntarily stop working on his or her own, and thus no longer have wages to be replaced. It could be argued that the provision of FECA benefits for wage loss is analogous to the SSDI program, which stops paying benefits when a disabled beneficiary reaches retirement age. However, SSDI benefits automatically convert to Social Security retirement benefits at retirement age.

However, if FECA disability benefits are intended to provide some relief to the worker beyond wage replacement, such as providing additional money that might have been paid by an at-fault employer through the tort system or guaranteeing a certain minimum standard of living for a disabled worker, then stopping benefits at any age while the disability continues would violate this intent and deprive the beneficiary of deserved benefits.

Currently, 14 states and the District of Columbia place limitations on the duration of permanent total disability benefits under their workers’ compensation systems. These limitations are in the form of a maximum number of weeks benefits may be paid, a termination of benefits at retirement or some other age, or a combination of both.48 Federal workers’ compensation benefits paid through the Longshore and Harbor Workers’ Compensation Act are paid for the duration of disability or the life of the beneficiary.

Legislative Activity

The legislation in the Senate includes provisions that would limit benefits to persons over the retirement age. Specifically, S. 1789 would reduce the amount of the basic FECA disability benefit to 50 percent of a workers’ pre-disability wage when he or she reaches the full-retirement age for Social Security. Certain current beneficiaries with permanent total disabilities would not be affected by this provision.

In the House, FECA reform legislation (H.R. 2465) does not include any provisions that would change FECA benefit amounts for beneficiaries at retirement age. However, in July 2011, the chairman and ranking Member of the House Education and Workforce Committee and the Subcommittee on Workforce Protections wrote a letter to the comptroller general requesting that the Government Accountability Office (GAO) examine several policy proposals regarding the FECA program, including a proposal to reduce the FECA benefits of persons over the Social Security full-retirement age to 50 percent of the pre-disability wage.

FECA Benefit Generosity

In general, FECA disability benefits are more generous than those offered by state workers’ compensation systems. For workers with traumatic injuries, FECA offers continuation of pay, at full salary, for the first 45 days. No state system currently provides any type of continuation of pay, absent the use of some form of sick or personal leave. Disability benefits under FECA are adjusted annually to reflect changes in the cost of living, a provision generally not found in state systems.

The maximum FECA benefit is based on 75 percent of the GS-15, Step 10 pay rate, without any locality adjustments whereas state maximums are generally based on state average wages or the worker’s own pre-disability wage. For 2011, the annual salary at GS-15, Step 10, is $129,517, whereas the average federal salary for the executive branch in March 2011 was $74,915. Thus, the maximum FECA benefit under the current system is higher than it would be if the FECA system based its maximum benefit level on average wages as is the case in the majority of the states.

The FECA basic benefit rate for total disability is two-thirds of the worker’s pre-disability wage.

Currently, 36 states and the District of Columbia have total disability benefit rates that are set at this level. Benefits under the federal Longshore and Harbor Workers’ Compensation Act are also set at two-thirds of the pre-disability wage. New Hampshire’s benefit rate is 60 percent of the worker’s pre-disability wage.

Currently, four states have total disability benefit rates that are based on pre-disability or average wages and that exceed the two-thirds standard. In New Jersey and Oklahoma, benefits are paid at 70 percent of the worker’s wage at the time of injury whereas benefits in Texas are based on 75 percent of the worker’s average wage. In Ohio, benefits are paid at 72 percent of the pre-disability wage for the first 12 weeks, then are reduced to the standard two-thirds rate.

Six states—Alaska, Connecticut, Iowa, Maine, Michigan, and Rhode Island—base benefits on net, rather than gross wages. It is generally not possible to compare these benefits to FECA benefits because of differences in tax rates that affect net income. Three states—Georgia, Pennsylvania, and Washington—have systems in which there is no direct comparison to the FECA total disability benefit rate.

Because of the augmented compensation provision of the FECA program, beneficiaries with dependents, including spouses, may receive total disability benefits at a rate of 75 percent of their predisability wages. No state pays augmented compensation for dependents, and the 75 percent benefit rate is higher than that paid by any comparable state workers’ compensation system. Currently, more than 70 percent of FECA beneficiaries are receiving augmented compensation, and thus benefits at the rate of 75 percent of their pre-disability wages.

One indication of the benefit generosity of the FECA program compared with state workers’ compensation programs is the amount of disability benefits paid as a percentage of total program benefits. In 2009, disability benefits made up 49.1 percent of the total costs of benefits paid by state workers’ compensation programs and 70.7 percent of total benefits paid by the FECA program.54 Assuming that the types of injuries faced by federal employees and workers in the private and non-federal public sectors are not significantly different and that medical costs are also similar, this difference can be attributed to the generosity of FECA disability benefits, especially for higher-wage workers, compared with those offered by state workers’ compensation systems.