Issue Briefs

Following are excerpts from a Labor Department officials testimony before a House subcommittee outlining the Obama administration’s proposals to revamp the FECA injury compensation program for federal employees.
Return to Work and Rehabilitation
The proposal that we have crafted for consideration would provide OWCP with enhanced opportunities to facilitate rehabilitation and return to work while simultaneously addressing several disincentives that may adversely impact timely return to work by applying a new set of benefit rates prospectively to new injuries and new claims for disability occurring after enactment.

We propose additional statutory tools that would enhance OWCP’s ability to return injured workers to productive employment. While OWCP currently has the authority under FECA to provide vocational rehabilitation services and to direct permanently injured employees to participate in vocational rehabilitation, our proposal removes the permanency limitation in the statute to make clear that such services are available to all injured workers and that participation in such an effort is required through Social Security retirement age. It is generally accepted and consistent with our experience that the earlier the claimant is involved in a vocational rehabilitation and a Return-to-Work program, the greater likelihood of a successful and sustained return to work post injury.

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The proposal would amend FECA to explicitly allow for vocational rehabilitation, where appropriate, as early as six months after injury. It provides OWCP the authority to require injured claimants unable to return to work within six months of their injury to participate with OWCP in creating a Return-to-Work Plan where appropriate. The Return-to-Work Plan would generally be implemented within a two-year period. This provision would send a strong signal to all Federal workers, whether injured or not, that the Federal government as a model employer is committed to doing everything it can to return employees to work as early as possible.

Our proposal would also amend FECA to provide permanent authority for what we call Assisted Reemployment and expand it to federal employers. Assisted Reemployment is a subsidy designed to encourage employers to choose qualified rehabilitated workers whom they might otherwise not hire. Since disabled Federal workers with skills transferable to jobs within the general labor market may in some cases prove difficult to place, Assisted Reemployment is designed to increase the number of disabled employees who successfully return to the labor force by providing wage reimbursement to potential employers. DOL appropriations bills have for years given OWCP the authority to provide up to three years of salary reimbursement to private-sector employers who provide suitable employment for injured federal workers. Because most Federal employees desire continued employment with the Federal government, our proposal to expand this program to the Federal sector would significantly increase its appeal and effectiveness, and provide further incentive for Federal agencies to hire those employees that may be less likely to return to work without additional supports. These provisions would assist with that effort and support the President’s Executive Order 13548 to increase hiring of individuals with disabilities in the Federal government.

As currently structured, FECA creates direct disincentives to return to work in two significant ways. The first and most far-reaching is that, while the basic rate of FECA compensation is 66 2/3%, a majority of Federal employees receive an augmented benefit of 75%, reflecting at least one dependent. Few state systems provide any augmentation for dependents or approach the Federal level of augmentation. In addition, the 75% compensation rate can result in benefits greater than the injured worker’s usual take home pay. The Administration’s proposal would establish a single compensation rate, reducing work disincentives, simplifying simplify administration and claims processing, and eliminating potential overpayments that can occur due to changes in dependency status.

A second significant disincentive to return to work is created by the disparity that exists between the level of retirement benefits, provided by the OPM, received by most Federal employees and the level of long-term FECA benefits for retirement age FECA recipients. Under current law, the thousands of long-term FECA beneficiaries who are over normal retirement age have a choice between Federal retirement system benefits and FECA benefits, but they overwhelmingly elect the latter because FECA benefits are typically more generous. OPM informs us that the average Federal employee retiring optionally on an immediate annuity under the Civil Service Retirement System will receive about 60% of their “high-three” average salary, most of which is taxable, compared to a tax-free 75% or 66 2/3% FECA benefit based on the individual’s salary when injured. With respect to the Federal Employees’ Retirement System, OPM believes it is reasonable to conclude that converting retirement age disability beneficiaries to a 50% conversion benefit level will result in totally disabled claimants receiving after-tax income roughly equivalent to the level of after-tax income Congress intended to provide through the three-part FERS retirement system.

The Administration’s proposal would provide claimants with a “Conversion Entitlement Benefit” upon reaching regular Social Security retirement age (and after receiving full benefits for at least one year) that would reduce their wage-loss benefits to 50% of their gross salary at date of injury (with cost of living adjustments thereafter), but would still be tax free.

As the GAO report referenced numerous times, the FECA, like all workers’ compensation programs in general, is not designed to compensate for missed career growth due to employment interruptions due to injury; however, this proposed conversion benefit more closely parallels a regular retirement benefit, as opposed to a full wage-loss benefit, so that FECA recipients are not overly advantaged in their retirement years compared to their non-injured counterparts on OPM retirement. An injured worker receiving this retirement level conversion benefit would no longer be subject to several of the sanction provisions outlined in the FECA, such as forfeiture for failure to report earnings or the requirement to seek/accept suitable employment or participate in vocational rehabilitation. Even at this reduced rate, however, an injured worker would still be required to substantiate continuing injury-related disability or face suspension of compensation benefits.

Updating Benefit Structures
We also propose a number of changes to the current FECA benefit structure. One relates to the schedule award provision, which is designed to address the impact of impairment on an individual’s life function, such as the loss of vision, hearing, or a limb. Impairment is permanent – assessed when an individual reaches maximum medical improvement–and is based upon medical evidence that demonstrates a percentage of loss of the affected schedule member. Each member, extremity, or function is assigned a specific number of weeks of compensation, and the employee’s salary is used to compute his or her entitlement to a schedule award. This payment structure results in considerable disparities in compensation: For example, a manager is paid far more than a letter carrier for loss of a leg even though the impact on the letter carrier may in reality be far more severe. In that instance, a GS-15 would receive twice what a GS-7 receives for the same loss of ability to get around, engage in recreational activities, etc., for this permanent impairment. We believe paying all schedule awards at a single rate (70% of $53,639, roughly equivalent of the annual base salary of a GS 11 Step 2/3 and representing an approximate mid-point of federal salary), adjusted annually for inflation, would be more equitable and would also speed claims processing.

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Similarly, allowing injured workers to receive FECA schedule award benefits in a lump sum concurrently with FECA wage-loss benefits for total or partial disability would simplify process for claimants and OWCP. The current process is complicated and convoluted for claimants, and leads many to switch back and forth between FECA and OPM retirement to avoid the prohibition on concurrent receipt of schedule award and wage-loss payments. While individuals are collecting OPM benefits, OWCP and employing agencies cannot require return-to-work activities and as a result claimants sometimes do not return to work as early or as often as they could. Allowing concurrent receipt of these benefits would mean claimants are compensated for permanent loss and vocational rehabilitation efforts can continue uninterrupted, thereby improving the chances of a successful and timely return to employment.

Finally, this proposal increases benefit levels for funeral expenses from $800 to $6,000 and facial disfigurement from $3,500 to $50,000; the proposal further provides that those levels will have a cost of living adjustment, similar to the cost of living adjustment currently done for wage-loss benefits. Both of these have not been significantly updated since 1949, and this change will bring FECA in line with increases in other workers’ compensation statutes.

Modernizing and Improving FECA
Because FECA has not been amended in over 40 years, updates are needed to modernize and improve several provisions of the statute. One such change was made several years ago but only applied to workers employed by the U. S. Postal Service (USPS) – the imposition of an upfront waiting period. In order to discourage the filing of claims for minor injuries that resolve very quickly, state workers’ compensation programs generally impose a waiting period before an injured worker is entitled to wage-loss compensation. Because of the way in which the 1974 amendments to FECA adding the “Continuation of Pay” provisions were drafted, the waiting period under FECA for traumatic injuries was effectively moved after the worker has received 45 days of “Continuation of Pay,” thus defeating the purpose of a waiting period. The Postal Enhancement and Accountability Act of 2006 amended the waiting period for Postal employees by placing the three-day waiting period immediately after an employment injury; we suggest placing the three-day waiting period immediately after an employment injury for all covered employees.

Another longstanding concern addressed by the proposal relates to the application of FECA subrogation provisions to claims. Workers’ compensation systems generally provide that when a work-related injury is caused by a negligent third party the worker who seeks damages from that third party must make an appropriate refund to the workers’ compensation system. As a result of the way in which the 1974 “Continuation of Pay” provision was drafted, OWCP cannot include amounts paid for Continuation of Pay in calculating the total refund to OWCP when a recovery is received by a FECA beneficiary from a third party. OWCP seeks authority to include these amounts.

OWCP also seeks the authority to match Social Security wage data with FECA files. While the SSA collects employment and wage information for workers, OWCP presently does not have authority to match that data to identify individuals who may be working while drawing FECA benefits. OWCP currently is required to ask each individual recipient to sign a voluntary release to obtain such wage information. Direct authority would allow automated screening to ensure that claimants are not receiving salary, pay, or remuneration prohibited by the statute or receiving an inappropriately high level of benefits.

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This proposal would also increase the incentive for employing agencies to reduce their injury and lost time rates. Currently the USPS and other agencies not funded by appropriations must pay their “Fair Share” of OWCP administrative expenses, but agencies funded by appropriations are not required to do so. Amending FECA to allow for administrative expenses to be paid out of the Employees’ Compensation Fund and included in the agency chargeback bill would increase Federal agencies’ incentive to reduce injuries and more actively manage return to work when injuries do occur.
To improve access to medical care, we suggest a provision that would increase the authority and use of Physicians’ Assistants and Nurse Practitioners. We suggest amending FECA to allow Physicians’ Assistants and Nurse Practitioners to certify disability during the Continuation of Pay period so that case adjudication is not delayed and treatment can be provided more rapidly. The provision allowing Physicians’ Assistants and Nurse Practitioners to certify disability during the Continuation of Pay period would also reduce the burden of disability certifications in war zone areas because access to a physician may be even more limited in these circumstances.

To further address injuries sustained in a designated zone of armed conflict, FECA should be amended to provide Continuation of Pay for wage loss up to 135 days for such injuries. This increase from the standard 45 days would allow additional flexibility for claims handling in these challenging areas and is an outgrowth of a cooperative effort with OPM, the Department of State, and the Department of Defense to address the needs of deployed civilian employees.

Conclusion
This proposal will enhance OWCP’s ability to return federal employees to work and provides a fair and reasonable resolution to the disincentives and inadequacies that have arisen within the current FECA statute. Since any FECA reform should be prospective only, it would apply to new injuries and new claims of disability after enactment; injured workers currently in receipt of disability benefits would see no changes in their benefit level. We believe that our proposals, if adopted in their entirety, would allow all federal employees and federal agencies to embrace and adopt a more pro-active and progressive attitude about return to work and disability employment, and avoid any unfair interruption of existing benefits. Even with this prospective approach, cost savings are estimated to be in excess of $360 million over a 10-year period government-wide.

The FECA program is at a critical juncture. We have done our best to keep the program current and responsive to the changing world we live in through administrative, technological, and procedural innovations and investments. Without these statutory reforms, OWCP’s best efforts may yield some further gains; however, we cannot overcome the fundamental disincentives in the current law and achieve the breakthrough improvements that we know are possible within the FECA program, which would allow FECA to maintain its status as a model of workers’ compensation programs.
The federal workforce comprises dedicated, hard-working women and men who are committed to serving the public. OWCP is fully committed to seeing that all injured workers receive the medical care and compensation they deserve, as well as the assistance needed to return to work when able to do so. FECA reform will enable OWCP to achieve those goals more effectively.