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68–017 PDF 2012

S. Hrg. 112–246 

EXAMINING THE FEDERAL WORKERS’ 

COMPENSATION PROGRAM FOR 

INJURED EMPLOYEES 

HEARING 

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE, AND THE 

DISTRICT OF COLUMBIA SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 26, 2011 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

DANIEL K. AKAKA, Hawaii, Chairman 

CARL LEVIN, Michigan 

MARY L. LANDRIEU, Louisiana 

MARK BEGICH, Alaska 

RON JOHNSON, Wisconsin 

TOM COBURN, Oklahoma 

JERRY MORAN, Kansas 

LISA M. POWELL, Majority Staff Director 

KATA C. SYBENGA, Counsel 

RACHEL R. WEAVER, Minority Staff Director 

SEAN D. KENNEDY, Professional Staff Member 

AARON H. WOOLF, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statement: Page 

Senator Akaka .................................................................................................. 1 

WITNESSES 

TUESDAY, JULY 26, 2011 

Hon. Christine Griffin, Deputy Director, U.S. Office of Personnel Management ...................................................................................................................... 3 

Gary Steinberg, Acting Director, Officer of Workers Compensation Programs, 

U.S. Department of Labor ................................................................................... 5 

Andrew Sherrill, Director, Education, Workforce, and Income Security, U.S. 

Government Accountability Office ...................................................................... 7 

Joseph Beaudoin, President, National Active and Retired Federal Employees 

Association ............................................................................................................ 14 

Ronald Watson, Consultant, National Association of Letter Carriers, AFL– 

CIO ........................................................................................................................ 15 

Gregory Krohm, Executive Director, International Association of Industrial 

Accident Boards and Commissions ..................................................................... 17 

ALPHABETICAL LIST OF WITNESSES

Beaudoin, Joseph: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 59 

Griffin, Hon. Christine: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 27 

Krohm, Gregory: 

Testimony .......................................................................................................... 17 

Prepared statement .......................................................................................... 74 

Sherrill, Andrew: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 45 

Steinberg, Gary: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 31 

Watson, Ronald: 

Testimony .......................................................................................................... 15 

Prepared statement .......................................................................................... 67 

APPENDIX 

Questions and responses for the record from: 

Christine Griffin ............................................................................................... 82 

Background .............................................................................................................. 92 

Statement for the Record from: 

Colleen M. Kelley, National Treasury Employees Union .............................. 96 

Federal Managers Association ......................................................................... 102 

Federal Law Enforcement Officers Association ............................................. 109 

David C. Williams, Inspector General, United States Postal Service .......... 113 

Lisa M. McManus, CCS Holdings ................................................................... 125 

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(1) 

EXAMINING THE FEDERAL WORKERS 

COMPENSATION PROGRAM FOR INJURED 

WORKERS 

TUESDAY JULY 26, 2011 

U.S. SENATE,

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

MANAGEMENT, THE FEDERAL WORKFORCE,

AND THE DISTRICT OF COLUMBIA,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:15 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 

Chairman of the Subcommittee, presiding. 

Present: Senator Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. This hearing will come to order. Aloha and 

thank you all for being here today as the Subcommittee examines 

the Federal Employees Compensation Act (FECA) which provides 

compensation to Federal employees injured on a job and the various proposals to change or reform the program. 

As the largest employer in the country, the Federal Government 

takes seriously its obligation to protect its employees and make 

them whole when they are injured at work. Nearly a century ago, 

workers’ compensation benefits were enacted to help fulfill this 

commitment to workers and avoid costly litigation. 

FECA provides Federal employees with work-related injuries or 

illnesses with lost wages, medical care for the injury or illness, and 

vocational rehabilitation (VR) services to help them return to work. 

One of FECA’s core principles is that workers and their families 

should be no better or worse off than they would have been had 

the worker not been injured. 

Today we will be reviewing a number of legislative proposals intended to modernize and improve this important Federal program. 

Some of the proposals contain common-sense reforms to modernize 

the program. For instance, as more civilian employees are serving 

in dangerous areas, such as Iraq and Afghanistan, we must ensure 

that they receive appropriate benefits if they are injured. 

To that end, the Administration has proposed providing those injured while deployed overseas in a zone of armed conflict, additional time to file a claim with their full pay continued and would 

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2 

ensure that employees injured in a terrorist attack while off-duty 

would receive FECA benefits. 

Additionally, the Labor Department (DOL) has requested access 

to Social Security wage information to verify FECA recipients’ 

earnings as a check against improper payments and fraud. I am 

also pleased with the Administration’s focus on improving returnto-work programs and providing injured workers the support they 

need to re-enter the workforce. 

My friend, Senator Collins, has introduced a bill that would 

transfer disabled FECA recipients from FECA into the Federal retirement system automatically at retirement age. I have deep concerns that this would create a substantial and unfair income reduction for many elderly disabled FECA recipients. 

Recipients’ retirement annuities would be based on their salary 

and years of service at the time of their injuries. The bill does not 

provide any adjustment to account for normal career progression 

that these injured employees miss out on. Worse, as drafted, benefits for some employees would not even be adjusted for inflation, 

which, in some cases, could be decades of inflation. 

The large majority of Federal employees who are covered by the 

Federal Employee Retirement System (FERS) would face an even 

more drastic drop in pay. Unlike the Civil Service Retirement Service (CSRS), which provides a defined benefit pension, FERS divided 

Federal employees retirement annuity into three parts, Social Security, the Thrift Savings Plan (TSP), and a reduced Federal pension. 

Congress explicitly considered Social Security and the TSP to be 

essential elements of retirement under FERS, but FECA recipients 

are not permitted to participate in the TSP and do not accrue additional Social Security benefits. With a low FERS annuity, little or 

no TSP savings, and a low Social Security benefit, many of these 

disabled FECA recipients could be impoverished if forced to transition to FERS. 

Any proposal that significantly reduces benefits at retirement 

will need substantial work. We must ensure that proposals to 

change FECA are fair and do not create undue hardships for employees who are permanently disabled because of an injury or illness sustained at work. This critical program has not been significantly updated in almost 40 years, and I think it deserves a closer 

look. 

I thank each of our witnesses for being here today and look forward to hearing from each of you about this program, the various 

reform proposals, and how these proposals will impact Federal employees. I look forward to hearing from our first panel of witnesses 

and welcome you here. 

Ms. Christine Griffin, the Deputy Director of the Office of Personnel Management (OPM), Mr. Gary Steinberg, Acting Director of 

the Office of Workers’ Compensation Programs (OWCP) at the U.S. 

Department of Labor, and Mr. Andrew Sherrill, Director of Education, Workforce, and Income Security at the U.S. Government Accountability Office (GAO). 

I want to take a moment to acknowledge Ms. Griffin’s service, 

since I understand that she will soon be leaving OPM, and this will 

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3 

1The prepared statement of Ms. Griffin appears in the appendix on page 27. 

be her last time testifying before this Subcommittee. We are going 

to miss her. 

Over the past few years, Ms. Griffin has shown tremendous commitment to improving all aspects of employment in the Federal 

Government. I am grateful to her for her work with this Subcommittee, especially on hiring reform and improving opportunities 

and accommodations for people with disabilities. 

It is with great appreciation, Ms. Griffin, that I say, mahalo nui 

loa, thank you very much, for your years of valuable service with 

OPM and I wish you success in your future endeavors. 

Ms. GRIFFIN. Thank you, Senator. 

Senator AKAKA. It is the custom of this Subcommittee to swear 

in all witnesses and I ask you just to raise your hands. 

Do you swear that the testimony you are about to give before 

this Subcommittee is the truth, the whole truth, and nothing but 

the truth, so help you God? 

Ms. GRIFFIN. I do. 

Mr. STEINBERG. I do. 

Mr. SHERRILL. I do. 

Senator AKAKA. Thank you. Let it be noted for the record that 

the witnesses answered in the affirmative. 

Before we start, I want you to know that your full written statements will be made part of the record, and I would also like to remind you to please limit your oral remarks to 5 minutes. Ms. Griffin, will you please proceed with your statement? 

STATEMENT OF CHRISTINE M. GRIFFIN,1 DEPUTY DIRECTOR, 

U.S. OFFICE OF PERSONNEL MANAGEMENT 

Ms. GRIFFIN. Thank you for the opportunity, Senator, and thank 

you for your kind remarks. Thanks for the opportunity to testify 

today regarding OPM’s views on retirement issues related to FECA 

reform proposals. I will defer to the Department of Labor on the 

details of broader FECA reform. However, I am here to discuss 

OPM’s support of a workers’ compensation system that is equitable 

to employers and employees and our efforts to improve the Federal 

employment of individuals with disabilities. 

The current workers’ compensation system provides a reasonable 

benefit comparable to an employee’s income when they were able 

to work. When an employee reaches retirement age, however, 

FECA benefits, in many instances, are more generous compared to 

what the employee would receive as a retiree. Therefore, the vast 

majority of long-term FECA claimants remain on the FECA rolls 

well past retirement age. 

To address the retirement equity issue, DOL and Senator Susan 

Collins have offered two different reform proposals. Labor’s proposal contains a conversion benefit that would reduce the retirement-eligible FECA claimant’s benefits to 50 percent of their gross 

salary at the date of the injury. This reduction would be closer to 

what their retirement benefit would have been after a career of 

service. It also has the advantage of simplicity and uniformity of 

coverage. 

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4 

The President’s Fiscal Year budget request estimates that it would result in a cost savings of more than $400 million over 10 

years. Senator Collins’ proposal, S. 261, would take retirement-eligible individuals off the compensation rolls and place them onto the 

retirement rolls. OPM has strong concerns and believes that Labor’s approach represents a more fair and equitable treatment. 

Senate 261 would require a system change for FECA claimants. 

At Social Security retirement age, FECA benefits would stop, if the 

individual were eligible for a retirement annuity, under CSRS or 

FERS. For FERS enrollees, employees and employers do not make 

retirement contributions, including into Social Security or TSP 

while an employee is receiving workers’ comp benefits. 

In addition, S. 261 would provide for retirement based only upon 

employment performed before an employee’s injury. These two 

issues combined could result in many individuals experiencing extreme financial hardship with very small annuities and without 

health benefits. Another unintended consequence is that individuals with the least amount of service at the time of their injury 

and who would not meet annuity requirements would not be subject to S. 261, and therefore, would receive much higher benefits 

than injured employees with more service. 

While the conversion concept applies to all claimants regardless 

of their retirement system, S. 261 only applies to employees covered by CSRS and FERS. However, there are numerous retirement 

systems that cover Federal employees such as the Foreign Service 

or Federal Reserve. To fully cover all individuals the system 

change concept would require that these retirement plans be 

amended. 

Senate 261 could be amended to provide a more equitable change 

from the workers’ comp program to a retirement system, but it 

would be very complicated. Equity would require a retirement benefit comparable to what the individual would have received had 

their employment not been interrupted by an injury or illness. 

This would require a formula for adjusting service credit and annual salary. It also would be necessary to address the loss of Social 

Security and TSP for the compensation period. Additionally, each 

Federal retirement system that covers individuals under FECA 

would have to be modified based upon its particular benefit provisions. 

While the conversion concept would require only minimal administrative resources for implementation, the system change concept 

would require major changes utilizing substantial resources. 

One year ago today, in fact, President Obama signed an Executive Order (EO) to increase Federal employment of individuals with 

disabilities, and in February I testified before the Subcommittee 

about OPM’s efforts in this area. OPM partners with agencies 

across the Federal Government, including OWCP, to provide training on the Executive Order, recruitment strategies, reasonable accommodation policies and procedures. 

Agencies are making strides toward the President’s goal of hiring 

more people with disabilities over the next 5 years. And, in fact, 

just last week, Gary and I held a joint meeting at OPM with all 

of the individuals who are implementing the plans at their agencies, as well as all of the workers’ comp return-to-work POWER iniH605-41331-79W7 with DISTILLER

5 

1The prepared statement of Mr. Steinberg appears in the appendix on page 31. 

tiative representatives, to make sure that they were aware that 

there are opportunities for people who want to return to work, they 

can, and we can accommodate them. 

In conclusion, OPM supports the Administration’s efforts to reform FECA in an equitable and fair manner. We welcome the opportunity to work with the Subcommittee to address our concerns. 

Thank you. 

Senator AKAKA. Thank you very much, Ms. Griffin. Mr. Steinberg, will you please proceed with your statement? 

STATEMENT OF GARY STEINBERG,1 ACTING DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, U.S. DEPARTMENT OF LABOR 

Mr. STEINBERG. Thank you, Chairman Akaka. I appreciate the 

opportunity to discuss the Federal Employees’ Compensation Act 

today. On behalf of Secretary Solis, I would like to share a set of 

balanced proposals that would enhance her ability to assist beneficiaries to return to work, provide a more equitable array of benefits, and generally modernize the program. 

Almost 95 years ago, Congress enacted FECA to provide workers’ 

compensation coverage to all Federal employees and their survivors 

for disabilities or death due to work-related injuries or illness. The 

faces of FECA include the postal worker who is hurt when his mail 

truck is hit while delivering the mail, the Federal Bureau of Investigation (FBI) agent injured or killed in the line of duty, and the 

Veterans Affairs (VA) nurse who hurts her back while lifting patients. 

DOL’s Office of Workers’ Compensation Programs has worked 

hard to administer the program fairly, objectively, and efficiently. 

We seek to continuously improve the quality and service delivery 

to our customers, enhance internal and external communication, 

and reduce costs to the taxpayer. 

We have made major strides in disability management that have 

resulted in significant reductions in the average number of work 

days lost from the most serious injuries. Over the last 10 years, the 

average number of days lost due to serious injuries has declined by 

over 20 percent, producing an annual savings of over $53 million. 

Our administrative costs are only 5 percent of the total program 

cost, well below the average of all State self-insurance programs 

which is over 11 percent. To further improve FECA, we have made 

comprehensive recommendations to Congress. I wish to highlight 

some of those major recommendations now. 

To help injured employees return to work, we request authority 

to start vocational rehabilitation activities without waiting until an 

injury is deemed permanent in nature. We seek a mandate to develop a return-to-work plan with claimants early in the rehabilitation process, and the authority to deploy an assisted reemployment 

program with Federal agencies, similar to the program we have 

successfully implemented with the private sector companies. 

The proposed changes will also have a positive impact on the 

government’s ability to achieve the President’s Executive Order on 

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hiring individuals with disabilities as well as protecting our workers and ensuring reemployment, the POWER initiatives. 

We also suggest changes to the benefit structure. For example, 

the payment of schedule awards for loss or loss of use of a limb, 

of one’s sight or hearing is often complicated and, thus, often delayed. Although not intended as replacement for economic loss, 

payments are based on the employee’s salary. So a letter carrier 

who has a knee impairment is compensated at less than half of her 

GS–15 manager for the very same injury. 

We think these awards should be paid by DOL concurrently with 

wage loss compensation made more rapidly, and to be fair, they 

should be calculated at a uniform level for all employees. We also 

propose to increase benefit levels for burial expenses, as well as facial disfigurements. 

Under current law, the majority of injured workers receive wage 

replacement at 75 percent of their salaries, tax-free, and Cost of 

Living Adjusted (COLA’ed). This rate is higher than the take-home 

pay of many Federal workers, and can serve as an obstacle to the 

Department’s efforts to encourage workers to make that hard and 

sometimes painful effort to overcome their injuries and return to 

work. 

We, therefore, recommend shifting the benefit level, for the majority of claimants, to 70 percent rather than 75 percent. To provide 

equity with other Federal employees, we also recommend establishing a lower conversion rate for beneficiaries beyond retirement 

age, which would more closely mirror OPM’s retirement rate. Both 

changes would be prospective in nature. 

In addition, elements of the statute need to be changed significantly to further reduce processing time. For example, the current 

statute increases the compensation rate for anyone with a dependent from the standard 66 and two-third rate to a rate of 75 percent. 

Paying all non-retirement age beneficiaries at 70 percent would 

simplify the process by eliminating the continuing need to obtain 

and validate documents regarding dependent eligibility. 

A single rate would be simpler and more equitable and would 

significantly reduce and provide savings to the taxpayer. This 

change alone, over a 10-year period, would produce a $500 million 

savings. My written testimony outlines other important provisions 

that would streamline and improve the program. 

In summary, while FECA is a model workers’ compensation system, it has limitations that need to be addressed. The reform we 

suggest today is not new. It has been proposed by the current and 

previous Administrations. We believe it is careful, balanced, reflective of good government, and would bring the program into the 

21st century. Thank you again for the opportunity to talk with you 

today and I look forward to answering any questions you have. 

Senator AKAKA. Thank you for your statement, Mr. Steinberg. 

Mr. Sherrill, would you please proceed with your statement? 

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1The prepared statement of Mr. Sherrill appears in the appendix on page 45. 

STATEMENT OF ANDREW SHERRILL,1 DIRECTOR, EDUCATION, 

WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT 

ACCOUNTABILITY OFFICE 

Mr. SHERRILL. Thank you, Chairman Akaka. I am pleased to be 

here today to discuss issues related to potential changes to FECA, 

which provides critical wage loss compensation and other benefits 

to Federal employees who are unable to work due to injuries sustained on the job. 

Concerns have been raised that Federal employees on FECA receive benefits that may be more generous than under the traditional retirement system and that the program may incentivize individuals to remain on the rolls well beyond retirement age. 

Over the last 30 years, there have been numerous proposals to 

change FECA, and more recent options for revising the program for 

older beneficiaries are similar to those that we have discussed in 

prior work. My statement today discusses stakeholder views surrounding previous proposals for change and policy questions and 

issues that still merit consideration today in crafting legislation to 

change benefits for older beneficiaries. 

In 1996, we reported that a perception among many that older 

FECA beneficiaries were receiving overly generous benefits had 

generated two types of proposals to change benefits once individuals reached retirement age. The first type would convert FECA 

benefits to Federal retirement benefits at retirement age. A bill recently introduced in the Congress includes a similar approach requiring FECA recipients to retire upon reaching Social Security 

age. 

A second type of proposal involves converting FECA wage loss 

benefits to a FECA annuity. The Department of Labor has recently 

proposed a similar change that would reduce FECA benefits for retirement-age recipients to 50 percent of their gross salary at the 

time of injury. 

In our past work, we have noted that proponents for change felt 

that reforms were necessary to control escalating costs and to ensure benefit equity. Those in opposition were concerned that benefit 

reductions would cause economic hardships, reduce incentives for 

employers to manage claims or develop safer work environments, 

and that age discrimination posed a possible legal challenge. 

In soliciting views from various experts and stakeholders, we 

identified a number of issues that merit consideration in crafting 

legislation to change benefits for older FECA beneficiaries. In going 

forward, Congress may wish to consider the following questions as 

it addresses current reform proposals. 

First, how would benefits be computed? For some proposals, as 

in the FECA annuity option, calculating the FECA benefits may be 

fairly simple. One issue for a FECA annuity option is whether it 

should be designed to achieve a certain benchmark, for example, to 

approximate a taxable retirement annuity. 

Converting FECA benefits to a retirement benefit may be more 

complex as it could involve varying retirement benefits depending 

upon the specific provisions, the different retirement systems, and 

the individual’s circumstances. For example, consideration of more 

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8 

complex adjustments may be necessary to address extended time 

out of the workforce and other variables. 

Second, which FECA beneficiaries would be affected and should 

some workers be exempt under some proposals such as those already on the rolls or those who are ineligible for Federal retirement? 

Third, what criteria would initiate a benefit change? Would age 

or retirement eligibility alone trigger events or would you need secondary criteria such as a delayed transition period for those at or 

near retirement age who may recently have been injured, but still 

have strong prospects for recovery and return to work? 

Fourth, how would other benefits be treated such as survivor and 

medical benefits under a reform system and who would administer 

the benefits? 

And finally, the critical question of how would benefits be funded. The FECA annuity option likely would remain funded under 

the traditional FECA charge-back system. In contrast, converting 

FECA benefits to retirement benefits may result in funding shortfalls for the retirement benefits and warrant consideration of alternative funding options. 

In conclusion, FECA continues to play a vital role in providing 

compensation to Federal employees who are unable to work because of injuries sustained while performing their duties. Prior and 

current reform proposals continue to raise a number of important 

issues with implications for both beneficiaries and Federal agencies 

responsible for administering the program. 

While not exhaustive, the analytical framework and questions 

posed in our prior report are still relevant today and can help all 

stakeholders and interested parties better understand the program 

complexities and key issues to consider as they move forward in assessing specific proposals for change. 

As you may know, we have ongoing work examining various 

issues related to FECA benefits for older beneficiaries, but are not 

yet at the stage of having preliminary findings and we look forward 

to working with both labor and OPM as we move forward with 

those analyses. That concludes my statement. I would be happy to 

answer any questions. 

Senator AKAKA. Thank you very much for your statements. My 

first question is for Mr. Sherrill. Your testimony discusses GAO 

work from 1996—— 

Mr. SHERRILL. Correct. 

Senator AKAKA [continuing]. That looked at similar proposals to 

reduce benefits to FECA recipients who were over retirement age. 

As your statement notes, many of the same questions raised by 

that report have not been answered and remain relevant today. I 

am especially interested in your testimony on how benefits will be 

calculated and funded under a retirement conversion proposal like 

S. 261. Could you please elaborate on the complexities of calculating and funding retirement benefits under such a conversion? 

Mr. SHERRILL. Certainly. Let me first talk about the calculation 

of the benefits. The first issue is whether or not to make any adjustments for people with regard to their retirement benefits, and 

if you make adjustments, you could treat the time on FECA as if 

the beneficiary had actually worked, either by giving credit for 

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9 

years of service or increasing the salary base depending on wage 

increases or inflation. 

Another question is whether you make any adjustments for foregone contributions to TSP or Social Security, whether you factor 

those in to provide protections or adjustments. So a number of different issues along those lines. 

With regard to the funding of retirement benefits, to the extent 

that there are shortfalls in the amount that agencies and individuals have contributed, if we are going to provide retirement benefits, there are different options to consider. One would be to have 

agencies pay lump sum payments at conversion for these new retirement benefits. That may be costly. 

Another option is to have agencies pay as you go, where they 

would make annual payments for these retirement benefits. There 

is also the option of having the agency and the employee continue 

retirement contributions before conversion, in order to provide additional sources of funding for this as well. Thus there are a lot of 

different factors to be considered. 

Senator AKAKA. Thank you for that response. Ms. Griffin, in your 

testimony, you mentioned that moving retirement age FECA recipients over to the Federal retirement system could not only dramatically reduce their monthly payments, but also leave some of them 

without health insurance. Why is that? And is there some way to 

ensure that disabled employees do not lose their health coverage? 

Ms. GRIFFIN. Well, not if we want to convert them over into retirement as S. 261 suggests because individuals are only entitled 

to continue health care benefits in retirement if they retire immediately after separation from employment, and these folks will all 

be in sort of a Catch 22 where they will already be out of the system by the time they retire. So they will not, by law, be eligible 

for health benefits. 

Senator AKAKA. I see. Mr. Steinberg, if FECA recipients were 

transferred to the Federal retirement system from FECA, how 

would this change impact their other FECA benefits such as benefits for medical costs resulting from their injuries? 

Mr. STEINBERG. They would still be eligible to receive the compensation for the medical costs. The point that concerns us even 

more is the fact that many of these individuals who have achieved 

retirement age still have the capacity to return to work and we are 

working with them in terms of vocational rehabilitation. We are 

working with them in terms of treatment of their injuries and illnesses. 

We believe we have the opportunity to help them return to work. 

If they were to move to the OPM retirement rolls, we would preclude that opportunity. So we will continue to support with the 

other benefits, but again, I think the big cost is the fact that we 

have lost the return to work opportunity for these individuals. 

Senator AKAKA. Thank you. Ms. Griffin, your statement briefly 

mentions that under S. 261, FECA recipients who concurrently 

apply for FERS disability would have their first benefit adjusted 

for additional service time and, hence, the average salary, while 

others would not. Would you please discuss why that is, as well as 

why a formula to adjust length of service and salary would be necH605-41331-79W7 with DISTILLER

10 

essary if FECA recipients were transferred to Federal retirement 

programs? 

Ms. GRIFFIN. And this is, as you said, under FERS? 

Senator AKAKA. Yes. 

Ms. GRIFFIN. Well, the FERS system, because it is more complicated than the CSRS, we have the TSP contribution as well as 

the Social Security piece. Those contributions will not be made 

while the person is out on workers’ comp. So those folks will really 

be in a more difficult situation under S. 261 if they are then converted over into retirement. Is that what you were asking? 

Senator AKAKA. Yes. Thank you. Mr. Steinberg, as you know, 

under S. 261, FECA recipients who are not eligible for FERS or 

CSRS could remain on FECA at retirement age. This means that 

employees, with just a few years of service, might receive dramatically higher lifetime benefits than those who served long enough to 

vest in the pension system. 

In contrast, the Administration proposal would apply uniformly 

to all FECA recipients. Will you please discuss why you propose to 

standardize benefits at retirement age and discuss any concerns 

you have with converting to Federal retirements? 

Mr. STEINBERG. The question is very insightful. The reality is 

that there are three different cohorts of individuals that would be 

affected. I think, as Ms. Griffin has characterized, you have the individuals who have not worked for the government long enough to 

be eligible for CSRS or FERS. They would stay on FECA. Under 

our proposal, they would receive 50 percent of their salary at the 

time of their injury. 

The individuals who just exceed the threshold have had very little opportunity to contribute to their retirement plan, both Social 

Security, FERS, as well as the Thrift Savings Plan, so they would 

be the ones impacted the most and be in a rather dire strait. 

The third category is those individuals who have worked a large 

portion of their career become injured. They would have a fair 

amount of investment, but still, there would be a difference between the 50 percent, or currently the 75 percent, and where they 

would likely be given their FERS contributions. 

We believe that the standard rate is fair, it is equitable, it brings 

the injured individual at retirement age to a level that far more 

closely equates to the retirement level of their colleagues who have 

worked their entire career, whether it is CSRS or FERS. 

Senator AKAKA. Thank you. Ms. Griffin, from your testimony, it 

sounds like there would be a number of complicated administrative 

challenges to converting FECA recipients to the Federal retirement 

system. OPM already struggles with delays in retirement processing and has been increasing its retirement staffing. Would OPM 

need additional resources and staff to deal with these new administrative burdens? 

Ms. GRIFFIN. Absolutely. Not only would we need more staff, but 

the changes to the computer systems—I mean, we are currently 

having difficulty modernizing the system as it is. To then further 

complicate it with these changes to all the different systems that 

exist would cause, I think, great difficulty and a fair amount of resources to actually implement. 

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Senator AKAKA. Ms. Griffin, the Department of Labor has indicated that reducing the FECA benefit to 50 percent at retirement 

age will give a FECA recipient a benefit comparable to what they 

would have received at retirement had they been able to continue 

working. 

If Congress considers reducing the FECA benefits at retirement 

age, it is essential to ensure that the conversion is fair and does 

not leave disabled elderly employees worse off financially than they 

would have been if they had not been injured. Has OPM compared 

retirement benefits at different pay levels in both FERS and CSRS 

to the proposed reduced FECA benefit? 

Ms. GRIFFIN. It is actually difficult. We looked at this and it is 

actually difficult to do a real straight comparison because there are 

a lot of variables that are unknown such as whether somebody is 

contributing to TSP and how much they are contributing and those 

types of things what is taxable and what is not. 

But if you do sort of a rough look at people at different levels, 

you really do see that there is a comparable way of approaching 

this by exactly what Department of Labor is proposing, looking at 

what they would end up with at 50 percent of what they were earning, what their high three would be before they actually went out 

on workers’ comp. 

And we think it is actually quite fair. But there are the variables, and we can provide something to you that does a rough estimate and we have that here, but there really are variables such 

as income tax and Social Security and the TSP contribution. 

Senator AKAKA. Well, thank you for that. I would ask you to 

please provide your analysis—— 

Ms. GRIFFIN. OK. We could do that. 

Senator AKAKA [continuing]. For the Committee. Thank you. Mr. 

Steinberg, an important difference between the Administration’s 

proposal and S. 261 is that the Administration’s proposal would 

apply the changes in benefit rates only to new injuries and new 

claims, while S. 261 would retroactively apply to past injuries. 

Will you please discuss why the Administration proposed only 

prospective benefit changes as well as any concerns you would have 

with retroactive changes? 

Mr. STEINBERG. We believe that the prospective approach provides a level of fairness and equity. The individuals have a sense 

of expectation. At this point we have a large number of individuals 

who are on our rolls that have planned for that level as they move 

into the older spectrum of age. 

Changing things immediately would cause a hardship to them, or 

have the potential to cause a hardship for them. Individuals who 

are currently Federal employees, understanding that the rate will 

be lowered and should they become injured or ill, as soon as they 

joined our rolls, they would understand that this would be their 

level of wage replacement once they achieve retirement. 

They would be in a better position to be able to plan for their 

retirement given that circumstance. Again, as Christine has indicated, they are not in a position to be able to contribute to Social 

Security, to FERS, and to Thrift Savings. This is what they rely 

on. This will allow them to much better prepare for their future. 

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12 

Senator AKAKA. Thank you. Mr. Sherrill, your testimony raises 

an interesting issue about some possible unintended consequences 

of S. 261. For instance, you note that someone over retirement age 

who gets injured at work could be forced into retirement even 

though they might otherwise have been able to recover and quickly 

return to work. 

Will you please elaborate why this would occur, as well as any 

thoughts you have on how it could be avoided? 

Mr. SHERRILL. This relates back to the issue that Mr. Steinberg 

talked about, which is the importance of focusing on the return to 

work of older beneficiaries when that is a possibility, and I earlier 

made reference to the idea of whether it would be appropriate to 

have secondary criteria to deal with such cases. 

If the primary criteria would be that there should be a change 

or a conversion at the retirement age, you would be concerned also 

about people who might be close to that, maybe recently injured, 

but do have a potential to return to work. 

So you might want to consider a provision to have them transition to retirement or to a different benefit either at retirement age 

or, for example, after 5 years of FECA benefits or so that there 

would be opportunities for them to have return to work activities 

and to get back into employment. 

Senator AKAKA. Thank you. Ms. Griffin, I appreciate this Administration’s focus on improving Federal employment opportunities 

for people with disabilities. I believe you deserve a lot of credit for 

providing leadership on this issue. Both Administration witnesses 

touched on this topic, but I would like you to elaborate on how the 

renewed focus on improving FECA return-to-work outcomes dovetails with the President’s other disability initiatives. 

Ms. GRIFFIN. Well, as I mentioned in my testimony, a year ago 

today, we are celebrating the anniversary of not only the 21st anniversary of the Americans with Disabilities Act (ADA), but also the 

signing of the Executive Order to increase Federal employment of 

people with disabilities. 

In that Executive Order, the President, I think, was smart 

enough to include a provision in there that talks about returning 

people to work, recognizing that we do have people who, from time 

to time, do go out because of an injury, but because we are actually 

saying that we can employ—we actually have the technology to employ the most severe people with disabilities in the Federal Government, who have the skills that we need to do certain jobs. 

And we can accommodate them and we have an amazing system 

for the Computer/Electronics Accommodations Program (CAP), 

which is over housed at the Department of Defense (DOD), but provides accommodations for all employees in the Federal Government. So we are recognizing that we can bring the most severe— 

people with the most severe disabilities into the Federal Government who can do a great job and we can accommodate them. We 

have the technology to do that. 

So there is, I think, with this Executive Order, a recognition that 

maybe some of these people do not have to go out in the first place 

because we can actually talk to them about how we can accommodate them, but more importantly, when they do have to go out, we 

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13 

can bring them back easily because we can accommodate them as 

well. 

And so, this dovetails beautifully and we have been working 

closely together, really going across the country, talking to Federal 

audiences and people with disabilities about this Executive Order 

and about the ability to hire people, but also return people to work 

that are out on workers’ comp. 

The technology is amazing. It changes almost, it seems like, on 

a monthly basis and we are able to do great things with veterans 

with disabilities, people with disabilities overall, and our own Federal workers’ comp claimants to get them back to work and accommodate them. 

Senator AKAKA. Thank you. Mr. Steinberg, your proposals asks 

that the Department have authority to access Social Security wage 

information to help reduce fraud by those who are working while 

still collecting FECA benefits. It is very important that personal 

Social Security information is protected, and because of that, access 

to it always has been very limited. 

My question is, how would this information sharing work and 

what safeguards would be in place to ensure this personal information is secure? 

Mr. STEINBERG. Senator Akaka, I was at the Department of Veterans Affairs when we had the data breach, so I am only too aware 

of the importance of protecting sensitive information, personally 

identifiable information (PII), health care information and so forth. 

But we have the responsibility to adhere to the Privacy Act. All of 

our individuals, all of our employees are well-trained and wellversed in the requirements associated with the Privacy Act. 

The same holds true for our interaction with the other Federal 

agencies. We have memorandum of understandings (MOUs) with 

them that also require them to protect information. What we are 

looking for here is the opportunity to move forward and gather information from the Social Security Administration (SSA) in an expedient manner. Right now, we have to ask permission of each 

claimant to go to SSA and have access to their earnings information. 

If we are afforded the opportunity to do that automatically, it 

eliminates the time of going and asking permission. It reduces the 

amount of time to then go forward to SSA. We will have an automatic ability to have access to that information. So again, we are 

able to evaluate situations of potential fraud, we are able to do it 

far quicker, but again, rest assured, we understand the Privacy Act 

requirements and we enforce that. 

Senator AKAKA. Well, I want to thank you very much. To this 

panel, your statements have been valuable. It will help us move 

forward and be as fair as we can. I want to thank you very much 

for being here today and helping us do this. So thank you very 

much for coming and for your testimony. 

I would ask that our second panel of witnesses come forward. On 

our second panel this afternoon, we have Mr. Joseph Beaudoin, 

President of the National Active and Retired Federal Employees 

Association (NARFE); Mr. Ronald Watson, Consultant for the National Association of Letter Carriers (NALC); and Dr. Gregory 

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1The prepared statement of Mr. Beaudoin appears in the appendix on page 59. 

Krohm, Executive Director of the International Association of Industrial Accident Boards and Commissions (IAIABC). 

It is the custom of this Subcommittee to swear in all witnesses, 

and I would ask all of you to please stand and raise your right 

hand. 

Do you solemnly swear that the testimony you are about to give 

this Subcommittee is the truth, the whole truth, and nothing but 

the truth, so help you God? 

Mr. BEAUDOIN. I do. 

Mr. WATSON. I do. 

Mr. KROHM. I do. 

Senator AKAKA. Thank you. Let it be noted for the record that 

the witnesses answered in the affirmative. 

Let me also remind all of you that although your oral statement 

is limited to 5 minutes, your full written statements will be included in the record. 

Mr. Beaudoin, please proceed with your statement. 

STATEMENT OF JOSEPH BEAUDOIN,1 PRESIDENT, NATIONAL 

ACTIVE AND RETIRED FEDERAL EMPLOYEES ASSOCIATION 

Mr. BEAUDOIN. Mr. Chairman, I am Joseph A. Beaudoin, President of NARFE. Thank you for the opportunity to testify. As you 

consider legislative reforms to FECA, I urge you to pursue common 

sense reforms that improve program efficiency, achieve cost savings, and improve fairness without reducing the basic compensation provided to those employees unfortunate enough to suffer a debilitating injury or illness as a result of their public service. 

Current proposals by Senator Susan Collins and the DOL to reduce benefits for FECA recipients at retirement age do not adequately take into account the disadvantages faced by employees unable to work because of a work-related injury, leaving them worse 

off in terms of income. 

I will now discuss the current proposals. S. 261, the Federal Employees Compensation Reform Act introduced by Senator Collins, 

would move FECA recipients to the retirement system at full Social 

Security retirement age. This presents multiple issues. 

First, there is no provision to adjust upwards the average highest 

3 years of salary to account for wage inflation. FECA recipients 

also will have lost the ability to increase their salary through 

raises and promotions. At the very least, they should receive an adjustment based on the Employment Cost Index, or another wage inflation indicator, to the average highest 3 years of salary for purpose of computing their annuity. 

Second, FECA recipients may not receive credit for years of service for the time between when they became injured and when they 

turned 62. Third, FERS-covered FECA recipients lose the ability to 

invest in a Thrift Savings Plan and receive matching contributions 

from their agencies. 

Finally, FERS-covered employees may have a reduced Social Security benefit because they are unable to earn quarterly credits 

used to calculate Social Security benefit payments. The net effect 

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15 

1The prepared statement of Mr. Watson appears in the appendix on page 67. 

of the transition to the retirement system mandated by S. 261, as 

written, would be reductions in benefits for many FECA recipients. 

We would like to thank Senator Collins for demonstrating a willingness to work with us and maintaining an open dialog with respect to FECA reforms. 

Next, the DOL proposes to reduce FECA recipients’ basic compensation benefit to 50 percent of their gross salary at the date of 

injury, still tax-free, when they reach full Social Security retirement age. 

While this proposal provides a retirement level income closer to 

that of current retirees, it still does not fully account for disadvantages faced by FECA recipients, notably for many of the same reasons S. 261 does not foregone raises and promotions, lost matching 

contributions, and reduced Social Security benefits. While the 

framework of DOL’s proposal offers more economic security than S. 

261’s, it still short-changes FECA recipients. 

Last, H.R. 2465, the Federal Workers’ Compensation Modernization and Improvement Act, provides a fairer, more considered approach to reform that achieves cost savings without reducing the 

basic benefits paid to employees who suffer a debilitating injury as 

a result of their public service. 

The legislation combines much needed adjustments to compensation for the worst case injuries and illnesses and common sense 

measures that should improve the processing of claims and reduce 

improper payments and save money. H.R. 2465 represents a model 

of the best path to reform, one that will achieve cost saving and 

improve fairness and garners broad, bipartisan support. 

In conclusion, current proposals to take money away from individuals who are irrefutably unable to work because they were injured as a result of their public service, fail a basic fairness test. 

If those individuals had the choice, they would be healthy and 

working and preparing for a retirement of choice, rather than of 

necessity. FECA reforms need not and should not sacrifice basic 

principles of fairness in the name of achieving cost savings. 

Mr. Chairman, I want to thank you for inviting us to testify 

today. 

Senator AKAKA. Thank you very much, Mr. Beaudoin. Mr. Watson, will you please proceed with your statement? 

STATEMENT OF RONALD WATSON,1 CONSULTANT, NATIONAL 

ASSOCIATION OF LETTER CARRIERS, AFL–CIO 

Mr. WATSON. Good afternoon, Chairman Akaka. 

Senator AKAKA. Good afternoon. 

Mr. WATSON. I am pleased to testify today on behalf of the nearly 

290,000 members of the National Association of Letter Carriers. 

Thank you for the invitation. 

NALC welcomes the prospect of reform to the Federal Employees 

Compensation Act, provided that it does not result in unfair harm 

to the injured workers the Act was designed to protect. In our view, 

some of the proposed reforms meet this test; others do not. For instance, there is a proposal to level wage loss compensation to 70 

percent for all injured workers. 

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16 

Proponents argue that 75 percent tax-free often exceeds the preinjury take-home pay, and thus creates a return-to-work disincentive that needs to be eliminated. We disagree with that. A 1998 

GAO report examined FECA wage loss compensation, measured as 

a percentage of pre-injury take-home pay. One analysis indicated 

about 10 percent of claimants received compensation that exceeded 

pre-injury take-home pay, and that 10 percent consisted of only the 

highest paid employees. 

Moreover, significantly, the analysis excluded all claimants who 

had established wage earning capacity determinations. Thus, the 

argument that wage loss compensation often far exceeds pre-injury 

take-home pay seems unsupported. 

Additional points are relevant in assessing return-to-work disincentives. Loss of benefits is one. Generally, workers are motivated by benefits as well as pay when making employment decisions. FECA beneficiaries lose significant benefits. Upon placement 

in a leave-without-pay status by an employing agency, lost benefits 

include annual leave, sick leave, TSP advantages, over-time opportunities, promotion prospects, and other pay increase potentials. 

After separation by the employing agency, additional lost benefits include Social Security credits for FERS employees, CSRS and/ 

or FERS annuity credits, higher health benefit plan rates, higher 

basic Federal Employee Group Life Insurance (FEGLI) rates for 

postal employees, loss of step increases, and loss of union-negotiated contractual protections. 

These losses are substantial. We believe there is no need to reduce the current 75 percent rate to address perceived return-towork disincentives. Instead, there is a need to address OWCP policies that may foster disincentives for employing agencies to return 

injured employees to work. 

Since 2007, the Postal Service National Reassessment Program 

(NRP) has resulted in the withdrawal of thousands of previously 

provided limited duty jobs. The NALC has aggressively challenged 

many of those withdrawals through our contractual grievance arbitration system. 

These are cases involving injured workers who are able to do 

some work and want to work, even though most are receiving 

OWCP wage loss compensation. Despite the availability of limited 

duty work, they are not allowed to work by the Postal Service. 

An example: It involved a letter carrier who had injured his foot 

on the job. OWCP authorized surgery. A chronic infection of the 

bone resulted from that surgery. As a result, he was medically restricted to very little walking. He could not deliver a route, but he 

could stand and sort mail. For many years, the Postal Service accommodated him. 

Then local management withdrew that limited duty job and 

placed him on leave without pay (LWOP). The sorting work he had 

been doing was reassigned to temporary employees. He began receiving wage loss comp from OWCP, but he also immediately filed 

a grievance to get his job back with the Postal Service, and he 

never stopped fighting until he succeeded in that. 

The argument that the 75 percent compensation rate creates a 

disincentive for return to work is wholly inconsistent with the 

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1The prepared statement of Mr. Krohm appears in the appendix on page 74. 

NALC’s recent experience, which includes hundreds and hundreds 

of injured letter carriers fighting to get their jobs back. 

Mr. Chairman, that concludes my testimony. Thank you for the 

opportunity and I welcome any questions that you may have. 

Senator AKAKA. Thank you very much, Mr. Watson. Dr. Krohm, 

will you please proceed with your statement? 

STATEMENT OF GREGORY KROHM,1 Ph.D., EXECUTIVE DIRECTOR, INTERNATIONAL ASSOCIATION OF INDUSTRIAL ACCIDENT BOARDS AND COMMISSIONS 

Mr. KROHM. Good afternoon, Chairman Akaka. It is a pleasure 

to be here. I am the Executive Director of the International Association of Industrial Accident Boards and Commissions. My organization, founded in 1914 at the inception of workers’ compensation 

in this country, has existed for the purpose of educating and networking with our member States to develop better workers’ compensation systems. 

So it is a pleasure to be here to talk about State workers’ compensation. That will be the focus of my remarks. I am not here to 

testify on any particular legislative proposal, but to offer some insights that my member states in the United States’ workers’ compensation systems, have learned through the years. 

I would like to begin by comparing and contrasting State benefits 

with some FECA program benefits, again, just for the sake of information only. I will begin with medical payments. Medical payments 

are very similar across the States. They provide medical care, as 

necessary, to cure and relieve the consequences of a work injury or 

illness, so a wide variety of licensed medical providers can provide 

the care. The injured worker is not subject to co-payments or balanced billing. 

So in that respect, in many respects, it is similar to the FECA 

program. States differ, however, very widely on the employer’s or 

employee’s rights to manage the care and how it is delivered to 

them in their choice of medical providers. As I understand it, 

FECA allows the claimant unlimited choice of medical providers 

and does not have guidelines or treatment protocols similar to what 

many States have. This seems to me to be a difference. 

Temporary disability, temporary total disability (TTD) benefits 

are the second most common form of claimants in State workers’ 

compensation. It is, by far, the most uniform type of indemnity 

benefit paid by States. Generally, States pay 662⁄3 percent of preinjury wages. Four States pay a larger percentage; Texas, New Jersey, and Oklahoma pay 70 percent; and Ohio pays 72 percent. 

There are four States that have a different formula based on, 

quote, spendable or after-tax income. TTD is usually paid for the 

length of disability or until maximum medical improvement is 

achieved, although some States, not a few, have weekly limits 

ranging in the area of 100 to 700 weeks as a higher limit on how 

many weeks of TTD can be paid. 

TTD is usually capped about somewhere around the State average weekly wage (SAWW), and this is adjusted in some States, plus 

or minus 25 percent. The income continuation feature of FECA is 

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18 

without any counterpart in State workers’ compensation. Now, it is 

true that some private sector employers offer sick leave benefits 

and short-term disability insurance that would ease the cash-flow 

crunch of an injured worker for that disability waiting period that 

is almost always imposed in State workers’ compensation, usually 

in the range of 3 to 8 days of a waiting period. 

An unusual feature of FECA is the increase in percentage of 

wage replacement from 662⁄3 to 75 percent for cases where there is 

at least one dependent. This would be very unusual, in fact nonexistent, in State programs, to have that much of a benefit adjustment in the TTD payment for a dependent. 

Permanent partial disability (PPD) benefits are a very, very large 

percentage of the payout in State workers’ compensation. And in 

fact, for all permanent disability payments for the State using a 

country-wide number, claims with permanent disability constitute 

only about 38 percent of all claims in State work comp systems, but 

generate 80 percent of the indemnity payouts. So they are a very 

large percentage of the indemnity payouts in State systems. 

PPD payments, in State systems are based on scheduled benefits 

or unscheduled benefits, scheduled benefits being a specific amount 

of indemnity is paid for the loss of use of a body part or a bodily 

system, and unscheduled benefits are based on some other form of 

assessment of impairment, usually made by a medical doctor, usually using the American Medical Association (AMA) impairment 

guidelines. 

Twenty-nine States pay impairment based on—the PPD rates 

would be based on something very similar to the TTD rate, and 

other States adjust that rate by age, occupation, or other factors, 

the severity of injury, perhaps. And 45 States place limits on the 

number of weeks payable or the total dollars payable for PPD. 

PPD, as a general rule, is very different across the States. It is 

one of the peculiarities of the State workers’ compensation system, 

that they have not been able to agree on any degree of uniformity 

on how to compensate for permanent partial disability. 

Permanent total disability (PTD) is, again, very difficult to summarize across States. There is much variation. As of 2010, 33 

States offered lifetime permanent total disability payments similar 

to FECA. Twenty-one had some form of automatic or formula-based 

cost of living escalator, not always as uniform and automatic as 

FECA’s. 

And many States eliminate permanent total disability benefits if 

the claimant resumes gainful employment. I should also add to my 

testimony that many States, in lieu of permanent disability payments, settle the—the responsible payer will settle the case with 

a lump sum negotiated settlement. So many cases of severe permanent disability never end up as a permanent total case. They are 

settled out with a lump sum payment. That degree of settlement 

with a lump sum payment varies widely by State. 

So there are significant differences between the State programs 

and FECA. By way of comparison, I have provided in my prepared 

testimony some statistics prepared by the National Council on 

Compensation Insurance (NCCI), which I will not read here but 

provided for your information only. 

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1The chart referenced by Mr. Krohm appears on page 78. 

Next I would like to touch upon an issue that often arises in 

State workers’ compensation, the relationship between benefit design and claim duration and cost. There is significant evidence that 

the richness of a disability benefit will affect claiming behavior. 

The richer the benefits—richer benefits are often associated with 

more positively—more positive or larger claiming behavior or duration of indemnity. 

This should not be a surprise to us because it seems only natural 

that if the cost of reporting a work injury and staying out of work 

becomes higher, more claims will not be reported and/or the injured 

worker will come back to work more quickly. 

For example, a case that I was familiar with when I worked with 

plumbing contractors, it was very clear that small plumbing contractors had very few workers’ compensation claims, at least in 

normal construction periods, because plumbers could make a lot 

more money even working injured, hurt, very hurt in some cases, 

than reporting the claim because there was just more money to be 

made as a plumber than there was on workers’ compensation. So 

as the expression goes, they would play hurt. 

I provided in my testimony a chart1 taken from a 2010 National 

Council on Compensation report on benefit features in 37 States 

and the median days of disability for lost time claims. 

I have looked at that chart, I have studied it carefully, as I have 

in many other contexts studied these particular benefit design features, and I must say I cannot see an easy correlation between 

things like the cap on TTD payments and the percentage of State 

average weekly wage that one might get in TTD payments, or, even 

for that matter, the days of the waiting period, whether 3, 5, 7 or 

8. I cannot see an easy relationship between those benefit design 

features and the disability duration days. 

Now, I earlier said that benefit design does make a difference. 

I firmly believe that. Incentives do count, they do matter. But it is 

not an easy relationship. The National Council on Compensation 

Insurance often does studies at the request of State governments 

for their actuaries to make considered opinions as to how benefit 

design changes are going to affect claiming behavior. 

They not only consider historic relationships and the objective 

facts of past claims, but they also try to bring into their consideration estimates of behavioral changes in claimants, both in terms 

of frequency of claiming behavior and the duration of their time 

away from work. 

Senator AKAKA. Dr. Krohm, will you please—— 

Mr. KROHM. So I only add that to my testimony to say that I—— 

Senator AKAKA. Dr. Krohm, will you please summarize your 

statement. 

Mr. KROHM. Pardon me, please? 

Senator AKAKA. Will you please summarize your statement? 

Mr. KROHM. OK. I will then go into my final part of my comments which is to state a strong plea, if you will, for the importance of disability management. From everything I can see, OWCP 

does place emphasis on disability management return-to-work. I 

think this is a very important component of workers’ compensation. 

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It is a difficult thing to achieve. There is no easy formula on disability management and return-to-work. It requires a lot of coordination and hard work, but those efforts of coordination and hard 

work are well worth it because it is good for injured workers to be 

returned to work, presumably their pre-injury employer, as soon as 

possible. 

I am firmly convinced that it is in the best interest of workers; 

it improves their health. The therapeutic healing benefits of returnto-work are pretty well-established, and I think it is a very important feature to controlling cost in workers’ compensation. With 

that, I will conclude my testimony. 

Senator AKAKA. Thank you very much, Dr. Krohm. Mr. Beaudoin 

and Mr. Watson, you both expressed some concerns with proposals 

to change the FECA benefit structure, but a willingness to support 

reforms that are fair to the injured workers that FECA was designed to protect. You both have members who were hurt serving 

this country and who rely on workers’ compensation benefits. 

Would you please elaborate on how you believe these proposals 

could impact disabled employees who are unable to work after a 

work-related illness or injury, and what must be done to ensure 

fairness? Mr. Beaudoin. 

Mr. BEAUDOIN. Yes, sir. We believe that the Senate Bill 261, as 

it is proposed, will cause problems with our workers. No. 1, it is 

a failure to account for disadvantages faced by FECA recipients. 

There are no adjustments of highest 3-year salary to account for 

wage inflation, so their income can never grow. 

They are not credited for years of service between the time they 

got injured and when the retirement age of 62 arrives. Again, there 

is no—they cannot grow in their income. The Civil Service Retirement System disability annuities do not increase for credit for service. 

The recipients lose the matching contributions to the TSP, which 

again affects their future income, present and future income, and 

since they cannot work, they cannot get Social Security or gain 

more Social Security benefits so that their wages pretty much 

freeze. But under the present system, it is fairer than the Senate 

Bill 261. 

We do believe that the House Bill 2465 is a much better bill for 

us or for the government to be using. 

Senator AKAKA. Thank you. Mr. Watson? 

Mr. WATSON. Yes. The NALC also agrees that House Bill 2465 

encompasses fair reform measures. Regarding the major reduction 

to benefits proposals that we have seen, one I already discussed 

and that is the reduction to 70 percent for most employees, in payment of wage loss compensation, and regarding another major proposal to reduce wages at retirement age, both found in S. 261, and 

also in the OWCP’s proposal to convert OWCP benefits to 50 percent at retirement age. 

We believe that the case has not been made for either one of 

those reductions. Clearly, S. 261 would wreak a horrible effect on 

certain employees, employees who were hurt early in their career 

and only had a few years vested in FERS retirement, for instance. 

Those employees would be devastated financially by S. 261. 

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21 

But even the other proposal to reduce benefits to 50 percent at 

Social Security retirement age, we do not believe the case has been 

made to do that. Usually when proponents of that reduction argue, 

they argue that, Well, CSRS employees, the average CSRS retirement computes to about 60 percent of what they were earning 

when they retired. 

And then they compare that with the 75 percent tax-free. But the 

fact is that most Federal employees today are not covered by CSRS. 

The latest statistic I saw was 17 percent. So 83 percent of employees are covered by FERS. There is a recent Congressional Research 

Service (CRS) study on FERS retirement rates that shows that— 

and, of course, FERS is a three-part retirement. There is the FERS 

annuity, there is Social Security, and then there is the Thrift Savings Plan. 

That CRS study showed that moderate placement into TSP for 

a career of only 5 percent at a nominal return rate of 6 percent, 

that would result in a typical FERS employee receiving about 82 

percent, or even more, as their total retirement when you add up 

the Social Security component, the FERS annuity component, and 

then what you can buy in an annuity with that TSP. 

And so, that old CSRS 60 percent rate does not seem to me to— 

that is not what people are going to be facing. If they contribute 

to the TSP and compensation on FECA benefits cannot do that, 

they are going to have much higher return rates. And so, we do not 

believe that the case has been made for the reduction to 50 percent. We do not believe it is fair. 

Senator AKAKA. Well, let me followup to a question with both of 

you. The Administration’s proposal to apply benefit changes only to 

future injuries and workers’ compensation claims, while S. 261, as 

drafted, would apply retroactively to FECA recipients injured in 

the past, what are your views specifically on the issue of retroactivity? 

Mr. BEAUDOIN. I am sorry. Were you asking me, sir? I thought 

you were asking Mr. Watson. 

Senator AKAKA. Mr. Beaudoin. 

Mr. BEAUDOIN. I am sorry. We feel it is very unfair right now 

because if we look at the younger workers, they are the ones that 

are going to be affected the most. The elderly workers or the ones 

that are in retirement, the effect on them will be not as great as 

the effect on the younger workers. 

But unless the people that are disabled at a young age can increase their retirement benefits by either being able to contribute 

with the matching contributions of TSP, or they can—you index 

their salaries, or allow them to—their salaries to grow, if S. 261 

was put into effect, some of our members would be on poverty. 

They would not be able to pay their bills and they would go on welfare. They just would not have the income to live a normal life. 

Senator AKAKA. Mr. Watson. 

Mr. WATSON. The idea of making a requirement to move to retirement at a certain age, Social Security age, or to reduce OWCP 

benefits at that age, in theory, the idea that those changes would 

be prospective rather than retroactive, is more fair, would be more 

fair for the reasons I believe Mr. Steinberg testified to, to make it 

prospective because then people could plan for it. 

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However, when you look at the OWCP’s proposal, on the one 

hand, it is prospective to a degree, but there are, if you read the 

language of their proposal closely, you can see that there are circumstances where they would bring in people. So it is not completely prospective. It is only partially prospective. 

But even still, with OWCP’s proposal, here is what the effect 

would be. It would not be retroactive so it would not apply to all 

of those CSRS retirees who average 60 percent, but it would apply 

to all the FERS employees who might be more reasonably and fairly looking at an 80 or 90 percent replacement rate. So it does not 

make any sense. 

Senator AKAKA. Thank you. Dr. Krohm, I understand that the 

majority of States have workers’ compensation benefits that are 

similar to FECA in that they are payable for the duration of the 

disability with no reduction at retirement age. 

Do you know if any of these States have considered reductions 

at retirement age, and why they have opted to continue coverage 

for the life of a permanently disabled recipient? 

Mr. KROHM. As I said, 33 percent of the—it should be 33 States 

have lifetime benefits. I have seen no discussion of any of those 

States changing that, and I have been looking at State laws pretty 

carefully since about 2000. There has been no discussion of that. 

It just seems to be a very settled part of the law in those States. 

Senator AKAKA. Mr. Watson, your testimony indicates that 

NALC members who are on FECA generally want to return to 

work if they can. 

Mr. WATSON. Yes. 

Senator AKAKA. And will even fight for a limited duty job when 

it is taken away. What barriers have you seen for returning to 

work, both at the Postal Service and, more generally, in the current 

FECA program? And do you believe the Administration’s reform 

proposals would improve return-to-work outcomes for your members? 

Mr. WATSON. I think that the Postal Service makes decisions 

based on financial calculations, so that in the past, it has been our 

experience or our belief that the Postal Service calculated a typical 

injured employee is paid 75 percent wage loss compensation. 

OWCP has about a 5 percent overhead rate and they charge the 

Postal Service. 

So the Postal Service paid 80 percent to have a guy sit at home. 

And as a result of that, we believe the Postal Service calculated it 

is better for us to get some work, even if the guy, for instance, a 

letter carrier, he cases his route, he goes out and delivers it. He 

has a leg injury. Now he cannot walk very much, and so all he can 

do is limited duty. He can only do part of his job, and maybe even 

then he is not as efficient as he used to be or perhaps as some others. 

But the Postal Service used to calculate, since we are going to 

pay 80 percent anyway of the guy’s salary, we might as well get 

some work out of him and have him work. We will pay him 100 

percent, but he will be here at work and we can assign him limited 

duties. That is the way it used to be. 

We believe they made a different calculation now and it flowed 

right from their transformation plan in 2002. The Postal Service 

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made this big plan way back then, big, big blue book, and one of 

the parts of the plan was to make an agreement with OWCP to 

have vocational rehabilitation of employees that was very condensed. 

And so, what they hoped for, what they planned for with that 

was to have employees who were found by OWCP to be vocational 

rehabilitated, and so a wage earning capacity would be placed on 

them. And what that means is, the FECA does not provide for 75 

percent of your date of injury salary. That is not what it says. It 

provides for 75 percent of your date of injury salary minus your remaining capacity to earn wages. 

And so what we find OWCP doing now is sometimes, many 

times, they will say to a letter carrier who is not provided limited 

duty by the Postal Service, we are going to help you find a job as 

a customer service rep for 3 months, and at the end of that period, 

we are going to determine that the job of customer service rep is 

available in your commute area and it pays $10 an hour, so you 

have a $400-a-week remaining wage earning capacity. 

Once they do that, OWCP no longer pays 75 percent of the date 

of injury salary. They pay 75 percent of the date of injury salary 

minus that ability to earn those wages, and that is true if the individual is able to obtain that employment or not. And we believe 

that is the calculation the Postal Service has made, and we think 

that is a major impediment to our efforts to allow employees who 

are injured on the job at the Postal Service to continue their careers in the Postal Service. It is that kind of thing that we are facing and dealing with. 

The other part of your question, Chairman Akaka, was what 

about the Administration’s proposals. We think that reductions in 

benefits such as to 70 percent and reductions at the retirement age, 

that those reductions of the cost to an employing agency like the 

Postal Service are only going to increase the incentives of employers to not provide limited duty work. And so, we are concerned 

about many of those proposals. 

Senator AKAKA. Thank you, Mr. Watson. Mr. Beaudoin, I would 

like to hear your thoughts on this as well. In your experience, do 

your members who are on FECA generally want to return to work 

and when they are able to their job, their old job, or to a more limited job duty? Do you think the reforms in the Department of Labor’s proposal will help improve return-to-work incentives? 

Mr. BEAUDOIN. Chairman Akaka, the workers or the members 

that we have would definitely like to return to work if they were 

able to so that they can increase in their retirement, they can have 

dignity, they can be model citizens. But in the Department of Labor 

proposal, there is a significant reduction in retirement age benefits 

for all recipients. 

And as we talked about before, the proposal fails to take into account disadvantages faced by the FECA recipients and that is, as 

we talked about also, the loss of ability to increase salary through 

raises and promotions and the loss of the contribution to TSP, and 

the recipients have lost the Social Security benefits. 

But if I could, I would like to give you an example of one of our 

members who has experienced a problem. This lady began working 

as a seasonal temporary employee for the Postal Service in 1993 

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and became a career employee in 1998. Fifteen years on the job 

with repetitive motions and continual heavy lifting left her with a 

serious back injury resulting in immobility, severe pain, and inability to work. 

At the time of her injury, she was about 41 years old, earned 

about $53,300 a year, or $4,441 a month. Her FECA benefit on that 

salary is about $2,931 per month, but a FERS retirement annuity 

for a high three salary of $53,300 on 15 years of service is only 

$666 per month. 

Even if she were to receive credit for years of service for time out 

of work between the ages of 41 and 62, her annuity would only be 

about $1,758 per month, a significant reduction from her FECA 

benefit. Furthermore, she has little savings in her Thrift Savings 

Plan, only $12,000, hardly enough to make a serious contribution 

to her retirement age. 

Her injury causes her enough pain and discomfort and losing her 

FECA benefits would cause even more. We do not believe that Senate Bill 261 should be considered because of the loss of wages that 

she will experience, as well as others. 

Senator AKAKA. Thank you. Mr. Watson, the Administration proposed expanding an authority to reimburse employers that provide 

suitable employment to injured Federal workers, to allow reimbursement to Federal agencies that hire these workers. Do you believe this proposal would help open a broader range of opportunities for your members who are able to return to work? 

Mr. WATSON. We have very serious misgivings about that proposal. We are certainly in favor of broadened opportunities, but we 

are afraid that the actual effect of this proposal would be to encourage the Postal Service to withdraw limited duty job offers even 

more, and that is for a couple of reasons. 

One of the major concerns we have with this proposal that DOL 

has made includes—well, the proposal includes a provision that allows the office to begin to require vocational rehabilitation services 

after 6 months, even if the injured worker has not yet fully recovered as much as they are going to recover from the injury. 

So currently, the law regarding the FECA provisions regarding 

vocational rehabilitation only require an employee to undergo and 

cooperate with it once they have reached maximum medical improvement (MMI), once they have recovered, once their disability is 

determined to be permanent. 

And so, the proposal of the DOL is to include requiring employees to do vocational rehabilitation, even though they have not 

reached that MMI point. And the problem with that is that there 

are restoration rights that employees have right now. It is based 

in the FECA and the implementing regulations are found at 5 

C.F.R. 353, and those restoration provisions hold that if an employee totally recovers within 1 year or if they reach MMI within 

1 year, then their rights to restoration to employment with the employer at the time of the injury are much greater than if they reach 

those points after 1 year. 

And so, this proposal is potentially going to result in letter carriers being required to undergo vocational rehabilitation; that is to 

say, get ready for a different job when they very well may have resH605-41331-79W7 with DISTILLER

25 

toration rights within the Postal Service if they do reach MMI or 

fully recover within 1 year. 

So we are afraid what that is going to do is encourage the Postal 

Service to do even more of what it has been doing, which is not providing limited duty to injured letter carriers. We are very concerned about that. 

Senator AKAKA. Thank you very much. This question is for the 

panel and I would like to begin with Dr. Krohm. So before we close 

this hearing, I would like to give each of you the opportunity to discuss any additional thoughts or highlight what you believe are the 

most important issues we should keep in mind as we consider reforms to FECA. We will now start with Dr. Krohm. 

Mr. KROHM. Thank you. Well, as we have heard, incentives can 

be tricky, they matter, they matter for both employees and they 

matter for both—and the employer. Getting them right requires 

hard work, but I think it is worth the effort because getting the injured worker back to work, preferably with the pre-injury employer, preferably in a job situation as close as possible to their preinjury employment, is the way to go. 

It is the gold standard for the best State systems that I know of, 

and I think it probably would apply just as well to the FECA program. Vocational rehabilitation is a good idea. It is necessary at 

times, but it would not be my first choice. It would be getting the 

injured worker back to work on light duty, modified duty with the 

pre-injury employer as soon as possible. 

Absent any medical restriction to the contrary, that could be the 

day after injury. There is no arbitrarily long waiting period that 

should be used to get the injured worker back to work at their preinjury employer. 

Senator AKAKA. Thank you. Mr. Watson. 

Mr. WATSON. Yes, I agree with Mr. Krohm that it is very important that injured workers have the opportunity to return to work 

as soon as medically called for, and ideally with the employer at 

the time of injury. I believe that is very important. And I think in 

order to achieve that goal, there are two things that could be done, 

now that we are dealing with FECA reform, and that is to address 

two very major issues. 

One is the issue of loss of wage-earning capacity determination, 

sometimes called Wage-Earning Capacity (WEC). The two terms 

mean the same thing. That is a major, major issue for us. 

What we have is letter carriers who have had a loss of wageearning capacity determination made based on a limited duty job 

in the Postal Service which is later withdrawn and then, because 

of that WEC determination, they receive no benefits from OWCP, 

none. They get nothing. They have no pay from the Postal Service, 

they have no benefits from OWCP. They lose their health benefit 

plan. 

That is happening and that needs to be addressed. And I think 

we have an opportunity to do that since we are discussing FECA 

reform. 

And the other related issue that I think we could try and address 

is the responsibilities of employing agencies to provide work for injured workers. There is very little in the FECA right now regarding 

that. The implementing regulations, such as they are, are found in 

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5 C.F.R. 353, and I think that we could do a lot of good by addressing those. Thank you. 

Senator AKAKA. Thank you. Mr. Beaudoin. 

Mr. BEAUDOIN. Chairman Akaka, the Federal workers who participate in FECA would do anything to turn back the clock and be 

working without injury. But that is not their reality. That is why 

the least we can do for the trauma they have suffered is compensate them fairly. 

We have looked at Senate Bill 261. We feel that is a start, but 

a start in the wrong direction. We have looked at the DOL and 

DOL has some good things in it, whereas, they would look into the 

fraud, look into the improper payments, but again, that is not as 

good as the House bill. 

Also, the House Committee on Education and Workforce requested a report from the GAO to study the impact of the DOL proposal on FECA recipients. We strongly request that they wait and 

consider that GAO report before moving forward with any type of 

legislation. 

But the present House bill, H.R. 2465, is the most fairest method 

there is for our injured workers and members who are on FECA, 

and we would request that one be the model that your Committee 

starts to work from and then expand upon it. Thank you. 

Senator AKAKA. Well, thank you very much, Mr. Beaudoin. I 

want to thank our witnesses today for your thoughts and your recommendations. I look forward to continuing to work with my colleagues and with all of you to make changes to improve FECA 

while ensuring that those with work-related injuries and illnesses 

are treated fairly and receive the benefits they deserve. 

The hearing record will remain open for 2 weeks for Members to 

submit any additional statements or questions or for members of 

the public who wish to submit additional written testimony. What 

you have done today will certainly help us as we continue to work 

on this legislation and we want to continue working with you, as 

I said, to keep it fair and to give our workers what they deserve. 

So thank you very much again. This hearing is now adjourned. 

[Whereupon, at 3:54 p.m., the hearing was adjourned.] 

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