In some cases the monthly FECA benefit is higher than what would be paid by a CSRS or FERS annuity. Image: ZikG/Shutterstock.com
By: FEDweek StaffA report for Congress has revisited the idea of converting extended Federal Employees Compensation Act benefits to disability retirement benefits—with a likely financial loss to the individual.
The report from the Congressional Research Service focuses on an aspect of the FECA injury and illness compensation program that has long been an issue. Those eligible for both FECA and disability retirement must choose one or the other. Most choose the former because it is financially advantageous and can continue on those benefits indefinitely, in some cases well beyond when it is reasonable to expect the person to ever return to work.
“Given the level of benefits, which can be as high as 75% 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,” said the report.
It cited as an example a 2020 audit finding that some that 15,000 Postal Service employees were receiving FECA benefits for disabilities that are expected to be permanent, with 8,500 of them age 60 or older and 2,600 of them age 70 or older.
CRS said 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.”
“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,” it said.
While the CRS does not make policy recommendations, it noted that 20 states limit the duration or total amount of injury compensation benefits to their employees, with conversion to retirement benefits afterward.
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