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[Senate Report 112-143]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 296

112th Congress }                                              {  Report

 2d Session    }                 SENATE                       { 112-143
_______________________________________________________________________

 
                21ST CENTURY POSTAL SERVICE ACT OF 2012

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 1789

                             together with

                            ADDITIONAL VIEWS

  TO IMPROVE, SUSTAIN, AND TRANSFORM THE UNITED STATES POSTAL SERVICE

                January 31, 2012.--Ordered to be printed
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
       Beth M. Grossman, Deputy Staff Director and Chief Counsel
   Lawrence B. Novey, Associate Staff Director and Chief Counsel for 
                          Governmental Affairs
                        Kenya N. Wiley, Counsel
               Nicholas A. Rossi, Minority Staff Director
                Mark B. LeDuc, Minority General Counsel
           J. Kathryn French, Minority Deputy Staff Director
            John A. Kane, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk
                                                       Calendar No. 296
112th Congress                                                   Report
                                 SENATE
 2d Session                                                     112-143

======================================================================

  TO IMPROVE, SUSTAIN, AND TRANSFORM THE UNITED STATES POSTAL SERVICE

                                _______
                                

                January 31, 2012.--Ordered to be printed

                                _______
                                

Mr. Lieberman, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1789]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1789) to improve, 
sustain, and transform the United States Postal Service, having 
considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History.............................................23
 IV. Section-by-Section Analysis.....................................25
  V. Evaluation of Regulatory Impact.................................34
 VI. Congressional Budget Office Estimate............................35
VII. Changes in Existing Law Made by the Bill, as Reported...........48
VIII.Additional Views................................................95

                         I. Purpose and Summary

    S. 1789, the 21st Century Postal Service Act of 2012, seeks 
to strengthen the United States Postal Service (Postal Service 
or USPS) and preserve its unique role in the nation's economy 
and infrastructure. The dramatic rise of electronic 
communication and the recent economic downturn have combined to 
imperil the viability of the Postal Service as it currently 
exists. S. 1789 is intended to put the Postal Service on a path 
toward sustainability. The bill would lessen some of the 
immediate financial pressure on the Postal Service, as well as 
establish a framework to address some of the long-term 
challenges the Postal Service confronts.

              II. Background and Need for the Legislation

    The federal government's provision of mail service dates to 
the early days of the country's history. By the mid-20th 
century, the U.S. Post Office Department was an extensive 
federal agency staffed by career federal civil servants. 
Pressure mounted, however, to transform the nation's mail 
service into a leaner and more self-sufficient entity.
    The modern-day Postal Service was created through the 
enactment of the Postal Reorganization Act of 1970.\1\ That 
legislation, while retaining the Postal Service as a federal 
entity, sought to transition the Service to a private-sector 
model. Whereas the Post Office Department received federal 
subsidies, the new Postal Service would be fully funded through 
the rates charged for the products and services it offered to 
its customers. Postal employees would no longer be part of the 
regular federal civil service, yet substantial federal 
involvement and oversight would remain. For instance, tens of 
thousands of postal employees would remain in the existing 
federal health and pension programs. Also, the Postal Service 
would remain subject to potential statutory mandates governing 
its operations, such as requirements for universal service and 
for six-day delivery. Additionally, postal rate increases would 
be approved by the Postal Regulatory Commission, an independent 
regulatory agency, and rates for monopoly products would be 
subject to statutory rates caps in order to ensure that mail 
service remains affordable.
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    \1\P.L. 91-375, codified at 39 U.S.C. Sec. Sec. 101 et seq.
---------------------------------------------------------------------------
    Yet by the early 21st century, the structure and service 
model established in the 1970 Act had become seriously frayed. 
Congress periodically intervened to provide relief and reforms, 
including in the costly and complex area of employee retirement 
benefits. Those measures, however, could not keep pace with the 
collapse of the traditional demand for mail services, and now 
the Postal Service once again faces serious challenges. As the 
Government Accountability Office (GAO) stated in September 
2011, ``Little time remains to prevent USPS--the largest 
federal civilian employer--from insolvency. The stark reality 
is that USPS's business model is broken . . . USPS cannot 
continue providing services at current levels without dramatic 
changes in its cost structure.''\2\
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    \2\U.S. Postal Service in Crisis: Proposals to Prevent a Postal 
Shutdown: Hearing Before the Senate Committee on Homeland Security and 
Governmental Affairs, 112th Cong. (Sept. 6, 2011) (statement of Phillip 
Herr, Director for Physical Infrastructure Issues, Government 
Accountability Office, at p.1)[hereinafter Herr Testimony at HSGAC 
Hearing Sept. 6, 2011].
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    The Postal Service plays a critical role in the U.S. 
economy. As of the end of fiscal year 2011, the Postal Service 
employed just over 557,000 people\3\ and, in the course of the 
year, delivered nearly 168 billion pieces of mail\4\ to more 
than 150 million households and businesses.\5\ It operates at 
the center of an over $1 trillion mailing industry that employs 
nearly 8.7 million people in both the public and private 
sectors.\6\ The Postal Service is vital, then, not only to 
those who use it directly, but also as a result of the ripple 
effects its operations have throughout the economy.
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    \3\U.S. Postal Service Form 10-K for fiscal year 2011 at p. 23, 
available at http://about.usps.com/who-we-are/financials/10k-reports/
fy2011.pdf [hereinafter USPS FY2011 10-K].
    \4\See USPS FY2011 10-K at p.18.
    \5\Patrick R. Donahoe, Postmaster General and CEO, U.S. Postal 
Service, Speech at the National Press Club, (November 21, 2011), at p.1 
(Nov. 21, 2011) available at http://about.usps.com/news/speeches/2011/
pr11_pmg1121.pdf [hereinafter Donahoe NPC Speech].
    \6\Donahoe NPC Speech, at p.1.
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    The Postal Service faces a dilemma: even as it stretches to 
deliver to more addresses, the overall volume of mail it 
handles is in decline. In 2011, the annual number of addresses 
to which the Postal Service delivered increased by more than 
636,000, but the 168 billion pieces of mail it handled 
represented a 1.7 percent decline from fiscal year 2010. This 
decline followed decreases in mail volume of 3.3 percent in 
fiscal year 2010, 12.7 percent in fiscal year 2009, 4.8 percent 
in fiscal year 2008, and 0.4 percent in fiscal year 2007.\7\ In 
total, mail volume in fiscal year 2011 was down 21 percent 
since its peak in fiscal year 2006 at more than 213 billion 
pieces.\8\
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    \7\Data is from USPS Form 10-K for fiscal years 2007, 2008, 2009, 
2010, 2011, available at http://about.usps.com/who-we-are/financials.
    \8\USPS FY2011 10-K at p.15.
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    The Postal Service generated a total of about $65.7 billion 
in revenue in fiscal year 2011.\9\ Expenses, however, totaled 
about $70.6 billion, leading to nearly $5 billion in losses for 
the year.\10\ These losses followed a record $8.5 billion in 
losses in fiscal year 2010.\11\ The fiscal year 2011 losses 
would have more than doubled--exceeding $10 billion for the 
year--had Congress not delayed the due date for a statutorily-
required retiree health pre-funding payment originally due on 
September 30, 2011 until the next fiscal year.\12\ Postmaster 
General Patrick R. Donahoe has repeatedly argued that, absent 
significant changes, the Postal Service will have completely 
exhausted its cash and borrowing authority at some point during 
fiscal year 2012, putting ongoing operations in jeopardy.\13\
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    \9\USPS FY2011 10-K at p.15.
    \10\USPS FY2011 10-K at p.15.
    \11\U.S. Postal Service Form 10-K for fiscal year 2010 at p. 12, 
available at http://about.usps.com/who-we-are/financials/10k-reports/
fy2010.pdf.
    \12\P.L 112-33, Sec. 124.
    \13\See, e.g., U.S. Postal Service in Crisis: Proposals to Prevent 
a Postal Shutdown: Hearing Before the Senate Committee on Homeland 
Security and Governmental Affairs, 112th Cong. (Sept. 6, 2011)(oral 
testimony of Patrick R. Donahoe, Postmaster General and CEO, U.S. 
Postal Service) available at http://www.hsgac.senate.gov/hearings/us-
postal-service-in-crisis-proposals-to-prevent-a-postal-shutdown 
[hereinafter Donahue Testimony at HSGAC Hearing Sept. 6, 2011].
---------------------------------------------------------------------------
    In a November 21, 2011 speech at the National Press Club, 
Mr. Donahoe blamed statutory restrictions and obligations 
placed on the Postal Service for the difficult financial 
situation it faces despite aggressive actions to cut costs and 
grow new lines of business. He said at one point: ``We are in a 
deep financial crisis today because we have a business model 
that is tied to the past. We are expected to operate like a 
business, but we do not have the flexibility to do so.''\14\
---------------------------------------------------------------------------
    \14\Donahoe NPC Speech at p.4.
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    Throughout his National Press Club speech, Mr. Donahoe 
highlighted actions he argues that private delivery companies 
have taken to cut costs, but that the Postal Service is 
prohibited from doing, such as adjusting delivery frequency. He 
also cited the Postal Service's costly pension and retiree 
health obligations. He said that the Postal Service has been 
required to pay $11.4 billion more than it owes into the 
Federal Employee Retirement System (FERS) over the past 21 
years.\15\ He also said that the Postal Service's $6.6 billion 
in total losses during fiscal years 2008 and 2009--the two 
years which saw the most dramatic declines in mail volume 
following the recent economic slowdown--were due to the $7 
billion in retiree health pre-funding payments paid out during 
that period.\16\
---------------------------------------------------------------------------
    \15\Donahoe NPC Speech at p.5.
    \16\Donahoe NPC Speech at p.5.
---------------------------------------------------------------------------
    The committee held a hearing to consider these and other 
issues facing the Postal Service on September 6, 2011. Senators 
Lieberman, Collins, Carper, and Scott Brown then introduced 
this comprehensive Postal Service reform legislation on 
November 2, 2011--S. 1789, the 21st Century Postal Service Act. 
The legislation addresses many of the major financial and 
structural challenges confronting the Postal Service and works 
to put the Postal Service on a sustainable path, so that it 
will continue to provide mail service to all Americans, as it 
has done since the early days of the Republic.

                    DISCUSSION OF LEGISLATIVE ISSUES

FERS overpayments

    USPS employees, like federal employees, participate in the 
Federal Employees Retirement System (FERS). Thus, the Postal 
Service is required to make the employer contributions for 
postal employees participating in FERS. Each year, the Office 
of Personnel Management (OPM) calculates the Postal Service's 
liability for these contributions under FERS. OPM has 
determined that the Postal Service currently has a surplus 
under the FERS program.\17\ Beginning in fiscal year 2011, S. 
1789 authorizes the Director of OPM to provide the Postal 
Service with a refund of any amount it has overpaid into FERS. 
The Postal Service would be required to use a portion of any 
refund it receives for fiscal years 2011, 2012 and 2013 to 
provide retirement incentives to employees. Postal Service 
officials have told the Committee that they anticipate that the 
expected FERS refund will give them more than enough cash to 
successfully encourage 100,000 postal employees to retire--
potentially saving the Postal Service as much as $8 billion per 
year or more. Any funds from the FERS surplus remaining after 
the implementation of a retirement incentive program could be 
used to fund Postal Service obligations related to pensions, 
retiree health, and workers' compensation.
---------------------------------------------------------------------------
    \17\Office of Personnel Management Office of Inspector General, A 
Study of the Risks and Consequences of the USPS OIG's Proposals to 
Change USPS's Funding of Retiree Benefits, at p.23 (Feb. 28, 2011).
---------------------------------------------------------------------------

Retiree health pre-funding payments

    The Postal Service is under various statutory mandates 
concerning retirement health benefits for its current and 
former employees. While it is critical that the Postal Service 
behave responsibly with respect to its retirement obligations, 
this bill seeks to recalibrate these mandates in order to 
lessen their immediate burden while still ensuring that the 
Postal Service will contribute sufficiently to meet realistic 
estimates of future needs.
    The Postal Accountability and Enhancement Act of 2006\18\ 
required the Postal Service to make a series of ten payments 
beginning in fiscal year 2007 to pre-fund its future retiree 
health obligations. The amount of each payment is set in 
statute and ranges from $5.4 billion to $5.8 billion annually, 
although Congress decreased the size of the payment due in 
fiscal year 2009 from $5.4 billion to $1.4 billion in an effort 
to ease the financial strain on the Postal Service.\19\
---------------------------------------------------------------------------
    \18\P.L. 109-435.
    \19\P.L. 111-68, Sec. 164.
---------------------------------------------------------------------------
    Under current law the Postal Service is scheduled in fiscal 
year 2017 to begin paying down whatever retiree health 
obligations remain over a period of 40 years.\20\
---------------------------------------------------------------------------
    \20\5 U.S.C. Sec. 8909a(d)(2)(B).
---------------------------------------------------------------------------
    As of the end of fiscal year 2011, the Postal Service has 
made $21 billion in retiree health payments. These retiree 
health payments were in addition to the premium payments the 
Postal Service made each year on behalf of current retirees. 
According to data provided to the Committee by the Postal 
Service, those premium payments totaled $1.7 billion in fiscal 
year 2007 and are projected to reach $4 billion annually by 
fiscal year 2016.
    The Committee recognizes that the statutorily mandated 
retiree health payment schedule has been difficult to meet due 
to the declining revenues of the Postal Service as a result of 
the electronic diversion of the mail and a major recession that 
significantly affected mail volume. At the same time, the 
Committee is aware that easing or eliminating the pre-funding 
obligation could one day either break promises made to 
retirees, or leave taxpayers with a significant financial 
obligation in the event that the Postal Service becomes unable 
to make the payments itself.
    In order to provide the Postal Service with financial 
relief while maintaining its responsibility for the costs 
related to its employees, S. 1789 would make three major 
reforms to the Postal Service's current retiree health payment 
schedule and structure:
    1. It would replace the existing payment schedule--the 
remaining statutory annual payments and the 40-year 
amortization schedule that will start in fiscal year 2017--with 
a new 40-year amortization schedule that would start in fiscal 
year 2012.
    2. It would set the pre-funding goal underlying the new 
amortization schedule at 80 percent of the obligation (rather 
than the current 100 percent), in recognition of the fact that 
the Postal Service, if necessary, has additional assets it 
could draw upon to meet these obligations.
    3. It would allow current retirees' premiums to be paid out 
of the health benefit fund in the Treasury in which the Postal 
Service's pre-funding payments have been deposited since fiscal 
year 2007. That fund--the Postal Service Retiree Health Benefit 
Fund--currently includes just over $41 billion.
    According to data provided to the committee by the Postal 
Service, the combination of these three provisions could cut 
the Postal Service's total retiree health payments by roughly 
half each year.

Postal Service Health Plan

    The Postal Service has proposed to sponsor its own health 
care plan, rather than continue to participate in the Federal 
Employee Health Benefits program, as a way to reduce health 
care costs as well as reduce the amount of the retiree health 
benefits payments.\21\ The Committee did not legislate such a 
change, but instead chose to leave the outcome up to the Postal 
Service and its recognized unions. The Committee chose to give 
the Postal Service and its employees the flexibility necessary 
to use the collective bargaining process to potentially develop 
a set of changes to the health benefits offered to postal 
employees. No changes in health benefits would go into effect 
without the concurrence of the Postal Service and each of the 
unions. Depending on the details of any agreement, these 
negotiations could, according to information provided to the 
Committee by the Postal Service, lead to a reduction in the 
Postal Service's total retiree health obligation to less than 
$3 billion annually.
---------------------------------------------------------------------------
    \21\Donahoe Testimony at HSGAC Hearing Sept. 6, 2011 at pp.12-13.
---------------------------------------------------------------------------

Binding arbitration in resolution of labor disputes

    Unlike most federal agencies and their employees, which are 
governed by government-wide civil service rules, the Postal 
Service generally sets pay and other terms and conditions of 
employment through a process of collective bargaining between 
postal management and postal unions. If the parties are unable 
to reach a timely agreement, the dispute must be resolved by 
binding arbitration.\22\ Under statute, when an existing 
collective bargaining agreement approaches its expiration date, 
or when a party to the agreement proposes to modify or 
terminate it before its expiration date, the parties have an 
opportunity to reach agreement or to adopt a procedure for 
binding resolution on their own and then with the assistance of 
a mediator. If the parties still cannot reach agreement, the 
statute calls for conclusive and binding arbitration.\23\
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    \22\39 U.S.C. Sec. 1207.
    \23\If a situation arose where a postal union did not have an 
agreement with the Postal Service, the existing statute gives the 
parties an opportunity to reach an agreement through collective 
bargaining on their own and then with the assistance of a mediator. But 
if the parties fail to reach agreement within 180 days after the 
commencement of collective bargaining, the statute calls for conclusive 
and binding arbitration. See 39 U.S.C. Sec. 1207(d).
---------------------------------------------------------------------------
    The statutory process for binding arbitration of labor 
disputes is established in 39 U.S.C. 1207(c). The arbitration 
board will consist of three members, one appointed by the 
Postal Service, one by the union, and one by the other two 
members. The instructions to the board in current statute are 
as follows:

          (2) The arbitration board shall give the parties a 
        full and fair hearing, including an opportunity to 
        present evidence in support of their claims, and an 
        opportunity to present their case in person, by counsel 
        or by other representative as they may elect. Decisions 
        of the arbitration board shall be conclusive and 
        binding upon the parties. The arbitration board shall 
        render its decision within 45 days after its 
        appointment.\24\
---------------------------------------------------------------------------
    \24\39 U.S.C. Sec. 1207(c)(2).

    The Postal Service has requested a statutory amendment to 
specifically require that the arbitration board must consider 
the Postal Service's financial health when making a decision. 
Then-Postmaster General Potter explained this request in April 
---------------------------------------------------------------------------
22, 2010 testimony in the following terms:

          . . . Under existing law, arbitration is always a 
        possibility. The financial health of the Postal Service 
        and the affordability of postal products should be key 
        considerations in any arbitration ruling. While some 
        arbitrators have considered the fiscal health of the 
        Postal Service, they are not required to take it into 
        account. . . . We ask that legislation be adopted to 
        require arbitrators to take into account the Postal 
        Service's financial condition before making any 
        decision.\25\
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    \25\The Future of the U.S. Postal Service: Hearing Before the 
Subcomm. on Federal Financial Management of the Senate Committee on 
Homeland Security and Governmental Affairs, 111th Cong. (Apr. 22, 
2010)(Testimony of John E. Potter, Former Postmaster General, at p.9).

    Donohoe, the current Postmaster General, reiterated the 
Postal Service's support for such a provision in testimony on 
May 17, 2011.\26\ GAO has also recommended such a change to 
statute: ``If USPS and its unions go to arbitration, there is 
no statutory requirement for arbitrators to consider USPS's 
financial condition. We continue to favor such an arbitration 
requirement.''\27\
---------------------------------------------------------------------------
    \26\Addressing the U.S. Postal Service's Financial Crisis: Hearing 
Before the Subcomm. on Federal Financial Management, Government 
Information, Federal Services and International Security of the Senate 
Committee on Homeland Security and Governmental Affairs, 112th Cong. 
(May 17, 2011) (Testimony of Patrick R. Donahoe, Postmaster General and 
CEO, U.S. Postal Service at p.8).
    \27\Finding Solutions to Challenges Facing the U.S. Postal Service: 
Hearing Before the Subcomm. on Federal Financial Management, Government 
Information, Federal Services and International Security of the Senate 
Committee on Homeland Security and Governmental Affairs, 111th Cong. 
(Dec. 2, 2010) (Statement submitted by Phillip Herr, Director for 
Physical Infrastructure Issues, Government Accountability Office, at 
p.9).
---------------------------------------------------------------------------
    The unions representing postal employees have expressed 
strong opposition to such a provision. For example, Cliff 
Guffey, president of the American Postal Workers Union, AFL-
CIO, testified on May 17, 2011, ``I must state our unalterable 
opposition to proposals to change the standard'' for binding 
labor arbitration.\28\ The previous year, Fredric V. Rolando, 
President of the National Association of Letter Carriers, AFL-
CIO, explained on December 2, 2010 that since ``the Postal 
Service has at least one appointed arbitrator on every 
arbitration board,'' if the Postal Service presents evidence on 
postal finances, ``[t]here is no way for an arbitration board 
to avoid considering the finances of the Postal Service in 
their decisions . . .'' In reality, Rolando testified, ``at 
least one of the parties (union or management) has presented 
evidence and testimony on the financial condition of the Postal 
Service to every arbitration board that has been established,'' 
and arbitrators consider all of the evidence presented, whether 
as a matter of legal requirement or of professional practice. 
He testified that it would be unwarranted for legislation to 
give special status to the financial condition of the Postal 
Service or of any other ``managerial objectives.''\29\
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    \28\Addressing the U.S. Postal Service's Financial Crisis: Hearing 
Before the Subcomm. on Federal Financial Management, Government 
Information, Federal Services and International Security of the Senate 
Committee on Homeland Security and Governmental Affairs, 112th Cong. 
(May 17, 2011) (Testimony of Cliff Guffy, President of the American 
Postal Workers Union, at p.12).
    \29\Finding Solutions to Challenges Facing the U.S. Postal Service: 
Hearing Before the Subcomm. on Federal Financial Management of the 
Senate Committee on Homeland Security and Governmental Affairs, 111th 
Cong. (Dec. 2, 2010) (Testimony by Frederic V. Rolando, President, 
National Association of Letter Carriers, at pp.10-11).
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    The Committee decided that, at this period when the Postal 
Service faces such dire financial difficulties, arbitrators 
must consider the financial condition of the Postal Service, 
and S. 1789 should say so explicitly. However, the Committee 
was determined to include a balanced provision in S. 1789, 
making it clear that Congress does not believe the financial 
condition of the Postal Service, or any other objectives put 
forward by either the Postal Service or one of its unions, are 
the only factors that arbitrators must consider.
    Accordingly, section 105 of the bill states that, in 
resolving a labor dispute by binding arbitration under 39 
U.S.C. 1207(c)--
          ``the arbitration board shall consider such relevant 
        factors as--
                  (i) the financial condition of the Postal 
                Service;
                  (ii) the requirements relating to pay and 
                compensation comparability under section 
                1003(a) [of title 39 of the U.S. Code]; and
                  (iii) the policies of this title [39 of the 
                U.S. Code].''
    The second clause of this provision in the bill refers to 
the existing statutory requirement that it ``be the policy of 
the Postal Service to maintain compensation and benefits for 
all officers and employees on a standard of comparability to 
the compensation and benefits paid for comparable levels of 
work in the private sector of the economy.'' The third clause 
refers to title 39, which is the title of the U.S. Code 
governing all aspects of the Postal Service, including both its 
service responsibilities and its employment policies.
    The Committee believes that all of the factors stated or 
referenced in section 105 of the bill will be relevant to labor 
disputes and should be considered by the arbitration boards 
resolving such disputes under 39 U.S.C. 1207(c). However, the 
Committee certainly does not intend to stack the deck in favor 
of management, and this provision would not do so. Witnesses 
indicated to the Committee that arbitration boards are already 
considering the financial condition of the Postal Service, and 
the Committee decided it is desirable to say so explicitly. The 
provision does not, however, say that financial condition 
preempts any other relevant factor considered by an arbitration 
board or is more important than any other factor. Additionally, 
the factors referred to in clauses (i), (ii), and (iii) are not 
exclusive or limiting. The Committee determined that those 
factors are inherently relevant and must be considered by an 
arbitration board, but section 105 also provides that the board 
is to consider any other factors that are relevant to the 
dispute.

Mail processing facility closures

    In order to address the financial challenges it faces using 
authorities it possesses under current law, the Postal Service 
announced a proposal on September 15, 2011, to change the 
First-Class mail delivery standard. The proposed service change 
would lengthen the delivery window for some First-Class mail. 
The projected cost savings from this proposal would come 
largely from closing or consolidating the mail processing 
facilities that currently support shorter delivery times. 
According to the Postal Service, the proposed change would 
enable it to close or consolidate as many as 250 mail 
processing facilities around the country.\30\ Despite having 
concerns about these changes, the Committee chose not to 
curtail or eliminate the Postal Service's existing authority to 
modify service standards and, in the process, restructure its 
processing footprint. Nonetheless, the Committee is concerned 
that employees, customers, and representatives of communities 
that could be affected by the closure or consolidation of a 
mail processing facility may not have an opportunity to provide 
sufficient input before the Postal Service makes a final 
decision.
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    \30\Press Release, U.S. Postal Service, Postal Service Faces New 
Reality, at p.1 (Sept. 15, 2011), available at http://about.usps.com/
news/national-releases/2011/pr11_103.htm.
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    Going forward, S. 1789 would make the process used to 
consider processing facility closures or consolidations more 
transparent and would give interested parties a more meaningful 
role in the decision. Specifically, Section 201 of S. 1789 
would mandate that the Postal Service provide at least 45 days 
advance notice before making a final decision to close or 
consolidate a facility; that it provide adequate opportunities 
for public comment; and that it conduct an area mail processing 
study that includes a plan to reduce the capacity of the postal 
facility rather than close it. Before finalizing a closure, the 
Postal Service would have to publish a written justification 
for the decision that responds to any public comments and 
demonstrates the Postal Service has considered potential undue 
burdens from the proposed closure. The Postal Service would 
also be required to make reasonable efforts to provide 
alternatives for those who would be affected by the closure of 
the processing facility.
    The Committee chose not to freeze or overturn facility 
closure or consolidation procedures currently underway or to 
overturn decisions that have already been made.\31\ At the same 
time, the Committee recognizes that these changes may be going 
forward under procedures that would not meet the standards set 
forth in the bill and which stakeholders and members of the 
Committee would find inadequate. For that reason, the bill 
requires additional review in cases where a processing facility 
has been studied for possible closure but no final 
determination has been made. In those cases, the Postal Service 
would need to consider the option of reducing the capacity of 
the facility rather than closing it--if it had not already done 
so--and to publish the results of that consideration as an 
amendment to the original area mail processing study. Nothing 
in the bill, however, would prohibit the Postal Service from 
ultimately deciding to close or consolidate a facility or 
require it to overturn a decision made before enactment to 
close or consolidate a facility.
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    \31\Subsequent to the Committee's consideration of S. 1789, the 
Postal Service, in response to concerns raised by the public and 
Members of Congress, announced that it would delay all pending closings 
or consolidations of mail processing facilities until May 15, 2012. 
Press Release, U.S. Postal Service, Statement on Delay of Closing or 
Consolidation of Post Offices and Mail Processing Facilities, at p.1 
(Dec. 13, 2011) available at http://about.usps.com/news/national-
releases/2011/pr11_1213closings-v2.pdf.
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Post Offices

    Recognizing that closing some underused post offices is 
likely unavoidable if the Postal Service is to become 
financially stable, the Committee has sought to improve the 
process for determining which offices will be shut.
    GAO has previously recommended shrinking the Postal 
Service's retail network as part of an overall restructuring to 
restore financial viability.\32\ The Postal Service is actively 
considering 728 retail facilities for closure, and has plans to 
close many more.\33\ The Postal Service announced in July 2011 
that it would conduct studies of approximately 3,700 post 
offices, retail annexes, stations, and branches nationwide for 
possible closure, and submitted its closure plan to the Postal 
Regulatory Commission (PRC) for review.\34\ Ultimately, the 
Postal Service seeks to reduce the total number of retail 
facilities from 32,000 currently, to fewer than 20,000 by 
2015.\35\ The Postal Service has estimated that it could 
potentially save $1.5 billion annually by consolidating its 
retail network.\36\
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    \32\Government Accountability Office (GAO), U.S. Postal Service: 
Restructuring Urgently Needed to Achieve Financial Viability, GAO-09-
958T, at p.6 (Aug. 2009). But see GAO, U.S. Postal Service: Actions 
Needed to Stave off Financial Insolvency, GAO-11-926T, at p.15 (Sept. 
2011)(noting some of the challenges, including public resistance, that 
may arise in trying to restructure USPS's retail network).
    \33\Congressional Research Service (CRS), The U.S. Postal Service: 
Common Questions About Post Office Closures, R41950, at pp. 3-4 (Jan. 
13, 2012).
    \34\Press Release, U.S. Postal Service, Postal Service Takes Next 
Steps in Optomizing Retail Network, at p.1 (July 26, 2011) available at 
http://about.usps.com/news/national-releases/2011/pr11_089.htm.
    \35\Herr Testimony at HSGAC Hearing Sept. 6, 2011 at p.14.
    \36\Donahoe Testimony at HSGAC Hearing Sept. 6, 2011 at p.7.
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    Thus far, the PRC has expressed concerns about the plans. 
The Commission issued an advisory opinion on December 23, 2011 
stating that the Postal Service's approach failed to provide 
adequate retail access in the event of a post office 
closure.\37\ Meanwhile, Members of Congress and others have 
also raised concerns about the planned closings. In response, 
the Postal Service in December 2011 announced that it would 
delay the closing or consolidation of post offices and mail 
processing facilities until May 15, 2012.
---------------------------------------------------------------------------
    \37\Postal Regulatory Commission, Advisory Opinion on Retail Access 
Optimization Initiative, Docket No. N2011-1, at p.1 (Dec. 23, 
2011)[hereinafter PRC Retail Access Opinion].
---------------------------------------------------------------------------
    Current law requires the Postal Service to consider several 
factors in determining whether to close a post office, such as 
the effect of the closing on the community, the effect on 
postal employees, whether the closing would undermine effective 
service for rural communities, and the amount of the projected 
savings.\38\
---------------------------------------------------------------------------
    \38\39 U.S.C. Sec. 404(d)(2)(A).
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    The Postal Service must notify the affected public of its 
intent to close or consolidate a particular post office and 
hold a 60-day comment period prior to the proposed date of such 
closure or consolidation.\39\ The public may appeal the Postal 
Service's decision to the PRC within 30 days after USPS has 
made its determination to close such post office. The 
Commission then has 120 days to make a determination about 
whether proper procedures were followed during the closure 
process.
---------------------------------------------------------------------------
    \39\39 U.S.C. Sec. 404(d)(1).
---------------------------------------------------------------------------
    Section 204 of S. 1789 improves the current process for 
post office closings by providing the Postal Service with the 
necessary tools to right-size its retail network while also 
ensuring that postal customers receive adequate access to 
retail services. The bill allows the Postal Service to provide 
retail alternatives to dedicated post offices, but also puts in 
place safeguards against premature or inappropriate closures. 
These safeguards are particularly important for individuals in 
small towns and rural areas. S. 1789 requires the Postal 
Service to consider several options prior to closing a post 
office, such as consolidating two post offices within a 
reasonable distance, reducing the number of operating hours at 
a particular post office instead of a closure or consolidation, 
and permitting a contractor or rural carrier to provide retail 
services in the community served by the post office. S. 1789 
also requires the Postal Service to establish certain retail 
service standards that take into account such factors as the 
proximity of retail postal services to customers, the age and 
disability status of individuals in the area, and the 
transportation challenges in the areas served. S. 1789 
prohibits the Postal Service from closing any post offices 
(except for health and safety reasons) prior to establishing 
such retail service standards.

Conversion of door delivery points

    The mode of mail delivery plays an important role in the 
efficiency and cost of delivery operations. The primary modes 
of delivery points for the Postal Service are door, curbside, 
and centralized. Door delivery refers to delivering mail to 
slots or receptacles at a customer's door. The Postal Service 
provides curbside delivery to customers who have mailboxes at 
the curb and that mail carriers can service from their 
vehicles. Centralized delivery includes cluster boxes and other 
mail receptacles at one delivery point, as currently used in 
some suburban areas, apartment buildings and gated communities. 
According to a recent report by the Postal Service's Office of 
Inspector General, door delivery is the most expensive mode of 
delivery, costing the Postal Service as much as $353 per 
delivery point, totaling $12 billion annually.\40\ The USPS IG 
also stated that converting existing door delivery to curbside 
delivery could save the Postal Service more than $4.5 billion 
annually, and converting all delivery modes to centralized 
delivery could save the Postal Service an additional $5.1 
billion per year.\41\ Curbside delivery is more cost effective 
because it allows the carrier to remain in the vehicle during 
delivery, allowing faster mail delivery and lessening the 
possibility of injury (such as stress and strain, falls, and 
dog bites).
---------------------------------------------------------------------------
    \40\U.S. Postal Service, Office of Inspector General, Audit 
Report--Modes of Delivery, DR-AR-11-006, at p.2 (2011) [hereinafter 
USPS IG Report].
    \41\USPS IG Report, at p.2.
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    S. 1789 attempts to improve the efficiency of mail delivery 
and reduce the Postal Service's costs by authorizing the 
conversion of door delivery points, where practicable. Section 
205 of the bill authorizes the Postal Service, where feasible, 
to deliver to curbside, sidewalk,\42\ or centralized mailboxes 
rather than to door delivery points no later than 2015. S. 1789 
also provides for certain exceptions to the conversion to 
curbside, sidewalk, or centralized mailboxes, including 
physical hardship of a customer, weather conditions in a 
geographical area (such as snow), street parking in urban areas 
that obstructs access to curbside mailboxes, or ``other 
exceptional circumstances.''
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    \42\A sidewalk mailbox is one where the delivery point is along a 
sidewalk adjacent to the street address, but not directly on the 
street, so that a letter carrier cannot reach the mailbox without 
exiting his or her vehicle.
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Changes to mail delivery schedule

    Mail is currently delivered six days a week to most homes 
and businesses in the United States. Six-day-a-week delivery 
dates to the mid-19th century,\43\ and as late as 1950, mail 
was even delivered twice a day or more in some areas.\44\ 
Nonetheless, beginning in 1976, there have been a series of 
proposals to reduce mail delivery to five days a week as a 
means of reducing operating costs and avoiding rate 
increases.\45\ Most recently, President Obama proposed allowing 
the Postal Service to move to five-day delivery as part of the 
Administration's deficit reduction package.\46\ To date, 
however, Congress has rejected these proposals and, since at 
least 1983, has included language in annual appropriation bills 
intended to preserve six-day-per-week delivery service.\47\
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    \43\U.S. Postal Service, Delivery: Monday through Saturday since 
1863, at p.1 (June 2009), available at http://about.usps.com/who-we-
are/postal-history/delivery-monday-through-saturday.pdf; CRS, The U.S. 
Postal Service and Six-Day Delivery: Issues for Congress, R40626, at 
p.3, (June 9, 2009), [hereinafter CRS R40626]. Six-day mail delivery 
has never been universal, however. Home delivery to rural addresses did 
not begin until 1896, and even today, there are a small number of 
remote or sparsely settled communities that receive mail only five 
days, or even three days, per week.
    \44\CRS R40626, at p.2; U.S. Postal Service, Deliveries per Day, at 
p.1 (June 2005), available at http://about.usps.com/who-we-are/postal-
history/deliveries-per-day.pdf.
    \45\CRS R40626, at pp.4-7, 14-20.
    \46\Office of Management and Budget, Living Within Our Means and 
Investing in the Future: The President's Plan for Economic Growth and 
Deficit Reduction, at p.23 (Sept. 2011).
    \47\CRS R40626 at.6-7; see, e.g., P.L. 112-74 (Consolidated 
Appropriations Act, 2012).
---------------------------------------------------------------------------
    Faced with steep declines in mail volume, an increase in 
the number of delivery addresses, and increasingly difficult 
financial circumstances, the Postal Service now asserts that it 
is essential to move to a five-day delivery schedule. The 
Postal Service has estimated that it will save a net of $3.1 
billion dollars annually ($3.3 billion in cost savings less 
$0.2 billion in lost revenue) by switching to five-day 
delivery--and argues that this is more than it can save through 
any other single operational change.\48\ According to the 
Postal Service, these cost savings would result from removing 
certain direct costs of Saturday delivery, such as 
transportation and fuel costs, and through efficiencies that 
would be achieved by delivering the same volume of mail over 
five days rather than six.\49\
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    \48\See Postal Regulatory Commission, Request of the U.S. Postal 
Service for an Advisory Opinion in the Nature of Postal Services, 
Docket No. N2010-1, at p.4 (March 30, 2010); Initial Brief of the U.S. 
Postal Service, Six-Day to Five-Day Street Delivery and Related Service 
Changes, 2010 (Postal Regulatory Commission October 15, 2010) (No. 
N2010-1) at pp. 49-50, 59. [hereinafter Initial Brief].
    \49\Initial Brief of the U.S. Postal Service, pp. 44-49.
---------------------------------------------------------------------------
    The PRC has taken issue with some of the Postal Service's 
analysis. On March 30, 2010, the Postal Service submitted a 
request to the PRC for an advisory opinion on the Postal 
Service's proposal to eliminate mail delivery on Saturdays. On 
March 24, 2011, the PRC issued its opinion, in which it 
concluded that the switch to five-day delivery, while saving 
money, would save considerably less than the Postal Service 
asserted. Specifically, the PRC concluded that the likely cost 
savings would be approximately $2.3 billion annually ($1 
billion less than USPS's estimate) and that lost revenue would 
be nearly $0.6 billion ($400 million greater than USPS's 
estimate); in other words, the net savings, according to the 
PRC would be approximately $1.7 billion per year, only about 
half of what was estimated by the Postal Service.\50\ The PRC 
also raised concerns that the Postal Service had not adequately 
addressed how the shift to five-day service might 
disproportionately affect certain groups or geographic areas 
that are arguably more dependent on mail service, including 
rural areas, newspapers, mail-order pharmacies, and communities 
that offer vote-by-mail programs.\51\ The Postal Service 
subsequently issued a report strongly disputing the PRC's 
conclusions.\52\
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    \50\Postal Regulatory Commission, Advisory Opinion on Elimination 
of Saturday Delivery, Docket No. N2010-1, at pp. 1-2 (March 24, 2011) 
[hereinafter PRC Saturday Delivery Opinion].
    \51\PRC Saturday Delivery Opinion, at pp.144-152.
    \52\U.S. Postal Service, Report of the U.S. Postal Service 
Regarding Advisory Opinion in Postal Regulatory Commission Docket No. 
N2010-1, available at http://about.usps.com/news/electronic-press-kits/
five-day-delivery/pdf/USPS-Report-re-PRC-Advisory-Opinion.pdf.
---------------------------------------------------------------------------
    GAO, in response to a Congressional request, conducted an 
independent analysis of the Postal Service's cost savings 
estimate as well as the criticisms of the estimate. In a March 
2011 report, GAO concluded that the Postal Service was likely 
to achieve ``significant cost savings'' by reducing delivery to 
five days, but noted that some of those savings would depend on 
the extent to which the Saturday workload could be absorbed 
through more efficient operations the rest of the week.\53\ GAO 
identified as a particular area of uncertainty whether there 
was excess capacity in city-delivery operations, as the Postal 
Service has asserted. In other words, if, because of reduced 
mail volume, urban mail carriers were not delivering as much 
mail as they could, Saturday mail could be added to the 
existing workload without increasing costs; on the other hand, 
if urban mail carriers were already working to capacity, 
additional routes and personnel--and therefore costs--might be 
needed to handle the additional mail that would have previously 
been delivered on Saturday. GAO also noted that a move from 
six-day to five-day service would not alone be sufficient to 
put the Postal Service on stable financial footing.
---------------------------------------------------------------------------
    \53\GAO, U.S. Postal Service: Ending Saturday Delivery Would Reduce 
Costs, but Comprehensive Restructuring Is Also Needed, GAO-11-270, at 
p.11 (March, 2011).
---------------------------------------------------------------------------
    It is clear that a shift to five-day delivery has the 
potential to save the Postal Service a substantial amount of 
money but there is not agreement on what the potential cost 
savings might be. Changing a delivery schedule that has been in 
place for nearly 150 years is a significant step and one that 
involves difficult tradeoffs, including the potential to reduce 
mail volume further and to eliminate an advantage that the 
Postal Service has over its competitors--the provision of 
Saturday delivery at no additional cost.
    As a result, and because public and customer reaction to 
the Postal Service's five-day delivery proposal has been mixed, 
S. 1789 prohibits the elimination of Saturday delivery for two 
full years while other savings initiatives are implemented. 
After that period, five-day delivery could only be adopted if 
it is truly the last, but still necessary resort. Specifically, 
the bill requires that the Postal Service first implement 
alternative measures (authorized elsewhere in the bill) to 
increase revenue and reduce costs; that it identify, and 
develop measures to ameliorate any disproportionate negative 
impact that the change to five-day delivery may have on 
particular categories of customers and communities; and that it 
submit a report describing the actions it has taken to 
Congress, GAO, and the PRC. GAO is then directed to submit an 
independent report evaluating the measures the Postal Service 
has undertaken and assessing whether a change in delivery 
service is necessary for the Postal Service to become 
profitable by 2015 and achieve long-term financial solvency. 
Finally, the PRC is to issue, and submit to Congress, an 
advisory opinion determining (1) whether the measures developed 
by the Postal Service ameliorate any disproportionate, negative 
impact that a shift to five-day delivery may have on certain 
customers and communities; and (2) whether, based on the GAO's 
report, the change to five-day service is financially 
necessary. Only if the PRC determines that the Comptroller 
General has concluded that the change is necessary to allow the 
Postal Service to become profitable by fiscal year 2015 and to 
achieve long-term financial solvency, may the Postal Service 
implement a five-day delivery schedule.\54\
---------------------------------------------------------------------------
    \54\Note that the bill provides that the Postal Service's ability 
to implement a five-day delivery schedule is dependent only on the 
PRC's determination regarding the Comptroller General's conclusions and 
does not depend on whether the PRC itself determines that such a change 
is advisable.
---------------------------------------------------------------------------
    Finally, the Postal Service is not seeking--and S. 1789 
makes clear that the switch to five-day delivery to street 
addresses does not authorize--changes in schedules for post 
offices, for delivery to post office boxes, or for competitive 
mail products such as Express Mail, or to reduce the delivery 
schedule for any route for which mail delivery is currently 
provided less frequently than six days per week. The bill also 
provides that there may not be more than two consecutive days 
without mail delivery service, even in the case of federal 
holidays and three-day weekends.

Nonpostal products and services

    As mail volumes and revenues continue to decline, the 
Postal Service might consider new ways to increase its revenues 
through nonpostal products and services. Current law limits the 
Postal Service to postal products and services and to certain 
nonpostal services approved under criteria set out in the 2006 
Postal Accountability and Enhancement Act (PAEA).\55\ 
Specifically, PAEA authorized the Postal Service to continue 
providing nonpostal services that were offered as of January 1, 
2006, and that the PRC determined should continue. PAEA 
required the PRC, when making its determination, to take into 
account ``the public need for the service'' and ``the ability 
of the private sector to meet the public need for the 
service.''\56\ These grandfathered nonpostal services include 
officially licensed retail products such as USPS apparel and 
china. In addition to the grandfathered nonpostal services, 
current law authorizes the Postal Service to provide services 
to federal government agencies.\57\ Under this authority, the 
Postal Service provides services for such as passport 
applications and the sale of migratory bird hunting and 
conservation stamps for the U.S. Fish and Wildlife Service.\58\
---------------------------------------------------------------------------
    \55\39 U.S.C. Sec. 404(e)
    \56\Postal Accountability and Enhancement Act, P.L. 109-435.
    \57\39 U.S.C. Sec. 411.
    \58\U.S. Postal Service FY 2010 Annual Compliance Report, at p.71 
(Dec. 29, 2010).
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    In 2009, the Postal Service asked Congress to pass 
legislation allowing it to expand into new nonpostal areas.\59\ 
The Congressional Research Service (CRS) has indicated that the 
Postal Service could increase revenue by offering more 
nonpostal products and services.\60\ However, there are 
differing views about the wisdom of such a move. GAO reviewed 
the nonpostal products and services that the Postal Service 
offered prior to the enactment of PAEA in 2006 and found that 
19 products marketed or under development during fiscal years 
1995, 1996, and 1997 resulted in a net loss of nearly $85 
million through fiscal year 1997 and a net loss of $3.7 million 
during the first three quarters of fiscal year 1998.\61\ GAO 
stated that ``whether USPS should be allowed to engage in 
nonpostal activities should be carefully considered, including 
its poor past performance in this area, as should the risks and 
fair competition issues.''\62\
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    \59\U.S. Postal Service in Crisis: Hearing Before the Subcomm. on 
Federal Financial Management of the Senate Committee on Homeland 
Security and Governmental Affairs, 111th Cong. (Aug. 6, 2009)(Testimony 
of John E. Potter, Former Postmaster General, at p.15).
    \60\CRS, The U.S. Postal Service's Financial Condition: Overview 
and Issues for Congress, R41024 at p.8 (Dec. 16, 2011).
    \61\GAO, U.S. Postal Service: Strategies and Options to Facilitate 
Progress toward Financial Viability, GAO-10-455, at p.43 (Apr. 
2010)[hereinafter GAO 10-455]; GAO, U.S. Postal Service: Development 
and Inventory of New Products, GAO/GGD-99-15, at p. 20 ( Nov. 1998).
    \62\GAO 10-455, at p.42.
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    S. 1789 attempts to provide the Postal Service with the 
flexibility to generate revenue through nonpostal products and 
services, while also including certain safeguards to ensure 
that such products and services will not create unfair 
competition with the private sector and will actually improve 
the Postal Service's financial position. Section 209 of the 
bill would allow the Postal Service to offer nonpostal products 
and services if the PRC has determined that the products and 
services: (1) make use of USPS's processing, transportation, 
delivery, retail network, or technology; (2) are consistent 
with the public interest and a demonstrated demand for the 
Postal Service to offer them; (3) do not create unfair 
competition with the private sector; and (4) have the potential 
to improve the Postal Service's financial condition.

Federal Employees' Compensation Act (FECA)

    This title would make changes to the Federal Employees' 
Compensation Act (FECA),\63\ the statute governing the workers' 
compensation program for federal civilian employees and postal 
employees. FECA provides wage-replacement and medical benefits 
and offers rehabilitation services and return-to-work 
assistance to workers who suffer occupational injury or 
disease. Survivors receive benefits if the covered worker dies 
from the workplace injury or illness. The program is 
administered by the Department of Labor (DOL), which pays 
benefits from a special fund and is then reimbursed by federal 
agencies and the Postal Service for benefits paid to their 
employees.
---------------------------------------------------------------------------
    \63\5 U.S.C. Sec. Sec. 8101 et seq. 
---------------------------------------------------------------------------
    The FECA program pays a basic benefit for a total 
disability equal to two-thirds of an injured worker's pre-
disability wage if the worker has no dependents; for those with 
dependents, the benefit rises to 75 percent (called ``augmented 
compensation''). For a partial disability, the benefit is in 
proportion to the wage-earning capacity that the worker lost. 
These benefits are adjusted for inflation and are tax-free, and 
continue for as long as the injury or illness renders the 
individual unable to work. Persons with specific permanent 
disabilities involving the loss of, or loss of use of, an 
appendage or bodily function are entitled to disability 
benefits for a set number of weeks provided by schedules set by 
statute and regulation (which an individual may receive in 
addition to benefits for total and partial disability, but not 
at the same time as them). The FECA program also covers all 
medical costs associated with work related injuries and 
provides vocational rehabilitation services and assistance in 
returning to work. During the first 45 days after a traumatic 
injury, an employee receives regular salary (called 
``continuation of pay''), subject to tax, rather than FECA 
benefits. The survivors of employees killed on the job are 
entitled to cash benefits based on the worker's wages and a 
modest benefit for funeral costs.

         THE NEED FOR FECA REFORM AND ITS INCLUSION IN S. 1789

    Congress enacted FECA in 1916\64\ and has not substantially 
updated it since 1974.\65\ A series of GAO reports,\66\ 
Inspector General reports,\67\ and proposals by both the 
current Administration\68\ and the previous Administration\69\ 
have identified serious problems in the FECA statute that have 
yet to be addressed. CBO has analyzed the budgetary 
implications of some of these proposals.\70\ On July 26, 2011, 
the Committee through, its Subcommittee on Oversight of 
Government Management, the Federal Workforce, and the District 
of Columbia, held a hearing to examine the FECA program and 
consider proposals for improving it. The Subcommittee heard 
testimony from the DOL official in charge of administering 
FECA, the Deputy Director of the Office of Personnel 
Management, two representatives of employee organizations, and 
experts from the Government Accountability Office and from the 
International Association of Industrial Accident Boards and 
Commissions (IAIABC).\71\
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    \64\Federal Employee Compensation Act of September 7, 1916.
    \65\P.L. 93-416.
    \66\GAO, Federal Employees' Compensation Act: Preliminary 
Observations on Fraud-Prevention Controls: Statement for the Record of 
Gregory D. Kutz, Director Forensic Audits and Investigative Service, to 
the Committee on Homeland Security and Governmental Affairs, U.S. 
Senate, GAO-12-212T (Nov. 9, 2011); GAO, Federal Employees' 
Compensation Act: Redefining Continuation of Pay Could Result in 
Additional Refunds to the Government, GAO/GGD-95-135, (June 1995).
    \67\U.S. Postal Service Office of Inspector General, Postal Service 
Workers' Compensation Program: Audit Report, Report Number HR-AR-11-007 
(Sept. 30, 2011); Department of Labor Office of the Inspector General, 
Semi Annual Report to Congress: April-September 2010 (2010).
    \68\OMB, Budget of the U.S. Government, Fiscal Year 2012, 
``Terminations, Reductions, and Savings,'' at p.163 (Feb. 2011); OMB, 
Budget of the U.S. Government, Fiscal Year 2011, ``Terminations, 
Reductions, and Savings,'' at p.107 (Feb. 2010) [hereinafter, OMB 
Budgets FY 2011 and FY 2012].
    \69\OMB, Major Savings and Reforms in the President's 2008 Budget, 
at p.178 (Feb. 2007); OMB, Major Savings and Reforms in the President's 
2007 Budget, at p.192 (Feb. 2006); OMB, ``Major Savings and Reforms in 
the President's 2006 Budget,'' at page 201 (Feb. 11, 2005); The 
President, Budget of the U.S. Government, Fiscal Year 2003, at p. 222 
(Feb. 2002).
    \70\CBO, Budget Options, Vol. 2, Option 920, at p.171-172 (Aug. 
2009), available at http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-
BudgetOptions.pdf (2009); CBO, Budget Options, Option 920, at p.249-250 
(Feb. 2007), available at http://www.cbo.gov/ftpdocs/78xx/doc7821/02-
23-BudgetOptions.pdf (2007); CBO, Budget Options, Option 600, at p.222 
(Feb. 2005), available at http://www.cbo.gov/ftpdocs/60xx/doc6075/02-
15-BudgetOptions.pdf (2005).
    \71\Examining the Federal Workers' Compensation Program for Injured 
Employees: Hearing Before the Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia to the 
Senate Committee on Homeland Security and Governmental Affairs, 112th 
Cong., (July 26, 2011) [hereinafter HSGAC July 2011 hearing]. The 
following witnesses testified and submitted written statements: The 
Honorable Christine M. Griffin, Deputy Director, U.S. Office of 
Personnel Management; Mr. Gary Steinberg, Acting Director, Office of 
Workers' Compensation Programs, U.S. Department of Labor; Mr. Andrew 
Sherrill, Director, Education, Workforce, and Income Security, U.S. 
Government Accountability Office; Mr. Joseph Beaudoin, President, 
National Active and Retired Federal Employees Association; Mr. Ronald 
Watson, Consultant, National Association of Letter Carriers, AFL-CIO, 
Dr. Gregory Krohm, Executive Director, International Association of 
Industrial Accident Boards and Commissions. Available at http://
www.hsgac.senate.gov/subcommittees/oversight-of-government-management/
hearings/examining-the-federal-workers-compensation-program-for-
injured-employees.
---------------------------------------------------------------------------
    Based on this record, the Committee found that FECA needs 
updating and reform in several respects. Because individuals 
can receive FECA benefits indefinitely, as long as their injury 
impairs their ability to work, and because those benefits are 
generally larger than federal retirement benefits, the program 
creates a financial incentive for injured workers to remain on 
the FECA rolls up to and beyond retirement age. In addition, 
the augmented compensation under FECA is out of line with other 
compensation systems. For example, no state workers 
compensation systems provide augmentation for dependents, and 
the 75 percent level of benefit far exceeds that of any 
comparable compensation program. Whereas state systems deter 
minor claims by imposing brief waiting periods between the time 
of injury and the time an employee becomes eligible for 
benefits, FECA's waiting period for non-postal employees does 
not come until after the 45-days of continuation of pay. The 
FECA statute also fails to allow the federal government to 
obtain reimbursement of continuation of pay when third parties 
are liable for having caused the on-the-job injury. In 
addition, DOL would be better able to prevent improper payments 
if it were allowed to cross-match FECA records with Social 
Security records and had other statutory authorities to improve 
program integrity. Finally, some benefit levels for specific 
injuries and for funeral costs in FECA are inordinately low 
because they have not been changed in many decades.
    FECA reform is necessarily intertwined with the effort to 
stabilize the Postal Service's finances. Employees of the 
Postal Service represent a disproportionate number of FECA 
beneficiaries, and are responsible for a larger share of FECA 
benefits than are the employees of any federal department or 
agency. Specifically, approximately 40 percent of injuries, 
illnesses, and fatalities that resulted in FECA claims during 
fiscal year 2010 involved Postal Service employees.\72\ 
According to DOL, in fiscal year 2010, injuries and illnesses 
of USPS employees resulted in 218.7 lost production days per 
100 employees, compared with the rest of the federal government 
that lost 77.4 days per 100 employees.\73\
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    \72\Department of Labor, Occupational Safety and Health 
Administration, Federal Injury and Illness Statistics for Fiscal Year 
2010, available at http://www.osha.gov/dep/fap/statistics/
fedprgms_stats10_final.html#footnote4a.
    \73\Department of Labor, Office of Workers' Compensation Programs, 
FY2010 End of Year LPD Report for All Government, available at http://
www.dol.gov/owcp/dfec/share/lpd/FY20104thQtr/AllGovernment.htm.
---------------------------------------------------------------------------
    Because FECA costs are so expensive for the Postal Service, 
the Committee determined that cost-cutting FECA reforms must be 
included in this legislation to place the Postal Service on a 
sound financial footing.
    Moreover, the Committee determined that applying FECA 
reforms only to the Postal Service would cause harmful 
fragmentation and confusion within the FECA program, and also 
that these reforms would be as valuable and appropriate for 
non-postal agencies as they are for the Postal Service. 
Accordingly, S. 1789 reforms the federal workers' compensation 
program government-wide.
    In considering what--if any--elements of FECA reform to 
include in S. 1789, the Committee evaluated three proposals: 
(1) the comprehensive FECA reforms developed and advocated by 
the Obama Administration,\74\ (2) S. 261, introduced by Senator 
Collins to address the issue of individuals (postal and non-
postal) remaining on the FECA rolls past retirement age; and 
(3) S. 353, Senator Collins' ``U.S. Postal Service Improvements 
Act of 2011,'' which contained the same FECA-related provisions 
as S. 261 as an integral part of the postal reform legislation. 
The Committee decided to adopt the best elements of these three 
proposals. The provisions in S. 1789 will help injured 
employees get rehabilitated and back to work and will reduce 
some disproportionately high benefit levels that now create 
financial incentives that directly or indirectly may be 
discouraging injured workers from achieving rehabilitation and 
going back to work. Helping and encouraging employees to get 
back to work is healthy for the employee and also saves money 
for the Postal Service and the rest of government.
---------------------------------------------------------------------------
    \74\See OMB Budgets FY 2011 and FY 2012.
---------------------------------------------------------------------------

                         KEY PROVISIONS ON FECA

    Reforms Applicable to Retirement-Age Employees. Under 
current law, FECA compensation and FECA medical benefits are 
payable for the duration of a person's disability. Because 
there is no time limit for either total or partial disability, 
beneficiaries who are eligible for the Civil Service Retirement 
System (CSRS) or Federal Employees Retirement System (FERS) 
retirement or disability annuities may instead choose to remain 
in the FECA program as long as they remain eligible. (To be 
eligible for disability benefits under CSRS or FERS, the 
employee must have worked for the requisite period of service 
creditable under the retirement system (5 years under CSRS, 18 
months under FERS) and have become disabled due to disease or 
injury regardless of whether it was work-related.)
    The DOL reports that, although less than two 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.\75\ The U.S. Postal 
Service informed the Committee in November 2011, that as of 
September 30, 2011 the FECA rolls include 9,501 postal workers 
aged 55 or older; 6,028 aged 60 or older; and 2,054 aged 70 or 
older, 894 aged 80 or older; and 144 age 90 or older including 
two aged 99.
---------------------------------------------------------------------------
    \75\HSGAC July 2011 hearing (Statement of Gary Steinberg, Acting 
Director, Office of Workers' Compensation Programs, U.S. Department of 
Labor, at p.6).
---------------------------------------------------------------------------
    Further, as noted above, FECA compensation is generally 
higher than a CSRS or FERS annuity. This situation is 
inequitable for employees who complete their careers of 
government service and then receive a smaller benefit in their 
retirement than do their contemporaries who suffered a 
workplace injury. Moreover, as Gary Steinberg, the acting head 
of DOL's Office of Workers' Compensation Programs testified, 
``injured workers may have an incentive to consciously or 
unconsciously resist rehabilitation and instead, in certain 
cases, may cling to the self-perception of being `permanently 
disabled.'''\76\ Such an outcome is not only costly for the 
government, but it is also damaging to the employee. The 
executive director of the International Association of 
Industrial Accident Boards and Commissions, Dr. Gregory Krohm, 
explained that getting back to work is good for injured workers 
``physically''--it ``complements the healing process.''\77\
---------------------------------------------------------------------------
    \76\HSGAC July 2011 hearing (Statement of Gary Steinberg, Acting 
Director, Office of Workers' Compensation Programs, U.S. Department of 
Labor, at p.9).
    \77\HSGAC July 2011 hearing (Statement of Dr. Gregory Krohm, 
Executive Director, International Association of Industrial Accident 
Boards and Commissions at p.8).
---------------------------------------------------------------------------
    Consistently since 2002, the DOL Office of the Inspector 
General has reported on the FECA program and has suggested that 
it is a de facto retirement program. In 2010, the DOL Office of 
the Inspector General expressed its support for reforms to the 
FECA program, specifically saying Congress should ``move 
claimants into a form of retirement after a certain age if they 
are still injured.''\78\ Both the current Administration and 
the previous Administration have likewise advocated for 
converting retirement-age FECA beneficiaries ``to a retirement 
annuity-level benefit.''\79\
---------------------------------------------------------------------------
    \78\Department of Labor Office of the Inspector General, Semi 
Annual Report to Congress: April-September 2010, at p.60 (2010).
    \79\OMB Budgets FY 2011 and FY 2012; OMB Budgets FY 2003 through FY 
2008
---------------------------------------------------------------------------
    The specific proposal of the Obama Administration is to 
reduce FECA benefits for enrollees to 50 percent of the pre-
disability wage upon the enrollee reaching full retirement age, 
as defined in the Social Security Act. Joseph A. Beaudoin, 
president of the National Active and Retired Federal Employees 
Association, testified that this proposal would provide a 
retirement-level income, but that ``it still does not fully 
account for disadvantages faced by FECA recipients,'' notably 
the lost raises, promotions, and benefits from having a working 
career cut short by disabling injury.\80\ Ron Watson, 
testifying for the National Association of Letter Carriers 
(NALC), also argued that FECA benefits are not generally higher 
than federal retirement benefits, considering that most federal 
employees are covered by FERS, under which retirees receive an 
annuity, Social Security and Thrift Savings Plan benefits.\81\ 
GAO has advised the Committee that a preliminary analysis by 
GAO shows the median FECA benefit to be about 26 percent higher 
than the median annual annuity received by federal retirees.
---------------------------------------------------------------------------
    \80\HSGAC July 2011 hearing (Statement of Joseph Beaudoin, 
President, National Active and Retired Federal Employees Association at 
p.5).
    \81\HSGAC July 2011 hearing (Statement of Ronald Watson, 
Consultant, National Association of Letter Carriers, AFL-CIO at p. 6).
---------------------------------------------------------------------------
    The Committee recognizes that workers who suffer workplace 
disability often suffer financial as well as other 
disadvantages, but was persuaded by other testimony and 
materials showing that the current FECA benefit levels are 
inequitably high after retirement age. The Committee determined 
to incorporate a provision similar to the Administration's 
proposal into S. 1789.
    The Committee also gave considerable attention to the 
question of whether and how to apply the changed benefit 
structure to individuals injured before the date of enactment. 
Both the current Administration and the previous Administration 
advocated that any reduced benefits under FECA reforms should 
apply only to individuals injured after the date of enactment. 
S. 261 and S. 353 took a different approach, applying to 
individuals injured before the effective date as well as those 
injured in the future.
    The Committee decided that current and future FECA 
enrollees should generally be subject to the same provisions. 
However, recognizing a potential burden to current recipients 
who would face cuts, the Committee opted to gradually 
transition current recipients to the new benefit structure and 
to exempt the most severely disabled employees. Therefore, the 
bill grandfathers certain existing FECA beneficiaries and 
provides a delayed transition for others, as detailed in 
section 302 of the bill. DOL has advised the Committee that, 
under these provisions, about half of FECA beneficiaries who 
are now on FECA's long-term disability rolls will not see their 
benefit level reduced under S.1789, either because they are 
already over retirement age or because they qualify under the 
bill's criteria for being permanently, totally disabled and 
unable to return to work.\82\
---------------------------------------------------------------------------
    \82\DOL estimates that, of the 50,000 individuals on the FECA 
periodic roll, roughly 24,000 will qualify for either a disability or 
age exemption or both. And this number may grow in the next few years, 
those who recently qualified for total disability would avoid a 
reduction if they maintain that status for three years.
---------------------------------------------------------------------------
    Augmented Compensation for Dependents. Under FECA, the rate 
of compensation is 66 2/3 percent of a worker's pre-disability 
wage lost due to the occupational injury, if the worker is 
unmarried and has no dependents. However, for beneficiaries 
with a spouse or other dependent, the augmented compensation 
provision under the FECA program raises benefits to a rate of 
75 percent of their pre-disability wages. Currently, more than 
70 percent of FECA beneficiaries are receiving augmented 
compensation.\83\
---------------------------------------------------------------------------
    \83\HSGAC July 2011 hearing (Statement of Gary Steinberg Acting 
Director, Office of Workers' Compensation Programs, U.S. Department of 
Labor at p.3).
---------------------------------------------------------------------------
    Both the current Administration and the previous 
Administration have called for eliminating the augmented 
compensation rate because it is out of line with benefits under 
state workers' compensation systems. As the acting head of the 
DOL Office of Workers' Compensation Programs testified, ``Few 
state systems provide any augmentation for dependents, and none 
approaches the Federal level.''\84\ He also told the committee 
that the 75 percent rate is so high that it can create a 
financial disincentive for an injured employee to successfully 
rehabilitate and return to work.\85\ Ron Watson, testifying on 
behalf of the NALC, argued that the FECA tax-free 75 percent 
rate does not often exceed pre-injury take-home pay and does 
not create a financial disincentive to forego the pay, together 
with substantial benefits, that the individual would receive if 
able to return to work.\86\
---------------------------------------------------------------------------
    \84\HSGAC July 2011 hearing (Statement of Gary Steinberg Acting 
Director, Office of Workers' Compensation Programs, U.S. Department of 
Labor at p.8).
    \85\HSGAC July 2011 hearing (Statement of Gary Steinberg Acting 
Director, Office of Workers' Compensation Programs, U.S. Department of 
Labor at p.8).
    \86\HSGAC July 2011 hearing (Statement of Ronald Watson, 
Consultant, National Association of Letter Carriers, AFL-CIO at p. 6).
---------------------------------------------------------------------------
    The Obama Administration recommended that all disabled FECA 
beneficiaries receive compensation at a rate of 70 percent of 
lost wages--a percentage that is between the current 75 percent 
rate for individuals who have dependents and the current 66 2/3 
rate applicable to those without dependents. However, the 
Committee determined that the rate should be set at 66 2/3 of 
lost pre-disability wages for all beneficiaries. This 
provision, in section 303 of the bill, brings the program in 
line with a majority of the state programs, including the 
District of Columbia. Currently, 36 states and the District of 
Columbia have total disability benefit rates that are set at 
this level.\87\ This also brings the program in line with 
benefits offered under other federal workers' compensation 
programs, such as the Longshore and Harbor Workers' 
Compensation Act, which also sets benefits at two-thirds of the 
pre-disability wage.
---------------------------------------------------------------------------
    \87\Ishita Sengupta, Virginia Reno, and John F. Burton, Jr., 
Workers' Compensation: Benefits, Coverage, and Costs, 2009, National 
Academy of Social Insurance, Washington, DC, August 2011, at pp. 86-95.
---------------------------------------------------------------------------
    Section 303 also contains provisions to phase in the new 
compensation rate for current beneficiaries, and to exempt 
those who are permanently and totally disabled.
    ``Schedule Compensation Payments.'' An employee who suffers 
a permanent disability involving the loss of an appendage or 
bodily function is entitled to disability benefits for a number 
of weeks, as provided under schedules set by statute and 
regulation.\88\ The employee may receive the schedule 
compensation benefit in addition to FECA benefits for partial 
or total disability but may not receive both simultaneously. 
Section 304 of the bill would make a limited but important 
exception: if an individual was injured before enactment of 
this legislation and faces a reduction in the level of 
disability benefits under section 302 or 303 of the bill, the 
individual may receive ``schedule compensation payments'' once 
the individual starts receiving the reduced benefits for 
partial or total disability.
---------------------------------------------------------------------------
    \88\See 5 U.S.C. Sec. Sec. 8107.
---------------------------------------------------------------------------
    Strengthened back-to-work program. In addition to removing 
certain financial disincentives to returning to work, S. 1789 
adopts several provisions from the Obama Administration's 
proposal to strengthen existing programs that help injured 
workers get back to work:
     Extends the vocational rehabilitation program 
under FECA, which now covers injured workers who are totally 
disabled, to also cover those who are partially disabled.
     Authorizes DOL to pay a federal employer the 
salary of a beneficiary for up to three years as an incentive 
to hire workers off of the FECA program rolls. Current law 
permits these payments only to non-federal employers.
     Makes compliance with the Return to Work plan 
developed between the program and the beneficiary a condition 
of receiving continued benefits (except this condition would 
not apply to beneficiaries who are over the age of retirement).
    Subrogation of Continuation of Pay. FECA states that, when 
third parties are responsible for employees' workplace 
injuries, DOL may require that employees pursue collection 
actions and then reimburse the government to cover 
``compensation'' that the employees received.\89\ (In legal 
terminology, this is called a right of subrogation.) 
Alternatively, DOL may require that employees assign to the 
government their collection rights against third parties. 
However, judicial and administrative decisions have held that 
continuation of pay received by employees during the first 45 
days after an occupational injury is not considered 
``compensation'' and is therefore not covered under the FECA 
provision granting subrogation rights to DOL.
---------------------------------------------------------------------------
    \89\5 U.S.C. Sec. Sec. 8131, 8132.
---------------------------------------------------------------------------
    GAO recommended that Congress amend FECA's subrogation 
provision to cover continuation of pay. Both the current 
Administration and previous Administration have proposed such 
an amendment, and the Committee has included this change in 
section 311 of the bill.
    Waiting Period. Since minor workplace injuries often heal 
very quickly, state workers' compensation programs generally 
impose a brief waiting period before providing compensation, in 
order to avoid minor or frivolous claims. FECA has a three-day 
waiting period for postal employees, but for non-postal workers 
the waiting period comes after the end of the 45-day 
continuation-of-pay period, during which the individual 
continues to receive salary while a FECA claim is being 
processed.\90\
---------------------------------------------------------------------------
    \90\5 U.S.C. Sec. 8117.
---------------------------------------------------------------------------
    Both the current Administration and the previous 
Administration proposed to establish a uniform up-front waiting 
period for all FECA claimants, postal and non-postal, and 
section 308 of the bill includes a mandatory, up-front three-
day waiting period.\91\ As under current law governing postal 
employees,\92\ the injured non-postal employee may receive FECA 
compensation for those three days if the period of disability 
exceeds 14 days.
---------------------------------------------------------------------------
    \91\OMB, Budget of the U.S. Government, Fiscal Year 2012, 
``Terminations, Reductions, and Savings,'' at p. 163 (February 2011); 
OMB, Budget of the U.S. Government, Fiscal Year 2011, ``Terminations, 
Reductions, and Savings,'' at p.107 (Feb. 2010); OMB, Major Savings and 
Reforms in the President's 2008 Budget, at p.178 (Feb. 2007); OMB, 
Major Savings and Reforms in the President's 2007 Budget, at p.192 
(Feb. 2006); OMB, Major Savings and Reforms in the President's 2006 
Budget, at p.201 (Feb. 11, 2005); The President, Budget of the U.S. 
Government, Fiscal Year 2003, at p.222 (Feb. 2002).
    \92\5 U.S.C. Sec. 8117.
---------------------------------------------------------------------------
    Amount of Compensation. The current Administration has 
proposed that several statutory benefit amounts, which have not 
been updated in many years, be significantly increased. The 
Committee agreed to include those statutory updates in section 
313 of the bill. These limits of the current law, for severe 
disfigurement and funeral expenses, have not been significantly 
changed since 1949.
    Disability Management Review; Independent Medical 
Examinations. Under current FECA practice, claimants select 
their own physician, and must be examined by a physician 
employed or selected by DOL only when the Department deems that 
a second opinion is needed. Both GAO and the Postal Service 
Inspector General have called for greater checks on the 
determinations of doctors selected by FECA participants. GAO, 
in preliminary observations on fraud-prevention controls in the 
FECA program, said that the lack of review by a government-
selected physician worsens potential vulnerabilities both when 
the government validates initial claims and as it monitors 
long-term cases.\93\ In addition, the USPS Inspector General 
reported the lack of employer-selected physicians exposed the 
Postal Service to a higher risk of fraud and increased workers' 
compensation costs.\94\ The USPS Inspector General reported 
that ``mandatory use of employer-selected physicians 
streamlines the process for managing workers' compensation 
cases, reduces the potential risk for fraud, and provides 
services that focus on returning employees to work.''\95\
---------------------------------------------------------------------------
    \93\GAO, Federal Employees' Compensation Act: Preliminary 
Observations on Fraud-Prevention Controls, GAO-12-212T, at p.14 
(November 2011).
    \94\U.S. Postal Service Office of Inspector General, Postal Service 
Workers' Compensation Program: Audit Report, Report Number HR-AR-11-
007, at p.4 (September 30, 2011).
    \95\U.S. Postal Service Office of Inspector General, Postal Service 
Workers' Compensation Program: Audit Report, Report Number HR-AR-11-
007, at p.4 (September 30, 2011).
---------------------------------------------------------------------------
    GAO has also reported complaints about the process for 
obtaining a second-opinion examination if an agency has doubts 
about the validity of a claim. Under current practice DOL 
determines whether a second opinion is warranted, and some 
employing agencies have reported to GAO ``that there have been 
instances where Labor failed to respond to their requests to 
have a second-opinion examination performed at the employing 
agencies' request even though the costs would be borne by their 
agencies.''\96\ (Labor officials responded to GAO that FECA 
claims examiners are highly skilled at determining when second 
opinion examinations are needed, and that requiring such 
additional examinations when FECA examiners deem them 
unnecessary would be very resource intensive.)\97\ GAO's 
preliminary observations are reinforced by experience in the 
private sector. The use of employer-selected physicians for 
independent medical examinations and second opinions is a 
common practice in the private sector under state-level 
workers' compensation programs.\98\
---------------------------------------------------------------------------
    \96\GAO, Federal Employees' Compensation Act: Preliminary 
Observations on Fraud-Prevention Controls, GAO-12-212T, at pp. 14-15 
(November 2011). GAO noted that it did not verify these claims.
    \97\GAO, Federal Employees' Compensation Act: Preliminary 
Observations on Fraud-Prevention Controls, GAO-12-212T, at pp. 14-15 
(November 2011).
    \98\Sengupta et al., 2011, pp. 24-25.
---------------------------------------------------------------------------
    In response to this situation, section 307 of the bill 
requires an independent medical assessment of disability and 
potential for return to work for beneficiaries after six months 
in the program and on a regularly scheduled basis thereafter, 
but no less frequently than every three years. This does not 
change existing law where a FECA beneficiary may choose to see 
his or her own doctor for treatment and initial assessment. 
This provides a check point for continued participation in the 
program as the individual moves to the long-term or periodic 
rolls. Moreover, this section gives employing agencies, which 
may be concerned about potentially irregular claims, the right 
to request that DOL obtain a second opinion at any time. If the 
agency makes the request before DOL has conducted any second-
opinion examination, DOL must grant the agency's request, and 
if the agency makes the request later, DOL must either grant 
the request or explain to the agency why the request was 
denied.
    Reporting of Outside Income; Program Integrity and 
Compliance. S. 1789 includes two provisions requested by this 
Administration to help avoid improper FECA payments including 
fraudulent claims. Section 306 of the bill directs the 
Secretary of Labor to require beneficiaries to report to DOL 
any outside income they receive. Section 312 also enables DOL 
to cross-match FECA records with Social Security data and 
contains several additional provisions to strengthen integrity 
and compliance efforts at FECA.

                        III. Legislative History

    On May 17, 2011, the Senate Homeland Security and 
Governmental Affairs Committee's Federal Financial Management, 
Government Information, Federal Services, and International 
Security Subcommittee held a hearing titled ``Addressing the 
U.S. Postal Service's Financial Crisis'' to discuss long-term 
solutions to improve the Postal Service's financial viability. 
Postmaster General Patrick Donahoe; Margaret Cigno, the 
Director of Accountability and Compliance at the PRC; USPS 
Inspector General David Williams; and Phillip Herr, Director, 
Physical Infrastructure Issues at GAO, testified at the 
hearing. Representatives from the American Postal Workers 
Union, the National League of Postmasters, and the Direct 
Marketing Association also testified.
    On September 6, 2011, the Senate Homeland Security and 
Governmental Affairs Committee held a hearing titled ``U.S. 
Postal Service in Crisis: Proposals to Prevent a Postal 
Shutdown'' to examine the Postal Service's current financial 
condition and possible solutions. Postmaster General Patrick 
Donahoe, OPM Director John Berry, and Phillip Herr from GAO 
testified at the hearing. Representatives from the private 
sector and postal employee and management associations also 
testified.
    S. 1789 was introduced by Senators Lieberman, Collins, 
Carper, and Brown on November 2, 2011, and referred to the 
Committee. The Committee considered the legislation at a 
business meeting on November 9, 2011. S. 1789 was ordered 
reported favorably by a roll call vote with several adopted 
amendments:
    A Lieberman-Collins-Carper-Brown substitute amends the 
provisions regarding the treatment of postal funding surplus to 
FERS, Medicare coverage for Postal Service Medicare-eligible 
annuitants, the Postal Service Health Benefits Program, postal 
facilities, the conversion of door delivery points, limitations 
on changes to mail delivery schedule, and the Federal Employees 
Compensation Act. Senators Lieberman, Levin, Akaka, Carper, 
Pryor, Landrieu, Tester, Begich, Collins, Coburn, Brown, 
McCain, Johnson, Paul, and Moran were present and the amendment 
was adopted by voice vote.
    Senator Levin offered an amendment that prohibits the 
Postal Service from entering into any contract that restricts 
the ability of Congress to exercise oversight authority. 
Senators Lieberman, Levin, Akaka, Carper, Pryor, Landrieu, 
Tester, Begich, Collins, Coburn, Brown, McCain, Johnson, Paul, 
and Moran were present and the amendment was adopted by voice 
vote.
    An Akaka amendment strikes section 103 of S. 1789, which 
required Medicare-eligible postal retirees to enroll in 
Medicare Parts A and B and directed the Postal Service to work 
with OPM to develop Medigap-like plans that offer comparable 
benefits within the Federal Employee Health Benefits program 
for postal retirees and their dependents. The amendment was 
adopted by a roll call vote of 10-6, with Senators Akaka, 
Pryor, Tester, Begich, Landrieu, McCaskill, Coburn, McCain, 
Johnson, and Paul recorded as a yes vote, and Senators 
Lieberman, Carper, Collins, Brown, Moran, and Portman recorded 
as a no vote. Senators Lieberman, Akaka, Carper, Pryor, Tester, 
Begich, Collins, Brown, and Moran were present for the vote.
    A Pryor-McCaskill-Landrieu amendment, as modified, requires 
the Postal Service to respond to each recommendation by the 
Postal Regulatory Commission, including each advisory opinion. 
Senators Lieberman, Levin, Akaka, Carper, Pryor, Begich, Pryor, 
Begich, Collins, Brown, Paul, and Moran were present and the 
amendment was adopted by voice vote.
    A McCaskill amendment provides for access by the 
Comptroller General to the National Directory of New Hires. The 
amendment was adopted by voice vote, with Senators Lieberman, 
Levin, Akaka, Carper, Pryor, McCaskill, Begich, Collins, Brown, 
and Moran present.
    A Moran-Tester-Collins-Pryor-Begich-McCaskill-Landrieu 
amendment changes the current process for closing and 
consolidating post offices to carefully consider the needs of 
rural areas and small towns. The amendment requires the Postal 
Service to consider instead of closing or consolidating a post 
office to reduce the number of operating hours, procure a 
contract providing retail services in the community served by 
the post office, or provide services through a rural carrier. 
The amendment was adopted by a roll call vote of 12-4, with 
Senators Lieberman, Levin, Akaka, Carper, Pryor, Begich, 
Collins, Brown, Moran, Landrieu, McCaskill, and Tester recorded 
as a yes vote, and Senators Coburn, McCain, Johnson, and 
Portman recorded as a no vote. Senators Lieberman, Levin, 
Akaka, Carper, Pryor, Begich, Collins, Brown, and Moran were 
present for the vote.
    The Committee ordered the bill, as amended, favorably 
reported by a roll call vote of 9-1. Senators Lieberman, Levin, 
Carper, Pryor, McCaskill, Begich, Collins, Brown, and Moran 
voted in favor of the bill, while Senator Akaka voted in 
opposition. Senators Landrieu and Portman asked to be recorded 
in favor of the bill by proxy, while Senators Tester, Coburn, 
McCain, Johnson, and Paul asked to be recorded against the bill 
by proxy.

                    IV. Section-by-Section Analysis

Section 1--Short title

    Section 1 establishes the title of the legislation as the 
``21st Century Postal Service Act of 2012.''

Section 2--Table of contents

    Section 2 sets forth the table of contents for the four 
titles in the Act.

                   TITLE I: POSTAL WORKFORCE MATTERS

Section 101--Treatment of surplus contributions to Federal Employees 
        Retirement System (FERS)

    This section requires a calculation of the Postal Service's 
FERS balance each year, and directs any overpayment to be 
transferred to the Postal Service, upon request of the 
Postmaster General. For fiscal years 2011 through 2013, a 
portion of this overpayment is to be used for retirement 
incentives, including buyouts (up to the existing cap for 
federal workers of $25,000 for any one individual) or 
additional service credits under section 102. If there are 
additional funds remaining, these may be used by the Postal 
Service for certain other items such as repaying debt, workers' 
compensation payments, paying down the retiree health liability 
and pension obligations.

Section 102--Additional service credit

    This section allows the Postal Service (through OPM) to 
offer up to one year of credited service for individuals in the 
CSRS pension system and up to two years for individuals in FERS 
as an incentive to encourage retirement. Thus, an individual 
who needed 30 years of service to retire and had 29 years of 
service could be offered an additional year so as to be 
eligible for full retirement. This section further provides 
that an individual who receives additional service credit as a 
retirement incentive may not also receive a cash buyout.

Section 103--Restructuring of payments for retiree health benefits

    This section would restructure the Postal Service's pre-
funding requirements for retiree health benefits. The bill 
would immediately begin a 40-year amortized payment schedule 
for the Postal Service to fund retirees' health benefits 
(previously scheduled to begin in fiscal year 2017). It would 
also reduce the pre-funding goal for retiree health benefits to 
80 percent of the projected liability.

Section 104--Postal Service Health Benefits Program

    This section would authorize the Postal Service to enter 
into negotiations with all of its recognized unions for the 
purpose of developing a potential new Postal Service health 
care plan outside the Federal Employee Health Benefit Plan 
(FEHB). The new Postal Service Health Benefits Program would 
only be implemented if all of the unions and the Postal Service 
agree. This section also requires USPS to consult with 
organizations representing supervisory and other managerial 
employees of the Postal Service in the course of its 
negotiations over the health care plan, and provides that any 
postal employee not represented by a recognized employee union 
may participate in any new Postal Service health plan agreed on 
by the Postal Service and the unions at the option solely of 
that employee.

Section 105--Arbitration; labor disputes

    This section would require that arbitrators deciding a 
contract dispute between the Postal Service and one of its 
recognized unions take into consideration such relevant factors 
as the following when rendering a binding decision: (1) the 
financial condition of the Postal Service; (2) the requirement 
in law that the Postal Service consider comparability of wages 
and benefits to those offered in the private sector; and (3) 
the policies of Title 39, the section of the U.S. Code that 
deals with postal matters.

                TITLE II: POSTAL SERVICES AND OPERATIONS

Section 201--Postal facilities

    This section requires certain steps before the closure of a 
mail processing facility:
          (1) A complete and published study that includes the 
        feasibility of downsizing rather than closing the 
        facility;
          (2) A 45-day public comment period after publishing 
        the study;
          (3) A 30-day period for the Postal Service to 
        consider any concerns raised, culminating with the 
        publication of a justification on its web site, which 
        shall include:
                  (a) Responses to public comments;
                  (b) A discussion of the effect of closure on 
                the affected community, including any 
                disproportionate impact on a State, region or 
                locality;
                  (c) The change in travel times and distances 
                for affected customers;
                  (d) The change in delivery times for all 
                classes of mail;
                  (e) A consideration of geographical factors 
                such as remoteness, weather related factors, 
                and broadband availability;
                  (f) Any other appropriate factors.
          (4) A waiting period of at least 15 days after the 
        publication on the USPS web site of the closure 
        justification before USPS may close the processing 
        facility.

Section 202--Additional Postal Service planning

    This section requires the Postal Service to consider how 
its plans to increase the use of alternate retail might affect 
customers' access to the products and services offered by the 
Postal Service, and how to improve access to postal services 
where possible. Current law requires the Postal Service to 
report annually on its efforts to change and streamline its 
network of processing and retail facilities. One aspect of the 
required report involves a discussion of the Postal Service's 
plans to expand the use of retail alternatives to post offices. 
This section builds on that report. It also requires any plans 
to replace post offices with alternate retail to: (1) consider 
the impact on small communities and rural areas; (2) ensure 
that the Postal Service continues to serve small communities 
and rural areas after the implementation of the plan; and (3) 
allow for the solicitation of community input.

Section 203--Area and district office structure

    In an effort to reduce costs and create efficiencies, this 
section requires the Postal Service to develop and update every 
five years a strategic plan relating to area and district 
office structure and to develop a 10-year plan with timetables 
that provides for the consolidation of area and district 
offices wherever the Postal Service determines that such 
consolidation would be cost effective and would not 
substantially and adversely affect operations. This section 
also requires the Postal Service, consistent with the required 
plans, to consolidate district offices located within 50 miles 
of each other, to consolidate those area and district offices 
that have less than the mean mail volume and number of work 
hours for all area and district offices, and to relocate area 
offices to headquarters.

Section 204--Post Offices; retail service standards

    This section requires the Postal Service to consider 
several options prior to making a determination to close or 
consolidate a post office. These include considering whether to 
consolidate two post offices within a reasonable distance, 
reduce the number of operating hours at a particular post 
office instead of a closure or consolidation, and permit a 
contractor or rural carrier to provide retail services in the 
community served by the post office. The Postal Service must 
provide notice at least 60 days prior to the proposed date of 
such post office closure or consolidation to persons served by 
such post office. This section also requires the Postal Service 
to develop a set of service standards that would guarantee its 
customers a certain level of access to retail services, whether 
at a post office or some alternative to a post office, taking 
into consideration the following: (1) the universal service 
obligation; (2) the alternate retail plan required under 
section 302 of the PAEA, as amended by section 202 of this 
bill; (3) the population served, including population density 
and demographic factors that may affect customers' ability to 
access services, such as age or disability status; (4) the 
feasibility of offering retail access in addition to that 
offered at post offices; and (5) the existing requirement that 
the Postal Service serve remote areas and communities with 
transportation challenges and other conditions, including 
inclement weather, that could impede access to services. 
Customers who believe that the Postal Service has failed to 
provide them or their community with a level of service 
consistent with the standard would be permitted to file a 
complaint with the PRC.

Section 205--Conversion of door delivery points

    This section authorizes the Postal Service to convert door 
delivery points to curbside, sidewalk, or centralized delivery 
points, and defines these terms. This section also provides 
certain exceptions to the use of this authority, including 
physical hardship of a customer, weather conditions in a 
geographical area (such as where snow removal efforts could 
obstruct access to mailboxes), circumstances in urban areas 
(such as obstructive street parking) that preclude efficient 
use of curbside delivery points, or ``other exceptional 
circumstances.'' This section further requires the Postal 
Service to establish procedures to solicit, consider, and 
respond to input from individuals affected by the conversion of 
door delivery points, and to report to Congress and the USPS 
Inspector General on its progress in carrying out this section.

Section 206--Limitations on changes to mail delivery schedule

    This section would prohibit the Postal Service from 
implementing any plan to eliminate Saturday delivery for at 
least two years. In addition, a switch to five-day delivery 
could only move forward if the following conditions are met: 
(1) the Postal Service identifies customers who may be affected 
disproportionately by five-day delivery and develops measures 
to ameliorate the negative impact; (2) the Postal Service makes 
use of its other authorities under current law and the new 
authorities and mandates included in this bill to increase 
revenue and reduce costs; and (3) after implementing these 
other savings options, the Postal Service determines that a 
five-day schedule is still necessary to achieve long-term 
financial sustainability, and submits a report on the other 
steps it has taken to Congress, the PRC and GAO. GAO is to 
review the Postal Service's financial situation, projections, 
and the adequacy of the savings initiatives already implemented 
in order to determine whether the implementation of five-day 
delivery is necessary for the Postal Service to become 
profitable by fiscal year 2015 and to achieve long-term 
financial solvency. The Postal Service would not be able to 
implement a five-day schedule unless the Comptroller General 
has made a determination that doing so is necessary, and the 
PRC confirms that the Comptroller General has done so.
    This section further specifies that where five-day delivery 
is implemented, there can be no more than two consecutive days 
without mail (e.g., on holiday weekends). The section also 
clarifies that the bill does not authorize further reductions 
in the delivery schedule for areas that may already have less 
than six-day delivery, nor any changes to the schedules for 
post offices, post office boxes, mail acceptance, or 
competitive products such as Express Mail.

Section 207--Time limits for consideration of service changes

    This section establishes a default timeline of 90 days for 
advisory opinions to be issued by the PRC if an alternate 
schedule is not mutually agreed upon between the PRC and the 
Postal Service. Subsequent to the issuance of the opinion, the 
Postal Service would not be permitted to act on the proposed 
service change until 30 days after it has formally responded to 
the opinion and any recommendations it might include. This 
section also requires the Postal Service to submit to the 
President and Congress a statement as to whether it plans to 
address the PRC's concerns and implement any recommendations 
made by the PRC. If the Postal Service determines not to 
address or implement the PRC's recommendations, it must provide 
the reasons for its determination.

Section 208--Public procedures for significant changes to mailing 
        specifications

    This section requires the Postal Service to provide at 
least 30 days notice of any proposed changes to mailing 
specifications not reviewed by the PRC, and to receive and 
respond to public comments on the changes. The section further 
requires the Postal Service to analyze the financial impact of 
the proposed change on the Postal Service and its customers.

Section 209--Nonpostal products and services

    Subsection (a) of this section provides that the Postal 
Service may provide nonpostal products and services, provided 
that the PRC determines that the offering of such product or 
service meets all of the following criteria:
          (1) It utilizes the Postal Service's processing, 
        transportation, delivery, or retail network or 
        technology;
          (2) It is consistent with the public interest and a 
        demonstrated demand for the Postal Service to provide 
        this new product or service rather than or in addition 
        to another entity;
          (3) It does not abuse the Postal Service's monopoly 
        status nor create unfair competition with the private 
        sector;
          (4) It is justified by a market analysis that has 
        been conducted by the Postal Service and submitted to 
        Congress and the PRC that demonstrates the potential to 
        improve the financial position of the Postal Service.
    Subsection(a) also provides that the PRC must designate any 
new product or service that meets the above criteria under an 
existing mailing product classification: market-dominant, 
competitive, or experimental. Classification of the product 
would allow it to be regulated in the same manner as existing 
postal products and services.
    Subsection (b) of this section requires the Postal Service 
to submit a market analysis to the PRC during the 5-year period 
beginning on the date of enactment of this Act. The market 
analysis serves as the basis for determining whether a 
potential nonpostal product or service will improve the net 
financial position of the Postal Service.

             TITLE III: FEDERAL EMPLOYEES' COMPENSATION ACT

Section 301--Short title and references

    This section says that title III of the bill may be cited 
as the ``Workers' Compensation Reform Act of 2012.'' The 
section also provides that, whenever a provision in title III 
of the bill refers to a statutory section being amended, the 
provision is in reference to title 5 of the United States Code 
unless noted otherwise.

Section 302--Federal workers' compensation reforms for retirement age 
        employees

    This section generally reduces FECA benefits for totally 
disabled enrollees to 50 percent of the pre-disability wage 
upon the enrollee reaching full retirement age, as defined in 
the Social Security Act. For partially disabled enrollees, the 
benefits are generally reduced to 50 percent of the pre-
disability wage, multiplied by the percentage of wage-earning 
capacity lost due to the injury.
    For individuals whose workplace injury occurs before the 
date of enactment, section 302 contains provisions to delay 
application of the reduced benefit level and to provide full 
exemption for those most severely injured and those already 
over retirement age. Specifically--
          (1) Those who are permanently, totally disabled and 
        unable to return to work are exempt from this section 
        (``grandfathered''), and their benefit rate is not 
        reduced to 50 percent. This category of grandfathered 
        individuals is defined under the legislation as those 
        who satisfy any one of the following criteria:
                  (a.) Lost the use of two appendages (e.g., 
                arms/legs);
                  (b.) Receiving custodial home nursing care or 
                full nursing home care for at least one year 
                prior to enactment; or
                  (c.) Receiving ``total disability'' wage-loss 
                compensation for at least three years prior to 
                enactment or will have done so within the first 
                three years after enactment.
          (2) Those who are already at the age of retirement on 
        the date of enactment are also exempt from this 
        section.
          (3) For those who do not qualify as permanently, 
        totally disabled (``grandfathered'') and are not 
        already over the retirement age, the benefit level will 
        be reduced to 50 percent upon reaching retirement age 
        or three years after the date of enactment, whichever 
        is later.

Section 303--Augmented compensation for dependents

    This section eliminates the additional compensation in 
current law for beneficiaries who have dependents.
    For individuals whose workplace injury occurs before the 
date of enactment, section 303 contains provisions to delay 
application of the reduced benefit level and to provide full 
exemption for those most severely injured. Specifically--
          (1) Those who are permanently, totally disabled and 
        unable to return to work are exempt from this section 
        (``grandfathered''), and they will continue to receive 
        the additional level of compensation if they have 
        dependants. This category of grandfathered individuals 
        is the same as those grandfathered under section 302.
          (2) For those who do not qualify as permanently, 
        totally disabled (``grandfathered'') will lose the 
        right to receive augmented compensation three years 
        after the bill is enacted.

Section 304--``Schedule compensation payments''

    This section allows workers' compensation beneficiaries to 
receive ``schedule compensation payments'' if their benefits 
are reduced under sections 302 or 303, after such reduction. 
Schedule compensation payments are specific payments authorized 
under existing law for certain injuries, such as loss of use of 
a limb. Under current law, an injured individual is not 
eligible to receive a schedule compensation payment for an 
injury simultaneously with benefits for total or partial 
disability.

Section 305--Vocational rehabilitation

    This section includes several provisions to strengthen 
existing programs that help injured workers get back to work:
          (1) Extends existing vocational rehabilitation 
        opportunities under FECA for workers who are totally 
        disabled to those who are partially disabled as well.
          (2) Authorizes DOL to pay a federal employer the 
        salary of a beneficiary for up to three years as an 
        incentive to hire workers off of the FECA program 
        rolls. Current law permits these payments only to non-
        federal employers.
          (3) Makes compliance with the Return to Work plan 
        developed between the program and the beneficiary a 
        condition of receiving continued benefits (except this 
        condition would not apply to beneficiaries who are over 
        the age of retirement).

Section 306--Reporting requirements

    This section requires the Secretary to require 
beneficiaries to report any outside income they receive to the 
Department of Labor. An employee who fails to comply will lose 
the right to receive compensation.

Section 307--Disability management review; independent medical 
        examinations

    This section requires an independent medical assessment of 
disability and potential for return to work for beneficiaries 
after six months in the program and on a regularly scheduled 
basis thereafter, but no less frequently than every three 
years. This does not change existing law under which a FECA 
beneficiary may choose to see his or her own doctor for 
treatment and initial assessment. Moreover, employing agencies 
may request that DOL obtain an independent medical examination 
at any time, and, if the agency makes the request before DOL 
has conducted such an examination, DOL must grant the agency's 
request.

Section 308--Waiting period

    Because minor workplace injuries often heal quickly, FECA 
provides a three-day waiting period before compensation begins. 
For postal employees, FECA's three-day waiting period comes 
immediately after the injury, but for non-postal workers the 
waiting period does not comes until after the end of the 45-day 
continuation-of-pay period.
    Section 308 begins the three-day waiting period immediately 
after a work-related injury for all injured employees. As under 
current law, injured employees may receive FECA compensation 
for those three days if the period of disability exceeds 14 
days.

Section 309--Election of benefits

    If an individual is eligible for compensation benefits both 
under FECA and under CSRS or FERS or another retirement system 
for federal employees, the individual must elect which benefits 
to receive, and the election shall be irrevocable if the 
individual chose benefits under the retirement system while 
eligible for FECA benefits. This section prevents an injured 
worker from retroactively claiming workers' compensation 
benefits after having declined such benefits in favor of 
federal retirement benefits. This provision is intended to 
prevent a claimant from electing federal retirement benefits as 
a means of avoiding required participation in vocational 
rehabilitation or acceptance of an offered suitable job and 
then later retroactively electing the potentially more generous 
workers' compensation benefits.

Section 310--Sanctions for non-cooperation with nurses

    This section suspends benefits when an injured worker fails 
to cooperate with a field nurse. A ``field nurse'' is defined 
to mean a registered nurse who assists DOL in the medical 
management of disability claims and assists claimants in 
coordinating medical care, and DOL is authorized to use field 
nurses to coordinate medical services and vocational 
rehabilitation services.

Section 311--Subrogation of continuation of pay

    This section allows the federal government to recover 
``continuation of pay'' (i.e., salary that's continued to be 
paid to the beneficiary during the 45-day period between the 
injury and the initiation of FECA disability benefits) from 
third parties that are liable for the beneficiary's work-
related injury.

Section 312--Integrity and compliance

    This section includes several provisions to strengthen the 
integrity and compliance efforts within the FECA program. No 
later than 270 days after enactment, the Secretary of Labor 
must establish an Integrity and Compliance Program to prevent, 
identify, and recover improper payments (including those 
obtained by fraud) for the FECA program. The section also 
directs the Secretary to cooperate with other agencies, 
including the Postal Service, and the agency inspectors 
general, to prevent, identify, and recover improper payments.
    The section also requires the Secretary of Health and Human 
Services to make the National Directory of New Hires available 
to the Secretary of Labor, the Postmaster General, the DOL 
Inspector General, the USPS Inspector General, and GAO, so that 
they can cross-match that data with claimant data under the 
FECA program. The Comptroller General is granted access to the 
National Directory of New Hires under this provision for any 
audit, evaluation, or investigation, including any audit, 
evaluation, or investigation relating to program integrity.

Section 313--Amount of compensation

    This section increases the amount an injured worker 
receives for a severe disfigurement of the face, head or neck 
from $3,500 to a maximum of $50,000. This section also 
increases the amount allowed to reimburse funeral expenses 
incurred due to a death from a work-related injury from $800 to 
a maximum of $6,000. The limits in the current law have not 
been significantly changed since 1949.

Section 314--Technical and conforming amendments

    This section contains technical and conforming amendments 
to the FECA statute in title 5 of the United States Code.

Section 315--Regulations

    This section requires the Labor Department to issue 
regulations to carry out this title of the legislation.

                        TITLE IV: OTHER MATTERS

Section 401--Profitability plan

    This section requires the Postal Service to submit to 
Congress within 90 days of enactment a plan detailing how it 
will become profitable by fiscal year 2015 and achieve long-
term financial solvency. The plan must take into consideration 
the Postal Service's current legal authorities, the authorities 
given to it under this bill, cost savings that will be achieved 
through negotiations with employees of the Postal Service, and 
projected changes in mail volume. The plan must also be updated 
each quarter until the last quarter of fiscal year 2015.

Section 402--Postal rates

    This section requires the PRC, not earlier than two years 
after enactment, to commence a study regarding: (1) the extent 
to which any market-dominant classes, products, or types of 
mail services do not bear their attributable costs; and (2) the 
impact of any excess mail processing, transportation, or 
delivery capacity of the Postal Service on the costs 
attributable to any class that bears less than 100 percent of 
the costs attributable to such classes, products, or types of 
mail service. The PRC must also hold a public hearing before 
completing the study. At the conclusion of this study, for 
certain classes deemed by the PRC to recover less than 90 
percent of costs, the Postmaster General may increase rates for 
such classes by no more than 2 percent a year above the current 
allowable rate increase until such time as the class is 
covering 90 percent of its costs.

Section 403--Cooperation with State and local governments

    This section allows the Postal Service to work with state 
and local governments to provide government services (such as 
fishing licenses or tax forms) in post offices in the same way 
as it currently does with services provided on behalf of 
federal agencies (such as passports).

Section 404--Shipping of wine and beer

    This section amends Title 18 of the U.S. Code and would 
allow the Postal Service to ship wine and beer (which private 
carriers such as FedEx and UPS already do), sent by a licensed 
winery or brewery in accordance with the laws of the state to 
which the items are addressed and received.
    The section would further require that the Postal Service 
issue regulations providing that wine and beer is mailed 
directly to a person who is at least 21 years old and 
presenting a valid, government-issued form of identification at 
the time of delivery.

Section 405--Annual report on U.S. mailing industry

    This section requires the PRC to publish annually a report 
on the financial health of the U.S. mailing industry, and 
requires the Postal Service and any other appropriate federal 
agency to assist in the report's preparation.

Section 406--Use of negotiated service agreements

    This section authorizes the Postal Service to enter into 
Negotiated Service Agreements (NSAs) with individual mailers to 
retain existing mail volume, clearing up an ambiguity in the 
law. The section also requires the Postal Service to coordinate 
with the PRC to increase the use of NSAs.

Section 407--Contracts disputes

    This section corrects a mistake in the Postal 
Accountability and Enhancement Act of 2006, which inadvertently 
deleted the Postal Service and the PRC from the list of 
agencies covered by the Contract Disputes Act of 1978. The 
Contract Disputes Act governs how contractor claims against 
federal agencies are to be handled.

Section 408--Contracting provisions

    This section institutes contracting reforms and new ethics 
provisions for the Postal Service and the PRC. These include: 
(1) establishing the position of Advocate for Competition, who 
will encourage the use of commercial items, challenge barriers 
to competition, and review procurement; (2) clarifying that the 
Postmaster General and the PRC Chairman are ultimately 
responsible for any delegation of authority with respect to 
contracting, and requires public posting of such delegations; 
(3) requiring the Postal Service and PRC to publicly post 
justifications for noncompetitive contracts, with the PRC 
required to post all such contracts, and the Postal Service 
required to post all contracts valued at more than $250,000; 
(4) requiring that if a contracting officer identifies an 
ethical issue surrounding a proposed contract, that contract 
must be submitted to the agency's designated ethics official 
before it is awarded; (5) clarifying ethics rules by requiring 
employees who have a decision-making role in the award of 
noncompetitive contracts to disclose any relationship that 
could potentially lead to questions about their impartiality, 
requiring a review by the ethics counsel of any disclosures to 
determine if disqualification of the employee from 
participation is warranted, and requiring contractors to 
disclose conflicts of interest. This section also allows the 
Postmaster General and the PRC Chairman to void a contract and 
recover funds when a violation is proven. This section also 
prohibits the Postal Service from entering into any contracts 
that restrict Congress from exercising its oversight authority.

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of S. 1789. The Congressional 
Budget Office states that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandate Reform Act and would impose no costs on state, 
local, or tribal governments, or private entities. The 
enactment of this legislation will not have significant 
regulatory impact.

             VI. Congressional Budget Office Cost Estimate

                                                  January 26, 2012.
Hon. Joseph I. Lieberman,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1789, the 21st 
Century Postal Service Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark 
Grabowicz.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 1789--21st Century Postal Service Act of 2011

    Summary: S. 1789 would change the laws that govern the 
operation of the United States Postal Service (USPS). Major 
provisions of the bill would:
           Transfer more than $11 billion in surplus 
        retirement contributions from the Civil Service 
        Retirement and Disability Fund (CSRDF) to the Postal 
        Service Fund;
           Change the payments that the Postal Service 
        is required to make to the Postal Service Retiree 
        Health Benefits Fund (PSRHBF);
           Permit the Postal Service to reduce mail 
        delivery from six days per week to five;
           Authorize the Postal Service to offer 
        employees credit for additional years of service as an 
        incentive to retire; and
           Reduce payments to most federal workers 
        receiving benefits under the Federal Employees' 
        Compensation Act (FECA) and reform the administration 
        of that act.
    In addition, other provisions of S. 1789 would aim to help 
the Postal Service reduce its costs and increase its revenues.
    CBO estimates that enacting the bill would result in off-
budget savings of $25.6 billion over the 2012-2022 period and 
on-budget costs totaling about $31.9 billion. (USPS cash flows 
are recorded in the federal budget in the Postal Service Fund 
and are classified as off-budget, while the cash flows of the 
PSRHBF, CSRDF, and the FECA account are on-budget.)
    Combining those effects, CBO estimates that the net cost to 
the unified budget of enacting S. 1789 would be $6.3 billion 
over the 2012-2022 period. All of those effects reflect changes 
in direct spending. In addition, we estimate that enacting S. 
1789 would decrease revenues by $15 million over the 2012-2015 
period. Pay-as-you-go procedures apply because enacting the 
legislation would increase on-budget direct spending and 
decrease revenues.
    S. 1789 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1789 is shown in Table 1. The costs of 
this legislation fall within budget functions 370 (commerce and 
housing credit) and 600 (income security).

                                                  TABLE 1--SUMMARY OF BUDGETARY IMPACT OF S. 1789, THE 21ST CENTURY POSTAL SERVICE ACT OF 2011
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      By fiscal year, in millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              OFF-BUDGET CHANGES IN DIRECT SPENDING

Estimated Budget Authority.......................     -5,299     -1,730     -2,123     -2,364     -3,022     -1,932     -1,900     -1,865     -1,830     -1,796     -1,764    -16,469    -25,624
Estimated Outlays................................     -5,299     -1,750     -2,123     -2,364     -3,022     -1,932     -1,900     -1,865     -1,830     -1,796     -1,764    -16,469    -25,624

                                                                              ON-BUDGET CHANGES IN DIRECT SPENDING

Estimated Budget Authority.......................     10,945      3,139      3,311      3,350      3,477      1,272      1,284      1,281      1,280      1,278      1,274     25,494     31,891
Estimated Outlays................................     10,945      3,139      3,311      3,350      3,477      1,272      1,284      1,281      1,280      1,278      1,274     25,494     31,891

                                                                            UNIFIED BUDGET CHANGES IN DIRECT SPENDING

Estimated Budget Authority.......................      5,647      1,410      1,189        986        455       -660       -616       -584       -550       -518       -490      9,026      6,268
Estimated Outlays................................      5,647      1,410      1,189        986        455       -660       -616       -584       -550       -518       -490      9,026      6,268

                                                                                       CHANGES IN REVENUES

Estimated Revenues...............................         -4         -5         -5         -1          0          0          0          0          0          0          0        -15        -15

                                                                          CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level....................          0         31         26         27          5         24        -51        -66        -95       -119       -146         65       -412
Estimated Outlays................................          0         27         26         27          4        -23        -51        -67        -94       -119       -146         62       -415
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding. For spending, positive numbers indicate increases in costs; negative numbers indicate reductions in costs. For revenues, negative
  numbers indicate reductions in revenue collections.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes that S. 1789 will be enacted early in calendar year 
2012. The bill would affect outlays of the Postal Service Fund, 
which is off-budget, and of the PSRHBF, CSRDF, and FECA 
accounts--all of which are on-budget. CBO estimates that the 
net cost to the unified budget would total $6.3 billion over 
the 2012-2022 period. In addition, we estimate that enacting 
the bill would decrease revenues by $15 million over the 2012-
2015 period (with no impact on revenues after 2015).

Background on USPS Payments for Employees Health Insurance and 
        Retirement

    The following sections present background information 
relating to the major provisions of S. 1789 that would affect 
postal finances.
    Postal Service Obligations for Retiree Health Care. Under 
current law, the Postal Service will make annual payments over 
the 2012-2016 period to two accounts for retirees' health 
insurance premiums. (USPS spending on those activities is 
classified as off-budget.) The agency will make a direct 
payment to the on-budget Federal Employees Health Benefits 
(FEHB) fund for current retirees. CBO estimates that this 
payment will be about $2.7 billion in 2012, rising to $3.8 
billion by 2016.
    In addition, over the 2012-2016 period, the Postal Service 
is required (under current law) to make specified annual 
payments that range from $5.6 billion to $11.1 billion to the 
PSRHBF, an on-budget account established by the Postal 
Accountability and Enhancement Act (Public Law 109-435) to 
prefund future retirees' health benefits. Under current law, 
funds in the PSRHBF may not be expended for retirees' health 
cost until fiscal year 2017.
    Beginning in 2017, the Postal Service will make estimated 
annual payments to the PSRHBF to cover the ``normal costs'' of 
providing health benefits to future retirees. Those payments 
will be equal to the annual increase in retiree health care 
liabilities attributable to current employees. In addition, the 
agency will make annual payments amortized over 40 years to 
liquidate the unfunded liability for retirees' health benefits. 
The unfunded liability is the total liability accrued to date 
for retirees' health benefits minus the PSRHBF balance that is 
equivalent to the amount that has not been set aside to cover 
future liabilities. Those payments will be estimated by the 
Office of Personnel Management (OPM) before 2017.
    The payments to the PSRHBF that are required under current 
law are shown in the memorandum to Table 2.
    Postal Service Pension Obligations. Most postal employees 
participate in the Federal Employees Retirement System (FERS), 
while some workers with longer tenure participate in the Civil 
Service Retirement System (CSRS). The Postal Service and its 
employees make payroll contributions toward FERS and CSRS.

                                                                  TABLE 2--OFF-BUDGET CHANGES IN DIRECT SPENDING UNDER S. 1789
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, outlays in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                 2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in USPS Payments for Retiree Health Benefits........        508     -1,522     -1,615     -1,665     -1,761       -655       -655       -655       -655       -655       -655     -9,984
Net Effect of Transfer of Surplus Retirement Contributions..     -5,700          0          0          0          0          0          0          0          0          0          0     -5,700
Reduction in Mail Delivery..................................          0          0       -300       -600     -1,250     -1,250     -1,200     -1,150     -1,100     -1,050     -1,000     -8,900
Increased Credits for USPS Retirees.........................       -107       -214       -215       -108          0          0          0          0          0          0          0       -643
Changes in USPS Payments for Workers' Compensation..........          0          6          7          8        -11        -27        -45        -60        -75        -91       -109       -397
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Total Off-Budget Changes............................     -5,299     -1,730     -2,123     -2,364     -3,022     -1,932     -1,900     -1,865     -1,830     -1,796     -1,764    -25,624

MEMORANDUM--USPS PAYMENTS FOR RETIREE HEALTH BENEFITS

Under Current Law:
    Estimated Payments to FEHB..............................      2,666      2,911      3,189      3,489      3,792          0          0          0          0          0          0     16,047
    Specified Payments to PSRHBFa...........................      2,100      5,600      5,700      5,700      5,800          0          0          0          0          0          0     24,900
    Estimated Payments for Normal Costsb....................          0          0          0          0          0      4,181      4,410      4,651      4,902      5,165      5,440     28,749
    Estimated Amortization Paymentsc........................          0          0          0          0          0      3,410      3,410      3,410      3,410      3,410      3,410     20,460
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Total...............................................      4,766      8,511      8,889      9,189      9,592      7,591      7,820      8,061      8,312      8,575      8,850     90,156
Under S. 1789:
    Estimated Payment for Normal Costs......................      3,174      3,368      3,560      3,760      3,970      4,181      4,410      4,651      4,902      5,165      5,440     46,581
    Estimated Amortization Payments.........................      2,100      2,100      2,100      2,100      2,100      2,100      2,100      2,100      2,100      2,100      2,100     23,100
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Subtotal............................................      5,274      5,468      5,660      5,860      6,070      6,281      6,510      6,751      7,002      7,265      7,540     69,681
    Changes in Other USPS Spending..........................          0      1,522      1,615      1,665      1,761        655        655        655        655        655        655     10,492
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Total...............................................      5,274      6,990      7,275      7,525      7,831      6,936      7,165      7,406      7,657      7,920      8,195     80,173
Changes in Payments for Retiree Health Benefits 508.........        508     -1,522     -1,615     -1,665     -1,761       -655       -655       -655       -655       -655       -655     -9,984
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Components may not sum to totals because of rounding.
USPS = United States Postal Service; FEHB = Federal Employees Health Benefits fund; PSRHBF = Postal Service Retiree Health Benefits Fund.
a. In fiscal year 2012, the Postal Service is required to pay $11.1 billion to the PSRHBF. However, CBO estimates that the agency will be able to pay only $2.1 billion.
b. These payments are equal to the annual increase in retiree health care liabilities attributable to current employees.
c. These costs are based on information provided by the Office of Personnel Management.

    Beginning in fiscal year 2017, the Postal Service will make 
annual payments amortized over 27 years to liquidate any 
``unfunded liability'' (as estimated by OPM) for retirees' CSRS 
pensions benefits. The unfunded liability is the total 
liability accrued to date for retirees' pension benefits minus 
the portion of the CSRDF attributable to Postal Service 
contributions that is equivalent to the amount that has not 
been set aside to cover future liabilities.

Off-Budget Changes in Direct Spending (Postal Service Fund)

    CBO estimates that enacting S. 1789 would reduce net USPS 
spending by $25.6 billion over the 2012-2022 period; as noted 
above, USPS spending is classified as off-budget. Details of 
changes in spending from the Postal Service Fund are summarized 
in Table 2 and discussed in the following subsections.
    Changes in Payments for Retiree Health Benefits. CBO 
estimates that the bill's provisions that would change payments 
to the PSRHBF would result in off-budget savings of about $10 
billion over the 2012-2022 period, as discussed below.
    Payments to the PSRHBF under S. 1789. The legislation would 
authorize the Postal Service, over the 2012-2016 period, to 
make payments to the FEHB fund for current retirees' health 
insurance premiums from the PSRHBF (under current law, funds in 
the PSRHBF are not available for spending until fiscal year 
2017). S. 1789 also would eliminate the current specified 
payments into the PSRHBF for fiscal years 2012 through 2016. In 
addition, beginning in 2012, the bill would direct the Postal 
Service to make estimated annual payments to the PSRHBF to 
cover the normal costs of providing health benefits to future 
retirees and estimated 40-year amortization payments to cover 
80 percent of the unfunded liability for retirees' health 
benefits (under current law, those payments would not begin 
until 2017). The payments required under S. 1789 are shown in 
the memorandum on Table 2; as detailed in the table's 
footnotes, CBO does not expect the Postal Service to be able to 
make the full payments required in 2012.
    The bill's changes in payments for retirees' health 
insurance premiums would lower the Postal Service's costs for 
those activities over the 2013-2022 period as shown in Table 2 
(see memorandum). For example, under current law, the Postal 
Service will pay a total of about $8.5 billion in 2013, but 
under S. 1789, the agency would pay $5.5 billion in that year. 
CBO also expects that lowering health care expenses would lead 
to an increase in other USPS costs totaling $1.5 billion in 
2013 and about $10.5 billion over the 2013-2022 period. We 
estimate that enacting S. 1789 would reduce net USPS spending 
by about $10 billion over the 10-year period. (Those provisions 
also would affect cash flows of the PSRHBF, as discussed 
below.)
    Changes in Other USPS Spending. CBO expects that lowering 
health care expenses would lead the agency to modify its 
ongoing efforts under current law to reduce spending. Faced 
with an imbalance of receipts from postal customers and 
operational costs, the Postal Service has made significant 
efforts to reduce spending in recent years. For example, early 
in 2009, the Postal Service announced plans to cut spending by 
$5.9 billion over the 2009-2010 period. Just a few months 
later, in response to worsening financial conditions, the 
agency accelerated the plan to cut $5.9 billion in 2009 alone. 
Since then, the Postal Service has announced the possibility of 
closing offices, laying off employees, and making major 
reductions in service.
    CBO expects that lowering health care expenses would lead 
the agency to alter its cost-reduction program by cutting 
spending less aggressively than it would without the 
legislation. CBO anticipates that enacting this legislation 
would lead the USPS to increase its net operational spending 
relative to current law. We estimate that the net increase in 
such USPS outlays over the 2013-2022 period would be about half 
of the reduction in health care payments about $1.5 billion in 
2013 and $10.5 billion over the 2013-2022 period.
    Net Effect of Transfer of Surplus Postal Retirement 
Contributions. For each of fiscal years 2011 through 2013, S. 
1789 would authorize the Postal Service Fund to receive a 
transfer of any surplus in the USPS FERS account within the 
CSRDF as of the end of the fiscal year. S. 1789 would permit 
the Postal Service to use the transferred amounts to fund 
employee buyout plans, pay off its debt to the U.S. Treasury, 
make payments for workers' compensation benefits, and for other 
expenses.
    OPM estimates that the Postal Service's surplus for its 
FERS account in the CSRDF was $11.4 billion as of September 30, 
2011. Under the bill, CBO estimates that $11.4 billion would be 
transferred from the CSRDF to the Postal Service Fund in fiscal 
year 2012. This intragovernmental transfer would be classified 
as a savings of $11.4 billion in off-budget direct spending for 
the Postal Service Fund in 2012. (This transfer also would 
result in a cost of $11.4 billion to the on-budget CSRDF as 
discussed below.)
    As with the bill's provision to lower the health care 
expenses, CBO expects that the transfer would lead the agency 
to alter its cost-reduction program by cutting spending less 
aggressively than it otherwise would and thus increase other 
expenses relative to current law. We estimate that this 
increase in other expenses would be about half the $11.4 
billion that would be transferred--$5.7 billion in 2012; we 
estimate that the net effect of this provision would be a 
savings of $5.7 billion in 2012 (as shown in Table 2).
    CBO has no basis for estimating whether there would be any 
surplus in the USPS FERS account in fiscal years 2012 and 2013 
to transfer to the Postal Service Fund.
    Reduction in Mail Delivery. S. 1789 would authorize the 
Postal Service to deliver mail five days per week, beginning no 
earlier than two years after enactment. Before any change in 
service, however, the Government Accountability Office (GAO) 
would have to evaluate the financial need for such a change and 
the Postal Regulatory Commission (PRC) would have to determine 
that a reduction in mail delivery would be necessary for the 
Postal Service to achieve long-term financial solvency. In 
addition, the bill would require the Postal Service to develop 
measures to reduce any disproportionate effects that five-day 
delivery would have on certain customers and communities.
    CBO estimates that reducing mail delivery to five days per 
week would result in savings of about $1.3 billion by fiscal 
year 2016. Estimated savings in 2015 and 2014 would be lower--
about $600 million and $300 million, respectively--as the 
Postal Service gradually increases efficiency under the new 
delivery system. Beginning in 2018, we expect that annual 
savings would gradually decline as those funds would probably 
be spent by the Postal Service or returned to mailers in the 
form of lower rates rather than accumulating as large annual 
surpluses in the Postal Service Fund. We estimate that annual 
savings would fall to $1 billion by 2022.
    Implementation of five-day delivery under S. 1789 would 
depend upon evaluations by GAO and PRC, and we cannot predict 
the actions of those agencies. However, we expect that there is 
a 50 percent chance that GAO and PRC actions would lead to 
five-day delivery. The anticipated savings of about $1.3 
billion in 2016 is based on estimates prepared by the Postal 
Service and the PRC, reduced by 50 percent to reflect the 
uncertainty of future actions by GAO and the PRC.\1\
---------------------------------------------------------------------------
    \1\The Postal Service estimates that eliminating mail delivery on 
Saturdays would eventually result in net savings of $3.1 billion 
annually, mostly in personnel and transportation costs. The PRC 
estimates that reduction of mail delivery from six to five days per 
week would save only $1.7 billion per year. The PRC estimates lower net 
savings largely because it disagrees with the Postal Service's 
assumption that most mail currently delivered on Saturday could be 
delivered on Mondays with minimal increased costs. PRC's estimate 
therefore includes a bigger expected offset to the gross savings for 
eliminating Saturday deliveries.
---------------------------------------------------------------------------
    Increased Credits for USPS Retirees. For certain employees 
who retire before 2015, section 102 of S. 1789 would authorize 
the USPS to offer credit for additional years of service as an 
incentive to retire. As discussed below, the provision would 
affect spending from the CSRDF and would result in several 
thousand USPS employees retiring over the 2012-2014 period a 
few years earlier than expected under current law. Over that 
period, the Postal Service would make lower employer 
contributions toward retirement and would spend less in 
salaries and benefits. CBO estimates that provision of S. 1789 
would save the USPS about $640 million over the 2012-2015 
period.
    Changes in Workers' Compensation for the USPS. The bill 
would make several changes to the Federal Employees' 
Compensation Act, which provides wage and medical benefits to 
federal employees who are injured in the course of their work.
    Based on information from the Department of Labor (DOL), 
CBO estimates that the changes proposed in S. 1789 would reduce 
gross outlays under FECA by $1.2 billion over the 2012-2022 
period. That gross savings would be partially offset by reduced 
reimbursements from federal agencies, including the Postal 
Service, of $1 billion during that period, for net savings to 
the FECA account over 10 years of about $200 million. Based on 
historical spending patterns, CBO estimates that about 40 
percent of the gross FECA savings would accrue to the USPS, 
which, accordingly, would pay about $400 million less in 
reimbursements to the FECA account under S. 1789 over the 2012-
2022 period as shown in Table 2.

On-Budget Changes in Direct Spending and Revenues

    CBO estimates that enacting S. 1789 would increase on-
budget direct spending by $31.9 billion over the 2012-2022 
period. Those costs would result from changes in the cash flows 
of PSRBHF, CSRDF, and FECA accounts as summarized in Table 3 
and discussed in the following subsections.
    Changes in USPS Payments to PSRHBF. As discussed 
previously, the bill would change payments that the Postal 
Service makes for retiree health benefits, and CBO estimates 
that those changes would decrease net on-budget direct spending 
by about $500 million in 2012 but would increase direct 
spending by about $20.5 billion over the 2012-2022 period. 
Those costs result from changes in cash flows of the PSRHBF as 
displayed in the memorandum to Table 3; as detailed in the 
table's footnotes, CBO does not expect the Postal Service to be 
able to make the specified payments required in 2012. S. 1789 
would not affect the net cash flows of the FEHB fund (although 
under the bill's provisions, the payments to this fund would be 
made out of the PSRHBF rather than the Postal Service Fund).
    CBO estimates that the payments to FEHB from the PSRHBF 
would range from $2.7 billion in 2012 to $3.8 billion in 2016. 
The bill would eliminate the specified payments required under 
current law from the Postal Service Fund into the PSRHBF over 
the 2012-2016 period (which total $24.9 billion). In addition, 
S. 1789 would direct the Postal Service, beginning in 2012, to 
make estimated annual payments to the PSRHBF to cover the costs 
of providing health benefits to future retirees. (Currently, 
payments for those so-called ``normal costs'' will not be made 
until 2017.) Based on information from OPM, CBO estimates that 
those payments would grow from $3.2 billion in 2012 to $5.4 
billion by 2022. Under the bill, the agency also would make 
estimated 40-year amortization payments toward the unfunded 
liability for retirees' health benefits beginning in 2012 
rather than in 2017 as under current law. OPM estimates that 
those payments would be $2.1 billion annually.

                                                            TABLE 3--CHANGES IN DIRECT SPENDING FOR ON-BUDGET ACCOUNTS UNDER S. 1789
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, outlays in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                 2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in USPS Payments to PSRHBF..........................       -508      3,043      3,229      3,329      3,522      1,310      1,310      1,310      1,310      1,310      1,310     20,475
Transfer of Surplus Retirement Contributions................     11,400          0          0          0          0          0          0          0          0          0          0     11,400
Increased Credits for USPS Retirees.........................         53         80         81         27         -1         -1         -1         -1         -1         -1         -1        234
Net Changes in FECA.........................................          0         16          1         -6        -44        -37        -25        -28        -29        -31        -35       -219
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Total Changes in On-Budget Costs....................     10,945      3,139      3,311      3,350      3,477      1,272      1,284      1,281      1,280      1,278      1,274     31,891

Memorandum--PSRHBF Estimates:

Under Current Law:
    Specified Payment from USPSa............................     -2,100     -5,600     -5,700     -5,700     -5,800          0          0          0          0          0          0    -24,900
    Normal Payments.........................................          0          0          0          0          0     -4,181     -4,410     -4,651     -4,902     -5,165     -5,440    -28,749
    Amortization Payments...................................          0          0          0          0          0     -3,410     -3,410     -3,410     -3,410     -3,410     -3,410    -20,460
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Total...............................................     -2,100     -5,600     -5,700     -5,700     -5,800     -7,591     -7,820     -8,061     -8,312     -8,575     -8,850    -74,109
Under S. 1789:
    FEHB Paymentb...........................................      2,666      2,911      3,189      3,489      3,792          0          0          0          0          0          0     16,047
    Normal Payments.........................................     -3,174     -3,368     -3,560     -3,760     -3,970     -4,181     -4,410     -4,651     -4,902     -5,165     -5,440    -46,581
    Amortization Payments...................................     -2,100     -2,100     -2,100     -2,100     -2,100     -2,100     -2,100     -2,100     -2,100     -2,100     -2,100    -23,100
                                                             -----------------------------------------------------------------------------------------------------------------------------------
        Total...............................................     -2,608     -2,557     -2,471     -2,371     -2,278     -6,281     -6,510     -6,751     -7,002     -7,265     -7,540    -53,634
Changes for PSRHBF..........................................       -508      3,043      3,229      3,329      3,522      1,310      1,310      1,310      1,310      1,310      1,310     20,475
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Components may not sum to totals because of rounding.
PSRHBF = Postal Service Retiree Health Benefits Fund; USPS = United States Postal Service; FECA = Federal Employees' Compensation Act; FEHB = Federal Employees Health Benefits Fund.
aIn fiscal year 2012, the Postal Service is required to pay $11.1 billion to the PSRHBF. However, CBO estimates that the agency will be able to pay only $2.1 billion.
bUnder current law, the FEHB payment would be made from the PSRHBF beginning in 2017, so S. 1789 would not affect cash flows over the 2017-2022 period.

    Transfer of Surplus Postal Retirement Contributions. As 
discussed previously, S. 1789 would transfer to the Postal 
Service Fund any surplus in the USPS FERS account within the 
CSRDF as of September 30, 2011. Based on information from OPM, 
CBO estimates that $11.4 billion would be transferred from the 
CSRDF to the Postal Service Fund in 2012. This transfer would 
increase on-budget spending from the CSRDF by $11.4 billion in 
2012.
    Increased Credits for USPS Retirees. For certain employees 
who retire before 2015, section 102 would authorize the USPS to 
offer credit for additional years of service as an incentive to 
retire. Eligible USPS employees in CSRS could be offered up to 
one year of additional service credit, and eligible employees 
in FERS could be offered up to two years of credit; those years 
of service would be used to determine eligibility for 
retirement and would be included in the calculation of any 
retirement annuity. Employees who accept the additional service 
credit offer could not also receive a voluntary separation 
incentive payment (cash buyout) available under current law.
    Accepting an additional service credit would boost an 
employee's retirement annuity by about 2 percent; on average, 
that increase would add $1,000 to $2,000 per year to the 
employee's pension. Based on the response to recent buyout 
offers, CBO estimates that a relatively small number of USPS 
employees would accept the service credit offer and that it 
would mostly appeal to employees who are within a year or two 
of eligibility for full retirement.
    CBO estimates that under this provision direct spending 
would increase by $234 million over the 2012-2022 period; 
employees who accept the service credit would begin receiving 
retirement benefits from the Civil Service Retirement and 
Disability Trust Fund earlier than under current law.
    The payment of employee retirement contributions made on 
behalf of participating employees would end earlier than 
expected under current law. The payment of employee 
contributions toward retirement are recorded in the budget as 
revenues. CBO estimates that enacting S. 1789 would lower 
revenues by $15 million over the 10-year period because of 
early retirement.
    Changes in Workers' Compensation for Agencies Other Than 
USPS. The bill would make several changes to the Federal 
Employees' Compensation Act, which provides wage and medical 
benefits to federal employees who are injured in the course of 
their work. Proposed changes include:
           Reducing benefits to 50 percent of a 
        claimant's pre-injury wage upon reaching retirement age 
        (as defined in the Social Security Act);
           Eliminating augmented benefits to claimants 
        who have dependents (so that all claimants who are 
        below retirement age--except certain exempt 
        individuals--receive a benefit equal to two-thirds of 
        their pre-injury wage);
           Improving cross-matching of data to identify 
        cases where individuals are wrongly receiving benefits;
           Increasing benefits under the disfigurement 
        compensation schedule and for funeral expenses;
           Establishing a schedule for managing 
        disability reviews, including requiring periodic 
        medical exams; and
           Improving the ability of the government to 
        recapture compensation costs from responsible parties.
    Under current law, FECA provides compensation for lost 
wages of up to 75 percent of a worker's salary if that person 
can no longer work because of debilitating injuries sustained 
on the job, as well as medical expenses relating to the injury 
and certain death benefits. In 2010, governmentwide benefits 
totaled $2.9 billion; most of those expenses are charged back 
to the beneficiaries' employing agency, so that in 2010, net 
FECA outlays (gross outlays less reimbursements from agencies) 
totaled $216 million.
    Based on information from DOL, CBO estimates that the 
changes proposed in S. 1789 would reduce gross outlays under 
FECA by $1.2 billion over the 2012-2022 period--which would be 
partially offset by reduced reimbursements of $1 billion during 
that period--for net savings to the FECA account of about $200 
million over the period (see Table 3).

Other provisions that could affect direct spending

    The bill would direct arbitrators involved in future labor 
negotiations to consider the financial condition of the Postal 
Service when mediating disputes between USPS and its labor 
unions and would reform certain Postal Service contracting 
practices. Those provisions might reduce USPS costs, but CBO 
expects that any net savings probably would be 
indistinguishable from savings that could result from the 
Postal Service's current efforts to negotiate more favorable 
labor contracts and improve procurement practices.
    In recent years the Postal Service has attempted to reduce 
its workforce by offering incentives for employees to retire 
early. (The agency has reduced its employee complement by more 
than 100,000 workers over the past three years, mostly through 
attrition.) CBO expects the Postal Service will continue to 
offer such incentives to lower its costs. As discussed earlier, 
S. 1789 would permit the Postal Service to use amounts 
transferred from its FERS account within the CSRDF to pay for 
employee buyout plans (including payments of up to $25,000 per 
employee). It is possible that enacting S. 1789 could increase 
the number of employees who retire during the next several 
years and thus lower USPS labor costs, but CBO has no basis for 
estimating any such effects.
    S. 1789 also would authorize the Postal Service to 
establish a program to provide services for agencies of the 
federal government or the states for a fee. Implementing this 
program would require the Postal Service to offer cost-
effective alternatives for services to state or federal 
agencies. Those proposed programs might increase USPS income 
but also would add to costs. CBO has no information to predict 
the net budget impact of such new ventures if any were 
undertaken by the Postal Service.

Spending Subject to Appropriation

    Changes to FECA in S. 1789 would result in lower 
discretionary costs of about $600 million over the 2012-2022 
period to federal agencies' salaries and expense accounts 
because of the lower reimbursements that would be required. 
However, S. 1789 would require DOL to institute and manage the 
new disability reviews, appeals from the procedures, and other 
requirements of the bill. CBO estimates that implementing those 
provisions would increase spending by about $200 million over 
the 2012-2022 period, assuming appropriation of the necessary 
amounts, resulting in an estimated net discretionary cost of 
$415 million over the 2012-2022 period.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table. Only on-budget changes to outlays or revenues 
are subject to pay-as-you-go procedures.

 CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1789, THE 21ST CENTURY POSTAL SERVICE ACT OF 2011, AS ORDERED REPORTED BY THE SENATE COMMITTEE ON HOMELAND
                                                  SECURITY AND GOVERNMENTAL AFFAIRS ON NOVEMBER 9, 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                          --------------------------------------------------------------------------------------------------------------
                                             2012    2013    2014    2015    2016    2017    2018    2019    2020    2021    2022   2012-2017  2012-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  NET INCREASE OR DECREASE (-) IN THE ON-BUDGET DEFICIT

Statutory Pay-As-You-Go Impact...........   10,941   3,134   3,306   3,349   3,477   1,272   1,284   1,281   1,280   1,278   1,274    25,479     31,876
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: S. 1789 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would impose no 
costs on state, local, or tribal governments.
    Previous CBO estimate: On December 1, 2011, CBO transmitted 
a cost estimate for H.R. 2309, the Postal Reform Act of 2011, 
as ordered reported by the House Committee on Oversight and 
Government Reform on October 13, 2011. We estimated that 
enacting H.R. 2309 would result in off-budget savings totaling 
$26.2 billion and on-budget costs of $7.7 billion over the 
2012-2021 period for a net savings to the unified budget of 
$18.5 billion.
    Estimate prepared by: Federal Spending: Mark Grabowicz--
USPS, Christi Hawley Anthony--Federal Employees' Compensation, 
Amber Marcelino--USPS Retiree Credits; Impact on State, Local, 
and Tribal Governments: Elizabeth Cove Delisle; Impact on the 
Private Sector: Paige Piper/Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

       VII. Changes in Existing Law Made by the Bill, as Reported

TITLE V--GOVERNMENT ORGANIZATION AND EMPLOYEES

           *       *       *       *       *       *       *

PART III--EMPLOYEES

           *       *       *       *       *       *       *

Subpart G--Insurance and Annuities

           *       *       *       *       *       *       *

CHAPTER 81--COMPENSATION FOR WORK INJURIES

           *       *       *       *       *       *       *

Subchapter I--Generally

           *       *       *       *       *       *       *

Sec. 8101. Definitions

    For the purpose of this subchapter (5 USCS Sec. Sec. 8101 
et seq.)--
          (1) ``employee'' means--
                  (A) * * *
                  (B) * * *
                  (C) * * *
                  (D) an individual employed by the government 
                of the District of Columbia for an injury that 
                occurred before the effective date of section 
                204(e) of the District of Columbia Self-
                Government and Governmental Reorganization Act 
                (Public Law 93-198; 87 Stat. 783; 5 U.S.C. 8101 
                note); and
                  (E) * * *
          (2) * * *
          (3) * * *
          (4) * * *
          (5) * * *
          (6) * * *
          (7) * * *
          (8) * * *
          (9) * * *
          (10) * * *
          (11) * * *
          (12) * * *
          (13) * * *
          (14) * * *
          (15) * * *
          (16) * * *
          (17) * * *
          (18) ``price index'' means the Consumer Price Index 
        (all items--United States city average) published 
        monthly by the Bureau of Labor Statistics; [and]
          (19) ``organ'' means a part of the body that performs 
        a special function, and for purposes of this subchapter 
        (5 USCS Sec. Sec. 8101 et seq.) excludes the brain, 
        heart, and back; [and]
          (20) ``United States medical officers and hospitals'' 
        includes medical officers and hospitals of the Army, 
        Navy, Air Forces, Department of Veterans Affairs, and 
        United States Public Health Service, and any other 
        medical officer or hospital designated as a United 
        States medical officer or hospital by the Secretary of 
        Labor;[.]
          (21) `retirement age' has the meaning given that term 
        under section 216(l)(1) of the Social Security Act (42 
        U.S.C. 416(l)(1));
          (22) `covered claim for total disability' means a 
        claim for a period of total disability that commenced 
        before the date of enactment of the Workers' 
        Compensation Reform Act of 2012;
          (23) `covered claim for partial disability' means a 
        claim for a period of partial disability that commenced 
        before the date of enactment of the Workers' 
        Compensation Reform Act of 2012; and
          (24) `individual who has an exempt disability 
        condition' means an individual--
                  (A) who--
                          (i) is eligible to receive continuous 
                        periodic compensation for total 
                        disability under section 8105 on the 
                        date of enactment of the Workers' 
                        Compensation Reform Act of 2012; and
                          (ii) meets the criteria under section 
                        8105(c);
                  (B) who, on the date of enactment of the 
                Workers' Compensation Reform Act of 2012--
                          (i) is eligible to receive continuous 
                        periodic compensation for total 
                        disability under section 8105; and
                          (ii) has sustained a currently 
                        irreversible severe mental or physical 
                        disability for which the Secretary of 
                        Labor has authorized, for at least the 
                        1-year period ending on the date of 
                        enactment of the Workers' Compensation 
                        Reform Act of 2012, constant in-home 
                        care or custodial care, such as 
                        placement in a nursing home; or
                  (C) who is eligible to receive continuous 
                periodic compensation for total disability 
                under section 8105--
                          (i) for not less than the 3-year 
                        period ending on the date of enactment 
                        of the Workers' Compensation Reform Act 
                        of 2012; or
                          (ii) if the individual became 
                        eligible to receive continuous periodic 
                        compensation for total disability under 
                        section 8105 during the period 
                        beginning on the date that is 3 years 
                        before the date of enactment of the 
                        Workers' Compensation Reform Act of 
                        2012 and ending on such date of 
                        enactment, for not less than the 3-year 
                        period beginning on the date on which 
                        the individual became eligible.

           *       *       *       *       *       *       *

Sec. 8104. Vocational rehabilitation

    (a) [The Secretary of Labor may direct a permanently 
disabled individual whose disability is compensable under this 
subchapter (5 USCS Sec. Sec. 8101 et seq.) to undergo 
vocational rehabilitation.] In General.--
          (1) Direction.--Except as provided in paragraph (2), 
        not earlier than the date that is 6 months after the 
        date on which an individual eligible for wage-loss 
        compensation under section 8105 or 8106 is injured, or 
        by such other date as the Secretary of Labor determines 
        it would be reasonable under the circumstances for the 
        individual to begin vocational rehabilitation, and if 
        vocational rehabilitation may enable the individual to 
        become capable of more gainful employment, the 
        Secretary of Labor shall direct the individual to 
        participate in developing a comprehensive return to 
        work plan and to undergo vocational rehabilitation at a 
        location a reasonable distance from the residence of 
        the individual. The Secretary shall provide for 
        furnishing the vocational rehabilitation services. In 
        providing for these services, the Secretary, insofar as 
        practicable, shall use the services or facilities of 
        State agencies and corresponding agencies which 
        cooperate with the [Secretary of Health, Education, and 
        Welfare in carrying out the purposes of chapter 4 of 
        title 29] the Secretary of Education in carrying out 
        the purposes of the Rehabilitation Act of 1973 (29 
        U.S.C. 701 et seq.), except to the extent that the 
        Secretary of Labor provides for furnishing these 
        services under section 8103 of this title (5 USCS 
        Sec. 8103). The cost of providing these services to 
        individuals undergoing vocational rehabilitation under 
        this section shall be paid from the Employees' 
        Compensation Fund. However, in reimbursing a State or 
        corresponding agency under an arrangement pursuant to 
        this section the cost to the agency reimbursable in 
        full [under section 32(b)(1) of title 29] under section 
        5 of the Rehabilitation Act of 1973 (29 U.S.C. 704) is 
        excluded.
          (2) Exception.--The Secretary of Labor may not direct 
        an individual who has attained retirement age to 
        participate in developing a comprehensive return to 
        work plan or to undergo vocational rehabilitation.
    (b) Contents of Return to Work Plan.--A return to work plan 
developed under subsection (a)--
          (1) shall--
                  (A) set forth specific measures designed to 
                increase the wage-earning capacity of an 
                individual;
                  (B) take into account the prior training and 
                education of the individual and the training, 
                educational, and employment opportunities 
                reasonably available to the individual; and
                  (C) provide that any employment undertaken by 
                the individual under the return to work plan be 
                at a location a reasonable distance from the 
                residence of the individual;
          (2) may provide that the Secretary will pay out of 
        amounts in the Employees' Compensation Fund reasonable 
        expenses of vocational rehabilitation (which may 
        include tuition, books, training fees, supplies, 
        equipment, and child or dependent care) during the 
        course of the plan; and
          (3) may not be for a period of more than 2 years, 
        unless the Secretary finds good cause to grant an 
        extension, which may be for not more than 2 years.
    [(b)] (c) Compensation.--Notwithstanding section 8106 (5 
USCS Sec. 8106), individuals directed to undergo vocational 
rehabilitation by the Secretary shall, while undergoing such 
rehabilitation, receive compensation at the rate provided in 
sections 8105 and 8110 of this title (5 USCS Sec. Sec. 8105 and 
8110), less the amount of any earnings received from 
remunerative employment[, other than employment undertaken 
pursuant to such rehabilitation].
    (d) Assisted Reemployment Agreements.--
          (1) In general.--The Secretary may enter into an 
        assisted reemployment agreement with an agency or 
        instrumentality of any branch of the Federal Government 
        or a State or local government or a private employer 
        that employs an individual eligible for wage-loss 
        compensation under section 8105 or 8106 to enable the 
        individual to return to productive employment.
          (2) Contents.--An assisted reemployment agreement 
        under paragraph (1)--
                  (A) may provide that the Secretary will use 
                amounts in the Employees' Compensation Fund to 
                reimburse an employer in an amount equal to not 
                more than 100 percent of the compensation the 
                individual would otherwise receive under 
                section 8105 or 8106; and
                  (B) may not be for a period of more than 3 
                years.
    (e) List.--To facilitate the hiring of individuals eligible 
for wage-loss compensation under section 8105 or 8106, the 
Secretary shall provide a list of such individuals to the 
Office of Personnel Management, which the Office of Personnel 
Management shall provide to all agencies and instrumentalities 
of the Federal Government.

           *       *       *       *       *       *       *

Sec. 8105. Total Disability

    (a) [If] In General.--Subject to subsection (b), if the 
disability is total, the United States shall pay the employee 
during the disability monthly monetary compensation equal to 66 
2/3 percent of his monthly pay, which is known as his basic 
compensation for total disability.
    (b) Conversion of Entitlement at Retirement Age.--
          (1) In general.--Except as provided in paragraph (2), 
        the basic compensation for total disability for an 
        employee who has attained retirement age shall be 50 
        percent of the monthly pay of the employee.
          (2) Exceptions.--
                  (A) Covered recipients who are retirement age 
                or have an exempt disability condition.--
                Paragraph (1) shall not apply to a covered 
                claim for total disability by an employee if 
                the employee--
                          (i) on the date of enactment of the 
                        Workers' Compensation Reform Act of 
                        2012, has attained retirement age; or
                          (ii) is an individual who has an 
                        exempt disability condition.
                  (B) Transition period for certain 
                employees.--For a covered claim for total 
                disability by an employee who is not an 
                employee described in subparagraph (A), the 
                employee shall receive the basic compensation 
                for total disability provided under subsection 
                (a) until the later of--
                          (i) the date on which the employee 
                        attains retirement age; and
                          (ii) the date that is 3 years after 
                        the date of enactment of the Workers' 
                        Compensation Reform Act of 2012.
    [(b)] (c) The loss of use of both hands, both arms, both 
feet, or both legs, or the loss of sight of both eyes, is prima 
facie permanent total disability.

           *       *       *       *       *       *       *

Sec. 8106. Partial Disability

    (a) [If] In General._Subject to subsection (b), if the 
disability is partial, the United States shall pay the employee 
during the disability monthly monetary compensation equal to 66 
2/3 percent of the difference between his monthly pay and his 
monthly wage-earning capacity after the beginning of the 
partial disability, which is known as his basic compensation 
for partial disability.
    (b) Conversion of Entitlement at Retirement Age.--
          (1) In general.--Except as provided in paragraph (2), 
        the basic compensation for partial disability for an 
        employee who has attained retirement age shall be 50 
        percent of the difference between the monthly pay of 
        the employee and the monthly wage-earning capacity of 
        the employee after the beginning of the partial 
        disability.
          (2) Exceptions.--
                  (A) Covered recipients who are retirement 
                age.--Paragraph (1) shall not apply to a 
                covered claim for partial disability by an 
                employee if, on the date of enactment of the 
                Workers' Compensation Reform Act of 2012, the 
                employee has attained retirement age.
                  (B) Transition period for certain 
                employees.--For a covered claim for partial 
                disability by an employee who is not an 
                employee described in subparagraph (A), the 
                employee shall receive basic compensation for 
                partial disability in accordance with 
                subsection (a) until the later of--
                          (i) the date on which the employee 
                        attains retirement age; and
                          (ii) the date that is 3 years after 
                        the date of enactment of the Workers' 
                        Compensation Reform Act of 2012.
          [(b)] (c) The Secretary of Labor may require a 
        partially disabled employee to report his earnings from 
        employment or self-employment, by affidavit or 
        otherwise, in the manner and at the times the Secretary 
        specifies. The employee shall include in the affidavit 
        or report the value of housing, board, lodging, and 
        other advantages which are part of his earnings in 
        employment or self-employment and which can be 
        estimated in money. An employee who--
          (1) fails to make an affidavit or report when 
        required; or
          (2) knowingly omits or understates any part of of his 
        earnings; forfeits his right to compensation with 
        respect to any period for which the affidavit or report 
        was required. Compensation forfeited under this 
        subsection, if already paid, shall be recovered by a 
        deduction from the compensation payable to the employee 
        or otherwise recovered under section 8129 of this title 
        (5 USCS Sec. 8129), unless recovery is waived under 
        that section.
    [(c)] (d) A partially disabled employee who--
          (1) refuses to seek suitable work; or
          (2) refuses or neglects to work after suitable work 
        is offered to, procured by, or secured for him;
is not entitled to compensation.

           *       *       *       *       *       *       *

Sec. 8106a. Reporting requirements

    (a) Definition.--In this section, the term `employee 
receiving compensation' means an employee who--
    (1) is paid compensation under section 8105 or 8106; and
    (2) has not attained retirement age.
    (b) Authority.--The Secretary of Labor shall require an 
employee receiving compensation to report the earnings of the 
employee receiving compensation from employment or self-
employment, by affidavit or otherwise, in the manner and at the 
times the Secretary specifies.
    (c) Contents.--An employee receiving compensation shall 
include in a report required under subsection (a) the value of 
housing, board, lodging, and other advantages which are part of 
the earnings of the employee receiving compensation in 
employment or self-employment and the value of which can be 
estimated.
    (d) Failure To Report and False Reports.--
        (1) In general.--An employee receiving compensation who 
        fails to make an affidavit or other report required 
        under subsection (b) or who knowingly omits or 
        understates any part of the earnings of the employee in 
        such an affidavit or other report shall forfeit the 
        right to compensation with respect to any period for 
        which the report was required.
          (2) Forfeited compensation.--Compensation forfeited 
        under this subsection, if already paid to the employee 
        receiving compensation, shall be recovered by a 
        deduction from the compensation payable to the employee 
        or otherwise recovered under section 8129, unless 
        recovery is waived under that section.

           *       *       *       *       *       *       *

Sec. 8107. Compensation schedule

    (a) If there is permanent disability involving the loss, or 
loss of use, of a member or function of the body or involving 
disfigurement, the employee is entitled to basic compensation 
for the disability, as provided by the schedule in subsection 
(c) of this section, [at the rate of 66 2/3 percent of his 
monthly pay] at the rate specified under subsection (d). The 
basic compensation is--
          (1) payable regardless of whether the cause of the 
        disability originates in a part of the body other than 
        that member;
          (2) payable regardless of whether the disability also 
        involves another impairment of the body; and
          (3) in addition to compensation for temporary total 
        or temporary partial disability.
    (b) *  *  *
    (c) The compensation schedule is as follows:
          (1) *  *  *
          (2) *  *  *
          (3) *  *  *
          (4) *  *  *
          (5) *  *  *
          (6) *  *  *
          (7) *  *  *
          (8) *  *  *
          (9) *  *  *
          (10) *  *  *
          (11) *  *  *
          (12) *  *  *
          (13) *  *  *
          (14) *  *  *
          (15) *  *  *
          (16) *  *  *
          (17) *  *  *
          (18) *  *  *
          (19) *  *  *
          (20) *  *  *
          (21) For serious disfigurement of the face, head, or 
        neck of a character likely to handicap an individual in 
        securing or maintaining employment, proper and 
        equitable compensation [not to exceed $3,500] in 
        proportion to the severity of the disfigurement, not to 
        exceed $50,000 shall be awarded in addition to any 
        other compensation payable under this schedule. The 
        maximum amount of compensation under this paragraph 
        shall be increased on March 1 of each year by the 
        amount determined by the Secretary of Labor to 
        represent the percent change in the price index 
        published for December of the preceding year over the 
        price index published for the December of the year 
        prior to the preceding year, adjusted to the nearest 
        one-tenth of 1 percent.
          (22) *  *  *
    (d) Rate for Compensation.--
          (1) Annual salary.--
                  (A) In general.--Except as provided in 
                paragraph (2), the rate under subsection (a) 
                shall be the rate of 66\2/3\ percent of the 
                annual salary level established under 
                subparagraph (B), in a lump sum equal to the 
                present value (as calculated under subparagraph 
                (C)) of the amount of compensation payable 
                under the schedule.
                  (B) Establishment.--
                          (i) In general.--The Secretary of 
                        Labor shall establish an annual salary 
                        for purposes of subparagraph (A) in the 
                        amount the Secretary determines will 
                        result in the aggregate cost of 
                        payments made under this section being 
                        equal to what would have been the 
                        aggregate cost of payments under this 
                        section if the amendments made by 
                        section 304(a) of the Workers' 
                        Compensation Reform Act of 2012 had not 
                        been enacted.
                          (ii) Cost of living adjustment.--The 
                        annual salary established under clause 
                        (i) shall be increased on March 1 of 
                        each year by the amount determined by 
                        the Secretary of Labor to represent the 
                        percent change in the price index 
                        published for December of the preceding 
                        year over the price index published for 
                        the December of the year prior to the 
                        preceding year, adjusted to the nearest 
                        one-tenth of 1 percent.
                  (C) Present value.--The Secretary of Labor 
                shall calculate the present value for purposes 
                of subparagraph (A) using a rate of interest 
                equal to the average market yield for 
                outstanding marketable obligations of the 
                United States with a maturity of 2 years on the 
                first business day of the month in which the 
                compensation is paid or, in the event that such 
                marketable obligations are not being issued on 
                such date, at an equivalent rate selected by 
                the Secretary of Labor, true discount 
                compounded annually.
          (2) Certain injuries.--For an injury that occurred 
        before the date of enactment of the Workers' 
        Compensation Reform Act of 2012, the rate under 
        subsection (a) shall be 66\2/3\ percent of the 
        employee's monthly pay.
    (e) Simultaneous Receipt.--
          (1) Total disability.--An employee who receives 
        compensation for total disability under section 8105 
        may only receive the lump sum of schedule compensation 
        under this section in addition to and simultaneously 
        with the benefits for total disability after the 
        earlier of--
                  (A) the date on which the basic compensation 
                for total disability of the employee becomes 50 
                percent of the monthly pay of the employee 
                under section 8105(b); or
                  (B) the date on which augmented compensation 
                of the employee terminates under section 
                8110(b)(2)(A)(ii), if the employee receives 
                such compensation.
          (2) Partial disability.--An employee who receives 
        benefits for partial disability under section 8106 may 
        only receive the lump sum of schedule compensation 
        under this section in addition to and simultaneously 
        with the benefits for partial disability after the 
        earlier of--
                  (A) the date on which the basic compensation 
                for partial disability of the employee becomes 
                50 percent of the difference between the 
                monthly pay of the employee and the monthly 
                wage-earning capacity of the employee after the 
                beginning of the partial disability under 
                section 8106(b); or
                  (B) the date on which augmented compensation 
                of the employee terminates under section 
                8110(b)(2)(B), if the employee receives such 
                compensation.

           *       *       *       *       *       *       *

Sec. 8110. Augmented compensation for dependents

    (a) *  *  *
    (b) Termination of Augmented Compensation.--
          (1) In general.--Subject to paragraph (2), augmented 
        compensation for dependants under subsection (c) shall 
        not be provided.
          (2) Exceptions.--
                  (A) Total disability.--For a covered claim 
                for total disability by an employee--
                          (i) the employee shall receive 
                        augmented compensation under subsection 
                        (c) if the employee is an individual 
                        who has an exempt disability condition; 
                        and
                          (ii) the employee shall receive 
                        augmented compensation under subsection 
                        (c) until the date that is 3 years 
                        after the date of enactment of the 
                        Workers' Compensation Reform Act of 
                        2012 if the employee is not an employee 
                        described in clause (i).
                  (B) Partial disability.--For a covered claim 
                for partial disability by an employee, the 
                employee shall receive augmented compensation 
                under subsection (c) until the date that is 3 
                years after the date of enactment of the 
                Workers' Compensation Reform Act of 2012.
                  (C) Permanent disability compensated by a 
                schedule.--For a claim for a permanent 
                disability described in section 8107(a) by an 
                employee that commenced before the date of 
                enactment of the Workers' Compensation Reform 
                Act of 2012, the employee shall receive 
                augmented compensation under subsection (c).
    [(b)] (c) A disabled employee with one or more dependents 
is entitled to have his basic compensation for disability 
augmented--
          (1) at the rate of 8\1/3\ percent of his monthly pay 
        if that compensation is payable under section 8105 or 
        8107(a) of this title (5 USCS Sec. 8105 or 8107(a));
          (2) at the rate of 8\1/3\ percent of the difference 
        between his monthly pay and his monthly wage-earning 
        capacity if that compensation is payable under section 
        8106(a) of this title (5 USCS Sec. 8106(a)).

           *       *       *       *       *       *       *

Sec. 8112. Maximum and minimum monthly payments

    (a) Except as provided by subsections (b) and (c) and 
section 8138 of this title [5 USCS Sec. 8138], the monthly rate 
of compensation for disability, [including augmented 
compensation under section 8110 of this title (5 USCS 
Sec. 8110) but] not including additional compensation under 
section 8111 of this title (5 USCS Sec. 8111), may not be more 
than [75 percent] 66\2/3\ percent of the monthly pay of the 
maximum rate of basic pay for GS-15, and in case of total 
disability may not be less than [75 percent] 66\2/3\ percent of 
the monthly pay of the minimum rate of basic pay for GS-2 or 
the amount of the monthly pay of the employee, whichever is 
less.
    (b) Exceptions.--
          (1) Covered disability condition.--For a covered 
        claim for total disability by an employee, if the 
        employee is an individual who has an exempt disability 
        condition--
                  (A) the monthly rate of compensation for 
                disability that is subject to the maximum and 
                minimum monthly amounts under subsection (a) 
                shall include any augmented compensation under 
                section 8110; and
                  (B) subsection (a) shall be applied by 
                substituting `75 percent' for `66\2/3\ percent' 
                each place it appears.
          (2) Partial disability.--For a covered claim for 
        partial disability by an employee, until the date that 
        is 3 years after the date of enactment of the Workers' 
        Compensation Reform Act of 2012--
                  (A) the monthly rate of compensation for 
                disability that is subject to the maximum and 
                minimum monthly amounts under subsection (a) 
                shall include any augmented compensation under 
                section 8110; and
                  (B) subsection (a) shall be applied by 
                substituting `75 percent' for `66\2/3\ percent' 
                each place it appears.
    [(b)] (c) The provisions of [subsection (a)] subsections 
(a) and (b) shall not apply to any employee whose disability is 
a result of an assault which occurs during an assassination or 
attempted assassination of a Federal official described under 
section 351(a) or 1751(a) of title 18, and was sustained in the 
performance of duty.

           *       *       *       *       *       *       *

 Sec. 8113. Increase or decrease of basic compensation

    (a) * * *
    (b) If an individual without good cause fails to apply for 
and undergo vocational rehabilitation when so directed under 
section 8104 of this title (5 USCS Sec. 8104), the Secretary, 
on review under section 8128 of this title (5 USCS Sec. 8128) 
and after finding that in the absence of the failure the wage-
earning capacity of the individual would probably have 
substantially increased, [may reduce] shall reduce 
prospectively the monetary compensation of the individual in 
accordance with what would probably have been his wage-earning 
capacity in the absence of the failure, until the individual in 
good faith complies with the direction of the Secretary. An 
individual who has attained retirement age may not be required 
to undergo vocational rehabilitation.

           *       *       *       *       *       *       *

Sec. 8116. Limitations on right to receive compensation

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) Retirement Benefits.--
          (1) In general.--An individual entitled to 
        compensation benefits payable under this subchapter and 
        under chapter 83 or 84 or any other retirement system 
        for employees of the Government, for the same period, 
        shall elect which benefits the individual will receive.
          (2) Election.--
                  (A) Deadline.--An individual shall make an 
                election under paragraph (1) in accordance with 
                such deadlines as the Secretary of Labor shall 
                establish, which shall be a reasonable period 
                after the individual has received notice of a 
                final determination that the individual is 
                entitled to compensation benefits payable under 
                this subchapter.
                  (B) Revocability.--An election under 
                paragraph (1) shall be revocable, 
                notwithstanding any other provision of law, 
                except for any period during which an 
                individual--
                          (i) was qualified for benefits 
                        payable under both this subchapter and 
                        under a retirement system described in 
                        paragraph (1); and
                          (ii) was paid benefits under the 
                        retirement system after having been 
                        notified of eligibility for benefits 
                        under this subchapter.
          (3) Informed choice.--The Secretary of Labor shall 
        provide information, and shall ensure that information 
        is provided, to an individual described in paragraph 
        (1) about the benefits available to the individual 
        under this subchapter or under chapter 83 or 84 or any 
        other retirement system referred to in paragraph (1) 
        the individual may elect to receive

           *       *       *       *       *       *       *

 Sec. 8117. [Time of accrual of right] Waiting period

    (a) [An employee other than a Postal Service employee is 
not entitled] In General.--An employee is not entitled to 
continuation of pay within the meaning of section 8118 for the 
first 3 days of temporary disability or, if section 8118 does 
not apply, is not entitled to compensation for the first 3 days 
of temporary disability, except--
          (1) when the disability exceeds 14 days; or
          [(2) when the disability is followed by permanent 
        disability; or]
          [(3)] (2) as provided by sections 8103 and 8104 of 
        this title (5 USCS Sec. Sec. 8103 and 8104).
    (b) [A Postal Service employee is not entitled to 
compensation or continuation of pay for the first 3 days of 
temporary disability, except as provided under paragraph (3) of 
subsection (a). A Postal Service] Use of Leave.--An employee 
may use annual leave, sick leave, or leave without pay during 
[that 3-day period] the first 3 days of temporary disability, 
except that if the disability exceeds 14 days [or is followed 
by permanent disability], the employee may have their sick 
leave or annual leave reinstated or receive pay for the time 
spent on leave without pay under this section.

           *       *       *       *       *       *       *

Sec. 8118. Continuation of pay[; election to use annual or sick leave]

    (a) * * *
    (b) Continuation of pay under this subchapter (5 USCS 
Sec. Sec. 8101 et seq.) shall be furnished--
          (1) without a break in time, except as provided under 
        [section 8117(b) (5 USCS Sec. 8117(b))] section 8117, 
        unless controverted under regulations of the Secretary;
          (2) for a period not to exceed 45 days; and
          (3) under accounting procedures and such other 
        regulations as the Secretary may require.
    [(c) An employee may use annual or sick leave to his credit 
at the time the disability begins, but his compensation for 
disability does not begin, and the time periods specified by 
section 8117 of this title (5 USCS Sec. 8117) do not begin to 
run, until termination of pay as set forth in subsections (a) 
and (b) or the use of annual or sick leave ends.]
    [(d)] (c) If a claim under subsection (a) is denied by the 
Secretary, payments under this section shall, at the option of 
the employee, be charged to sick or annual leave or shall be 
deemed overpayments of pay within the meaning of section 5584 
of title 5, United States Code.
    [(e)] (d) Payments under this section shall not be 
considered as compensation as defined by section 8101(12) of 
this title (5 USCS Sec. 8101(12)).

           *       *       *       *       *       *       *

Sec. 8123. Physical examinations

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) Disability Management Review.--
          (1) Definitions.--In this subsection--
                  (A) the term ``covered employee'' means an 
                employee who is in continuous receipt of 
                compensation for total disability under section 
                8105 for a period of not less than 6 months; 
                and
                  (B) the term `disability management review 
                process' means the disability management review 
                process established under paragraph (2)(A).
          (2) Establishment.--The Secretary of Labor shall--
                  (A) establish a disability management review 
                process for the purpose of certifying and 
                monitoring the disability status and extent of 
                injury of each covered employee; and
                  (B) promulgate regulations for the 
                administration of the disability management 
                review process.
          (3) Physical examinations required.--Under the 
        disability management review process, the Secretary of 
        Labor shall periodically require covered employees to 
        submit to physical examinations under subsection (a) by 
        physicians selected by the Secretary. A physician 
        conducting a physical examination of a covered employee 
        shall submit to the Secretary a report regarding the 
        nature and extent of the injury to and disability of 
        the covered employee.
          (4) Frequency.--
                  (A) In general.--The regulations promulgated 
                under paragraph (2)(B) shall specify the 
                process and criteria for determining when and 
                how frequently a physical examination should be 
                conducted for a covered employee.
                  (B) Minimum frequency.--
                          (i) Initial.--An initial physical 
                        examination shall be conducted not more 
                        than a brief period after the date on 
                        which a covered employee has been in 
                        continuous receipt of compensation for 
                        total disability under section 8015 for 
                        6 months.
                          (ii) Subsequent examinations.--After 
                        the initial physical examination, 
                        physical examinations of a covered 
                        employee shall be conducted not less 
                        than once every 3 years.
          (5) Employing agency or instrumentality requests.--
                  (A) In general.--The agency or 
                instrumentality employing an employee who has 
                made a claim for compensation for total 
                disability under section 8105 may at any time 
                submit a request for the Secretary of Labor to 
                promptly require the employee to submit to a 
                physical examination under this subsection.
                  (B) Requesting officer.--A request under 
                subparagraph (A) shall be made on behalf of an 
                agency or instrumentality by--
                          (i) the head of the agency or 
                        instrumentality;
                          (ii) the Chief Human Capital Officer 
                        of the agency or instrumentality; or
                          (iii) if the agency or 
                        instrumentality does not have a Chief 
                        Human Capital Officer, an officer with 
                        responsibilities similar to those of a 
                        Chief Human Capital Officer designated 
                        by the head of the agency or 
                        instrumentality to make requests under 
                        this paragraph.
                  (C) Information.--A request under 
                subparagraph (A) shall be in writing and 
                accompanied by--
                          (i) a certification by the officer 
                        making the request that the officer has 
                        reviewed the relevant material in the 
                        employee's file;
                          (ii) an explanation of why the 
                        officer has determined, based on the 
                        materials in the file and other 
                        information known to the officer, that 
                        requiring a physical examination of the 
                        employee under this subsection is 
                        necessary; and
                          (iii) copies of the materials 
                        relating to the employee that are 
                        relevant to the officer's determination 
                        and request, unless the agency or 
                        instrumentality has a reasonable basis 
                        for not providing the materials.
                  (D) Examination.--If the Secretary of Labor 
                receives a request under this paragraph before 
                an employee has undergone an initial physical 
                examination under paragraph (4)(B)(i), the 
                Secretary shall promptly require the physical 
                examination of the employee. A physical 
                examination under this subparagraph shall 
                satisfy the requirement under paragraph 
                (4)(B)(i) that an initial physical examination 
                be conducted.
                  (E) After initial examination.--
                          (i) In general.--If the Secretary of 
                        Labor receives a request under this 
                        paragraph after an employee has 
                        undergone an initial physical 
                        examination under paragraph (4)(B)(i), 
                        the Secretary shall--
                                  (I) review the request and 
                                the information, explanation, 
                                and other materials submitted 
                                with the request; and
                                  (II) determine whether to 
                                require the physical 
                                examination of the employee who 
                                is the subject of the request.
                          (ii) Not Granted.--If the Secretary 
                        determines not to grant a request 
                        described in clause (i), the Secretary 
                        shall promptly notify the officer who 
                        made the request and provide an 
                        explanation of the reasons why the 
                        request was denied.
    (f) Field Nurses.--
          (1) Definition.--In this subsection, the term `field 
        nurse' means a registered nurse that assists the 
        Secretary in the medical management of disability 
        claims under this subchapter and provides claimants 
        with assistance in coordinating medical care.
          (2) Authorization.--The Secretary may use field 
        nurses to coordinate medical services and vocational 
        rehabilitation programs for injured employees under 
        this subchapter. If an employee refuses to cooperate 
        with a field nurse or obstructs a field nurse in the 
        performance of duties under this subchapter, the right 
        to compensation under this subchapter shall be 
        suspended until the refusal or obstruction stops.''

           *       *       *       *       *       *       *

Sec.  8131. Subrogation of the United States

    (a) If an injury or death for which continuation of pay or 
compensation is payable under this subchapter (5 USCS 
Sec. Sec. 8101 et seq.) is caused under circumstances creating 
a legal liability on a person other than the United States to 
pay damages, the Secretary of Labor may require the beneficiary 
to--
          (1) assign to the United States any right of action 
        he may have to enforce the liability or any right he 
        may have to share in money or other property received 
        in satisfaction of that liability; or
          (2) prosecute the action in his own name. An employee 
        required to appear as a party or witness in the 
        prosecution of such an action is in an active duty 
        status while so engaged.
    (b) A beneficiary who refuses to assign or prosecute an 
action in his own name when required by the Secretary is not 
entitled to continuation of pay or compensation under this 
subchapter (5 USCS Sec. Sec. 8101 et seq.).
    (c) The Secretary may prosecute or compromise a cause of 
action assigned to the United States. When the Secretary 
realizes on the cause of action, he shall deduct therefrom and 
place to the credit of the Employees' Compensation Fund the 
amount of continuation of pay or compensation already paid to 
the beneficiary and the expense of realization or collection. 
Any surplus shall be paid to the beneficiary and credited on 
future payments of continuation of pay or compensation payable 
for the same injury. However, the beneficiary is entitled to 
not less than one-fifth of the net amount of a settlement or 
recovery remaining after the expenses thereof have been 
deducted.
    (d) * * *

           *       *       *       *       *       *       *

Sec. 8132. Adjustment after recovery from a third person

    If an injury or death for which continuation of pay or 
compensation is payable under this subchapter (5 USCS 
Sec. Sec. 8101 et seq.) is caused under circumstances creating 
a legal liability in a person other than the United States to 
pay damages, and a beneficiary entitled to continuation of pay 
or compensation from the United States for that injury or death 
receives money or other property in satisfaction of that 
liability as the result of suit or settlement [by him or in his 
behalf] by the beneficiary or on behalf of the beneficiary, the 
beneficiary, after deducting therefrom the costs of suit and a 
reasonable attorney's fee, shall refund to the United States 
the amount of continuation of pay and compensation paid by the 
United States and credit any surplus on future payments of 
[compensation payable to him] continuation of pay or 
compensation payable to the beneficiary for the same injury. No 
court, insurer, attorney, or other person shall pay or 
distribute to the beneficiary or [his designee] the designee of 
the beneficiary the proceeds of such suit or settlement without 
first satisfying or assuring satisfaction of the interest of 
the United States. The amount refunded to the United States 
shall be credited to the Employees' Compensation Fund. [If 
compensation has not been paid to the beneficiary, he shall 
credit the money or property on compensation payable to him by 
the United States] If continuation of pay or compensation has 
not been paid to the beneficiary, the money or property shall 
be credited against continuation of pay or compensation payable 
to the beneficiary by the United States for the same injury. 
However, the beneficiary is entitled to retain, as a minimum, 
at least one-fifth of the net amount of the money or other 
property remaining after the expenses of a suit or settlement 
have been deducted; and in addition to this minimum and at the 
time of distribution, an amount equivalent to a reasonable 
attorney's fee proportionate to the refund to the United 
States.

           *       *       *       *       *       *       *

Sec. Sec. 8133. Compensation in case of death

    (a) If death results from an injury sustained in the 
performance of duty, the United States shall pay a monthly 
compensation equal to a percentage of the monthly pay of the 
deceased employee in accordance with the following schedule:
          (1) To the widow or widower, if there is no child, 50 
        percent.
          (2) To the widow or widower, if there is a child, 45 
        percent and in addition 15 percent for each child not 
        to exceed a total of 66\2/3\ percent (except as 
        provided in subsection (g)) for the widow or widower 
        and children.
          (3) To the children, if there is no widow or widower, 
        40 percent for one child and 15 percent additional for 
        each additional child not to exceed a total of [75 
        percent] 66\2/3\ percent (except as provided in 
        subsection (g)), divided among the children share and 
        share alike.
          (4) To the parents, if there is no widow, widower, or 
        child, as follows:
                  (A) 25 percent if one parent was wholly 
                dependent on the employee at the time of death 
                and the other was not dependent to any extent;
                  (B) 20 percent to each if both were wholly 
                dependent; or
                  (C) a proportionate amount in the discretion 
                of the Secretary of Labor if one or both were 
                partly dependent.
    If there is a widow, widower, or child, so much of the 
percentages are payable as, when added to the total percentages 
payable to the widow, widower, and children, will not exceed a 
total of [75 percent] 66\2/3\ percent (except as provided in 
subsection (g)).
          (5) To the brothers, sisters, grandparents, and 
        grandchildren, if there is no widow, widower, child, or 
        dependent parent as follows:
                  (A) 20 percent if one was wholly dependent on 
                the employee at the time of death;
                  (B) 30 percent if more than one was wholly 
                dependent, divided among the dependents share 
                and share alike; or
                  (C) 10 percent if no one is wholly dependent 
                but one or more is partly dependent, divided 
                among the dependents share and share alike.
    If there is a widow, widower, or child, or dependent 
parent, so much of the percentages are payable as, when added 
to the total percentages payable to the widow, widower, 
children, and dependent parents, will not exceed a total of [75 
percent] 66\2/3\ percent (except as provided in subsection 
(g)).
    (b) *  *  *
    (c) *  *  *
    (d) *  *  *
    (e) In computing compensation under this section, the 
monthly pay is deemed not less than the minimum rate of basic 
pay for GS-2. However, the total monthly compensation may not 
exceed--
          (1) the monthly pay computed under section 8114 of 
        this title (5 USCS Sec. 8146a), except for increases 
        authorized by section 8146a of this title (5 USCS 
        Sec. 8146a); or
          (2) [75 percent] 66\2/3\ percent (except as provided 
        in subsection (g)) of the monthly pay of the maximum 
        rate of basic pay for GS-15.
    (f) *  *  *
    (g) If the death occurred before the date of enactment of 
the Workers' Compensation Reform Act of 2012, subsections (a) 
and (e) shall be applied by substituting `75 percent' for 
`66\2/3\ percent' each place it appears.

           *       *       *       *       *       *       *

 8134. Funeral expenses; transportation of body

    (a) If death results from an injury sustained in the 
performance of duty, the United States shall pay, to the 
personal representative of the deceased or otherwise, funeral 
and burial expenses not to exceed [$800] $6,000, in the 
discretion of the Secretary of Labor. The maximum amount of 
compensation under this subsection shall be increased on March 
1 of each year by the amount determined by the Secretary of 
Labor to represent the percent change in the price index 
published for December of the preceding year over the price 
index published for the December of the year prior to the 
preceding year, adjusted to the nearest one-tenth of 1 percent.
    (b) * * *

           *       *       *       *       *       *       *

Sec. 8139. Employees of the District of Columbia

    Compensation awarded under this subchapter to an employee 
of the government of the District of Columbia shall be paid in 
the manner provided by statute for the payment of the general 
expenses of the government of the District of Columbia.

           *       *       *       *       *       *       *

Sec. 8141. Civil Air Patrol volunteers

    (a) * * *
    (b) In administering this subchapter (5 USCS Sec. Sec. 8101 
et seq.) for a member of the Civil Air Patrol covered by this 
section--
          (1) * * *
          (2) the percentages applicable to payments under 
        section 8133 of this title (5 USCS Sec. 8133) are--
                  (A) * * *
                  (B) 20 percent for section 8133(a)(3) of this 
                title (5 USCS Sec. 8133(a)(3)) for one child 
                and 10 percent additional for each additional 
                child, but not to exceed a total of [75 
                percent] 66\2/3\ percent (except as provided in 
                subsection (c)), if the member died fully or 
                currently insured under subchapter II of 
                chapter 7 of title 42 (42 USCS Sec. Sec. 401 et 
                seq.); and
                  (C) * * *
          (3) * * *
          (4) * * *
          (5) * * *
    (c) If the death occurred before the date of enactment of 
the Workers' Compensation Reform Act of 2012, subsection 
(b)(2)(B) shall be applied by substituting `75 percent' for 
`66\2/3\ percent'.
    [(c)] (d) The Secretary of Labor or his designee may inform 
the Secretary of the Air Force or his designee when a claim is 
filed. The Secretary of the Air Force, on request of the 
Secretary of Labor, shall advise him of the facts concerning 
the injury and whether or not the member was rendering service, 
or engaged in travel to or from service, in performance or 
support of an operational mission of the Civil Air Patrol at 
the time of injury. This subsection does not dispense with the 
report of the immediate superior of the member required by 
section 8120 of this title (5 USCS Sec. 8120), or other reports 
agreed on under that section.

           *       *       *       *       *       *       *

Sec. 8147. Employees' Compensation Fund

    (a) * * *
    (b) * * *
    (c) * * *
    (d) Notwithstanding subsection (b), any benefits or other 
payments paid to or on behalf of an employee under this 
subchapter or any extension or application thereof for a 
recurrence of injury, consequential injury, aggravation of 
injury, or increase in percentage of impairment to a member for 
which compensation is provided under the schedule under section 
8107 suffered in a permanent position with an agency or 
instrumentality of the United States while the employment with 
the agency or instrumentality is covered under an assisted 
reemployment agreement entered into under section 8104(d) shall 
not be included in total cost of benefits and other payments in 
the statement provided to the agency or instrumentality under 
subsection (b) if the injury was originally incurred in a 
position not covered by an assisted reemployment agreement.

           *       *       *       *       *       *       *

Sec. 8148. Forfeiture of benefits by convicted felons

    (a) Any individual convicted of a violation of section 1920 
of title 18, or any other Federal or State criminal statute 
relating to fraud in the application for or receipt of any 
benefit under this subchapter or subchapter III of this chapter 
(5 USCS Sec. Sec. 8101 et seq. or 8191 et seq.), shall forfeit 
(as of the date of such conviction) any entitlement to any 
benefit such individual would otherwise be entitled to under 
this subchapter or subchapter III (5 USCS Sec. Sec. 8101 et 
seq. or 8191 et seq.) for any injury occurring on or before the 
date of such conviction. Such forfeiture shall be in addition 
to any action the Secretary may take under [section 8106] 
section 8106a or 8129 (5 USCS Sec. 8106 or 8129).
    (b) * * *
    (c) * * *

           *       *       *       *       *       *       *

Sec. 8153. Integrity and Compliance Program

    (a) Definitions.--In this section--
          (1) the term `FECA program' means the Federal 
        Employees Compensation Program administered under this 
        subchapter;
          (2) the term `Integrity and Compliance Program' means 
        the Integrity and Compliance Program established under 
        subsection (b);
          (3) the term `provider' means a provider of medical 
        or other services under the FECA program; and
          (4) the term `Secretary' means the Secretary of 
        Labor.
    (b) Integrity and Compliance Program.--Not later than 270 
days after the date of enactment of this section, the Secretary 
shall establish an Integrity and Compliance Program for the 
purpose of preventing, identifying, and recovering improper 
payments (including improper payments obtained by fraud) for 
the FECA program, which shall include--
          (1) procedures for identifying potentially improper 
        payments (including improper payments obtained by 
        fraud) before payment is made to claimants and 
        providers, including, where appropriate, predictive 
        analytics;
          (2) reviews after payment is made to identify 
        potentially improper payments (including improper 
        payments obtained by fraud) to claimants and providers;
          (3) on-going screening and verification procedures to 
        ensure the continued eligibility of medical providers 
        to provide services under the FECA program, including 
        licensure, Federal disbarment, and the existence of 
        relevant criminal convictions;
          (4) provision of appropriate information, education, 
        and training to claimants and providers on requirements 
        to ensure the integrity of the FECA program, including 
        payments under the FECA program;
          (5) appropriate controls and audits to ensure that 
        providers adopt internal controls and procedures for 
        compliance with requirements under the FECA program;
          (6) procedures to ensure--
                  (A) initial and continuing eligibility of 
                claimants for compensation, benefits, or 
                services under the FECA program; and
                  (B) ongoing verification of databases of 
                information relating to claimants to ensure 
                accuracy and completeness; and
          (7) appropriately sharing and accessing data and 
        information with other agencies and instrumentalities 
        of the United States, including the United States 
        Postal Service.
    (c) Interagency Cooperation on Anti-fraud Efforts.--
          (1) In general.--In administering the FECA program, 
        including the Integrity and Compliance Program, the 
        Secretary shall cooperate with other agencies and 
        instrumentalities of the United States (including the 
        United States Postal Service) and the Inspectors 
        General of such agencies and instrumentalities to 
        prevent, identify, and recover improper payments 
        (including improper payments obtained by fraud) under 
        the FECA program.
          (2) Task force.--
                  (A) In general.--There is established a task 
                force, which shall be known as the FECA 
                Integrity and Compliance Task Force (in this 
                paragraph referred to as the `Task Force').
                  (B) Membership.--The members of the Task 
                Force shall be--
                          (i) the Secretary, who shall serve as 
                        the Chairperson of the Task Force;
                          (ii) the Postmaster General, who 
                        shall serve as the Vice Chairperson of 
                        the Task Force;
                          (iii) the Attorney General;
                          (iv) the Director of the Office of 
                        Management and Budget;
                          (v) the Inspector General of the 
                        Department of Labor;
                          (vi) the Inspector General of the 
                        United States Postal Service;
                          (vii) the Inspectors General of other 
                        appropriate agencies and 
                        instrumentalities of the United States 
                        that employ a significant number of 
                        individuals receiving compensation, 
                        benefits, or services under the FECA 
                        program, as determined by the 
                        Chairperson and Vice Chairperson of the 
                        Task Force; and
                          (viii) other appropriate Federal 
                        officials, as determined by the 
                        Chairperson and Vice Chairperson of the 
                        Task Force.
                  (C) Duties.--The Task Force shall--
                          (i) set forth, in writing, a 
                        description of the respective roles and 
                        responsibilities in preventing, 
                        identifying, recovering, and 
                        prosecuting fraud under, and otherwise 
                        ensuring integrity and compliance of, 
                        the FECA program of--
                                  (I) the Secretary (including 
                                subordinate officials such as 
                                the Director of the Office of 
                                Workers' Compensation 
                                Programs);
                                  (II) the Inspector General of 
                                the Department of Labor;
                                  (III) the Inspectors General 
                                of agencies and 
                                instrumentalities of the United 
                                States that employ claimants 
                                under the FECA program;
                                  (IV) the Attorney General; 
                                and
                                  (V) any other relevant 
                                officials;
                          (ii) develop procedures for sharing 
                        information of possible fraud under the 
                        FECA program or other intentional 
                        misstatements by claimants or providers 
                        under the FECA program, including 
                        procedures addressing--
                                  (I) notification of 
                                appropriate officials of the 
                                Department of Labor of 
                                potential fraud or intentional 
                                misstatements, including 
                                provision of supporting 
                                information;
                                  (II) timely and appropriate 
                                response by officials of the 
                                Department of Labor to 
                                notifications described in 
                                subclause (I);
                                  (III) the inclusion of 
                                information and evidence 
                                relating to fraud and other 
                                intentional misstatements in 
                                criminal, civil, and 
                                administrative proceedings 
                                relating to the provision of 
                                compensation, benefits, or 
                                medical services (including 
                                payments to providers) under 
                                the FECA program;
                                  (IV) the coordination of 
                                criminal investigations with 
                                the administration of the FECA 
                                program; and
                                  (V) the protection of 
                                information relating to an 
                                investigation of possible fraud 
                                under the FECA program from 
                                potential disclosure, including 
                                requirements that enable 
                                investigative files to be 
                                appropriately separated from 
                                case management files;
                          (iii) not later than 1 year after the 
                        date of enactment of this section, 
                        submit to the Committee on Homeland 
                        Security and Governmental Affairs of 
                        the Senate and the Committee on 
                        Oversight and Government Reform and the 
                        Committee on Education and the 
                        Workforce of the House of 
                        Representatives a report that includes 
                        the description and procedures required 
                        under clauses (i) and (ii).
    (d) Improvements to Access of Federal Databases.--
          (1) In general.--The Secretary, the Postmaster 
        General, the Inspector General of the United States 
        Postal Service, and the Inspector General of the 
        Department of Labor shall have access to and make use 
        of the agency databases described in this subsection in 
        order to improve compliance with the requirements under 
        and the integrity of the FECA program.
          (2) Social security earnings information.--
                  (A) In general.--Notwithstanding section 552a 
                or any other provision of Federal or State law, 
                upon written request, the Commissioner of 
                Social Security shall make available to the 
                Secretary, the Inspector General of the 
                Department of Labor, the Postmaster General, 
                and the Inspector General of the United States 
                Postal Service the Social Security earnings 
                information of a living or deceased employee 
                required by the Secretary to carry out this 
                subchapter.
                  (B) Procedures.--The Secretary shall 
                establish procedures for correlating the 
                identity and status of recipients of 
                compensation, benefits, or services under this 
                subchapter with Social Security earnings 
                information described in subparagraph (A).
          (3) Office of personnel management federal retiree 
        database.--Notwithstanding section 552a or any other 
        provision of Federal or State law, upon written 
        request, the Director of the Office of Personnel 
        Management shall make available to the Secretary, the 
        Inspector General of the Department of Labor, the 
        Postmaster General, and the Inspector General of the 
        United States Postal Service the information in the 
        databases of Federal employees and retirees maintained 
        by the Director.
          (4) Department of veterans affairs beneficiaries 
        database.--Notwithstanding section 552a or any other 
        provision of Federal or State law, upon written 
        request, the Secretary of Veterans Affairs shall make 
        available to the Secretary, the Inspector General of 
        the Department of Labor, the Postmaster General, and 
        the Inspector General of the United States Postal 
        Service the information in the database of disabled 
        individuals maintained by the Secretary of Veterans 
        Affairs.
          (5) National directory of new hires.--Notwithstanding 
        section 552a, section 453(j) of the Social Security Act 
        (42 U.S.C. 653(j)), or any other provision of Federal 
        or State law, upon written request, the Secretary of 
        Health and Human Services shall make available to the 
        Secretary, the Inspector General of the Department of 
        Labor, the Postmaster General, the Inspector General of 
        the United States Postal Service, and the Comptroller 
        General of the United States the information in the 
        National Directory of New Hires. The Comptroller 
        General may obtain information from the National 
        Directory of New Hires under this paragraph for any 
        audit, evaluation, or investigation, including any 
        audit, evaluation, or investigation relating to program 
        integrity.
          (6) Provision.--Information requested under this 
        subsection shall be provided--
                  (A) in a timely manner;
                  (B) at a reasonable cost to the Secretary, 
                the Inspector General of the Department of 
                Labor, the Postmaster General, the Inspector 
                General of the United States Postal Service, or 
                the Comptroller General of the United States; 
                and
                  (C) in the manner, frequency, and form 
                reasonably specified by the officer making the 
                request, which, upon request, shall include 
                electronic form.
          (7) Assessment of data cost-effectiveness.--
                  (A) In general.--The Secretary shall consider 
                and assess procedures for correlating the 
                identity and status of recipients of 
                compensation, benefits, or services under this 
                subchapter with information relating to 
                employees, retirees, and individuals described 
                in paragraphs (3), (4), and (5).
                  (B) Report.--Not later than 1 year after the 
                date of enactment of this section, the 
                Secretary shall submit to the Committee on 
                Homeland Security and Governmental Affairs of 
                the Senate and the Committee on Oversight and 
                Government Reform and the Committee on 
                Education and the Workforce of the House of 
                Representatives a report on the cost-
                effectiveness of the use of the databases 
                described in paragraphs (3), (4), and (5) for 
                program compliance and integrity. The report 
                required under this subparagraph may be 
                included as part of the report required under 
                subsection (f).
          (8) United states postal service feca enrollee 
        database.--Not later than 180 days after the date of 
        enactment of this section, in order to track, verify, 
        and communicate with the Secretary and other relevant 
        entities, the Postmaster General shall establish an 
        electronic database of information relating to 
        employees of the United States Postal Service who have 
        applied for or are receiving compensation, benefits, or 
        services under this subchapter.
    (e) General Protocols and Security.--
          (1) Establishment.--
                  (A) In general.--In order to ensure strong 
                information security and privacy standards, the 
                Secretary, the Postmaster General, the 
                Inspector General of the Department of Labor, 
                and the Inspector General of the United States 
                Postal Service shall establish protocols for 
                the secure transfer and storage of any 
                information provided to an individual or entity 
                under this section.
                  (B) Considerations.--In establishing 
                protocols under subparagraph (A), the 
                Secretary, the Postmaster General, the 
                Inspector General of the Department of Labor, 
                and the Inspector General of the United States 
                Postal Service shall consider any 
                recommendations submitted to the Secretary by 
                the Inspector General of the Department of 
                Health and Human Services with respect to the 
                secure transfer and storage of information, and 
                to comply with privacy laws and best practices.
                  (C) Fraud case protection.--The Secretary, 
                the Postmaster General, the Inspector General 
                of the Department of Labor, and the Inspector 
                General of the United States Postal Service 
                shall establish protocols and procedures to 
                enable information and materials relating to an 
                active investigation of possible fraud relating 
                to the FECA program to be appropriately kept 
                separate from the files for employees relating 
                to the provision of compensation, benefits, or 
                services under the FECA program.
          (2) Compliance.--The Secretary, the Postmaster 
        General, the Inspector General of the Department of 
        Labor, and the Inspector General of the United States 
        Postal Service shall ensure that any information 
        provided to an individual or entity under this section 
        is provided in accordance with protocols established 
        under paragraph (1).
    (f) Report.--Not later than 1 year after the date of 
enactment of this section, and annually thereafter for 5 years, 
the Secretary shall submit a report on the activities of the 
Secretary under this section, including implementation of the 
Integrity and Compliance Program, to--
          (1) the Committee on Homeland Security and 
        Governmental Affairs of the Senate; and
          (2) the Committee on Oversight and Government Reform 
        and the Committee on Education and the Workforce of the 
        House of Representatives.
    (g) GAO Review.--The Comptroller General of the United 
States shall--
          (1) conduct periodic reviews of the Integrity and 
        Compliance Program; and
          (2) submit reports on the results of the reviews 
        under paragraph (1) to the Committee on Homeland 
        Security and Governmental Affairs of the Senate and the 
        Committee on Oversight and Government Reform and the 
        Committee on Education and the Workforce of the House 
        of Representatives not later than--
                  (A) 2 years after the date of enactment of 
                this section; and
                  (B) 3 years after submission of the report 
                under subparagraph (A).

           *       *       *       *       *       *       *

CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *

Subchapter III--Civil Service Retirement

           *       *       *       *       *       *       *

Sec. 8332. Creditable service

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) * * *
    (f) * * *
    (g) * * *
    (h) * * *
    (i) * * *
    (j) * * *
    (k) * * *
    (l) * * *
    (m) * * *
    (n) * * *
    (o) * * *
    (p)(1)(A) For an employee of the United States Postal 
Service who is covered under this subchapter and voluntarily 
separates from service before October 1, 2014, at the direction 
of the United States Postal Service, the Office shall add not 
more than 1 year (as specified by the United States Postal 
Service) to the total creditable service of the employee for 
purposes of determining entitlement to and computing the amount 
of an annuity under this subchapter (except for a disability 
annuity under section 8337).
    (B) An employee who receives additional creditable service 
under this paragraph may not receive a voluntary separation 
incentive payment from the United States Postal Service.
    (2)(A) Subject to subparagraph (B), and notwithstanding any 
other provision of law, no deduction, deposit, or contribution 
shall be required for service credited under this subsection.
    (B) The actuarial present value of the additional liability 
of the United States Postal Service to the Fund resulting from 
this subsection shall be included in the amount calculated 
under section 8348(h)(1)(A).

           *       *       *       *       *       *       *

Sec. 8337. Disability retirement

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) * * *
    (f)(1) * * *
    (2) * * *
    (3) [Paragraphs] Except as provided under chapter 81, 
paragraphs (1) and (2) do not bar the right of a claimant to 
the greater benefit conferred by either this subchapter (5 USCS 
Sec. Sec. 8331 et seq.) or subchapter I of chapter 81 (5 USCS 
Sec. Sec. 8101 et seq.).
    (g) * * *
    (h) * * *

           *       *       *       *       *       *       *

CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *

Subchapter II--Basic Annuity

           *       *       *       *       *       *       *

Sec. 8411. Creditable service

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) * * *
    (f) * * *
    (g) * * *
    (h) * * *
    (i) * * *
    (j) * * *
    (k) * * *
    (l) * * *
    (m)(1)(A) For an employee of the United States Postal 
Service who is covered under this chapter and voluntarily 
separates from service before October 1, 2014, at the direction 
of the United States Postal Service, the Office shall add not 
more than 2 years (as specified by the United States Postal 
Service) to the total creditable service of the employee for 
purposes of determining entitlement to and computing the amount 
of an annuity under this chapter (except for a disability 
annuity under subchapter V of that chapter).
    (B) An employee who receives additional creditable service 
under this paragraph may not receive a voluntary separation 
incentive payment from the United States Postal Service.
    (2)(A) Subject to subparagraph (B), and notwithstanding any 
other provision of law, no deduction, deposit, or contribution 
shall be required for service credited under this subsection.
    (B) The actuarial present value of the additional liability 
of the United States Postal Service to the Fund resulting from 
this subsection shall be included in the amount calculated 
under section 8423(b)(1)(B).

           *       *       *       *       *       *       *

Sec. 8423. Government Contributions

    (a) * * *
    (b)(1) The Office shall compute--
    (2) * * *
    (3) * * *
    (4) * * *
    (5)(A) In this paragraph, the term `postal funding surplus' 
means the amount by which the amount computed under paragraph 
(1)(B) is less than zero.
    (B)(i) Beginning with fiscal year 2011, for each fiscal 
year in which the amount computed under paragraph (1)(B) is 
less than zero, upon request of the Postmaster General, the 
Director shall transfer to the United States Postal Service 
from the Fund an amount equal to the postal funding surplus for 
that fiscal year for use in accordance with this paragraph.
    (ii) The Office shall calculate the amount under paragraph 
(1)(B) for a fiscal year by not later than June 15 after the 
close of the fiscal year, and shall transfer any postal funding 
surplus to the United States Postal Service within 10 days 
after a request by the Postmaster General.
    (C) For each of fiscal years 2011, 2012, and 2013, if the 
amount computed under paragraph (1)(B) is less than zero, a 
portion of the postal funding surplus for the fiscal year shall 
be used by the United States Postal Service for the cost of 
providing to employees of the United States Postal Service who 
voluntarily separate from service before October 1, 2014--
          (i) voluntary separation incentive payments 
        (including payments to employees who retire under 
        section 8336(d)(2) or 8414(b)(1)(B) before October 1, 
        2014) that may not exceed the maximum amount provided 
        under section 3523(b)(3)(B) for any employee; and
          (ii) retirement service credits, as authorized under 
        section 8332(p) or 8411(m).
    (D) Any postal funding surplus for a fiscal year not 
expended under subparagraph (C) may be used by the United 
States Postal Service for the purposes of--
          (i) repaying any obligation issued under section 2005 
        of title 39; or
          (ii) making required payments to--
                  (I) the Employees' Compensation Fund 
                established under section 8147;
                  (II) the Postal Service Retiree Health 
                Benefits Fund established under section 8909a;
                  (III) the Employees Health Benefits Fund 
                established under section 8909; or
                  (IV) the Civil Service Retirement and 
                Disability Fund.
    [(5)](6) For the purpose of carrying out paragraph (1) with 
respect to any fiscal year, the Office may--
          (A) require the Board of Actuaries of the Civil 
        Service Retirement System to make actuarial 
        determinations and valuations, make recommendations, 
        and maintain records in the same manner as provided in 
        section 8347(f) (5 USCS Sec. 8347(f)); and
          (B) use the latest actuarial determinations and 
        valuations made by such Board of Actuaries.

           *       *       *       *       *       *       *

Sec. 8464a. Relationship between annuity and workers' compensation

    (a)(1) * * *
    (2) * * *
    (3) [Paragraphs] Except as provided under chapter 81, 
paragraphs (1) and (2) do not bar the right of a claimant to 
the greater benefit conferred by either this chapter or 
subchapter I of chapter 81 (5 USCS Sec. Sec. 8401 et sq. or 
8101 et seq.).
    (b) * * *

           *       *       *       *       *       *       *

CHAPTER 89--HEALTH INSURANCE

           *       *       *       *       *       *       *

Sec. 8906. Contribution

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) * * *
    (f) * * *
    (g)(1) Except as provided in paragraphs (2) and (3), the 
Government contributions authorized by this section for health 
benefits for an annuitant shall be paid from annual 
appropriations which are authorized to be made for that purpose 
and which may be made available until expended.
    (2)(A) The Government contributions authorized by this 
section for health benefits for an individual who first becomes 
an annuitant by reason of retirement from employment with the 
United States Postal Service on or after July 1, 1971, or for a 
survivor of such an individual or of an individual who died on 
or after July 1, 1971 while employed by the United States 
Postal Service, shall [through September 30, 2016, be paid by 
the United States Postal Service, and thereafter shall] after 
the date of enactment of the 21st Century Postal Service Act of 
2012 be paid first from the Postal Service Retiree Health 
Benefits Fund up to the amount contained in the Fund, with any 
remaining amount paid by the United States Postal Service.
    (B) In determining any amount for which the Postal Service 
is liable under this paragraph, the amount of the liability 
shall be prorated to reflect only that portion of total service 
which is attributable to civilian service performed (by the 
former postal employee or by the deceased individual referred 
to in subparagraph (A), as the case may be) after June 30, 
1971, as estimated by the Office of Personnel Management.
    (3) The Government contribution for persons enrolled in a 
health benefits plan as part of the demonstration project under 
section 1108 of title 10 shall be paid as provided in 
subsection (i) of that section.
    (h) * * *
    (i) * * *

           *       *       *       *       *       *       *

Sec. 8909a. Postal Service Retiree Health Benefit [Benefits] Fund

    (a) * * *
    (b) * * *
    (c) * * *
    (d)(1) * * *
    (2)(A) * * *
    (B) Not later than June 30, [2017] 2012, the Office shall 
compute, and by June 30 of each succeeding year shall 
recompute, a schedule including a series of annual installments 
which provide for the liquidation of any liability or surplus 
by September 30, 2056, or within 15 years, whichever is later, 
of 80 percent of the net present value determined under 
subparagraph (A), including interest at the rate used in that 
computation.
    (3)(A) The United States Postal Service shall pay into such 
Fund--
          (i) $ 5,400,000,000, not later than September 30, 
        2007;
          (ii) $ 5,600,000,000, not later than September 30, 
        2008;
          (iii) $ 1,400,000,000, not later than September 30, 
        2009; and
          (iv) $ 5,500,000,000, not later than September 30, 
        2010[;].
          [(v) $ 5,500,000,000, not later than October 4, 2011;
          [(vi) $ 5,600,000,000, not later than September 30, 
        2012;
          [(vii) $ 5,600,000,000, not later than September 30, 
        2013;
          [(viii) $ 5,700,000,000, not later than September 30, 
        2014;
          [(ix) $ 5,700,000,000, not later than September 30, 
        2015; and
          [(x) $ 5,800,000,000, not later than September 30, 
        2016.]
    (B) Not later than September 30, 2012 [2017], and by 
September 30 of each succeeding year, the United States Postal 
Service shall pay into such Fund the sum of--
          (i) the net present value computed under paragraph 
        (1); and
          (ii) any annual installment computed under paragraph 
        (2)(B).
    (4) * * *
    (5) * * *
    (6) * * *
    (e) Subsections (a) through (d) shall be subject to section 
104 of the 21st Century Postal Service Act of 2012.

           *       *       *       *       *       *       *

TITLE XVIII--CRIMES AND CRIMINAL PROCEDURE

           *       *       *       *       *       *       *

PART I--CRIMES

           *       *       *       *       *       *       *

CHAPTER 53--INDIANS

           *       *       *       *       *       *       *

Sec. 1161. Application of Indian liquor laws

    The provisions of sections 1154, 1156, 3113, 3488, and 
3669, of this title, shall not apply within any area that is 
not Indian country, nor to any act or transaction within any 
area of Indian country provided such act or transaction is in 
conformity both with the laws of the State in which such act or 
transaction occurs and with an ordinance duly adopted by the 
tribe having jurisdiction over such area of Indian country, 
certified by the Secretary of the Interior, and published in 
the Federal Register, and, with respect to the mailing of wine 
or malt beverages (as those terms are defined in section 117 of 
the Federal Alcohol Administration Act (27 U.S.C. 211)), is in 
conformity with section 3001(p) of title 39.

           *       *       *       *       *       *       *

CHAPTER 83--POSTAL SERVICE

           *       *       *       *       *       *       *

Sec. 1716. Injurious articles as nonmailable

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) * * *
    (f) All spirituous, vinous, malted, fermented, or other 
intoxicating liquors of any kind are nonmailable and shall not 
be deposited in or carried through the [mails] mails, except to 
the extent that the mailing is allowable under section 3001(p) 
of title 39. 

           *       *       *       *       *       *       *

TITLE XXXI--MONEY AND FINANCE

           *       *       *       *       *       *       *

Subtitle II--The Budget Process

           *       *       *       *       *       *       *

CHAPTER 15--APPROPRIATION ACCOUNTING

           *       *       *       *       *       *       *

Subchapter III--Transfers and Reimbursements

           *       *       *       *       *       *       *

Sec. 1538. Authorization for assisted reemployment

    Funds may be transferred from the Employees' Compensation 
Fund established under section 8147 of title 5 to the 
applicable appropriations account for an agency or 
instrumentality of any branch of the Federal Government for the 
purposes of reimbursing the agency or instrumentality in 
accordance with an assisted reemployment agreement entered into 
under section 8104 of title 5. 

           *       *       *       *       *       *       *

TITLE XXXIX--POSTAL SERVICE

           *       *       *       *       *       *       *

PART I--GENERAL

           *       *       *       *       *       *       *

CHAPTER 4--GENERAL AUTHORITY

           *       *       *       *       *       *       *

Sec. 404. Specific powers

    (a) Subject to the provisions of section 404a, but 
otherwise without limitation of the generality of its powers, 
the Postal Service shall have the following specific powers, 
among others:
          (1) to provide for the collection, handling, 
        transportation, delivery, forwarding, returning, and 
        holding of mail, and for the disposition of 
        undeliverable mail;
          (2) to prescribe, in accordance with this title, the 
        amount of postage and the manner in which it is to be 
        paid;
          (3) to determine the need for post offices, postal 
        and training facilities and equipment, and to provide 
        such offices, facilities, and equipment as it 
        determines are needed;
          (4) to provide and sell postage stamps and other 
        stamped paper, cards, and envelopes and to provide such 
        other evidences of payment of postage and fees as may 
        be necessary or desirable;
          (5) to provide philatelic services;
          (6) after the date of enactment of the 21st Century 
        Postal Service Act of 2012, and except as provided in 
        subsection (e), to provide other services that are not 
        postal services, after the Postal Regulatory 
        Commission--
                  (A) makes a determination that the provision 
                of such services--
                          (i) uses the processing, 
                        transportation, delivery, retail 
                        network, or technology of the Postal 
                        Service;
                          (ii) is consistent with the public 
                        interest and a demonstrated or 
                        potential public demand for--
                                  (I) the Postal Service to 
                                provide the services instead of 
                                another entity providing the 
                                services; or
                                  (II) the Postal Service to 
                                provide the services in 
                                addition to another entity 
                                providing the services;
                          (iii) would not create unfair 
                        competition with the private sector; 
                        and
                          (iv) has the potential to improve the 
                        net financial position of the Postal 
                        Service, based on a market analysis 
                        provided to the Postal Regulatory 
                        Commission by the Postal Service; and
                  (B) for services that the Postal Regulatory 
                Commission determines meet the criteria under 
                subparagraph (A), classifies each such service 
                as a market-dominant product, competitive 
                product, or experimental product, as required 
                under chapter 36 of title 39, United States 
                Code;
          [(6)] (7) to investigate postal offenses and civil 
        matters relating to the Postal Service;
          [(7)] (8) to offer and pay rewards for information 
        and services in connection with violation of the postal 
        laws, and, unless a different disposal is expressly 
        prescribed, to pay one-half of all penalties and 
        forfeitures imposed for violations of law affecting the 
        Postal Service, its revenues, or property, to the 
        person informing for the same, and to pay the other 
        one-half into the Postal Service Fund; and
          [(8)] (9) to authorize the issuance of a substitute 
        check for a lost, stolen, or destroyed check of the 
        Postal Service.
          [(9) Redesignated (8)]
    (b) * * *
    (c) * * *
    [(d)(1) The Postal Service, prior to making a determination 
under subsection (a)(3) of this section as to the necessity for 
the closing or consolidation of any post office, shall provide 
adequate notice of its intention to close or consolidate such 
post office at least 60 days prior to the proposed date of such 
closing or consolidation to persons served by such post office 
to ensure that such persons will have an opportunity to present 
their views.]
    (d)(1) The Postal Service, prior to making a determination 
under subsection (a)(3) of this section as to the necessity for 
the closing or consolidation of any post office, shall--
          (A) consider whether--
                  (i) to close the post office or consolidate 
                the post office and another post office located 
                within a reasonable distance;
                  (ii) instead of closing or consolidating the 
                post office--
                          (I) to reduce the number of hours a 
                        day that the post office operates; or
                          (II) to continue operating the post 
                        office for the same number of hours a 
                        day;
                  (iii) to procure a contract providing full, 
                or less than full, retail services in the 
                community served by the post office; or
                  (iv) to provide postal services to the 
                community served by the post office through a 
                rural carrier;
          (B) provide postal customers served by the post 
        office an opportunity to participate in a nonbinding 
        survey conducted by mail on a preference for an option 
        described in subparagraph (A); and
          (C) if the Postal Service determines to close or 
        consolidate the post office, provide adequate notice of 
        its intention to close or consolidate such post office 
        at least 60 days prior to the proposed date of such 
        closing or consolidation to persons served by such post 
        office to ensure that such persons will have an 
        opportunity to present their views.
    (2) * * *
    (3) * * *
    (4) * * *
    (5) A determination of the Postal Service to close or 
consolidate any post office, station, or branch may be appealed 
by any person served by such office, station, or branch to the 
Postal Regulatory Commission within 30 days after such 
determination is made available to such person [under paragraph 
(3)]. The Commission shall review such determination on the 
basis of the record before the Postal Service in the making of 
such determination. The Commission shall make a determination 
based upon such review no later than 120 days after receiving 
any appeal under this paragraph. The Commission shall set aside 
any determination, findings, and conclusions found to be--
          (A) arbitrary, capricious, an abuse of discretion, or 
        otherwise not in accordance with the law;
          (B) without observance of procedure required by law; 
        or
          (C) unsupported by substantial evidence on the 
        record.
The Commission may affirm the determination of the Postal 
Service or order that the entire matter be returned for further 
consideration, but the Commission may not modify the 
determination of the Postal Service. The Commission may suspend 
the effectiveness of the determination of the Postal Service 
until the final disposition of the appeal. The provisions of 
section 556, section 557, and chapter 7 of title 5 shall not 
apply to any review carried out by the Commission under this 
paragraph.
    (e)(1) * * *
    (2) [Nothing in this section shall be considered to permit 
or require that the Postal Service provide any nonpostal 
service, except that the] The Postal Service may provide 
nonpostal services which were offered as of January 1, 2006, as 
provided under this subsection.
    (3) * * *
    (4) * * *
    (5) * * *
    (f) Closing or Consolidation of Certain Postal 
Facilities.--
          (1) Postal facility.--In this subsection, the term 
        `postal facility'--
                  (A) means any Postal Service facility that is 
                primarily involved in the preparation, 
                dispatch, or other physical processing of mail; 
                and
                  (B) does not include--
                          (i) any post office, station, or 
                        branch; or
                          (ii) any facility used only for 
                        administrative functions.
          (2) Area mail processing study.--
                  (A) New area mail processing studies.--After 
                the date of enactment of this subsection, 
                before making a determination under subsection 
                (a)(3) as to the necessity for the closing or 
                consolidation of any postal facility, the 
                Postal Service shall--
                          (i) conduct an area mail processing 
                        study relating to that postal facility 
                        that includes a plan to reduce the 
                        capacity of the postal facility, but 
                        not close the postal facility;
                          (ii) publish the study on the Postal 
                        Service website; and
                          (iii) publish a notice that the study 
                        is complete and available to the 
                        public, including on the Postal Service 
                        website.
                  (B) Completed or ongoing area mail processing 
                studies.--
                          (i) In general.--In the case of a 
                        postal facility described in clause 
                        (ii), the Postal Service shall--
                                  (I) consider a plan to reduce 
                                the capacity of the postal 
                                facility, but not close the 
                                post facility; and
                                  (II) publish the results of 
                                the consideration under 
                                subclause (I) with or as an 
                                amendment to the area mail 
                                processing study relating to 
                                the postal facility.
                          (ii) Postal facilities.--A postal 
                        facility described in this clause is a 
                        postal facility for which, on or before 
                        the date of enactment of this 
                        subsection--
                                  (I) an area mail processing 
                                study that does not include a 
                                plan to reduce the capacity of 
                                the postal facility, but not 
                                close the facility, has been 
                                completed or is in progress; 
                                and
                                  (II) a determination as to 
                                the necessity for the closing 
                                or consolidation of the postal 
                                facility has not been made.
          (3) Notice; public comment; and public hearing.--If 
        the Postal Service makes a determination under 
        subsection (a)(3) to close or consolidate a postal 
        facility, the Postal Service shall--
                  (A) provide notice of the determination to--
                          (i) Congress; and
                          (ii) the Postal Regulatory 
                        Commission;
                  (B) provide adequate public notice of the 
                intention of the Postal Service to close or 
                consolidate the postal facility;
                  (C) ensure that interested persons have an 
                opportunity to submit public comments during a 
                45-day period after the notice of intention is 
                provided under subparagraph (B);
                  (D) before the 45-day period described in 
                subparagraph (C), provide for public notice of 
                that opportunity by--
                          (i) publication on the Postal Service 
                        website;
                          (ii) posting at the affected postal 
                        facility; and
                          (iii) advertising the date and 
                        location of the public community 
                        meeting under subparagraph (E); and
                  (E) during the 45-day period described under 
                subparagraph (C), conduct a public community 
                meeting that provides an opportunity for public 
                comments to be submitted verbally or in 
                writing.
          (4) Further considerations.--Not earlier than 30 days 
        after the end of the 45-day period for public comment 
        under paragraph (3), the Postal Service, in making a 
        determination whether or not to close or consolidate a 
        postal facility, shall consider--
                  (A) the views presented by interested persons 
                solicited under paragraph (3);
                  (B) the effect of the closing or 
                consolidation on the affected community, 
                including any disproportionate impact the 
                closure or consolidation may have on a State, 
                region, or locality;
                  (C) the effect of the closing or 
                consolidation on the travel times and distances 
                for affected customers to access services under 
                the proposed closing or consolidation;
                  (D) the effect of the closing or 
                consolidation on delivery times for all classes 
                of mail;
                  (E) any characteristics of certain 
                geographical areas, such as remoteness, 
                broadband internet availability, and weather-
                related obstacles to using alternative 
                facilities, that may result in the closing or 
                consolidation having a unique effect; and
                  (F) any other factor the Postal Service 
                determines is necessary.
          (5) Justification statement.--Before the date on 
        which the Postal Service closes or consolidates a 
        postal facility, the Postal Service shall post on the 
        Postal Service website a closure or consolidation 
        justification statement that includes--
                  (A) a response to all public comments 
                received with respect to the considerations 
                described under paragraph (4);
                  (B) a description of the considerations made 
                by the Postal Service under paragraph (4); and
                  (C) the actions that will be taken by the 
                Postal Service to mitigate any negative effects 
                identified under paragraph (4).
          (6) Closing or consolidation of postal facilities.--
                  (A) In general.--Not earlier than the 15 days 
                after posting and publishing the final 
                determination and the justification statement 
                under paragraph (6) with respect to a postal 
                facility, the Postal Service may close or 
                consolidate the postal facility.
                  (B) Alternative intake of mail.--If the 
                Postal Service closes or consolidates a postal 
                facility under subparagraph (A), the Postal 
                Service shall make reasonable efforts to ensure 
                continued mail receipt from customers of the 
                closed or consolidated postal facility at the 
                same location or at another appropriate 
                location in close geographic proximity to the 
                closed or consolidated postal facility.
          (7) Postal service website.--For purposes of any 
        notice required to be published on the Postal Service 
        website under this subsection, the Postal Service shall 
        ensure that the Postal Service website--
                  (A) is updated routinely; and
                  (B) provides any person, at the option of the 
                person, the opportunity to receive relevant 
                updates by electronic mail.
          (8) Protection of certain information.--Nothing in 
        this subsection may be construed to require the Postal 
        Service to disclose--
                  (A) any proprietary data, including any 
                reference or citation to proprietary data; and
                  (B) any information relating to the security 
                of a postal facility.

           *       *       *       *       *       *       *

Sec. 411. Cooperation with other Government agencies and within the 
                    Postal Service

    [Executive agencies] (a) Cooperation With State and Local 
Governments.--Executive agencies within the meaning of section 
105 of title 5, [and the Government Printing Office] the 
Government Printing Office, and agencies and other units of 
State and local governments are authorized to furnish property, 
both real and personal, and personal and nonpersonal services 
to the Postal Service, and the Postal Service is authorized to 
furnish property and services to them. The furnishing of 
property and services under this [section] subsection shall be 
under such terms and conditions, including reimbursability, as 
the Postal Service and the head of the agency concerned shall 
deem appropriate.
    (b) Cooperation Within the Postal Service.--The Office of 
the Inspector General and other components of the Postal 
Service may enter into agreements to furnish to each other 
property, both real and personal, and personal and nonpersonal 
services. The furnishing of property and services under this 
subsection shall be under such terms and conditions, including 
reimbursability, as the Inspector General and the head of the 
component concerned shall deem appropriate 

           *       *       *       *       *       *       *

CHAPTER 7_CONTRACTING PROVISIONS

           *       *       *       *       *       *       *

CHAPTER 7--CONTRACTING PROVISIONS
Sec.
701. Definitions.
702. Advocate for competition.
703. Delegation of contracting authority.
704. Posting of noncompetitive purchase requests for noncompetitive 
          contracts.
705. Review of ethical issues.
706. Ethical restrictions on participation in certain contracting 
          activity.
707. Congressional oversight authority.

Sec. 701. Definitions

    In this chapter--
          (1) the term `contracting officer' means an employee 
        of a covered postal entity who has authority to enter 
        into a postal contract;
          (2) the term `covered postal entity' means--
                  (A) the Postal Service; or
                  (B) the Postal Regulatory Commission;
          (3) the term `head of a covered postal entity' 
        means--
                  (A) in the case of the Postal Service, the 
                Postmaster General; or
                  (B) in the case of the Postal Regulatory 
                Commission, the Chairman of the Postal 
                Regulatory Commission;
          (4) the term `postal contract' means any contract 
        (including any agreement or memorandum of 
        understanding) entered into by a covered postal entity 
        for the procurement of goods or services; and
          (5) the term `senior procurement executive' means the 
        senior procurement executive of a covered postal 
        entity.

Sec. 702. Advocate for competition

    (a) Establishment and Designation.--
          (1) Establishment.--There is established in each 
        covered postal entity an advocate for competition.
          (2) Designation.--The head of each covered postal 
        entity shall designate for the covered postal entity 1 
        or more officers or employees (other than the senior 
        procurement executive) to serve as the advocate for 
        competition.
    (b) Responsibilities.--The advocate for competition of each 
covered postal entity shall--
          (1) be responsible for promoting competition to the 
        maximum extent practicable consistent with obtaining 
        best value by promoting the acquisition of commercial 
        items and challenging barriers to competition;
          (2) review the procurement activities of the covered 
        postal entity; and
          (3) prepare and transmit to the head of each covered 
        postal entity, the senior procurement executive of each 
        covered postal entity, the Board of Governors, and 
        Congress, an annual report describing--
                  (A) the activities of the advocate under this 
                section;
                  (B) initiatives required to promote 
                competition;
                  (C) barriers to competition that remain; and
                  (D) the number of waivers made by each 
                covered postal entity under section 704(c).

Sec. 703. Delegation of contracting authority

    (a) In General.--
          (1) Policy.--Not later than 60 days after the date of 
        enactment of the 21st Century Postal Service Act of 
        2012, the head of each covered postal entity shall 
        issue a policy on contracting officer delegations of 
        authority for the covered postal entity.
          (2) Contents.--The policy issued under paragraph (1) 
        shall require that--
                  (A) notwithstanding any delegation of 
                authority with respect to postal contracts, the 
                ultimate responsibility and accountability for 
                the award and administration of postal 
                contracts resides with the senior procurement 
                executive; and
                  (B) a contracting officer shall maintain an 
                awareness of and engagement in the activities 
                being performed on postal contracts of which 
                that officer has cognizance, notwithstanding 
                any delegation of authority that may have been 
                executed.
    (b) Posting of Delegations.--
          (1) In general.--The head of each covered postal 
        entity shall make any delegation of authority for 
        postal contracts outside the functional contracting 
        unit readily available and accessible on the website of 
        the covered postal entity.
          (2) Effective date.--This paragraph shall apply to 
        any delegation of authority made on or after 30 days 
        after the date of enactment of the 21st Century Postal 
        Service Act of 2012.

Sec. 704. Posting of noncompetitive purchase requests for 
                    noncompetitive contracts

    (a) Posting Required.--
          (1) Postal regulatory commission.--The Postal 
        Regulatory Commission shall make the noncompetitive 
        purchase request for any noncompetitive award, 
        including the rationale supporting the noncompetitive 
        award, publicly available on the website of the Postal 
        Regulatory Commission--
                  (A) not later than 14 days after the date of 
                the award of the noncompetitive contract; or
                  (B) not later than 30 days after the date of 
                the award of the noncompetitive contract, if 
                the basis for the award was a compelling 
                business interest.
          (2) Postal service.--The Postal Service shall make 
        the noncompetitive purchase request for any 
        noncompetitive award of a postal contract valued at 
        $250,000 or more, including the rationale supporting 
        the noncompetitive award, publicly available on the 
        website of the Postal Service--
                  (A) not later than 14 days after the date of 
                the award; or
                  (B) not later than 30 days after the date of 
                the award, if the basis for the award was a 
                compelling business interest.
          (3) Adjustments to the posting threshold for the 
        postal service.--
                  (A) Review and determination.--Not later than 
                January 31 of each year, the Postal Service 
                shall--
                          (i) review the $250,000 threshold 
                        established under paragraph (2); and
                          (ii) based on any change in the 
                        Consumer Price Index for all-urban 
                        consumers of the Department of Labor, 
                        determine whether an adjustment to the 
                        threshold shall be made.
                  (B) Amount of adjustments.--An adjustment 
                under subparagraph (A) shall be made in 
                increments of $5,000. If the Postal Service 
                determines that a change in the Consumer Price 
                Index for a year would require an adjustment in 
                an amount that is less than $5,000, the Postal 
                Service may not make an adjustment to the 
                threshold for the year.
          (4) Effective date.--This subsection shall apply to 
        any noncompetitive contract awarded on or after the 
        date that is 90 days after the date of enactment of the 
        21st Century Postal Service Act of 2012.
    (b) Public Availability.--
          (1) In general.--Subject to paragraph (2), the 
        information required to be made publicly available by a 
        covered postal entity under subsection (a) shall be 
        readily accessible on the website of the covered postal 
        entity.
          (2) Protection of proprietary information.--A covered 
        postal entity shall--
                  (A) carefully screen any description of the 
                rationale supporting a noncompetitive award 
                required to be made publicly available under 
                subsection (a) to determine whether the 
                description includes proprietary data 
                (including any reference or citation to the 
                proprietary data) or security-related 
                information; and
                  (B) remove any proprietary data or security-
                related information before making publicly 
                available a description of the rational 
                supporting a noncompetitive award.
    (c) Waivers.--
          (1) Waiver permitted.--If a covered postal entity 
        determines that making a noncompetitive purchase 
        request publicly available would risk placing the 
        Postal Service at a competitive disadvantage relative 
        to a private sector competitor, the senior procurement 
        executive, in consultation with the advocate for 
        competition of the covered postal entity, may waive the 
        requirements under subsection (a).
          (2) Form and content of waiver.--
                  (A) Form.--A waiver under paragraph (1) shall 
                be in the form of a written determination 
                placed in the file of the contract to which the 
                noncompetitive purchase agreement relates.
                  (B) Content.--A waiver under paragraph (1) 
                shall include--
                          (i) a description of the risk 
                        associated with making the 
                        noncompetitive purchase request 
                        publicly available; and
                          (ii) a statement that redaction of 
                        sensitive information in the 
                        noncompetitive purchase request would 
                        not be sufficient to protect the Postal 
                        Service from being placed at a 
                        competitive disadvantage relative to a 
                        private sector competitor.
          (3) Delegation of waiver authority.--A covered postal 
        entity may not delegate the authority to approve a 
        waiver under paragraph (1) to any employee having less 
        authority than the senior procurement executive.

Sec. 705. Review of ethical issues

    If a contracting officer identifies any ethical issues 
relating to a proposed contract and submits those issues and 
that proposed contract to the designated ethics official for 
the covered postal entity before the awarding of that contract, 
that ethics official shall--
          (1) review the proposed contract; and
          (2) advise the contracting officer on the appropriate 
        resolution of ethical issues.

Sec. 706. Ethical restrictions on participation in certain contracting 
                    activity

    (a) Definitions.--In this section--
          (1) the term `covered employee' means--
                  (A) a contracting officer; or
                  (B) any employee of a covered postal entity 
                whose decisionmaking affects a postal contract 
                as determined by regulations prescribed by the 
                head of a covered postal entity;
          (2) the term `covered relationship' means a covered 
        relationship described in section 2635.502(b)(1) of 
        title 5, Code of Federal Regulations, or any successor 
        thereto; and
          (3) the term `final conviction' means a conviction, 
        whether entered on a verdict or plea, including a plea 
        of nolo contendere, for which a sentence has been 
        imposed.
    (b) In General.--
          (1) Regulations.--The head of each covered postal 
        entity shall prescribe regulations that--
                  (A) require a covered employee to include in 
                the file of any noncompetitive purchase request 
                for a noncompetitive postal contract a written 
                certification that--
                          (i) discloses any covered 
                        relationship of the covered employee; 
                        and
                          (ii) the covered employee will not 
                        take any action with respect to the 
                        noncompetitive purchase request that 
                        affects the financial interests of a 
                        friend, relative, or person with whom 
                        the covered employee is affiliated in a 
                        nongovernmental capacity, or otherwise 
                        gives rise to an appearance of the use 
                        of public office for private gain, as 
                        described in section 2635.702 of title 
                        5, Code of Federal Regulations, or any 
                        successor thereto;
                  (B) require a contracting officer to consult 
                with the ethics counsel for the covered postal 
                entity regarding any disclosure made by a 
                covered employee under subparagraph (A)(i), to 
                determine whether participation by the covered 
                employee in the noncompetitive purchase request 
                would give rise to a violation of part 2635 of 
                title 5, Code of Federal Regulations (commonly 
                referred to as the `Standards of Ethical 
                Conduct for Employees of the Executive 
                Branch');
                  (C) require the ethics counsel for a covered 
                postal entity to review any disclosure made by 
                a contracting officer under subparagraph (A)(i) 
                to determine whether participation by the 
                contracting officer in the noncompetitive 
                purchase request would give rise to a violation 
                of part 2635 of title 5, Code of Federal 
                Regulations (commonly referred to as the 
                `Standards of Ethical Conduct for Employees of 
                the Executive Branch'), or any successor 
                thereto;
                  (D) under subsections (d) and (e) of section 
                2635.50 of title 5, Code of Federal 
                Regulations, or any successor thereto, require 
                the ethics counsel for a covered postal entity 
                to--
                          (i) authorize a covered employee that 
                        makes a disclosure under subparagraph 
                        (A)(i) to participate in the 
                        noncompetitive postal contract; or
                          (ii) disqualify a covered employee 
                        that makes a disclosure under 
                        subparagraph (A)(i) from participating 
                        in the noncompetitive postal contract;
                  (E) require a contractor to timely disclose 
                to the contracting officer in a bid, 
                solicitation, award, or performance of a postal 
                contract any conflict of interest with a 
                covered employee; and
                  (F) include authority for the head of the 
                covered postal entity to a grant a waiver or 
                otherwise mitigate any organizational or 
                personal conflict of interest, if the head of 
                the covered postal entity determines that the 
                waiver or mitigation is in the best interests 
                of the Postal Service.
          (2) Posting of waivers.--Not later than 30 days after 
        the head of a covered postal entity grants a waiver 
        described in paragraph (1)(F), the head of the covered 
        postal entity shall make the waiver publicly available 
        on the website of the covered postal entity.
    (c) Contract Voidance and Recovery.--
          (1) Unlawful conduct.--In any case in which there is 
        a final conviction for a violation of any provision of 
        chapter 11 of title 18 relating to a postal contract, 
        the head of a covered postal entity may--
                  (A) void that contract; and
                  (B) recover the amounts expended and property 
                transferred by the covered postal entity under 
                that contract.
          (2) Obtaining or disclosing procurement 
        information.--
                  (A) In general.--In any case where a 
                contractor under a postal contract fails to 
                timely disclose a conflict of interest to the 
                appropriate contracting officer as required 
                under the regulations promulgated under 
                subsection (b)(1)(D), the head of a covered 
                postal entity may--
                          (i) void that contract; and
                          (ii) recover the amounts expended and 
                        property transferred by the covered 
                        postal entity under that contract.
                  (B) Conviction or administrative 
                determination.--A case described under 
                subparagraph (A) is any case in which--
                          (i) there is a final conviction for 
                        an offense punishable under section 
                        27(e) of the Office of Federal 
                        Procurement Policy Act (41 U.S.C. 
                        423(e)); or
                          (ii) the head of a covered postal 
                        entity determines, based upon a 
                        preponderance of the evidence, that the 
                        contractor or someone acting for the 
                        contractor has engaged in conduct 
                        constituting an offense punishable 
                        under section 27(e) of that Act.

Sec.  707. Congressional oversight authority

    The Postal Service may not enter into any contract that 
restricts the ability of Congress to exercise oversight 
authority.

           *       *       *       *       *       *       *

PART II--PERSONNEL

           *       *       *       *       *       *       *

CHAPTER 12--EMPLOYEE-MANAGEMENT DISAGREEMENTS

           *       *       *       *       *       *       *

Sec. 1207. Labor Disputes

    (a) * * *
    (b) * * *
    (c) (1) * * *
    (2)(A) The arbitration board shall give the parties a full 
and fair hearing, including an opportunity to present evidence 
in support of their claims, and an opportunity to present their 
case in person, by counsel or by other representative as they 
may elect. Decisions of the arbitration board shall be 
conclusive and binding upon the parties. [The arbitration board 
shall render its decision within 45 days after its 
appointment.] The arbitration board shall render a decision not 
later than 45 days after the date of its appointment.
          (B) In rendering a decision under this paragraph, the 
        arbitration board shall consider such relevant factors 
        as--
                  (i) the financial condition of the Postal 
                Service;
                  (ii) the requirements relating to pay and 
                compensation comparability under section 
                1003(a); and
                  (iii) the policies of this title.
    (3) * * *
    (d) * * *

           *       *       *       *       *       *       *

PART III--MODERNIZATION AND FISCAL ADMINISTRATION

           *       *       *       *       *       *       *

CHAPTER 24--APPROPRIATIONS AND ANNUAL REPORT 

           *       *       *       *       *       *       *

Sec.  2403. Annual report on the fiscal stability of the United States 
                    mailing industry

    (a) In General.--Not later than 1 year after the date of 
enactment of this section, and annually thereafter, the Postal 
Regulatory Commission shall submit a report on the fiscal 
stability of the United States mailing industry with respect to 
the preceding fiscal year to--
          (1) the Committee on Homeland Security and 
        Governmental Affairs of the Senate; and
          (2) the Committee on Oversight and Government Reform 
        of the House of Representatives.
    (b) Assistance.--The United States Postal Service and any 
Federal agency involved in oversight or data collection 
regarding industry sectors relevant to the report under 
subsection (a) shall provide any assistance to the Postal 
Regulatory Commission that the Postal Regulatory Commission 
determines is necessary in the preparation of a report under 
subsection (a).

           *       *       *       *       *       *       *

PART IV--MAIL MATTER

           *       *       *       *       *       *       *

CHAPTER 30--NONMAILABLE MATTER 

           *       *       *       *       *       *       *

Sec.  3001. Nonmailable Matter

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    (e) * * *
    (f) * * *
    (g) * * *
    (h) * * *
    (i) * * *
    (j) * * *
    (k) * * *
    (l) * * *
    (m) * * *
    (n) * * *
    (o) * * *
    (p)(1) In this subsection, the terms `wine' and `malt 
beverage' have the same meanings as in section 117 of the 
Federal Alcohol Administration Act (27 U.S.C. 211).
    (2) Wine or malt beverages shall be considered mailable if 
mailed--
          (A) by a licensed winery or brewery, in accordance 
        with applicable regulations under paragraph (3); and
          (B) in accordance with the laws of--
                  (i) the State, territory, or district of the 
                United States where the sender or duly 
                authorized agent initiates the mailing; and
                  (ii) the State, territory, or district of the 
                United States where the addressee or duly 
                authorized agent takes delivery.
    (3) The Postal Service shall prescribe such regulations as 
may be necessary to carry out this subsection, including 
regulations providing that--
          (A) the mailing shall be by a means established by 
        the Postal Service to ensure direct delivery to the 
        addressee or a duly authorized agent;
          (B) the addressee (and any duly authorized agent) 
        shall be an individual at least 21 years of age;
          (C) the individual who takes delivery, whether the 
        addressee or a duly authorized agent, shall present a 
        valid, government-issued photo identification at the 
        time of delivery;
          (D) the wine or malt beverages may not be for resale 
        or other commercial purpose; and
          (E) the winery or brewery involved shall--
                  (i) certify in writing to the satisfaction of 
                the Postal Service, through a registration 
                process administered by the Postal Service, 
                that the mailing is not in violation of any 
                provision of this subsection or regulation 
                prescribed under this subsection; and
                  (ii) provide any other information or 
                affirmation that the Postal Service may 
                require, including with respect to the 
                prepayment of State alcohol beverage taxes.
    (4) For purposes of this subsection--
          (A) a winery shall be considered to be licensed if it 
        holds an appropriate basic permit issued--
                  (i) under the Federal Alcohol Administration 
                Act; and
                  (ii) under the law of the State in which the 
                winery is located; and
          (B) a brewery shall be considered to be licensed if--
                  (i) it possesses a notice of registration and 
                bond approved by the Alcohol and Tobacco Tax 
                and Trade Bureau of the Department of the 
                Treasury; and
                  (ii) it is licensed to manufacture and sell 
                malt beverages in the State in which the 
                brewery is located.

           *       *       *       *       *       *       *

CHAPTER 36--POSTAL RATES, CLASSES, AND SERVICES

           *       *       *       *       *       *       *

Subchapter I--Provisions Relating to Market-Dominant Products

           *       *       *       *       *       *       *

Sec. 3622. Modern rate regulation

    (a) * * *
    (b) * * *
    (c)(1) * * *
    (2) * * *
    (3) * * *
    (4) * * *
    (5) * * *
    (6) * * *
    (7) * * *
    (8) * * *
    (9) * * *
    (10) the desirability of special classifications for both 
postal users and the Postal Service in accordance with the 
policies of this title, including agreements between the Postal 
Service and postal users, when available on public and 
reasonable terms to similarly situated mailers, that--
          (A) [either] will--
                  (i) improve the net financial position of the 
                Postal Service through reducing Postal Service 
                costs or increasing the overall contribution to 
                the institutional costs of the Postal Service; 
                [or]
                  (ii) enhance the performance of mail 
                preparation, processing, transportation, or 
                other functions; [and] or
                  (iii) preserve mail volume and revenue; and
          (B) do not cause unreasonable harm to the 
        marketplace.
    (d) * * *
    (e) * * *
    (f) * * *
    (g) Coordination.--The Postal Service and the Postal 
Regulatory Commission shall coordinate actions to identify 
methods to increase the use of negotiated service agreements 
for market-dominant products by the Postal Service consistent 
with subsection (c)(10).

           *       *       *       *       *       *       *

Subchapter V--Postal Services, Complaints, and Judicial Review

           *       *       *       *       *       *       *

Sec. 3661. Postal services

    (a) The Postal Service shall develop and promote adequate 
and efficient postal services.
    [(b) When the Postal Service determines that there should 
be a change in the nature of postal services which will 
generally affect service on a nationwide or substantially 
nationwide basis, it shall submit a proposal, within a 
reasonable time prior to the effective date of such proposal, 
to the Postal Regulatory Commission requesting an advisory 
opinion on the change.
    [(c) The Commission shall not issue its opinion on any 
proposal until an opportunity for hearing on the record under 
sections 556 and 557 of title 5 has been accorded to the Postal 
Service, users of the mail, and an officer of the Commission 
who shall be required to represent the interests of the general 
public. The opinion shall be in writing and shall include a 
certification by each Commissioner agreeing with the opinion 
that in his judgment the opinion conforms to the policies 
established under this title.]
    (b) Proposed Changes for Market-dominant Products.--
          (1) Submission of proposal.--If the Postal Service 
        determines that there should be a change in the nature 
        of postal services relating to market-dominant products 
        that will generally affect service on a nationwide or 
        substantially nationwide basis, the Postal Service 
        shall submit a proposal to the Postal Regulatory 
        Commission requesting an advisory opinion on the 
        change.
          (2) Advisory opinion.--Upon receipt of a proposal 
        under paragraph (1), the Postal Regulatory Commission 
        shall--
                  (A) provide an opportunity for public comment 
                on the proposal; and
                  (B) issue an advisory opinion not later 
                than--
                          (i) 90 days after the date on which 
                        the Postal Regulatory Commission 
                        receives the proposal; or
                          (ii) a date that the Postal 
                        Regulatory Commission and the Postal 
                        Service may, not later than 1 week 
                        after the date on which the Postal 
                        Regulatory Commission receives the 
                        proposal, determine jointly.
          (3) Response to opinion.--The Postal Service shall 
        submit to the President and to Congress a response to 
        an advisory opinion issued under paragraph (2) that 
        includes--
                  (A) a statement of whether the Postal Service 
                plans to modify the proposal to address any 
                concerns or implement any recommendations made 
                by the Commission; and
                  (B) for any concern that the Postal Service 
                determines not to address and any 
                recommendation that the Postal Service 
                determines not to implement, the reasons for 
                the determination.
          (4) Action on proposal.--The Postal Service may take 
        action regarding a proposal submitted under paragraph 
        (1)--
                  (A) on or after the date that is 30 days 
                after the date on which the Postal Service 
                submits the response required under paragraph 
                (3);
                  (B) on or after a date that the Postal 
                Regulatory Commission and the Postal Service 
                may, not later than 1 week after the date on 
                which the Postal Regulatory Commission receives 
                a proposal under paragraph (2), determine 
                jointly; or
                  (C) after the date described in paragraph 
                (2)(B), if--
                          (i) the Postal Regulatory Commission 
                        fails to issue an advisory opinion on 
                        or before the date described in 
                        paragraph (2)(B); and
                          (ii) the action is not otherwise 
                        prohibited under Federal law.
          (5) Modification of timeline.--At any time, the 
        Postal Service and the Postal Regulatory Commission may 
        jointly redetermine a date determined under paragraph 
        (2)(B)(ii) or (4)(B).

           *       *       *       *       *       *       *

Subchapter VII--Modern Service Standards

           *       *       *       *       *       *       *

Sec. 3691. Establishment of modern service standards

    (a) * * *
    (b) * * *
    (c) * * *
    (d) * * *
    Postal Service Plan.
    Pub. L. 109-435, title III, Sec. 302, Dec. 20, 2006, 120 
Stat. 3219, provided that:
    ``(a) * * *
    ``(b) * * *
    ``(c) * * *
    ``(d) Alternate Retail Options.--The Postal Service plan 
[shall include] shall--
          (1) include plans to expand and market retail access 
        to postal services, in addition to post offices, 
        including--
                  ``[(1)] (A) vending machines;
                  ``[(2)] (B) the Internet;
                  ``[(3)] (C) postage meters;
                  ``[(4)] (D) Stamps by Mail;
                  ``[(5)] (E) Postal Service employees on 
                delivery routes;
                  ``[(6)] (F) retail facilities in which 
                overhead costs are shared with private 
                businesses and other government agencies;
                  ``[(7)] (G) postal kiosks; or
                  ``[(8)] (H) any other nonpost office access 
                channel providing market retail access to 
                postal services[.]; and
          ``(2) where possible, provide for an improvement in 
        customer access to postal services;
          ``(3) consider the impact of any decisions by the 
        Postal Service relating to the implementation of the 
        plan on small communities and rural areas; and
          ``(4) ensure that--
                  ``(A) small communities and rural areas 
                continue to receive regular and effective 
                access to retail postal services after 
                implementation of the plan; and
                  ``(B) the Postal Service solicits community 
                input in accordance with applicable provisions 
                of Federal law.''

           *       *       *       *       *       *       *

Sec.  3692. Conversion of door delivery points

    (a) Definitions.--In this section, the following 
definitions shall apply:
          (1) Centralized delivery point.--The term 
        `centralized delivery point' means a group or cluster 
        of mail receptacles at 1 delivery point that is within 
        reasonable proximity of the street address associated 
        with the delivery point.
          (2) Curbline delivery points.--The term `curbline 
        delivery point' means a delivery point that is--
                  (A) adjacent to the street address associated 
                with the delivery point; and
                  (B) accessible by vehicle on a street that is 
                not a private driveway.
          (3) Door delivery point.--The term `door delivery 
        point' means a delivery point at a door of the 
        structure at a street address.
          (4) Sidewalk delivery point.--The term `sidewalk 
        delivery point' means a delivery point on a sidewalk 
        adjacent to the street address associated with the 
        delivery point.
    (b) Conversion.--Except as provided in subsection (c), and 
in accordance with the profitability plan required under 
section 401 and standards established by the Postal Service, 
the Postal Service is authorized to, to the maximum extent 
feasible, convert door delivery points to--
          (1) curbline delivery points;
          (2) sidewalk delivery points; or
          (3) centralized delivery points.
    (c) Exceptions.--
          (1) Continued door delivery.--The Postal Service may 
        allow for the continuation of door delivery due to--
                  (A) a physical hardship of a customer;
                  (B) weather, in a geographic area where snow 
                removal efforts could obstruct access to 
                mailboxes near a road;
                  (C) circumstances in an urban area that 
                preclude efficient use of curbside delivery 
                points;
                  (D) other exceptional circumstances, as 
                determined in accordance with regulations 
                issued by the Postal Service; or
                  (E) other circumstances in which the Postal 
                Service determines that alternatives to door 
                delivery would not be practical or cost 
                effective.
          (2) New door delivery points.--The Postal Service may 
        provide door delivery to a new delivery point in a 
        delivery area that received door delivery on the day 
        before the date of enactment of this section, if the 
        delivery point is established before the delivery area 
        is converted from door delivery under subsection (b).
    (d) Solicitation of Comments.--The Postal Service shall 
establish procedures to solicit, consider, and respond to input 
from individuals affected by a conversion under this section.
    (e) Review.--Subchapter V of this chapter shall not apply 
with respect to any action taken by the Postal Service under 
this section.
    (f) Report.--Not later than 60 days after the end of each 
fiscal year through fiscal year 2015, the Postal Service shall 
submit to Congress and the Inspector General of the Postal 
Service a report on the implementation of this section during 
the preceding fiscal year that--
          (1) includes the number of door delivery points--
                  (A) that existed at the end of the fiscal 
                year preceding the preceding fiscal year;
                  (B) that existed at the end of the preceding 
                fiscal year;
                  (C) that, during the preceding fiscal year, 
                converted to--
                          (i) curbline delivery points or 
                        sidewalk delivery points;
                          (ii) centralized delivery points; and
                          (iii) any other type of delivery 
                        point; and
                  (D) for which door delivery was continued 
                under subsection (c)(1);
          (2) estimates any cost savings, revenue loss, or 
        decline in the value of mail resulting from the 
        conversions from door delivery that occurred during the 
        preceding fiscal year;
          (3) describes the progress of the Postal Service 
        toward achieving the conversions authorized under 
        subsection (b); and
          (4) provides such additional information as the 
        Postal Service considers appropriate.

           *       *       *       *       *       *       *

TITLE XLI--PUBLIC CONTRACTS

           *       *       *       *       *       *       *

Subtitle III--Contract Disputes

           *       *       *       *       *       *       *

CHAPTER 71--CONTRACT DISPUTES

           *       *       *       *       *       *       *

Sec.  7101. Definitions

    (1) * * *
    (2) * * *
    (3) * * *
    (4) * * *
    (5) * * *
    (6) * * *
    (7) * * *
    (8) * * *
          (A) * * *
          (B) * * *
          (C) an independent establishment as defined in 
        section 104 of title 5, except that the term does not 
        include the Government Accountability Office; [and]
          (D) a wholly owned Government corporation as defined 
        in section 9101(3) of title 31[.]; and
          (E) the United States Postal Service and Postal 
        Regulatory Commission.

                         VIII. ADDITIONAL VIEWS

    While many of the provisions in this important and pressing 
legislation would meaningfully improve the financial situation 
of the Postal Service, we have strong objections to the FECA 
benefit changes and the arbitration language in the bill.

             THE FEDERAL EMPLOYEES' COMPENSATION ACT (FECA)

    Title III of the bill would make certain cuts to benefits 
and reforms to the Federal Employee Compensation Act (FECA). 
The benefit reductions in sections 302 and 303 are premature, 
unnecessary, and unfair.
    The Committee report asserts that changes to FECA benefits 
must be included in this legislation to place the Postal 
Service on a sound financial footing.\1\ However, according to 
CBO, these workers' compensation changes contribute nothing to 
the Postal Service's financial solvency in the next five 
critical years for stabilizing the Postal Service's 
finances.\2\ Indeed, through 2016, the changes would result in 
a net increase of $10 million in Postal Service costs, 
according to CBO.\3\ In total, over the ten-year scoring 
window, these benefit cuts would save the Postal Service a 
total of $397 million. Contrast this savings with the $8.9 
billion in net savings CBO projects the Postal Service would 
save over the same time period by eliminating Saturday mail 
delivery, which is another issue that many Senators have raised 
significant concerns about.\4\ In other words, CBO estimates 
that the workers' compensation provisions would save about four 
percent of what five-day delivery would save during the scoring 
window. Due to the concerns raised about this issue, the 
Committee appropriately exhibits caution with delivery 
reductions, allowing them only after first implementing 
alternative cost-saving measures, undergoing review by the GAO 
and PRC, and finding that it is necessary to the Postal 
Service's solvency.\5\ We should exhibit at least the same 
caution with savings that comes out of the pockets of employees 
disabled in service to their country.
---------------------------------------------------------------------------
    \1\See supra.
    \2\See CBO, Cost Estimate S. 1789--21st Century Postal Service Act 
of 2011, table 2.
    \3\Id.
    \4\Id. This includes only nine years of projected savings because 
savings for the implementation of five-day delivery start in 2014.
    \5\See supra.
---------------------------------------------------------------------------
    The Committee report cites the record of the hearing of the 
Committee's Subcommittee on Oversight of Government Management, 
the Federal Workforce, and the District of Columbia on July 26, 
2011, as a basis for moving forward with this reform. However, 
many questions and concerns were raised at that hearing that 
are still outstanding and should be answered before we move 
forward with FECA reforms. The Committee report further states 
that the FECA benefit reforms included in S.1789 are largely 
based a proposal by the George W. Bush Administration and 
carried forward by the Obama Administration; however there are 
some significant differences between this bill and the 
Administration's proposal. The benefit reductions in this bill 
are greater than those in the Administration's proposal, and 
most concerning, this bill would apply benefit reductions 
retroactively to up to half of FECA beneficiaries who are now 
on FECA's long-term disability rolls.
    Witnesses at the Subcommittee's July 2011 hearing were 
especially concerned with the retroactive application of 
benefit reductions to those already injured. Gary Steinberg, 
Acting Director of the Office of Workers' Compensation Programs 
at the Department of Labor, testified that the Administration 
proposed prospective rather than retroactive changes to 
benefits because it would provide a level of fairness and 
equity since recipients have planned for a certain level of 
benefits into the future and changing things immediately has 
the potential to cause a hardship for them.\6\
---------------------------------------------------------------------------
    \6\HSGAC/OGM hearing on July 26, 2011.
---------------------------------------------------------------------------
    FECA, like state workers' compensation programs, is a form 
of insurance providing wage replacement and medical benefits to 
employees injured on the job in exchange for mandatory 
relinquishment of the employees' right to sue the government 
for those injuries. FECA provides such employees' their 
exclusive remedy against the federal government, and employees 
may not recover non-economic losses such as compensation for 
pain and suffering.\7\ Retroactive changes to benefit levels 
after the injury has occurred violate the government's part of 
this bargain. Just as a litigant is not permitted to 
unilaterally change the terms of a settlement after it is made, 
the federal government should not be able to unilaterally 
change its workers' compensation liability after that liability 
has attached. Furthermore, retroactive changes violate a basic 
premise of insurance. A responsible employee may choose to 
further insure himself or herself against disability, but that 
is not possible if their coverage under the workers' 
compensation statute can be changed after the fact.
---------------------------------------------------------------------------
    \7\5 U.S.C. Sec.  8116(c); United States v. Lorenzetti, 467 U.S. 
167, 169 (1984).
---------------------------------------------------------------------------
    The Government Accountability Office (GAO) is currently 
conducting a number of reviews of the FECA program, including a 
review of both pre- and post-retirement age benefits to 
determine fair benefit amounts at the request of a bipartisan 
group of members from the House Committee on Education and 
Workforce. The outcome of these reviews would help inform any 
changes to FECA benefits. Without the results of these GAO 
reviews we do not have the information we need to decide on 
fair benefit levels. There are too many complex issues related 
to the appropriate benefit levels that deserve more analysis. 
We must be extremely cautious when making cuts to benefits that 
could harm employees who were disabled by injuries sustained in 
service to their country, especially elderly disabled 
employees.
    The tax-free nature of FECA benefits makes determining 
appropriate benefit levels particularly complicated. The 
Committee report states that the current FECA compensation 
benefit levels can provide a financial disincentive for an 
injured employee to return to work because the FECA benefit 
could exceed their pre-injury take home pay. While this may be 
the case for some higher-income workers, this is not true for 
those with lower wages. GAO has reported that lower wage 
workers often receive less in FECA benefits than their pre-
injury, after-tax wages and that the majority of FECA 
recipients receive less on FECA than before their injury.\8\ 
Lower-income employees who pay no federal income tax currently 
experience a one-fourth to one-third drop in income on FECA 
full disability, depending on whether they have dependents. 
With this legislation, all lower-wage workers with no federal 
income tax liability would experience a one-third reduction in 
income.\9\
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    \8\GAO, Federal Employee Compensation Act: Percentages of Take-Home 
Pay Replaced by Compensation Benefits, GAO/GGD-98-174 (August 17, 
1998), at pp. 6-7.
    \9\Employees who had been eligible for refundable income tax 
credit, such as the Earned Income Tax Credit or the Additional Child 
Tax Credit may fare even worse because disability payments are not 
categorized as earned income, needed to claim these refundable credits.
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    The interaction between FECA and the Social Security 
program creates additional complicating factors that the 
Committee has not taken into account. Although the reduction in 
FECA benefits is triggered by reaching full retirement age, as 
defined in the Social Security Act, employees in the Civil 
Service Retirement System (CSRS) do not participate in Social 
Security and therefore do not receive Social Security 
retirement benefits. For other employees, Social Security 
should offset some of the reduction in benefits, but not for 
CSRS employees. S. 1789 does not take this important 
distinction into account. Employees in the Federal Employee 
Retirement System (FERS) do participate in Social Security. 
However, FERS employees with long-term disabilities may have 
little Social Security credit since they do not continue 
accruing additional Social Security benefits while receiving 
FECA benefits, but there is no adjustment for those employees 
either. In both cases, many injured employees over retirement 
age would have to rely on reduced FECA benefits with either 
very little or no additional retirement income from Social 
Security. Employees on FECA also are unable to save money 
through the Thrift Savings Program, and they may have had 
limited ability to save money otherwise because they missed out 
in wage growth during their time on FECA.
    In addition, many people continue to work long after the 
Social Security retirement age. Those injured later in their 
careers will receive a lower benefit solely because of their 
age. Congress previously passed legislation that allowed 
benefit reductions at age 70, but repealed it because of the 
burden it placed on injured employees (and on the Department of 
Labor which had been tasked with conducting reviews), and 
because it was deemed to be age discriminatory.\10\ This 
legislation raises the same concerns.
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    \10\HSGAC/OGM hearing on July 26, 2011 (Statement of Andrew 
Sherrill, Director, Education, Workforce, and Income Security, U.S. 
Government Accountability Office).
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    Reducing benefits at retirement age is not the norm in 
state workers' compensation programs. The majority of states 
have permanent benefits for permanent disabilities. Dr. Gregory 
Krohm testified before the Subcommittee that 33 states have no 
reduction of benefits at retirement age.\11\ In addition, he 
said that ``seems to be a very settled part of the law in those 
States'' and he has ``seen no discussion of any of those States 
changing that.''\12\
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    \11\HSGAC/OGM hearing on July 26, 2011 (Statement of Dr. Gregory 
Krohm, Executive Director, International Association of Industrial 
Accident Boards and Commissions).
    \12\HSGAC/OGM hearing on July 26, 2011.
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    By making the proposed changes to FECA benefits without 
first studying and determining the appropriate benefit levels, 
lower income workers may see additional, significant reductions 
that they cannot afford. Despite this potential, there are no 
provisions to take into account the severe economic hardship 
that may result.
    Many employee groups strongly oppose the FECA provisions in 
this bill, including the American Federation of Labor and 
Congress of Industrial Organizations (AFL-CIO); the American 
Federation of Government Employees, AFL-CIO; the American 
Federation of State, County and Municipal Employees, AFL-CIO; 
the American Foreign Service Association; the American Postal 
Workers' Union, AFL-CIO; the Federal Law Enforcement Officers 
Association; Federally Employed Women; the International 
Federation of Professional & Technical Engineers, AFL-CIO; the 
National Active and Retired Federal Employees; the National 
Association of Letter Carriers, AFL-CIO; the National Postal 
Mail Handlers Union; the National Rural Letter Carriers' Union; 
the National Treasury Employees Union; the Organization of 
Professional Employees of the U.S. Department of Agriculture; 
and the Professional Aviation Safety Specialists, AFL-CIO.
    At the Subcommittee's hearing, Joseph Beaudoin, President 
of the National Active and Retired Federal Employees, 
summarized many of the concerns, testifying:

          FECA reforms need not, and should not, sacrifice 
        basic principles of fairness in the name of achieving 
        cost savings. Rather, FECA reforms should save money by 
        helping bring FECA recipients back into the workforce, 
        eliminating inefficiencies in the processing of claims, 
        allowing for full reimbursement from liable third 
        parties, or reducing improper payments and fraud . . . 
        But current proposals to take money away from 
        individuals who are irrefutably unable to work because 
        they were injured or become ill as a result of their 
        service for the federal government fails a basic 
        fairness test . . . Thus, I urge all members of 
        Congress to seriously consider the significant 
        financial implications that proposed reductions to FECA 
        benefits could have on disabled public servants who 
        have lost the ability to earn income to adjust their 
        financial situation to new circumstances.\13\
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    \13\HSGAC/OGM hearing on July 26, 2011, supra note 65 (Statement of 
Joseph A. Beaudoin, President, National Active and Retired Federal 
Employees Association).

    We should heed his sound advice.

          BINDING ARBITRATION IN RESOLUTION OF LABOR DISPUTES

    We also remain concerned about statutorily mandating 
standards for arbitration decisions, in Section 105 of S. 1789, 
as reported. This provision has evolved over time in several 
bills since its inclusion as part of S. 1507 as reported by 
this Committee in the 111th Congress. While this report 
indicates that the ``Committee certainly does not intend to 
stack the deck in favor of management,''\14\ the creation of 
any statutory criteria without accompanying statutory 
recognition of the current open-ended factors an arbitrator may 
consider demonstrates that the Committee has determined that 
these criteria are in fact of some greater importance. My 
concerns are more thoroughly addressed in the Committee Report 
accompanying S. 1507.\15\
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    \14\See supra.
    \15\S. Rept. 111-203 (additional views of Senator Akaka and Senator 
Levin).
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    An amendment filed by Senator Begich during consideration 
of S. 1789 would have helped to clarify the intent of the 
arbitration provision by adding that nothing in 39 U.S. Code 
should be taken to limit any factors that an arbitration board 
could consider in rendering a decision. We urge the Committee 
to continue working on this issue.
    The Postal Service certainly faces an immediate financial 
crisis, brought on by a number of factors and accelerated by 
the worst economic crisis since the Great Depression. Efforts 
to reform benefit levels in the FECA program, while important, 
should be examined separately. We strongly support the aims of 
this bill, with the exception of the changes to FECA benefits 
in Title 3 of the bill and the arbitration language in Section 
105.

                                   Daniel K. Akaka.
                                   Jon Tester.
                                   Mark Begich.

                                  
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