Page 1 GAO-13-142R FECA Revisions and Postal Workers

November 26, 2012

The Honorable John Kline

Chairman 

The Honorable George Miller

Ranking Member 

Committee on Education and the Workforce 

United States House of Representatives 

The Honorable Tim Walberg 

Chairman 

The Honorable Lynn Woolsey

Ranking Member 

Subcommittee on Workforce Protections 

Committee on Education and the Workforce 

United States House of Representatives 

Subject: Federal Employees’ Compensation Act: Analysis of Proposed Changes on USPS 

Beneficiaries

In 2010, the Federal Employees' Compensation Act (FECA) program paid $1.9 billion in cash 

benefits to federal workers who sustained injuries or illnesses while performing federal duties.1 The 

U.S. Department of Labor (Labor) administers FECA and bases FECA benefits on an employee’s 

wages at the time of injury and whether the employee has eligible dependents. In addition, 

consideration is given to the beneficiary’s ability to work after the injury.2

 

1 The receipt of FECA benefits is generally the exclusive remedy for being injured on the job and a federal 

employee is prohibited from suing his or her employer or recovering damages for such injury under another 

statute.

Specifically, beneficiaries 

unable to return to work—total disability beneficiaries—who have an eligible dependent are 

compensated at 75 percent of gross wages at the time of injury and those without an eligible 

dependent are compensated at 66-2/3 percent. These benefits are adjusted for inflation and are not 

taxed nor subject to age restrictions. Some policymakers have raised questions about the level of 

FECA benefits, especially compared to the retirement benefits under the Federal Employees 

Retirement System (FERS), which generally covers employees first hired in 1984 or later.

2 Beneficiaries who are determined to have some wage earning capacity—partial disability beneficiaries—are 

compensated based on the difference between wages at the time of injury and wages that Labor determines

they are able to earn. Those with a dependent are compensated at 75 percent of this difference and those 

without an eligible dependent at 66-2/3 percent of the difference. 

United States Government Accountability Office

Washington, DC 20548
Page 2 GAO-13-142R FECA Revisions and Postal Workers

A proposal by Labor to revise FECA includes the following changes to the benefits for future total

and partial disability beneficiaries:3

• Set initial FECA benefits at a single rate (70 percent of applicable wages at time of injury), 

regardless of whether the beneficiary has eligible dependents.4

• Convert FECA benefits to 50 percent of applicable wages at time of injury—adjusted for 

inflation—once beneficiaries reach the full Social Security retirement age.

A large proportion of FECA beneficiaries were employed by the U.S. Postal Service (USPS) at the 

time of their injury—43 percent of 2010 FECA beneficiaries were USPS employees. To consider the 

effects of these proposed changes on USPS FECA beneficiaries, we evaluated (1) What would be 

the effect of compensating total disability USPS FECA beneficiaries at a single rate regardless of 

having dependents, as proposed by Labor? and (2) How would FERS and total disability FECA 

benefits in retirement compare for USPS beneficiaries under current FECA and Labor’s proposed 

FECA revision?

Scope and Methodology

This report uses the same methods as our October 2012 FECA report, which addressed the same 

objectives for non-postal FECA beneficiaries.5

To address our objectives, we conducted simulations to compare FECA benefits with (1) actual 

take-home pay

We describe our methodology below; however, for a 

complete description of our methodology for both objectives, see appendix II of GAO-13-108. For 

details specific to the USPS analysis see enclosure I of this report.

6 in 2010, and (2) actual FERS benefits in 2010.7 We limited the analysis in this 

report to FECA beneficiaries who were employed by USPS at the time of injury, USPS workers, and 

USPS annuitants covered under FERS.8

 

3 The proposal analyzed is Labor’s “Federal Injured Employees’ Reemployment Act of 2010” technical 

assistance discussion draft, January 13, 2011. The proposed changes would not affect the benefits of current 

FECA recipients.

 We examined the effects of the proposed FECA revisions 

on those FECA beneficiaries who were considered to be totally disabled, i.e., they had no wage 

earning capacity. FECA benefits were not designed to increase at a rate comparable to pay 

increases an individual could have received through step increases or promotions (career growth) if 

he or she had never been injured. However, our analysis factors in career growth to provide a 

comparison between FECA benefits and the take-home pay the beneficiary could have received, 

absent an injury. We considered how these effects varied across certain subgroups of employees, 

including those based on the presence of a dependent, the extent of missed income, and years of 

service. To conduct our simulations, we used data from the 2010 Integrated Federal Employees’ 

Compensation System (iFECS); 1995-2010 USPS Human Capital Enterprise System (HCES); 2010 

FERS annuitant data; 2000-2012 Thrift Savings Plan (TSP) data; and Social Security benefit data 

from the Master Beneficiary Record (MBR). We determined that the data we used were sufficiently 

4 Generally, the proposal decreases benefits for beneficiaries with dependents and increases benefits for 

those without dependents compared to the current program. 5 GAO, Federal Employees’ Compensation Act: Analysis of Proposed Program Changes, GAO-13-108

(Washington, D.C.: October 26, 2012). 6 We defined take-home pay as gross wages reduced by mandatory retirement contributions and federal and 

state income taxes (assuming a single dependent) and did not take discretionary deductions into account.

7 The analyses were based on snapshots in 2010 and did not consider any cumulative effects of the proposed 

FECA revisions on lifetime income.

8 Partial disability beneficiaries—who have some capacity to earn wages— were beyond the scope of this 

work, in part because Labor does not keep data about their total income (including any earnings) in an 

electronic database. 
Page 3 GAO-13-142R FECA Revisions and Postal Workers

reliable for the purposes of the report. 

To consider the effect of compensating total disability USPS FECA beneficiaries at the single rate of 

70 percent —which we refer to as “revised FECA”—we conducted a simulation that compared the 

extent to which FECA and the proposed revision would replace a USPS beneficiary’s take-home 

pay. Since we cannot observe a beneficiary’s missed career path and missed wages, we analyzed 

a set of USPS employees who had never been injured and who were employed at the end of fiscal 

year 2010. We matched recent total disability USPS FECA beneficiaries to these USPS employees 

in order to ensure the two groups of individuals were similar.

9

 Our match was based on workrelated characteristics, such as whether an employee was characterized by USPS as having a bluecollar or white-collar occupation. We also included personal characteristics that may be important 

in terms of career and wage growth, such as the date and age when the employees started their 

federal careers, as well as their wage histories prior to the injury. Once we matched the two sets, 

we simulated injuries on the uninjured USPS workers, timed to coincide with the corresponding 

FECA beneficiary’s injury. From that point forward, we only considered the matched set of USPS 

employees—and not the FECA beneficiaries—in our analysis.10 Based on the USPS employees’ 

actual wages at the time of the simulated injury, we calculated their hypothetical FECA and revised 

FECA benefits, which we simulated based on gross wages at the time of injury. We applied cost-ofliving adjustments to project the initial benefits to 2010. Having determined the 2010 FECA benefits 

(simulated) and 2010 earnings (actual) for each of these USPS employees, we were able to 

calculate the proportion of 2010 take-home pay replaced by the simulated FECA benefit, or wage 

replacement rate.11

By using 2010 take-home pay, we factor missed career growth into the wage replacement rates we 

calculate. Although, as mentioned above, FECA was not designed to compensate for missed career 

growth, we used a matching methodology that allows us to measure the adequacy of benefits with 

respect to the counterfactual. Specifically, we capture the extent to which FECA beneficiaries are 

able to maintain the standard of living they would have had absent an injury. Alternatively, one 

could use a method that does not account for missed career growth. For instance, our 1998 FECA 

report calculated wage replacement rates by comparing FECA benefits to take-home pay at the 

time of injury, adjusted for inflation. That approach measured the degree to which beneficiaries 

were able to maintain the standard of living they would have had at the time of injury.

 

12

 

9 For more details on the similarity of the matched sets of FECA beneficiaries and USPS employees, see 

enclosure I.

The 

10 We focus solely on the USPS worker—rather than the USPS FECA beneficiary—because doing so is more 

precise than comparing the benefit of the FECA beneficiary to the earnings of the matched USPS worker. By 

considering only the USPS worker, we are able to capture the wage replacement rate, the proportion of takehome pay replaced by FECA, in a way that meaningfully accounts for career growth while avoiding undue 

imprecision in wage replacement rates that could be attributed to salary differences between the USPS 

worker and the matched FECA beneficiary.

11 Policymakers can target wage replacement rates; however, there is no consensus on the appropriate wage 

replacement rate for workers’ compensation programs, such as FECA. Such decisions involve balancing the 

goals of benefit adequacy and incentives to return to work. In 1972, the National Commission on State 

Workmen’s Compensation Laws endorsed a move towards 80 percent of spendable pay or take-home pay. A 

1998 GAO report on FECA also cited this 80 percent benchmark; see GAO, Federal Employees’ 

Compensation Act: Percentages of Take-Home Pay Replaced by Compensation Benefits, GAO/GGD-98-174

(Washington, D.C.: August 1998). In 2004, a report by the National Academy of Social Insurance used twothirds of gross wages as a target replacement rate for workers’ compensation programs. See H. Allan Hunt, 

editor, Adequacy of Earnings Replacement in Workers’ Compensation Programs, A Report of the Study Panel 

on Benefit Adequacy of the NASI Workers’ Compensation Steering Committee (Washington D.C.: 2004). 12See GAO/GGD-98-174.In part because of the data available at the time of the report, GAO/GGD-98-174

calculated wage replacement rates that did not account for missed career growth; instead, it accounted for 

cost of living adjustments for federal workers and FECA beneficiaries. The report found that, on average, 

FECA benefits replaced over 95 percent of wages at the time of injury for beneficiaries, including both postal 

and non-postal beneficiaries. 
Page 4 GAO-13-142R FECA Revisions and Postal Workers

availability of additional data and the improved methods employed in our current analysis allow us 

to present an assessment of the adequacy of benefits that includes career growth.

13

Similarly, to compare FERS to total disability FECA benefits for those injured while working for 

USPS, we again relied on a matching technique, and conducted our analysis for both current FECA 

and the proposal to reduce benefits at retirement age, which we refer to as “reduced FECA.” Since 

we cannot observe the FERS benefits a FECA beneficiary would have received absent an injury, 

we matched recent total disability USPS FECA beneficiaries with similar FERS annuitants who 

retired from USPS to compare outcomes.14 This approach captures retirement benefits in the 

counterfactual case of having never been injured and is consistent with the approach we used in 

the first objective of this report and in our February 2012 FECA report, which compared FECA 

benefits to retirement benefits under the Civil Service Retirement System.15 As before, we 

simulated injuries for the matched set of USPS FERS annuitants and calculated their hypothetical 

FECA benefits—at current FECA compensation rates and the proposed reduction to 50 percent of 

applicable wages, once a beneficiary reaches retirement age. We projected these simulated FECA 

benefits to 2010 and compared these FECA benefits, supplemented by a TSP annuity, to the actual 

FERS benefit packages.16 The FERS benefit package includes the FERS annuity, Social Security 

benefits, and TSP annuities.17 However, FERS had only been in place 26 years in 2010, so we do 

not capture a fully mature system.18 Over time, FERS benefits would likely increase as some 

annuitants would have longer federal careers, so our calculation likely understates future FERS 

benefits. Since Labor’s proposal would only affect future FECA beneficiaries, we conducted a final 

simulation to account for a mature FERS. In this simulation, we examined the effects of missing 

part of a 30-year career due to injury. Specifically, we used the same USPS annuitants as above 

and extended their work histories to cover a 30-year period, which allowed us to estimate retirement 

benefits based on a 30-year career given their wage histories. Again we simulated injuries and 

calculated hypothetical FECA and reduced FECA benefits.19

We conducted this performance audit from October to November 2012 in accordance with generally 

accepted government auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings based 

on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

 

Summary of Findings 

Under our simulation, compensating all USPS FECA beneficiaries at 70 percent of wages at the 

time of injury reduced the overall median wage replacement rate—the percentage of take-home pay 

 

13For additional discussion of the merits of accounting for missed career growth in assessing the adequacy of 

benefits, see Hunt, 2004.

14 For details on the match and subsequent analysis, see enclosure I of this document and appendix II of 

GAO-13-108. 15See GAO, Federal Employees’ Compensation Act: Benefits for Retirement-Age Beneficiaries GAO-12-309R

(Washington, D.C.: February 6, 2012). 16 FECA beneficiaries cannot receive FECA benefits concurrently with the FERS annuity. Further, Social 

Security benefits attributable to federal service are offset by FECA after retirement.

17 We assumed that individuals chose a single life TSP annuity that was not adjusted for inflation. 18 By mature FERS, we mean a retirement system in place at least 30 years to give a full range of income 

levels and investment growth. Our current data has limited observations on FERS annuitants with more than 

25 years of service. Without taking account of the mature system, we understate the future FERS benefit. 19 We then simulated different scenarios by varying the percentage an individual contributed to the TSP and 

the rate of growth for TSP balances. Please see appendix II of GAO-13-108 for more details about our 

simulation of a mature FERS.
Page 5 GAO-13-142R FECA Revisions and Postal Workers

replaced by FECA—from 88 to 84 percent.20

With regard to Labor’s proposal to reduce FECA benefits at Social Security retirement age, we 

found that in 2010, the median FECA benefit package (FECA and TSP) was 37 percent higher than 

the median current FERS benefit package (FERS, TSP, and Social Security) and that Labor’s 

proposal would result in the reduced FECA package being roughly equal to the FERS package for

2010 USPS annuitants.

In comparing wage replacement rates of those 

beneficiaries with and without a dependent, we found that beneficiaries with an eligible dependent 

had a median wage replacement rate that was 3 percentage points greater than that of 

beneficiaries without a dependent under current FECA. The proposed revision increased the 

magnitude and reversed the direction of this difference. Beneficiaries with an eligible dependent 

had a median wage replacement rate that was 8 percentage points less than that of beneficiaries 

without a dependent. 

21 Our final simulation of a mature FERS system—intended to reflect future 

benefits of federal workers with 30-year careers—found that the median FECA benefit package was 

13 percent greater or 4 percent less than the median FERS retirement benefit package, depending 

on TSP contributions. Under the mature FERS simulation, the median reduced FECA benefit was 

22 or 29 percent less than the median FERS benefit package, again depending on TSP 

contributions. 

Background

FECA provides cash benefits to eligible federal employees who suffer temporary or permanent 

disabilities resulting from work-related injuries or diseases. Labor’s Division of Federal Employees’ 

Compensation in the Office of Workers’ Compensation Programs (OWCP) administers the FECA 

program and charges agencies for whom injured employees worked for benefits provided. These 

agencies subsequently reimburse Labor’s Employees’ Compensation Fund from their next annual 

appropriation. FECA benefits for total disability beneficiaries are set at 75 or 66-2/3 percent of their 

wages at the time of injury, for those with and without eligible dependents respectively. These 

benefits are adjusted annually for cost-of-living increases and are neither subject to age restrictions 

nor taxed. 

One way to measure the adequacy of FECA benefits is to consider wage replacement rates, which 

are the proportion of pre-injury wages that are replaced by FECA. Wage replacement rates that do 

not account for missed career growth capture the degree to which a beneficiary is able to maintain 

his or her pre-injury standard of living. However, FECA and other workers’ compensation programs 

were not designed to account for missed income due to career growth. Wage replacement rates 

that account for missed income growth capture the degree to which a beneficiary is able to maintain 

his or her foregone standard of living. Data limitations can preclude calculating wage replacement 

rates that account for missed income growth; however, doing so provides a more complete story of 

the comparison between an injured worker and his or her counter-factual of having never been 

 

20 Median wage replacement rates for USPS FECA beneficiaries were generally higher than those of other 

non-USPS beneficiaries discussed in GAO-13-108. In that report, Labor’s proposed revision reduced the 

median wage replacement rate from 80 to 77 percent. USPS FECA beneficiaries have a higher wage 

replacement rates because USPS workers generally experienced less income growth than the non-USPS 

workers discussed in GAO-13-108. 21 In general, FECA benefits for USPS annuitants compared more favorably to FERS than did FECA benefits 

for other federal workers that we analyzed in GAO-13-108. Specifically, in that report we found that in 2010 

the median FECA benefit package was about 32 percent greater than the median FERS benefit package.
Page 6 GAO-13-142R FECA Revisions and Postal Workers

injured. Wage replacement rates can be targeted by policy-makers; however, there is no consensus 

on what wage replacement rate policies should target.22

FECA beneficiaries receive different retirement benefits than their retired counterparts. Specifically, 

under FERS, federal retirees have a benefit package comprised of three components: the FERS 

annuity, which is based on years of service; the TSP, which is similar to a 401(k); and Social 

Security benefits.23 FECA benefits do not change at retirement age and beneficiaries cannot 

receive a FERS annuity and FECA benefits simultaneously. In addition, FECA beneficiaries cannot 

contribute to their TSP accounts post-injury, but they can receive benefits accrued from 

contributions made to their TSP accounts prior to being injured. In addition, Social Security benefits 

attributable to federal service are offset by FECA.

Compensating USPS FECA Beneficiaries at the Single Rate of 70 Percent Would Reduce 

Wage Replacement Rates Overall and Across Many Subgroups 

Compensating USPS FECA Beneficiaries at 70 Percent of Wages Would Decrease the Median 

Wage Replacement Rate and Increase Differences in These Rates between Beneficiaries with and 

without Dependents

According to our simulation, compensating all total disability FECA beneficiaries at the revised rate 

of 70 percent of wages at the time of injury resulted in an overall reduction in the median wage 

replacement rate—the percentage of take-home pay replaced by FECA. As shown in figure 

1,under the current program, FECA replaced 88 percent of 2010 take-home pay and, under the 

revision, FECA replaced 84 percent in our simulation.

Median wage replacement rates for USPS FECA beneficiaries were generally higher than those of

non-USPS beneficiaries discussed in GAO-13-108. In both cases, the wage replacement rates 

account for missed income growth, as they are simulated based on 2010 take-home pay. All else 

equal, FECA beneficiaries who would have experienced more income growth—from the time of 

injury through 2010—had lower wage replacement rates than did those beneficiaries who would 

have experienced less income growth absent their injury. In general, USPS FECA beneficiaries 

missed less income growth due to their injury than did non-USPS FECA beneficiaries. 

Consequentially, USPS FECA beneficiaries had higher wage replacement rates than non-USPS 

FECA beneficiaries. For example, 4 out of 5 USPS beneficiaries in our sample would have had less 

than 10 percent income growth had they never been injured. In contrast, 2 out of 5 non-USPS 

FECA beneficiaries would have had less than 10 percent income growth, absent an injury.

 

22 H. Allan Hunt, editor, Adequacy of Earnings Replacement in Workers’ Compensation Programs, a Report of 

the Study Panel on Benefit Adequacy of the NASI Workers’ Compensation Steering Committee (Washington, 

D.C.: 2004).

23 FERS, which generally covers employees first hired in 1984 or later, replaced the Civil Service Retirement 

System (CSRS). According to OPM about 80 percent of federal annuitants that were on the OPM’s roll in 

2011 were CSRS annuitants. Among those CSRS annuitants, the average years of federal service was 

almost 30 years.
Page 7 GAO-13-142R FECA Revisions and Postal Workers

Figure 1: 2010 USPS Wage Replacement Rates under FECA and Labor’s Proposed Revisiona

Note: 

a Wage replacement rates are calculated based on 2010 take-home pay and account for missed income growth.

We also considered the effect of the proposal on beneficiaries with eligible dependents in 

comparison to those without, as the proposal equalizes their compensation rates. As shown in 

figure 2, current FECA, which compensates beneficiaries with a dependent at a higher rate than 

those without a dependent (75 versus 66-2/3 percent), replaces 89 and 86 percent of take-home 

pay for beneficiaries with or without a dependent, respectively. This 3 percentage point difference in 

median wage replacement rates is less than the difference in current compensation rates in part 

because FECA benefits are not taxed, whereas wages are. Thus, a worker with dependents would 

have more tax deductions and greater take-home pay—the augmented FECA compensation 

accounts for this difference to some extent. 

Equalizing FECA compensation rates does not account for these tax-related differences in takehome pay. Equalizing FECA compensation rates at 70 percent regardless of eligible dependents 

increased the magnitude and reversed the direction of the difference in median wage replacement 

rates between beneficiaries with and without eligible dependents. As shown in figure 2, Labor’s 

proposal more than doubled the difference in median wage replacement rates—to 8 percentage 

points—between beneficiaries with and without an eligible dependent. The median wage 

replacement rates under Labor’s proposal were 83 and 90 percent, respectively.24 

 

24 Because actual wage replacement rates for beneficiaries with a dependent may be lower than simulated 

due to our assumption of a single dependent, the difference in median wage replacement rates between 

those with and without a dependent may be smaller under FECA and larger under the proposed revision.
Page 8 GAO-13-142R FECA Revisions and Postal Workers

Figure 2: 2010 Median Wage Replacement Rates for USPS Beneficiaries with and without a 

Dependenta

Note:

a Wage replacement rates are calculated based on 2010 take-home pay and account for missed income growth.

Missed Income Growth and Lower Income at the Time of Injury Were Associated with Lower Wage 

Replacement Rates under FECA and the Proposed Revision

We examined the effects of this proposal on various subgroups and found that compensating all 

beneficiaries at 70 percent of wages at the time of injury generally reduced median wage 

replacement rates. We found no reductions in any one subgroup that were disproportionate to the 

overall revision. We did see variation in the proportion of take-home pay replaced by FECA (and the 

proposed revision) within subgroups. 

Beneficiaries who missed substantial income growth because of their injury had lower median wage 

replacement rates than those who missed relatively little career and income growth. Specifically, 

under FECA, the median wage replacement rate was 66 percent for beneficiaries whose income 

would have increased by 40 to 49 percent absent an injury. In contrast, the median wage 

replacement rate was 88 percent for those beneficiaries whose income would have increased 

between 0 and 9 percent. These differences were also present under revised FECA (see fig. 3). As 

beneficiaries missed out on more income growth, FECA replaced a smaller proportion of their 2010 

take-home pay because the FECA cost-of-living adjustments do not keep pace with missed salary 

increases and promotions. However, FECA was not designed to account for such increases.
Page 9 GAO-13-142R FECA Revisions and Postal Workers

Figure 3: 2010 USPS Median Wage Replacement Rates by Missed Income Growtha,b

Note: 

a Wage replacement rates are calculated based on 2010 take-home pay and account for missed income growth.

b Intervals do not include upper endpoints. 

 

In addition, having lower wages at the time of injury was also associated with lower wage 

replacement rates under FECA and revised FECA. As shown in figure 4, the median FECA wage 

replacement rate for beneficiaries with low income at the time of injury was 12 percentage points 

less than that of beneficiaries with relatively high income. The magnitude of the difference was 

similar under revised FECA.
Page 10 GAO-13-142R FECA Revisions and Postal Workers

Figure 4: 2010 USPS Median Wage Replacement Rates by Income Grouping at Time of Injury

Note:

a Wage replacement rates are calculated based on 2010 take-home pay and account for missed income growth.

Years of Service Play a Key Role in the Comparison between FECA and FERS Benefits

Labor’s Proposal Would Roughly Equalize FECA and FERS Benefit Packages for 2010 USPS 

Annuitants

According to our retirement simulation comparing current FECA benefits to FERS benefits, we 

found that the overall median USPS FECA benefit package (FECA benefits and TSP annuity) was 

37 percent greater than the current median FERS retirement benefit package (FERS annuity, TSP 

annuity, and Social Security), as shown in figure 5.25 This implies that in retirement, USPS FECA 

beneficiaries generally had greater income from FECA and their TSP in comparison to the FERS 

benefits they would have received absent an injury. However, because FERS had only been in 

place for 26 years in 2010, we are not capturing the “mature” FERS benefit that an annuitant could 

accrue with more years of service. Consequently, it is likely that we are understating the potential 

FERS benefit when we consider 2010 benefit levels.26 

 

25 In our dataset, the median years of service was 18 years for the 2010 USPS annuitants. 26 Because few people in our dataset had more than 25 years of federal service at the time of retirement, we 

do not capture those who would choose to work 30 or more years in the federal government before retiring.
Page 11 GAO-13-142R FECA Revisions and Postal Workers

Figure 5: Composition of Median Benefits for FECA, FERS, and Reduced FECA (USPS)

Labor’s proposal to reduce FECA benefits once beneficiaries reach retirement age to 50 percent of 

wages at the time of injury would result in an overall median for the reduced FECA benefit package 

(reduced FECA plus the TSP) that is approximately equal to the median 2010 FERS benefit 

package for USPS annuitants. This implies that under the proposed reduction, USPS FECA 

beneficiaries would have similar income from their FECA benefit package in comparison to their 

foregone FERS benefit. Again, these results reflect current FERS and do not capture a “mature” 

FERS benefit.

Increased Years of Service Were Associated with Increased FERS Benefits Relative to FECA 

Benefits for 2010 USPS Annuitants

Although the overall median FECA benefit was substantially higher than the median FERS benefit 

for 2010 USPS annuitants, the difference between the two varies based on years of service. 

Median FECA benefit packages were consistently greater than median FERS benefit packages 

across varying years of service; however, the gap between the two benefits narrowed as years of 

service increased (see fig. 6). This occurred in large part because FERS benefits increase 

substantially with additional years of service. For example, beneficiaries whose total federal career 

would have spanned less than 10 years had a median FECA benefit that was about 65 percent 

greater than the corresponding FERS benefit. In contrast, beneficiaries whose total federal career 

would have spanned between 20 and 24 years had a median FECA benefit that was 23 percent 

greater than the corresponding FERS benefit. It is worth noting that these results do not capture a 

“mature” FERS benefit and suggest that in the future, the overall difference between FECA and 

FERS benefit packages would be less than reflected in our analysis, when individuals have the 

opportunity to work a full 30-year career.
Page 12 GAO-13-142R FECA Revisions and Postal Workers

Figure 6: Median FECA and FERS Benefit Packages by Years of Service in 2010 (USPS)

In addition, reduced FECA benefits were similar or less than FERS benefits across varying years of 

service.27 However, as years of service increase, the gap between the two benefits widened. For 

example, beneficiaries whose total federal career would have spanned less than 10 years had a 

median reduced FECA benefit that was about 13 percent greater than the corresponding FERS 

benefit. In contrast, beneficiaries whose total federal career would have spanned 25 to 29 years 

had a median reduced FECA benefit that was 20 percent less than the corresponding FERS 

benefit.28 

Median Reduced FECA Benefit Packages Would Likely Be Less Than Median FERS Benefit 

Packages for USPS Annuitants with 30-Year Careers

In our simulation of a “mature” FERS coupled with the assumption that individuals have 30-year 

USPS careers, we found that the median current FECA benefit packages were either greater than 

or on par with median FERS benefit packages—depending on the amount an individual contributes 

toward their TSP account for retirement. As shown in figure 7, under the default scenario where 

there is no employee contribution and USPS contributes 1 percent to TSP, the median FECA 

benefit package is about 13 percent greater than the median FERS benefit package for USPS 

annuitants. However, under a scenario where each employee contributes 5 percent—and receives 

 

27 In other words, under the proposed reduced FECA, beneficiaries would have similar or less income in 

retirement than they would have had absent an injury.

28 Again, these results do not capture a “mature” FERS benefit and seem to suggest that the median reduced 

FECA benefit package would be less than the median FERS benefit package in the future.
Page 13 GAO-13-142R FECA Revisions and Postal Workers

a 5 percent agency match—the median FECA benefit package is about 4 percent less than the 

median FERS benefit package for USPS annuitants. 

Figure 7: Median FECA and FERS Benefit Packages by Years of Service (USPS)

Our simulation also found that the median reduced FECA benefit package was less than the 

median FERS benefit package—regardless of the simulated contributions to TSP accounts.29

Concluding Observations 

 

Specifically, under a scenario where there is no employee contribution—and a 1 percent USPS 

contribution—the median reduced FECA benefit package is about 22 percent less than the median 

FERS benefit package for USPS annuitants. Under a scenario where each employee contributes 5 

percent—and receives a 5 percent agency match—the median reduced FECA benefit package is 

about 29 percent less than the FERS benefit package for USPS annuitants.

FECA continues to play a vital role in providing compensation to federal employees, including 

USPS employees, who are unable to work because of injuries sustained while performing their 

 

29 While our simulation assumes 30 years of federal service and captures the effects of being injured at some 

point within a 30-year federal career, it does not reflect the actual federal workforce, where careers may not 

span 30 years. To the extent that federal workers work less than 30 years, we overestimate the FERS benefit 

package. To the extent that they work more than 30 years, we underestimate the FERS benefit package. On 

balance, with some working more and some working less, it is uncertain whether our results underestimate or 

over estimate the actual outcome.
Page 14 GAO-13-142R FECA Revisions and Postal Workers

federal duties. Although there are questions about the level of FECA benefits, reducing those 

benefits could have implications for the adequacy of benefits, both during a beneficiary’s foregone 

working years and after the beneficiary reaches retirement age.30

Equalizing FECA compensation rates between those with and without eligible dependents could 

reduce benefits for some beneficiaries; however, doing so results in disparity in the degree to which 

beneficiaries with dependents can maintain their standard of living relative to those without an 

eligible dependent. This disparity is attributable to differences in tax deductions for dependents and 

would be compounded over time for both USPS and other FECA beneficiaries. An alternative 

approach might be an across-the-board reduction in FECA compensation, which could keep 

replacement rates relatively equal between beneficiaries with and without dependents. Yet this type 

of approach could adversely affect the adequacy of benefits for those with relatively low wage 

replacement rates, such as beneficiaries who missed substantial career growth. However, the 

FECA benefit structure was not designed to take missed career growth into account.

Once FECA beneficiaries reach retirement age, their FECA benefit package (FECA benefit and 

TSP annuity) may be greater than the current FERS benefit package—and reducing FECA at 

retirement as Labor has proposed would bring FECA more in line with current FERS. However, as 

any changes to FECA would affect beneficiaries in the future, it is important to note that as FERS 

matures over time, our analysis suggests that differences between the median FECA benefit 

package and the FERS benefit package diminish. Specifically, our simulation showed that the 

FECA benefit package may be on par or less than the FERS benefit package, and the reduced 

FECA benefit package would be substantially less than FERS. A clearer picture of how FECA and 

FERS will actually differ will be possible as FERS matures.

Our analyses demonstrated that there are policy levers that can be adjusted in order to achieve 

change. However, consideration needs to be given to the impact the change will have on the 

adequacy of benefits and the ensuing fairness across beneficiaries, both at the time of injury and 

over the lifetime of the beneficiary. Reducing FECA benefits could have a substantial impact over 

time on individuals who cannot work and may have limited options to replace income in response to 

benefit reductions.

We provided a draft of this report to the Department of Labor and the United States Postal Service 

and they did not have any comments.

- - - - - 

We are sending copies of this report to relevant congressional committees, the Secretary of Labor, 

the Postmaster General, and other interested parties. In addition, the report will be made available 

at no charge on the GAO web-site at http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact me at (202) 512-7215 or 

sherrilla@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may 

 

30 The results of our analysis for USPS FECA beneficiaries were similar to the results for non-USPS FECA 

beneficiaries discussed in GAO-13-108.
Page 15 GAO-13-142R FECA Revisions and Postal Workers

be found on the last page of this report. GAO staff who made key contributions to this report are 

listed in enclosure II.

Andrew Sherrill

Director, Education, Workforce, and

 Income Security Issues
Page 16 GAO-13-142R FECA Revisions and Postal Workers

ENCLOSURE I: OBJECTIVE, SCOPE, AND METHODS

To analyze the effects of a proposed revision to the Federal Employees’ Compensation Act (FECA) 

program on employees in U.S. Postal Service (USPS), we answered two key questions: (1) what 

would be the effect of compensating total disability FECA beneficiaries at a single rate regardless of 

having dependents, and (2) how would the Federal Employee Retirement System (FERS) and total 

disability FECA benefits in retirement compare under the current FECA benefit structure and a 

proposed FECA reduction at the time of retirement? To answer these questions, we used methods 

nearly identical to those in our prior report, which addressed the same objectives for non-postal 

federal employees.31

SECTION 1: DATA SOURCES

Specifically, for this report, we conducted simulations to compare (1) FECA 

benefits with actual take-home pay of postal workers in 2010 and (2) FECA benefits with actual 

FERS benefits received by retired postal workers in 2010. This enclosure describes the methods 

we used to answer these questions only to the extent that they differ from those in our prior 

analysis. Section 1 describes the key data sources and Section 2 highlights aspects of the analysis 

that differ from our simulations for non-postal employees in GAO-13-108.

To answer our key questions, we used administrative data on three populations: 2010 postal 

employees, FECA beneficiaries, and FERS annuitants. These data came from five federal 

agencies: the Department of Labor (Labor), USPS, the Office of Personnel Management (OPM), 

the Federal Retirement Thrift Investment Board (FRTIB), and the Social Security Administration 

(SSA). Table 1 provides an overview of each of these data files. This section provides a 

description of the USPS data.32

Table 1: Data Sources Used in Analysis 

 

Data file Federal 

agency 

responsible 

Population 

covered

Type of 

information in 

file

Years of 

data 

analyzed

Data 

used for 

question

Integrated Federal 

Employees’ 

Compensation System 

(iFECS) 

Labor FECA 

beneficiaries

Benefits and 

characteristics 

2010 1 & 2

Human Capital 

Enterprise System 

USPS Postal 

employees 

Data on pay 

and other 

characteristics 

1995-

2010

1 & 2

FERS annuitant data OPM FERS 

annuitants

Annuity data 2010 2

Thrift Savings Plan 

(TSP) data

FRTIB FERS 

annuitants and 

FECA 

beneficiaries

TSP balances 

and 

withdrawals

2000-

2010

2

Master Beneficiary 

Record

SSA FERS 

annuitants

Social Security 

benefit-related 

data

2010 2

Source: GAO.

 

31For details on the methods used in the prior report, see GAO, Federal Employees’ Compensation Act: Analysis of 

Proposed Program Changes, GAO-13-108 (Washington, D.C.: October 2012), p 53-74. 32The other four datasets are described in detail in GAO-13-108. 
Page 17 GAO-13-142R FECA Revisions and Postal Workers

Note: 1This analysis will only cover total disability beneficiaries. Lack of data prevents a similar analysis of those 

beneficiaries with some wage earning capacity.

Human Capital Enterprise System

To obtain information on the salaries and work histories of former and current postal employees, we 

used data from the USPS Human Capital Enterprise System from 1995 to 2010. The data prior to 

1995 were not sufficiently reliable for the purposes of our report. We obtained the following 

information on postal employees from this database: date of birth, state of residence, retirement 

system (FERS vs. CSRS), occupation code, spells of employment, wage history, and dates of 

service.

Data reliability

For each of the datasets used in this report, we conducted a data reliability assessment of selected 

variables by conducting electronic data tests for completeness and accuracy, reviewing 

documentation on the dataset, and interviewing knowledgeable officials about how the data were 

collected and maintained and their appropriate uses. We determined that the variables that we 

used from the data we reviewed were reliable for the purposes of this report.

SECTION 2: AN OVERVIEW OF KEY DIFFERENCES IN METHODS

The analysis in this report largely follows the methods we used to analyze non-postal workers as 

described in GAO-13-108. This section describes the key differences between these two sets of 

analyses. 

Study group

The analysis in this report examines postal workers rather than non-postal workers. 

Correspondingly, we used data on FECA beneficiaries who were employed by USPS at the time of 

their injury, USPS workers in 2010, and USPS annuitants covered under FERS. We restricted our 

analysis to postal workers who were classified as full-time career employees for at least 9 out of the 

15 years we analyzed.33

Computation of the wage replacement rate and benefit ratio

 

We used the same methods to compute wage replacement rates as in the prior report, with one 

exception.34 In our computation of take-home pay, we used the employee’s basic pay rate rather 

than the adjusted pay rate. Unlike the Central Personnel Data File, from which we obtained wage 

information on non-postal federal employees for our prior report, the postal data did not have 

information on adjusted pay because, with only a few exceptions, postal employees do not receive 

locality pay. In addition, many USPS employees worked part-time for at least 1 year for which we 

had data. To account for years of part-time employment, we followed guidance from USPS to 

convert hourly wages to annual income levels.35

 

33By doing so, we reduced the number of employees for whom we had to annualize part-time earnings data as described 

below.

 This ensured that the wage replacement rates 

34 As in the prior report, we deducted payroll, federal, and state taxes using the assumption that there was no spousal 

income; the dependent, when present, was a spouse; and the spouse was over the age of 65 if the worker was over the 

age of 65. We did not account for other discretionary deductions such as for health and life insurance payments or TSP

contributions. To determine federal and state income taxes, we used the National Bureau of Economic Research’s 

(NBER) TAXSIM. TAXSIM is NBER’s FORTRAN program for calculating liabilities under U.S. federal and state income 

tax laws from individual data. The TAXSIM Model (http://www.nber.org/taxsim) simulates the U.S. federal and state

income tax rules.

35Specifically, to make this conversion, we multiplied the hourly wage by 2,080 hours in a work-year. 
Page 18 GAO-13-142R FECA Revisions and Postal Workers

were based on full-time employment. Annualizing part-time wages was necessary due to a lack of 

data on hours and yearly earnings.

Annualizing the hourly wages of part-time employees likely overestimated the income used to 

simulate FECA benefits. This is because part-time employees might not have worked the full-time 

equivalent schedule that annualization assumes. Consequently, our estimated ratios of FECA 

benefits to take-home pay and immature FERS benefits are somewhat over-estimated for part-time 

workers. This limitation does not affect our ratios of FECA benefits to mature FERS benefits, 

however, because our simulation of the mature retirement system assumes that all employees work 

full-time for 30 years. 

Methods for selecting matched analysis samples 

We used the same multivariate matching technique used in the prior report to select samples of 

2010 postal employees and FERS annuitants who were similar to FECA beneficiaries, with several 

exceptions. 

The characteristics we used to select the samples differed slightly from those used in the prior 

report. Specifically, we could not use information on the employee’s education level because the 

postal data did not include this information. In addition, we did not use the employee’s agency in our 

matching process, because all of the employees had worked for the postal service. Finally, the 

postal data did not include the OPM definition of “blue-collar” and “white-collar” occupations, which 

we used in the prior report. To create these categories, we followed the guidance provided to us by 

USPS. 

We selected the matched sample of 2010 postal employees for the wage replacement analysis 

using an 80 percent simple random sample. The prior report used a 10 percent sample, due to the 

larger population of non-postal employees.

Lastly, we selected the closest two FERS annuitants for each FECA recipient. The 2:1 matching 

ratio ensured that the sample sizes for calculating benefit ratios for postal and non-postal workers 

were similar. The looser matching criterion did not cause the similarity of the groups to decline 

materially, as shown below.

Figure 8 presents the distributions of these characteristics for the postal FECA beneficiaries and the 

2010 employees after matching. Table 2 provides descriptive statistics for all characteristics. Figure 

9 and table 3 present equivalent results for the postal FECA beneficiaries and the FERS annuitants 

after matching. The large number of 2010 employees and FERS annuitants allowed us to select 

employees with career histories that closely resembled those of the postal FECA beneficiaries 

before they were injured.
Page 19 GAO-13-142R FECA Revisions and Postal Workers

Figure 8: Distributions of Key Characteristics of Matched FECA Beneficiaries and Postal 

Employees
Page 20 GAO-13-142R FECA Revisions and Postal Workers

Table 2: Distributions of Covariates in Matched Sample of Postal Employees and FECA Beneficiaries

Matched postal 

employees FECA beneficiaries

1st Quartile Median Mean 3rd Quartile 1st Quartile Median Mean 3rd Quartile

Minimum income before injury 

(2010 dollars) 26770 33186 31103 34719 26778 33063 31097 34756

Median career income before 

injury (2010 dollars) 34836 37788 37299 40472 34805 37822 37359 40581

Maximum career income 

before injury (2010 dollars) 39557 44154 43895 48562 39692 44185 44101 49217

First year working 1987 1990 1991 1995 1987 1990 1991 1995

Years of service at injury 6.8 11.3 11.7 16.8 7.2 11.4 11.8 16.8

Age in first year of work (years) 28.3 34.3 34.7 40.5 28.7 34.6 35 40.8

Age in last year of work (years) 41.1 46.9 46.5 51.9 41.3 47.1 46.9 52.2

Age in 2010 (years) 49.2 53.7 54 58.9 49 54 53.9 59

Number of employment spells 1 1 0.9 1 1 1 0.9 1

% Male 40.3 40.3

% USPS white collar 

occupation 2.4 2.4

% USPS blue collar occupation 67 67

% USPS temporary / noncareer occupation 15.2 15.2

% Other / not available 

occupation 15.4 15.4

Source: GAO analysis of USPS and Labor data.
Page 21 GAO-13-142R FECA Revisions and Postal Workers

Figure 9: Distributions of Key Characteristics of Matched FECA Beneficiaries and FERS 

Annuitants
Page 22 GAO-13-142R FECA Revisions and Postal Workers

Table 3: Distributions of Covariates in Matched Sample of FERS Annuitants and FECA Beneficiaries

FERS annuitants FECA beneficiaries

1st Quartile Median Mean 3rd Quartile 1st Quartile Median Mean 3rd Quartile

Minimum income before injury 

(2010 dollars) 27619 33627 31800 34879 27438 33592 31645 34756

Median career income before 

injury (2010 dollars) 35435 37881 37680 40712 35409 37831 37658 40712

Maximum career income before 

injury (2010 dollars) 39665 44181 43957 49005 39983 44154 44108 49219

First year working 1987 1990 1991 1994 1987 1990 1991 1995

Years of service at injury 7.4 11.7 12 16.9 7.1 11.6 11.9 17.1

Age in first year of work (years) 37.3 41.7 41.9 45.6 37.2 41.5 41.7 45.1

Age in last year of work (years) 50.8 53.3 54 56.9 50.1 53.3 53.8 57.1

Age in 2010 (years) 58.7 61 61.7 63.5 58 60 61 63

Number of employment spells 1 1 1 1 1

% Male 45.4 45.1

% USPS white collar occupation 2.2 2.2

% USPS blue collar occupation 61.6 61.6

% USPS temporary / non-career 

occupation 22.1 22.1

% Other / not available 

occupation 14 14

Source: GAO analysis of USPS and Labor data.
Page 23 GAO-13-142R FECA Revisions and Postal Workers

Enclosure II: GAO Contacts and Staff Acknowledgments

GAO Contacts

Andrew Sherrill at (202) 512-7215 or sherrilla@gao.gov. 

Staff Acknowledgments

In addition to the contact named above, key contributors to this report were Michael J. 

Collins, Assistant Director; Melinda Cordero, Nagla’a El-Hodiri, Erin M. Godtland, Michael 

Kniss, Jeff Tessin, and Walter Vance. In addition, James Bennett, Jessica Botsford, Holly 

Dye, Jennifer Gregory, Gene Kuehneman, Kathy Leslie, Sheila McCoy, Rhiannon Patterson, 

and James Rebbe contributed to the report.

(131216)
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