FEDERAL 

EMPLOYEES’ 

COMPENSATION ACT

Analysis of Proposed 

Program Changes 

Report to the Committee on Education 

and the Workforce, U.S. House of 

Representatives 

October 2012 

GAO-13-108 

United States Government Accountability Office

GAO 
Page i GAO-13-108 Federal Employees' Compensation Act 

Letter 1 

Summary of Findings 7

Single Compensation Rate (Revised FECA) 7

Reduction at Retirement Age (Reduced FECA) 8

Concluding observations 10

Appendix I Federal Employees’ Compensation Act 13 

Appendix II Objectives, Scope and Methodology 54

Section 1: Data Sources 54

Section 2: Analysis of Effects of Compensating Total Disability 

FECA Beneficiaries At a Single Rate Regardless of Having 

Dependents 57

Section 3: Comparison of FERS and Total Disability FECA Benefits 

under Current and Reduced FECA 64

Appendix IV GAO Contact and Staff Acknowledgments 76 

Tables 

Table 1: Data Sources Used in Analysis 55

Table 2: Distributions of covariates in matched wage replacement 

analysis sample 60

Table 3: Distributions of covariates in matched FECA-FERS 

analysis sample 67

Figures 

Figure 1: Distributions of key characteristics of matched FECA 

beneficiaries and federal employees 59

Figure 2: Distributions of key characteristics of matched FECA 

beneficiaries and FERS annuitants 66

Figure 3: Components of FECA and FERS Retirement Packages 70

Contents 
Page ii GAO-13-108 Federal Employees' Compensation Act 

Abbreviations 

CPDF Central Personnel Data Files 

COLA cost of living adjustments 

FECA Federal Employees’ Compensation Act 

FEHB Federal Employees Health Benefits 

FERS Federal Employees Retirement System 

GS General Schedule 

iFECS Integrated Federal Employees’ Compensation System 

MBR Master Beneficiary Record 

OWCP Office of Workers’ Compensation Programs 

TSP Thrift Savings Plan 

USPS U.S. Postal Service 

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Page 1 GAO-13-108 Federal Employees' Compensation Act 

United States Government Accountability Office

Washington, DC 20548 

October 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 Protection 

Committee on Education and the Workforce 

United States House of Representatives 

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 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

 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 subject to age restrictions. 

Some policymakers are concerned about the level of FECA benefits, 

especially compared to the retirement benefits under the Federal 

 

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. 

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. 

 
 

Page 2 GAO-13-108 Federal Employees' Compensation Act 

Employees Retirement System (FERS), which generally covers 

employees first hired in 1984 or later. 

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. 

To consider the effects of these proposed changes, we evaluated (1) 

What would be the effect of Labor’s proposal to compensate total 

disability FECA beneficiaries at a single rate regardless of having 

dependents? and (2) How would FERS and total disability FECA benefits 

in retirement compare under current FECA and Labor’s proposed FECA 

revision? 

To address our objectives we conducted simulations to compare (1) 

FECA benefits with actual take-home pay in 2010, and (2) FECA benefits 

with actual FERS benefits in 2010.5

 We limited the analysis in this report 

to FECA beneficiaries, federal workers, and federal annuitants covered 

under FERS.6

 This report does not cover employees or FECA 

beneficiaries who worked at the U.S. Postal Service (USPS)—they will be 

covered in an upcoming GAO report. We examined the effects of the 

proposed FECA revisions on those FECA beneficiaries who were 

 

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. 

4

Generally, the proposal decreases benefits for beneficiaries with dependents and 

increases benefits for those without dependents compared to the current program. 

5

The analyses were based on snapshots in 2010 and did not consider any cumulative 

effects of the proposed FECA revisions on lifetime income. 

6

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-13-108 Federal Employees' Compensation Act 

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 certain subgroups, including those based on the presence 

of a dependent, the extent of missed income and career growth 

(measured by General Schedule (GS) level ranges: 1-4, 5-8, 9-12, and 

13-15),7

 GS level at time of injury (measured by GS level ranges), and 

years of service. To conduct our simulations we used 2010 data from the 

Integrated Federal Employees’ Compensation System (iFECS), 1988-

2010 data from the Central Personnel Data Files (CPDF);8

 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 reliable for the 

purposes of the report. 

To consider the effect of compensating total disability 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 beneficiary’s take-home pay. Since 

we cannot observe a FECA beneficiary’s missed career path and missed 

wages, we analyzed a set of federal workers who had never been injured 

and who were employed at the end of fiscal year 2010. We matched 

recent total disability FECA beneficiaries to these federal workers in order 

to ensure the two sets were similar.9

 Our match was based on workrelated characteristics—such as employing agency and blue collar versus 

white collar classification—as well as on personal characteristics that may 

be important in terms of career and wage growth—such as date and age 

 

7

GS ranges were based on income (2010 dollars): GS 1-4 (<$27,431), GS 5-8 ($27,431-

$41,562), GS 9-12 ($41,563-$71,673), and GS 13-15 (≥$71,674). 

8

The analysis in this report is limited to those agencies covered by the CPDF. The CPDF 

does not cover all civilian federal workers, for example, USPS is not represented in the 

CPDF. Forty-three percent of FECA beneficiaries in 2010 worked for USPS. 

9

For more details on the similarity of the matched sets of FECA beneficiaries and federal 

workers, see appendix II. 
 

Page 4 GAO-13-108 Federal Employees' Compensation Act 

when starting their federal careers, as well as wage histories prior to the 

injury. Once we matched the two sets, we simulated injuries on the 

uninjured federal workers, timed to coincide with the corresponding FECA 

beneficiary’s injury. From that point forward, we only considered the 

matched set of federal workers—and not the FECA beneficiaries—in our 

analysis.10 Based on the federal workers’ 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 of living adjustments to project the initial benefits 

to 2010. Having determined the 2010 FECA benefits (simulated) and 

2010 earnings (actual) for each of these federal workers, we were able to 

calculate the proportion of 2010 take-home pay11 replaced by the 

simulated FECA benefit, or wage replacement rate.12

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 

 

10We focus solely on the federal worker because doing so is more precise than comparing 

the benefit of the FECA beneficiary to the earnings of the matched federal worker. By 

considering only the federal worker, we are able to capture the wage replacement rate, 

the proportion of take-home 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 federal worker and the matched FECA 

beneficiary. 

11We 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. 

12 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 two-thirds 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). 
 

Page 5 GAO-13-108 Federal Employees' Compensation Act 

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.13 The 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.14

Similarly, to compare FERS to total disability FECA benefits, 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 FECA beneficiaries with similar FERS 

annuitants to compare outcomes. 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 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.16 We 

projected these simulated FECA benefits to 2010 and compared these 

FECA benefits, supplemented by a TSP annuity, to the actual FERS 

 

13See 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 nonpostal beneficiaries. 

14For additional discussion of the merits of accounting for missed career growth in 

assessing the adequacy of benefits, see Hunt, 2004. 

15See GAO, Federal Employees’ Compensation Act: Benefits for Retirement-Age 

Beneficiaries GAO-12-309R (Washington, D.C.: February 6, 2012). 

16For further details on how we conducted the match and subsequent analysis, see 

appendix II. 
 

Page 6 GAO-13-108 Federal Employees' Compensation Act 

benefit packages.17 The FERS benefit package includes the FERS 

annuity, Social Security benefits, and TSP annuities.18 However, FERS 

had only been in place 26 years in 2010, so we do not capture a fully 

mature system.19 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 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.20

We conducted this performance audit from January to October 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. 

On July 3, 2012, and September 19, 2012, we briefed your staff on the 

preliminary results of this study; this report formally conveys the 

information provided in those briefings (see app. I for the briefing slides). 

 

17FECA beneficiaries cannot receive FECA benefits concurrently with the FERS annuity. 

Further, Social Security benefits attributable to federal service are offset by FECA after 

retirement. 

18We assumed that individuals chose a single life TSP annuity that was not adjusted for 

inflation. 

19By 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. 

20We then simulated different scenarios by varying the percentage an individual 

contributed to the TSP and the rate of growth for TSP balances. 
 

Page 7 GAO-13-108 Federal Employees' Compensation Act 

Under our simulation, compensating all beneficiaries at 70 percent of 

wages at the time of injury reduced the overall median wage replacement 

rate—the percentage of take-home pay replaced by FECA—from 80 to 77 

percent. 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 6 percentage 

points less than that of beneficiaries without a dependent. 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 32 percent greater 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 6 percent less than the 

FERS package. 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 on par or 10 percent less 

than the median FERS retirement benefit package, depending on TSP 

contributions. Under the mature FERS simulation, the median reduced 

FECA benefit package was 31 or 35 percent less than the median FERS 

benefit package, again depending on TSP contributions. 

Our results are detailed below: 

 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 percentage of 

take-home pay replaced by FECA. Specifically, under the current 

program, FECA replaced 80 percent of 2010 take-home pay and 

under the revision FECA replaced 77 percent. 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. We found that current FECA, which 

compensates beneficiaries with a dependent at a higher rate than 

those without a dependent (75 versus 66-2/3 percent), replaces 81 

and 78 percent of take-home pay for beneficiaries with or without a 

dependent, respectively. This 3 percent difference in median wage 

replacement rates is less than the difference in compensation rates in 

part because FECA benefits are not taxed, whereas wages are. Thus, 

a worker with dependents would have more tax deductions and 

Summary of Findings 

Single Compensation 

Rate (Revised FECA) 
 

Page 8 GAO-13-108 Federal Employees' Compensation Act 

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 take-home pay. Equalizing FECA compensation rates at 70 percent 

regardless of eligible dependents results in a larger difference in 

median wage replacement rates between beneficiaries with and 

without a dependent (76 and 82 percent, respectively).21

 In addition, 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. However, we found no reductions in any one 

subgroup that were disproportionate to the overall revision. We did 

see wide variation in the proportion of take-home pay replaced by 

FECA (and the proposed revision) within subgroups—wage 

replacement rates ranged from just over 50 percent to about 90 

percent. For example, beneficiaries who missed substantial career 

and income growth because of their injury had lower median wage 

replacement rates than those who missed relatively little career and 

income growth. For those who missed substantial career 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 GS step increases and promotions. However, FECA was not 

designed to account for such GS step increases and promotions. 

 According to our retirement simulation comparing current FECA 

benefits to FERS benefits, we found that the overall median FECA 

benefit package (FECA benefits and TSP annuity) was 32 percent 

greater than the current median FERS retirement benefit package 

(FERS annuity, TSP annuity, and Social Security). This implies that in 

retirement, 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 26 years in 2010, we are not capturing the “mature” 

FERS benefit—and it is likely that we are understating the potential 

 

21Because 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. 

Reduction at 

Retirement Age 

(Reduced FECA) 
 

Page 9 GAO-13-108 Federal Employees' Compensation Act 

FERS benefit.22 We also found that under current FECA, median 

FECA benefit packages were consistently greater than median FERS 

benefit packages across varying years of service. However, as years 

of service increase, the gap between the two benefits narrowed. For 

example, beneficiaries whose total federal career would have 

spanned less than 10 years had a median FECA benefit that was 

about 46 percent greater than the corresponding FERS benefit. In 

contrast, beneficiaries whose total federal career would have spanned 

25-29 years had a median FECA benefit that was 16 percent greater 

than the corresponding FERS benefit. This occurred in large part 

because FERS benefits increase substantially with additional years of 

service. 

 Reducing 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 about 6 percent less than the median FERS benefit 

package. This implies that under the proposed reduction, FECA 

beneficiaries would have similar income from their FECA benefit 

package in comparison to their foregone FERS benefit. In addition, 

reduced FECA benefits were generally less than FERS benefits 

across varying years of service.23 However, as years of service 

increase, the gap between the two benefits widens. For example, 

beneficiaries whose total federal career would have spanned less 

than 10 years had a median reduced FECA benefit that was about 2 

percent greater than the corresponding FERS benefit. In contrast, 

beneficiaries whose total federal career would have spanned 25-29 

years had a median reduced FECA benefit that was 19 percent less 

than the corresponding FERS benefit. 

 In our simulation of a “mature” FERS coupled with the assumption 

that individuals have 30-year federal careers, we found that the 

median FECA benefit packages were either on par with or less than 

median FERS benefit packages—depending on the amount an 

individual contributes toward their TSP account for retirement. 

 

22Because 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. 

23In other words, under the proposed reduced FECA, beneficiaries would have less 

income in retirement than they would have had absent an injury. 
 

Page 10 GAO-13-108 Federal Employees' Compensation Act 

Specifically, under a scenario where there is no employee contribution 

and the employing agency contributes 1 percent to TSP, the median 

FECA benefit package is about 1 percent greater than the median 

FERS benefit package. However, under a scenario where each 

employee contributes 5 percent—and receives a 5 percent agency 

match—the median FECA benefit package is about 10 percent less 

than the median FERS benefit package. Using the same simulation, 

we found that the median reduced FECA benefit package was less 

than the median FERS benefit package—regardless of the simulated 

contributions to TSP accounts.24 Specifically, under a scenario where 

there is no employee contribution—and a 1 percent agency 

contribution—the median reduced FECA benefit package is about 31 

percent less than the median FERS benefit package. Under a 

scenario where each employee contributes 5 percent—and receives a 

5 percent agency match—the median reduced FECA benefit package 

is about 35 percent less than the FERS benefit package. 

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 federal duties. However, concerns about the level of 

FECA benefits have increased interest in reforming the program. While 

reducing the level of benefits could be achieved, doing so would have 

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

foregone working years and after the beneficiary reaches retirement age. 

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. 

An alternative approach might be an across-the-board reduction in FECA 

compensation, which could keep replacement rates relatively equal 

 

24While 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. 

Concluding 

observations 
 

Page 11 GAO-13-108 Federal Employees' Compensation Act 

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. 

In short, there are no quick fixes. Our analyses demonstrated that there 

are policy levers that can be adjusted in order to achieve reform. 

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. 

 
 

Page 12 GAO-13-108 Federal Employees' Compensation Act 

We provided a draft of this report to the Department of Labor, the Office 

of Personnel Management, the Social Security Administration, and the 

Thrift Savings Investment Board, and they did not have any comments. 

As agreed with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from its 

issue date. At that time, we will send copies of this report to relevant 

congressional committees, the Secretary of Labor, the Director of the 

Office of Personnel Management, the Commissioner of Social Security, 

the Executive Director of the Thrift Savings Board, 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 staff 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 be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix III. 

Andrew Sherrill 

Director 

Education, Workforce, and 

 Income Security Issues 
Appendix I: Federal Employees’ Compensation 

Act 

Page 13 GAO-13-108 Federal Employees' Compensation Act 

Appendix I: Federal Employees’ 

Compensation Act 

Federal Employees’ 

Compensation Act: 

Analysis of Proposed Program Changes

Briefing to Congressional Staff:

Committee on Education and the Workforce

United States House of Representatives

July 2012

and

September 2012

1
Appendix I: Federal Employees’ Compensation 

Act 

Page 14 GAO-13-108 Federal Employees' Compensation Act 

Introduction

• 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.

• The US Department of Labor (Labor) administers FECA and FECA benefits are 

generally based on an employee’s wages at time of injury and whether the employee 

has eligible dependents.1

• Since FECA benefits are adjusted for inflation and are not taxed or subject to age 

limitations, some policymakers are concerned about the generosity 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.

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

total and partial disabilities (changes would not affect current FECA recipients):2

• Set initial FECA benefits at a single compensation rate (70 percent of applicable wages at 

time of injury), regardless of whether the beneficiary has eligible dependents.3

• 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.

2

1 FECA beneficiaries with eligible dependents receive 75 percent of applicable wages at time of injury; those without dependents receive 66-2/3 percent. 2 The proposal analyzed is Labor’s “Federal Injured Employees’ Reemployment Act of 2010” technical assistance discussion draft, January 13, 2011. 3 Generally, the proposal decreases benefits for beneficiaries with eligible dependents and increases benefits for those without dependents.
Appendix I: Federal Employees’ Compensation 

Act 

Page 15 GAO-13-108 Federal Employees' Compensation Act 

Key Objectives

1. What would be the effect of Labor’s proposal to compensate 

total disability FECA beneficiaries at a single rate regardless of 

having eligible dependents?

2. How would FERS and total disability FECA benefits in 

retirement compare under current FECA and Labor’s 

proposed FECA revision?

3
Appendix I: Federal Employees’ Compensation 

Act 

Page 16 GAO-13-108 Federal Employees' Compensation Act 

4 The comparisons focused on 2010 and did not consider any cumulative effects of the proposed FECA revisions on lifetime income.

5 We defined GS ranges based on income (2010 dollars) as follows: GS 1-4 (<$27,431), GS 5-8 ($27,431-$41,562), GS 9-12 ($41,563-$71,673), and GS 

13-15 (≥$71,674).

Scope and Methodology

• This briefing focuses on federal workers covered under FERS, FERS annuitants, and total 

disability FECA beneficiaries.

• Partial disability beneficiaries—who have some capacity to earn wages—were not included in the scope of this work.

• Workers and beneficiaries at the U.S. Postal Service (USPS) were not included in this work (details on 5).

• To determine the effects of proposed FECA revisions, we compared (1) simulated FECA 

benefits for a set of federal workers to their actual earnings in 2010; and (2) simulated FECA 

benefits to FERS benefits in 2010.4

• We examined the effects of the proposed FECA revisions on total disability FECA 

beneficiaries overall, and within subgroups, including those based on the:

• Presence of an eligible dependent

• Extent of missed income and career growth—defined as moving from one GS level range to the next5

• GS level at time of injury (measured by GS level ranges)

• State tax rates and overall tax liabilities (e.g., exemptions and deductions)

4

Scope and Methodology: Scope
Appendix I: Federal Employees’ Compensation 

Act 

Page 17 GAO-13-108 Federal Employees' Compensation Act 

Scope and Methodology (cont’d)

• To address the key objectives, we analyzed:

• 2010 Integrated Federal Employees’ Compensation System (iFECS) data

• 1988 – 2010 Central Personnel Data Files (CPDF)

• The CPDF does not cover all civilian federal workers; for instance, USPS is excluded—which 

accounted for 43% of FECA beneficiaries in 2010.

• 2010 FERS annuitant data

• 2000-2012 Thrift Savings Plan (TSP) data

• Social Security benefit data from the Master Beneficiary Record (MBR)

• We determined the data we used to be sufficiently reliable for the purposes of this 

report.

5

Scope and Methodology: Data
Appendix I: Federal Employees’ Compensation 

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Page 18 GAO-13-108 Federal Employees' Compensation Act 

Scope and Methodology (cont’d)

• To determine how compensating all beneficiaries at 70 percent of wages at the time of injury would 

affect beneficiaries, we compared the proportion of take-home pay replaced by FECA under the 

current program and the proposed revision. Specifically we took the following steps:

• We matched recent total disability FECA beneficiaries who worked for agencies represented in the 

CPDF and were covered under FERS to similar workers who had never been injured and who were 

employed at the end of fiscal year 2010.

• To simulate FECA benefits for the matched set of federal workers, we timed our simulation of 

injuries to coincide with the injury for the corresponding FECA beneficiary—and calculated their 

hypothetical FECA benefits as of fiscal year 2010. We:

• Calculated initial FECA benefits as a percentage of gross wages at time of injury under FECA (75 and 

66-2/3 percent for beneficiaries with and without an eligible dependent, respectively) and the proposed 

revision to compensate all beneficiaries at 70 percent.

• Projected initial benefits to 2010 using the cost of living adjustments (COLA) for FECA.

• To compare FECA benefits with actual earnings, we calculated wage replacement rates as the 

percentage of 2010 take-home pay replaced by simulated 2010 FECA benefits.

• The wage replacement rate, as defined above, captures actual career growth because it compares 

simulated FECA benefits to actual earnings in 2010.6

6

Scope and Methodology: Objective 1

6 Consistent with GAO/GGD-98-174, 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. In part due to a lack of data, the wage replacement 

rates in GAO-98-174 captured cost of living increases, not career growth. See GAO, Federal Employees’ Compensation Act: Percentages of Take Home 

Pay Replaced by Compensation Benefits, GAO/GGD-98-174 (Washington, D.C.: August 1998). For more details on our methodology see appendix II.
Appendix I: Federal Employees’ Compensation 

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Page 19 GAO-13-108 Federal Employees' Compensation Act 

Scope and Methodology (cont’d)

To compare FERS benefits to FECA and the proposed reduction to 50 percent at retirement, we:

• Matched recent total disability FECA beneficiaries who were at least 55 years old, worked for agencies represented in the 

CPDF, and were covered under FERS to similar FERS annuitants who were receiving FERS benefits as of June 2010.7

• We limited our analysis to those who had complete data.

• To simulate FECA benefits for the matched set of federal annuitants, we timed our simulation of injuries to coincide with the

injury for the corresponding FECA beneficiary—and calculated their hypothetical FECA benefits in retirement as of fiscal 

year 2010. We:

• Calculated initial FECA benefits as a percentage of gross wages at time of injury under FECA and projected benefits to 2010; and

• Annuitized the estimated TSP balances at time of injury.

• To calculate hypothetical TSP balances, we used the TSP balances of the corresponding FECA beneficiary at the time of his/her

separation from the federal workforce (approximately the time of injury).

• Calculated hypothetical FECA benefits under the proposal to reduce FECA benefits once the beneficiary reaches Social Security retirement 

age and recalculated FECA as 50 percent of gross earnings at time of injury and projected benefits to 2010.

• Calculated total FERS benefits of the matched set of FERS annuitants, including:

• FERS annuity;

• Social Security benefit; and

• Annuitized estimates of TSP balances at the time of separation from the federal government (retirement).

• Compared FERS benefits to current FECA and the proposed FECA reduction.

• Since FERS is not yet a mature system, we also simulated a mature system consisting of 30 years of federal service, using the work 

histories of matched FERS annuitants.8

7

Scope and Methodology: Objective 2

7 We assumed that Social Security benefits were attributable to federal service and therefore offset by FECA. We did not have data on non-federal 

employment, thus we did not include any additional Social Security benefits. This results in an underestimate of retirement income for FECA beneficiaries. 8 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. Absent a mature system, we underestimate the FERS benefit.
Appendix I: Federal Employees’ Compensation 

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Page 20 GAO-13-108 Federal Employees' Compensation Act 

9 Cash benefits also include schedule awards for loss of, or loss of use of, a body part or function; death benefits for survivors; and funeral expenses.

How FECA Works

• Labor’s Division of Federal Employees’ Compensation in the Office of Workers’ 

Compensation Programs (OWCP) administers the FECA program with a goal of having 

claimants recover and return to work in a sustained capacity following an injury.

• OWCP 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 provides cash benefits and other benefits to federal employees who suffer 

temporary or permanent disabilities resulting from work-related injuries or diseases.

• Cash benefits include payments for wages lost when employees cannot work because of 

work-related disabilities due to traumatic injuries or occupational diseases.9

• Other benefits include vocational rehabilitation and medical care for injured workers, 

including medical expenses associated with the workplace injury.

• For medical expenses unrelated to this injury, FECA beneficiaries who opt to remain in the Federal 

Employees Health Benefits (FEHB) plan have the same benefits and premiums as federal workers.

• OWCP deducts beneficiaries’ premiums from FECA benefits and pays the employing agency’s 

premiums.

8

Background
Appendix I: Federal Employees’ Compensation 

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Page 21 GAO-13-108 Federal Employees' Compensation Act 

10 At the time of injury, wage replacement rates are greater than FECA compensation rates. For example, given a dependent and gross wages of 50,000, the 

FECA benefit is $37,500 (75%). Assuming 15% taxes, take home pay would be $42,500, and the wage replacement rate would be 88% (37,500/42,500). 11 FECA benefits are adjusted using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as are Social Security benefits.

FECA Benefit Calculation

• FECA benefits for total disability beneficiaries are a proportion of gross 

wages at the time of injury.

• FECA beneficiaries with eligible dependents receive 75 percent; and

• FECA beneficiaries without dependents receive 66-2/3 percent.10

• Benefits are adjusted annually for cost of living increases and are not 

taxed.11

• Total disability beneficiaries include:

• those individuals whom OWCP has determined to have little or no reemployment 

potential based on file reviews.

• those individuals for whom extended disability is anticipated. These beneficiaries 

receive total disability benefits while OWCP evaluates the potential for reemployment.

9

Background
Appendix I: Federal Employees’ Compensation 

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Page 22 GAO-13-108 Federal Employees' Compensation Act 

Proposed FECA Revision

• Labor’s proposed “Federal Injured Employees’ Reemployment Act of 

2010” Technical Assistance Discussion Draft Dated January 13, 2011:

• Covers: Total and partial disability FECA beneficiaries. 

• Proposed revisions—which would not affect current FECA 

beneficiaries—include:

• Beneficiaries would no longer receive augmented compensation for having 

eligible dependents, and the basic rate of compensation for total and partial 

disability would be set at 70 percent of applicable wages for all beneficiaries;

• Compensation at full Social Security retirement age would generally be reduced 

to 50 percent of applicable wages at time of injury—adjusted for inflation—for 

all beneficiaries; and

• FECA claimants would not receive continuation of pay for the first 3 days of 

temporary disability, except when disability would exceed 14 days.12

10

Background

12 Currently employing agencies are required to pay eligible FECA claimants their regular salary for 45 days to prevent a disruption in pay. In 2006, FECA

was amended to require USPS employees to use 3 days of their own accrued sick or annual leave (or leave without pay) before receiving continuation 

of pay. However, available data does not allow for analysis of any related cost savings that may have resulted from this change.
Appendix I: Federal Employees’ Compensation 

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Page 23 GAO-13-108 Federal Employees' Compensation Act 

13 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).

Wage Replacement Rates Are a Measure of the 

Adequacy of Workers’ Compensation Benefits

• Wage replacement rates are used to measure adequacy of benefits.

• 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.

• FECA and other worker’s 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 injured.

• Wage replacement rates can be targeted by policy makers.

• There is no consensus on what wage replacement rate policies should target.

• In 1972 the National Commission on State Workmen’s Compensation Laws endorsed a move towards 80 percent of spendable pay or take-home pay.

• GAO/GGD-98-174 also cited this 80 percent benchmark.

• In 2004, a report by the National Academy of Social Insurance used two thirds of gross wages as a target replacement rate for workers’ compensation programs.13

11

Background
Appendix I: Federal Employees’ Compensation 

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Page 24 GAO-13-108 Federal Employees' Compensation Act 

Benefit Ratio

• A benefit ratio compares the benefits of one program to the benefits of another.

• We define the FECA to FERS benefit ratio as:

• Benefit ratio = FECA Benefit/FERS Benefit

• and express it as a percentage.

• If FECA benefits are:

• Greater than FERS benefits, the benefit ratio is greater than 100.

• Equal to FERS benefits, the the benefit ratio is 100.

• Less than FERS benefits, the benefit ratio is less than 100.

• For example:

• A benefit ratio of 130 means FECA benefits are 30 percent greater than FERS benefits.

• A benefit ratio of 90 means FECA benefits are 10 percent less than FERS benefits.

12

Background
Appendix I: Federal Employees’ Compensation 

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Page 25 GAO-13-108 Federal Employees' Compensation Act 

14 Employees with 20 or more years of federal service who retire at the age of 62 or later accrue annuity benefits at a rate of 1.1 percent for each year of 

service; most other eligible employees accrue annuity benefits at a rate of 1 percent for each year of service. 15 FECA offsets the Social Security benefits that are attributable to federal service after a beneficiary reaches Social Security retirement age. Social 

Security benefits not attributable to federal service are not offset.

FERS and the Interaction of FERS and FECA

• Federal Employee Retirement System Act of 1986 generally covers federal employees 

initially hired on or after January 1, 1984.

• As of September 30, 2009, about 85 percent of the federal workforce was covered by FERS.

• FERS has three elements:

• Social Security

• FERS basic retirement annuity, which is based on an employee’s length of service and highest average 

basic pay earned for three consecutive years of service.14

• The FERS annuity increases with years of service.

• TSP

• Similar to a 401K.

• Employing agency contributes an amount equal to 1 percent of employees’ salary automatically and 

matches employee contributions up to a maximum agency contribution of 5 percent.

• FECA beneficiaries:

• Receive Social Security benefits; however Social Security benefits attributable to federal service are 

offset.15

• Do not receive a FERS annuity while receiving FECA.

• Cannot contribute to the TSP but maintain their pre-injury account balances.

13

Background
Appendix I: Federal Employees’ Compensation 

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Page 26 GAO-13-108 Federal Employees' Compensation Act 

Summary of Key Findings (Objective 1)

• Under our simulation, compensating all beneficiaries at 70 percent of gross wages at the 

time of injury reduced the overall median wage replacement rate—the percentage of 

take-home pay replaced by FECA—from 80 percent to 77 percent. 

• The proposed revision increased differences between the median wage replacement 

rates for those beneficiaries with and those without eligible dependents.16

• While the proposed revision generally reduced wage replacement rates of beneficiaries 

in the subgroups we examined, we found no reductions that were disproportionate to the 

overall reduction in median benefits; however, wage replacement rates varied within the 

subgroups based on worker characteristics.17

14

16 Findings in objective 1 are specific to pre-retirement outcomes. Throughout this objective, we refer to the matched set of federal workers as “beneficiaries” 

when discussing their simulated benefits; and we refer to these same individuals as “workers” when discussing their actual careers. 17 Subgroups we examined showed variation in the extent of missed income and career growth, GS level at time of injury, and state tax rates.
Appendix I: Federal Employees’ Compensation 

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Page 27 GAO-13-108 Federal Employees' Compensation Act 

18 Very few FECA beneficiaries had wage replacement rates over 100 percent—2.2 and 1.3 percent of beneficiaries under FECA and the proposed revision, 

respectively. Most of these workers had declines in actual income from the time of their simulated injury through 2010. Beneficiaries could have wage 

replacement rates over 100 percent for other reasons, including FECA cost of living increases and high tax liabilities.

Proposed Revision Reduced 2010 Median Wage 

Replacement Rate from 80 Percent to 77 Percent 

• Under our simulation, the 

proposed revision decreased the 

overall median wage replacement 

rate by 3.1 percentage points.

• About half of total disability 

beneficiaries had 2010 wage 

replacement rates between 71 and 

87 percent under FECA

and between 69 and 84 percent 

under the proposed revision.18

15

Finding 1: Wage Replacement

Figure 1: Wage Replacement Rates Under FECA 

and the Proposed Revision

Source: GAO analysis of simulation results.
Appendix I: Federal Employees’ Compensation 

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Page 28 GAO-13-108 Federal Employees' Compensation Act 

Proposed Revision (cont’d)

• The overall decrease in the median wage replacement rate was due to 

the greater proportion of beneficiaries with a dependent and the relative 

magnitude of the changes.

• Those with a dependent (n=4,011) had a 5 percentage point decrease in 

compensation rate—from 75% to 70% under the proposed revision—and their 

wage replacement rates decreased, as expected.

• Those without a dependent (n=1,456) had a 3-1/3 percentage point increase in 

compensation rate—from 66-2/3% to 70% under the proposed revision—and 

their wage replacement rates increased, as expected.

16

Wage Replacement: Median Rates

Policy Implication:

Compensating all FECA beneficiaries at 70 percent of wages at

the time of injury would likely result in a decrease of the median 

wage replacement rate. Under our simulation the median wage 

replacement rate decreased from 80 to 77 percent.
Appendix I: Federal Employees’ Compensation 

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Page 29 GAO-13-108 Federal Employees' Compensation Act 

19 Our data did not include information on the number of dependents, so we assumed a single dependent. All else equal, having more dependents would 

generally increase take-home pay (because of smaller tax liabilities) and therefore result in lower wage replacement rates. For information on the relationship 

between number of dependents and wage replacement rates, see 27.

Equalizing FECA Compensation Rates Alters the 

Relative Equality in Wage Replacement Rates

17

Wage Replacement: Median Rates

Figure 2: Median Wage Replacement Rates For Beneficiaries with and without a Dependent

Source: GAO analysis of simulation results.

The proposed revision increased the magnitude, and reversed the direction, of the difference in wage 

replacement rates between beneficiaries with and without a dependent.

•Under FECA, beneficiaries with a dependent had a median wage replacement rate that was 3.5 percentage points 

higher than did those without dependents.

• Had we accounted for the actual number of dependents, beneficiaries with a dependent would have lower wage 

replacement rates, and the difference between wage replacement rates would be smaller. As a result, under 

FECA these replacement rates are relatively similar.19

•Under the proposed revision, beneficiaries with a dependent had a median wage replacement rate 5.8 percentage points 

lower than did those without dependents.

• Had we accounted for the actual number of dependents, the difference between wage replacement rates would 

be greater.

•Currently, lower tax liabilities partially offset the augmented benefits (75 vs. 66-2/3 percent) for beneficiaries with a 

dependent.
Appendix I: Federal Employees’ Compensation 

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Page 30 GAO-13-108 Federal Employees' Compensation Act 

Equalizing FECA Compensation Rates (cont’d)

18

Wage Replacement: Median Rates

Policy Implication:

Currently, FECA replaces similar percentages of take-home pay for beneficiaries with or without a 

dependent. The proposal to compensate all beneficiaries at 70 percent of gross income at the time of 

injury results in unequal wage replacement rates. 

This occurs because FECA benefits are not taxed, whereas wages are. Tax deductions for dependents 

allow individuals with dependents to keep a greater proportion of their earnings, i.e., have greater takehome pay. 

As a result, equalizing FECA compensation rates at 70 percent—or any other percentage—results in 

FECA replacing a smaller proportion of take-home pay for beneficiaries with a dependent than it 

replaces for beneficiaries without a dependent.
Appendix I: Federal Employees’ Compensation 

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Page 31 GAO-13-108 Federal Employees' Compensation Act 

Proposed Revision Did Not Disproportionately 

Affect Subgroups We Examined

• While the overall median wage replacement rate was around 80 percent, wage 

replacement rates for some beneficiaries in the subgroups we examined were 

substantially lower.

• The proposed revision generally reduced wage replacement rates of 

beneficiaries in the subgroups we examined; however, we found no reductions 

that were disproportionate to the overall reduction in median benefits.

• Under both FECA and the proposed revision, we found variation in wage 

replacement rates between beneficiaries, based on:

• Extent of missed career growth;

• Extent of missed income growth;

• GS level at time of injury; and

• State tax rates and overall tax liabilities.

19

Wage Replacement: Subgroups Examined
Appendix I: Federal Employees’ Compensation 

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Page 32 GAO-13-108 Federal Employees' Compensation Act 

20 About 74 percent of workers stayed in the same GS category from time of simulated injury to 2010 and 24 percent advanced a full GS category.

GS ranges were based on income (2010 dollars): GS 1-4 (<$27,431), GS 5-8 ($27,431-$41,562), GS 9-12 ($41,563-$71,673), and GS 13-15 (≥$71,674). 21 Because of missed career growth, beneficiaries who were on FECA longer had lower wage replacement rates.

Missing Out on Career Growth Resulted in Lower 

Wage Replacement Rates

• Among workers who remained in the same GS category from the time of their simulated injury through 2010, median 

wage replacement rates were about 9-15 percentage points higher than for those who advanced a full GS category.20

• For example, under FECA the median wage replacement rate for workers with less career growth in GS 9-12 was about

15 percentage points higher than that of workers who experienced greater career growth from GS 9-12 to GS 13-15—

84.5 percent to 69.7 percent.21

20

Wage Replacement: Subgroups Examined

Figure 3: 

Median Wage 

Replacement 

Rates by Career 

Growth for 

FECA and a 

Proposed 

Revision

Source: GAO 

analysis of 

simulation results.

Note: Missed 

career growth,

or career growth 

absent an injury, 

is captured by 

moving from one 

GS level category 

to the next after 

the time of the 

simulated injury. 
Appendix I: Federal Employees’ Compensation 

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Page 33 GAO-13-108 Federal Employees' Compensation Act 

Missing Out on Career Growth (cont’d)

• Actual wage growth through GS step increases and promotions 

outweighed FECA’s annual cost of living adjustments—generally 

higher than those for federal workers (1990-2011)—and resulted 

in lower wage replacement rates for beneficiaries who missed 

substantial career growth.

• Because of missed career growth, beneficiaries who were on 

FECA longer had lower wage replacement rates.

21

Wage Replacement: Subgroups Examined

Policy Implication:

Because FECA was not designed to account for missed career growth, 

its cost of living increases do not keep pace with GS step increases and 

promotions. Those beneficiaries who miss out on career growth due to 

their injury have lower wage replacement rates than those who do not. 
Appendix I: Federal Employees’ Compensation 

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Page 34 GAO-13-108 Federal Employees' Compensation Act 

22 The remaining 8 percent—420 workers—experienced a decline in income.

Missing Out on Income Growth Resulted in Lower 

Wage Replacement Rates

• Wage replacement rates declined as missed income grew.

• Among the 92 percent of workers who experienced income growth in their careers,22 wage 

replacement rates under FECA ranged from about 87 percent down to about 52 percent.

• More workers had 0-9 percent income growth than any other range; their median wage 

replacement rate under FECA was about 87 percent.

22

Wage Replacement: Subgroups Examined

Figure 4: Median 

Wage Replacement 

Rates by Income 

Growth

Source: GAO analysis

of simulation results.

Intervals do not include upper endpoints.
Appendix I: Federal Employees’ Compensation 

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Page 35 GAO-13-108 Federal Employees' Compensation Act 

23 GS ranges were based on income (2010 dollars): GS 1-4 (<$27,431), GS 5-8 ($27,431-$41,562), GS 9-12 ($41,563-$71,673), and GS 13-15 (≥$71,674).

Missing Out on Income Growth (cont’d)

• Most workers whose injuries caused them to miss 0 to 9 percent growth in income were injured at higher GS levels:23

• 30 percent were injured at GS levels 1-4 or 5-8.

• 70 percent were injured at GS levels 9-12 or 13-15.

• Most workers whose injuries caused them to miss greater than 60 percent growth in income were injured at lower GS levels:

• 60 percent were injured at GS levels 1-4 or 5-8.

• 40 percent were injured at GS levels 9-12 or 13-15.

23

Wage Replacement: Subgroups Examined

Figure 5: 

GS Level 

Groupings 

by Percent 

of Missed 

Income 

Growth

Source: GAO 

analysis of 

simulation 

results.

Intervals do not include upper endpoints.
Appendix I: Federal Employees’ Compensation 

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Page 36 GAO-13-108 Federal Employees' Compensation Act 

Missing Out on Income Growth (cont’d)

• Actual income growth outweighed FECA’s annual cost of living adjustments—generally higher than 

those for federal workers (1990-2011)—and resulted in lower wage replacement rates for 

beneficiaries who missed substantial income growth.24

• Because of missed income growth, beneficiaries who were on FECA longer had lower wage 

replacement rates.

24

Wage Replacement: Subgroups Examined

Policy Implication:

Because FECA was not designed to account for missed income growth, 

its cost of living increases do not keep pace with missed income growth. 

Those beneficiaries who miss out on income growth due to their injury 

have lower wage replacement rates than those who do not. 

24 In general, wages grow faster than prices.
Appendix I: Federal Employees’ Compensation 

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Page 37 GAO-13-108 Federal Employees' Compensation Act 

Lower GS Levels at Time of Injury Were 

Associated with Lower Wage Replacement Rates

25

Wage Replacement: Subgroups Examined

Median wage replacement rates were lower for beneficiaries injured at 

lower GS levels (i.e., those with lower incomes).25

25 GS ranges were based on income (2010 dollars): GS 1-4 (<$27,431), GS 5-8 ($27,431-$41,562), GS 9-12 ($41,563-$71,673), and GS 13-15 (≥$71,674).

Figure 6: Median Wage Replacement Rates by GS Level at Time of Injury

Source: GAO analysis of simulation results.
Appendix I: Federal Employees’ Compensation 

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Page 38 GAO-13-108 Federal Employees' Compensation Act 

Lower GS Levels at Time of Injury Were 

Associated with Lower Wage Replacement Rates

• Those injured at lower GS levels had lower median wage replacement rates 

because of missed career growth and tax liabilities.

• A higher percentage of beneficiaries injured at lower GS levels were workers who advanced a 

full GS category from the time of their simulated injury through 2010.

• About 63 percent of beneficiaries injured at GS 1-4 advanced a full GS category, 

compared to 38 and 18 percent, respectively, of beneficiaries injured at GS 5-8, and GS 

9-12.26

• Because tax liability increases with income, beneficiaries at lower GS levels generally pay 

lower taxes and thus take home more of their gross pay if not injured; FECA benefits thus 

replace a smaller percentage of take-home pay.

26

Wage Replacement: Subgroups Examined

Policy Implication:

Workers who were injured at lower GS levels had lower wage replacement 

rates—that is FECA replaces a smaller portion of their take-home pay—than 

did those injured at higher GS levels. This difference occurs at initial 

compensation and can grow over time.

26 GS ranges were based on income (2010 dollars): GS 1-4 (<$27,431), GS 5-8 ($27,431-$41,562), GS 9-12 ($41,563-$71,673), and GS 13-15 (≥$71,674).
Appendix I: Federal Employees’ Compensation 

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Page 39 GAO-13-108 Federal Employees' Compensation Act 

27 FECA benefits are not taxed.

State Taxes and Tax Liabilities Were Associated 

with Limited Variation in Wage Replacement Rates

• Lower taxes yield higher take-home pay, and are thus associated with lower wage 

replacement rates.27

• Median wage replacement rates:

• grow as taxable income increases (e.g., spousal income);

• decline as tax exemptions and deductions increase (e.g., for dependents, mortgage interest); and

• were generally lower for workers in states with lower tax rates.

27

Wage Replacement: Subgroups Examined

Figure 7: 

Median Wage 

Replacement 

Rates by 

State Tax

Source: GAO 

analysis of 

simulation results.
Appendix I: Federal Employees’ Compensation 

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Page 40 GAO-13-108 Federal Employees' Compensation Act 

Summary of Key Findings: FECA and FERS

Objective 2:

• In our simulation comparing FECA to FERS in 2010, both overall and across most 

subgroups we looked at:

• The median FECA benefit package (FECA and TSP) is greater than the median 

FERS retirement benefit package (FERS, TSP, and Social Security) for FERS 

annuitants in 2010.

• The median reduced FECA benefit package—Labor’s proposal to reduce FECA 

benefits upon reaching Social Security retirement age—is less than the median 

FERS benefit package for FERS annuitants in 2010.28

• Because FERS is not yet mature, comparisons of FECA and FERS benefits in 2010 

reflect limited years of service. Under our simulation of a mature FERS—consisting of a 

30 year federal career—FECA and reduced FECA were generally lower than FERS.

28

28 Labor’s proposed revision of FECA would reduce benefits to 50 percent of wages at the time of injury upon reaching Social Security retirement age, which 

is between 65 and 67 years of age, based on birth year. To increase the size of the analysis set, we simulated benefit reductions for all annuitants, regardless 

of age.
Appendix I: Federal Employees’ Compensation 

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Page 41 GAO-13-108 Federal Employees' Compensation Act 

29 Our analysis did not include any retirement income generated by retirement accounts held outside the TSP—from work outside the federal government or from other 

savings decisions. Further, our data does not allow distinction between the proportion of the TSP balance attributable to the employee’s contribution 

vs. that of the government; as a result, some of the retirement benefits described are financed by reduced consumption during working years.

Current FECA Benefits At Retirement Are Generally 

Greater Than FERS Benefits for 2010 Annuitants

• The median FECA benefit at 

retirement age under the current 

program (including both FECA 

benefit and TSP) was about 32 

percent greater than the median 

FERS benefit (FERS annuity, TSP, 

and Social Security).29 

• In our analysis, FERS 

annuitants had a median of 

about 16 years of service.

• The median FECA benefit under 

the proposed reduction was 

about 6 percent less than the 

median FERS benefit.

29

Finding 2: FECA vs. FERS at Retirement Age

Figure 8: Composition of Median Benefits for FECA, FERS, and Reduced FECA

Source: GAO analysis 

of simulation results.

Note: Percentages are 

the ratio of the median 

benefit component 

(e.g., TSP) to the 

median overall benefit. 

These ratios may not 

sum to exactly 100% 

across components, 

because the component 

medians may apply to 

different workers. 
Appendix I: Federal Employees’ Compensation 

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Page 42 GAO-13-108 Federal Employees' Compensation Act 

FERS Benefits Received by 2010 Annuitants with 

More Years of Service Are Closer to FECA Benefits

• FECA benefits were consistently greater than 

FERS benefits for varying years of service, and 

reduced FECA benefits were generally less 

than FERS benefits for varying years of service.

• The gap between current FECA benefits 

and FERS benefits narrowed as years

of service increased.

• An annuitant with more years of federal 

service had increased FERS benefits—

due to growth in the TSP and FERS 

annuity from additional years worked,

as well as to career (income) growth.

• The gap between reduced FECA

benefits and FERS benefits widened

as years of service increased

• FECA COLAs do not keep pace with

the total “missed” accumulation of FERS 

retirement benefits.

30

FECA vs. FERS: Years of Service

Figure 9: Median FECA and FERS Benefit Packages by Years of Service in 2010

Source: GAO analysis of simulation results.

Median FERS benefits may 

be greater than median FECA 

benefits in the future
Appendix I: Federal Employees’ Compensation 

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Page 43 GAO-13-108 Federal Employees' Compensation Act 

Years of Service (cont’d)

• As years of service increase, FECA and FERS become more 

similar. While FERS benefits accrue at a faster rate than FECA 

benefits grow prior to retirement, it is unclear which benefit would 

be greater if there were workers who had 30 year careers.30

• In addition, current FERS benefits at retirement are generally 

greater than the reduced FECA benefit, and in a mature system 

FERS benefits may be even greater.

31

FECA vs. FERS: Years of Service

30 FERS had only been in place for 26 years in our 2010 data. Consequently, very few annuitants covered under FERS had 30 years of federal service 

(some converted from the prior retirement system to FERS). Federal employees age 62 with over 30 years of service accrue retirement benefits at a 

slightly higher rate. In addition, having 4 additional years of TSP contributions and growth can lead to greater account balances.
Appendix I: Federal Employees’ Compensation 

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Page 44 GAO-13-108 Federal Employees' Compensation Act 

• For varying GS levels at the time of injury:

• Median FECA benefits were consistently greater than 

FERS benefits; and

• Median reduced FECA benefits were generally less 

than FERS benefits.

• Beneficiaries injured at lower GS levels had lower FECA 

benefits relative to FERS than did beneficiaries injured at 

higher GS levels.31

• This relationship also exists within years of service groups; for 

instance, among workers who would have had careers that lasted 

20-25 years, the median FECA benefit ranged from 8.4 percent 

(injured at GS 5-8) to 29.3 percent (injured at GS 13-15) more than 

the median FERS benefit.32

• Accounting for both years of service and GS level at time of 

injury, beneficiaries injured at lower GS levels who would 

have had longer careers had they not been injured received 

the lowest FECA benefits relative to FERS benefits.

Lower GS Levels at Time of Injury Resulted in 

Lower FECA Benefits Relative to FERS Benefits

32

FECA vs. FERS: GS Level at Time of Injury

31 This relationship exists because lower earners receive a higher rate of Social Security benefits than higher earners; thus, while FECA benefits grow 

proportionally based on income, FERS benefits do not because Social Security rates vary, providing a higher rate of benefits to lower earners. 32 There were not enough workers in our sample injured at GS 1-4 who would have had careers of 20-25 years to report their FECA/FERS benefit ratio.

Figure 10: Median FECA and FERS Benefit Packages by GS Level 

at Time of Injury

Source: GAO analysis of simulation results.
Appendix I: Federal Employees’ Compensation 

Act 

Page 45 GAO-13-108 Federal Employees' Compensation Act 

Post-Retirement FECA Benefits Grow at a Faster 

Rate than FERS Benefits

• After retirement, FECA benefits increase at a faster rate than 

FERS benefits.33

• The COLA for FECA is generally greater than the COLA for the FERS 

annuity, and under our simulation TSP annuities are not adjusted for 

inflation. 

• Since FECA and reduced FECA are adjusted at the same rate, 

reduced FECA benefits would also grow faster than FERS 

benefits after retirement.

• As a result, establishing equity between the two benefit packages at 

retirement could result in FECA eventually being greater than FERS.

33

FECA vs. FERS: Years Since Retirement

33 FECA and Social Security are adjusted by the same price index (CPI-W); the FERS annuities are adjusted as follows: if CPI-W < 2%, then FERS COLA = CPI; if 2 < CPI 

≤ 3% then COLA = 2%; and if CPI > 3% then COLA = CPI - 1. The magnitude of the difference in benefits may be overstated due to the structure of the data set (the lack of 

a mature FERS) and our assumption of a single life annuity with level payments, which does not adjust annually post retirement (an inflation-indexed annuity would).
Appendix I: Federal Employees’ Compensation 

Act 

Page 46 GAO-13-108 Federal Employees' Compensation Act 

FECA Benefits Were on Par or Less Than FERS 

Benefits Under Our Mature FERS Simulation

• Our simulation compares the FECA benefits for a beneficiary after a total of 30 years (pre- and post-injury combined) to the FERS benefit package he or she 

would have had absent an injury after a 30-year career. 

• Federal workers may retire with less than 30 years of federal service, and some may retire with more than 30 years of federal service. As such, our results may overestimate (or underestimate) FERS.

• In our simulation of the mature FERS system, FECA benefits were on par with or less than FERS benefits—depending on contributions to TSP—after a simulated 

30-year career. Our simulation of reducing FECA to 50 percent of applicable wages at retirement resulted in reduced FECA benefits that were substantially lower than FERS benefits after a simulated 30-year career (see figures 11 and 12).

34

FECA vs. FERS: Simulation of Mature FERS
Appendix I: Federal Employees’ Compensation 

Act 

Page 47 GAO-13-108 Federal Employees' Compensation Act 

FECA Benefits Were on Par or Less Than FERS 

Benefits Under Our Mature FERS Simulation (cont’d)

35

FECA vs. FERS: Simulation of Mature FERS

• In our simulation of a mature FERS with 30 year careers and 6 percent annual growth for the 

TSP accounts, we found:

• The median FECA benefit package was 1 percent greater than the median FERS benefit package—assuming 

a TSP contribution of 1 percent.

• The median FECA benefit package was 10 percent less than the median FERS benefit package—assuming a 

TSP contribution of 10 percent.

Source: GAO analysis of simulation results.

Figure 11: FECA and FERS benefits based on simulation of 30 year careers
Appendix I: Federal Employees’ Compensation 

Act 

Page 48 GAO-13-108 Federal Employees' Compensation Act 

36

FECA vs. FERS: Simulation of Mature FERS

• In our simulation of a mature FERS with 30 year careers and 6 percent annual growth for the 

TSP accounts, we found:

• The median reduced FECA benefit package was 31 percent less than the median FERS benefit package—

assuming a TSP contribution of 1 percent.

• The median reduced FECA benefit package was 35 percent less than the median FERS benefit package—

assuming a TSP contribution of 10 percent.

Source: GAO analysis of simulation results.

Figure 12: Reduced FECA and FERS benefits based on simulation of 30 year careers

FECA Benefits Were on Par or Less Than FERS 

Benefits Under Our Mature FERS Simulation (cont’d)
Appendix I: Federal Employees’ Compensation 

Act 

Page 49 GAO-13-108 Federal Employees' Compensation Act 

• For current FERS annuitants, 

median FECA benefits were 

consistently greater than median 

FERS benefits for varying years of 

service.

• However, as years of service 

increased, FERS benefits 

grew relative to both current 

and reduced FECA benefits 

(narrowing and widening the 

respective gaps in benefits).

• Our simulation of a mature FERS, 

which assumed 30-year federal 

careers, showed that the median 

FECA benefit package may be on 

par or less than the median FERS 

retirement package in the future.

37

FECA vs. FERS: Simulation of Mature FERS

Source: GAO analysis of simulation results.

Figure 13: Median FECA and FERS Benefit Packages by Years of Service

FECA Benefits Were on Par or Less Than FERS 

Benefits Under Our Mature FERS Simulation (cont’d)
Appendix I: Federal Employees’ Compensation 

Act 

Page 50 GAO-13-108 Federal Employees' Compensation Act 

34 This is an illustrative example, as no such reduction was in the Labor proposal and the effects of such reductions were not considered in this report.

Concluding Observations: 

Wage Replacement Rates Under FECA and 

Proposed Revision 

• Labor’s proposal to compensate all FECA beneficiaries at 70 percent of gross wages would reduce 

the overall median wage replacement rate from 80 to 77 percent, based on our simulation. 

• While the median wage replacement rate under both FECA and the proposed revision are 

about 80 percent, wage replacement rates for some subgroups—such as those who missed 

extensive income growth—were as low as 50 percent.

• Since wage replacement rates are a measure of adequacy of benefits, it may be desirable to have 

similar wage replacement rates across beneficiaries. 

• Any proposal to reduce and equalize compensation rates—for example, at 70 percent—would 

disproportionately affect beneficiaries with dependents relative to those without dependents. 

Such a change would alter the relative equality of current wage replacement rates under 

FECA and result in an imbalance in the adequacy of benefits. 

• The ensuing differences in wage replacement rates are primarily attributable to taxes.

• It is important to note that while the current program may be advantageous to beneficiaries with an 

eligible dependent, the proposed revision would be advantageous to those without an eligible 

dependent.

• An alternative approach might be an across the board reduction in FECA compensation, 

which could keep wage replacement rates relatively equal between beneficiaries with and 

without dependents.34 

• However, such a change may have a large impact on the adequacy of benefits for those with relatively 

low wage replacement rates, such as beneficiaries who missed substantial career growth.

38
Appendix I: Federal Employees’ Compensation 

Act 

Page 51 GAO-13-108 Federal Employees' Compensation Act 

Concluding Observations: 

Wage Replacement Rates Under FECA and 

Proposed Revision (cont’d)

• It is important to note that FECA was not designed to account for missed 

income growth or other workplace dynamics. As such, neither FECA nor the 

proposed revision can maintain a constant wage replacement rate over time. 

• However, wage replacement rates that account for missed income growth provide 

a more complete story of the comparison between an injured worker and his or her 

counter-factual of having never been injured.

• Establishing a benefit structure that accounts for missed career growth and 

maintains constant wage replacement rates would require a nuanced approach 

to calculating and adjusting benefits over a beneficiary’s missed career, for 

example by establishing variable benefit adjustments based on standardized 

career trajectories. 

• However, such a nuanced system may be cost intensive to research, design, and 

implement, and it is unclear whether it would be cost effective or feasible to 

implement in a fair manner.

39
Appendix I: Federal Employees’ Compensation 

Act 

Page 52 GAO-13-108 Federal Employees' Compensation Act 

Concluding Observations: 

FECA and Proposed Revision Compared to FERS

• The median FECA benefit package in retirement was greater than the median FERS retirement package in 

2010; going forward, the median FECA benefit package may be on par or less than the median FERS 

retirement package, as in our simulation of a mature FERS with 30-year careers.

• Labor’s proposed reduction to 50 percent resulted in more equitable benefits—the median reduced FECA 

benefit package was about 6 percent less than the median FERS benefit package in 2010—yet going 

forward, the median reduced FECA package may be substantially less than the median FERS retirement 

package, as in our simulation of a mature FERS with 30-year careers.

• In addition, in 2010, the median reduced-FECA benefit package was substantially lower than the median FERS 

benefit package for some subgroups, including those injured at lower GS levels and those who missed longer careers.

• To the extent that policymakers might consider benefits that are substantially less than FERS to be inadequate, they 

may want to consider the merits of setting a minimum FECA benefit level after retirement to mitigate such an 

outcome.

• Since FECA benefits may grow faster than FERS benefits after retirement, any policy that equalizes FECA 

and FERS at retirement may not maintain equity between the two benefit packages over time.

• Slowing the growth of FECA benefits after retirement could help maintain equity; however, doing so would erode the 

purchasing power of FECA beneficiaries over time and may leave them at risk of having inadequate income.

• Because annuitants with more years of service have greater retirement income, it would be important to 

compare FECA to FERS once the FERS system is mature.

40
Appendix I: Federal Employees’ Compensation 

Act 

Page 53 GAO-13-108 Federal Employees' Compensation Act 

Concluding Observations: 

Lifetime Context of FECA 

• From our analyses, different stories emerge with implications for the “adequacy” of FECA 

benefits. 

• Our simulation of wage replacement rates indicated that FECA replaces a decreasing 

proportion of a beneficiary’s “missed income” over time, implying the beneficiary is less able to 

maintain the standard of living he/she would have had absent the injury. During this missed 

career, FECA benefits are less than the income a beneficiary would have taken home.

• Our retirement simulation indicated that FECA benefits at retirement are greater than FERS 

benefits in the current system (not yet mature).

• Our simulation of the mature FERS, assuming 30-year careers, indicated that FECA benefits at 

retirement may be on par or less than FERS benefits in the future.

• Any such differences would be compounded over time. It is unclear whether the lifetime 

cumulative effects of these differences result in a beneficiary being better or worse off 

financially than he or she would have been absent an injury—an outcome that depends 

on several factors, including the age of the beneficiary at the time of injury.

• While our analyses considered FECA and FERS benefits in 2010, it will be important for 

policy makers to understand the cumulative effects of these differences on FECA 

beneficiaries as they consider making changes to FECA.

41
Appendix II: Objectives, Scope and 

Methodology 

Page 54 GAO-13-108 Federal Employees' Compensation Act 

To analyze the effects of a proposed revision to the Federal Employees’ 

Compensation Act (FECA) program on non-postal federal employees1

, 

we answered two key questions: (1) what is the effect of compensating 

total disability FECA beneficiaries at a single rate regardless of having 

dependents, and (2) how do 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? This appendix provides a detailed account of the data 

and methods we used to answer these questions. Section 1 describes the 

key data sources. Sections 2 and 3 describe the methods we used to 

answer questions 1 and 2, respectively. 

To answer the key questions, we used administrative data on three 

populations: recent federal employees, FECA beneficiaries, and FERS 

annuitants. These data came from 4 federal agencies: the Department of 

Labor (Labor), 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 each data source and the 

steps we took to ensure their reliability. 

 

1

We analyzed federal employees who have records in the Central Personnel Data File, 

which is described in further detail below. This file does not contain information on 

employees in the U.S. Postal Services as well as several other federal agencies. Results 

of a similar analysis of postal employees will be included in a follow-on report. 

Appendix II: Objectives, Scope and 

Methodology 

Section 1: Data 

Sources 
Appendix II: Objectives, Scope and 

Methodology 

Page 55 GAO-13-108 Federal Employees' Compensation Act 

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

Central Personnel Data File 

(CPDF) 

OPM Federal employees Data on pay and other 

characteristics 

1988-2010 1 & 2

FERS annuitant data OPM FERS annuitants Annuity data 2010 2

Thrift Savings Plan 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. 

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

analysis of those beneficiaries with some wage earning capacity. 

To obtain information on the characteristics and benefits of FECA 

beneficiaries, we used data from the Department of Labor’s (Labor) 

Integrated Federal Employees’ Compensation Systems (iFECS), FECA’s 

claimant database for chargeback year 2010, which ends on June 30, 

2010.2

 Specifically, we used information on case status (such as whether 

the case was closed, under administrative review, etc.); the type of 

compensation and medical benefits (such as whether the benefit was 

long-term or short-term or for medical benefits only); the amount of the 

benefit the beneficiary receives; and information on whether the 

beneficiary had a dependent. 

To obtain information on the salaries and work histories of former and 

current federal employees, we used data from the Central Personnel Data 

File (CPDF). The CPDF is maintained by the Office of Personnel 

Management, and represents the primary government source of 

information on federal employees. We used information from the annual 

status files in the CPDF. The status files consist of data elements 

describing all employees who were present in the federal workforce in 

 

2

FECA benefits are paid out of the Employees’ Compensation Fund, and most are 

charged back to the employee’s agency. Labor’s 2010 chargeback year for FECA agency 

billing purposes ends on June 30, 2010. 

Integrated Federal 

Employees’ Compensation 

System 

Central Personnel Data 

File 
Appendix II: Objectives, Scope and 

Methodology 

Page 56 GAO-13-108 Federal Employees' Compensation Act 

September of each year, with some notable exclusions.3 These elements 

include information on the federal employee’s adjusted basic pay, 

agency, date of birth, education level, occupation, length of federal 

service, and work schedule (such as full-time or part-time). We used 

CPDF data from 1988 through 2010.4

To obtain information on FERS annuitants, we used FERS annuitant data 

for 2010 from the Office of Personnel Management. Specifically, we used 

the annuity amount received by the FERS annuitant and the annuity date. 

To obtain information on TSP balances for FECA beneficiaries and FERS 

annuitants who separated from the government, we used Thrift Savings 

Plan data from 2000 to 2010. These data are maintained by the Federal 

Retirement Thrift Investment Board. Specifically, we used the information 

on the TSP balance as of April 2012, the history of withdrawals from the 

TSP account from 2000 to 2012 to calculate the balance at the date of 

separation from federal service, and the date and amount of roll-overs 

into the TSP account. We excluded beneficiaries with roll-overs into their 

TSP account. 

To obtain information related to the Social Security benefits of FERS 

annuitants, we used data from the 2010 Master Beneficiary Record, an 

administrative SSA data file. Specifically, we used information on the 

worker’s beneficiary type and Primary Insurance Amount (PIA). We 

 

3

Specifically, CPDF coverage of the executive branch currently includes all agencies 

except the Board of Governors of the Federal Reserve, the Central Intelligence Agency, 

the Defense Intelligence Agency, Foreign Service personnel at the State Department, the 

National Geospatial-Intelligence Agency, the National Security Agency, the Office of the 

Director of National Intelligence, the Office of the Vice President, the Postal Rate 

Commission, the Tennessee Valley Authority, the U.S. Postal Service, and the White 

House Office. Also excluded are the Public Health Service’s Commissioned Officer Corps, 

nonappropriated fund employees, and foreign nationals overseas. CPDF coverage of the 

legislative branch is limited to the Government Printing Office, the U.S. Tax Court, and 

selected commissions. 

4

The 2010 CPDF data were the most recent data available for the first GAO analysis of 

FECA, which compared FECA with CSRS annuitants. For the purposes of comparing the 

results across the reports, we used the same year of data. 

FERS annuitant data 

Thrift Savings Plan data 

Master Beneficiary Record 
Appendix II: Objectives, Scope and 

Methodology 

Page 57 GAO-13-108 Federal Employees' Compensation Act 

limited our analysis to workers who are in current pay status and retired 

on their own account.5

For each of the datasets described above, 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. 

This section presents the methods we used to answer the question: What 

is the effect of compensating total disability FECA beneficiaries at a single 

rate regardless of having dependents? To answer this question, we 

created a sample of federal employees that were employed by the federal 

government in September 2010 that were similar to full disability FECA 

beneficiaries, and we compared their actual salary levels in 2010 to a 

hypothetical FECA benefit level the employee would have received under 

the current and revised FECA benefit structure, if he or she had been 

injured at the same point in time that the matched FECA beneficiary had 

been injured. 

To compare FECA benefits before and after the proposed revision, we 

computed a wage replacement rate under each policy scenario. The 

wage replacement rate, as we define it, is the amount of the FECA benefit 

as a proportion of take-home pay.6

 Using the wage replacement rate 

instead of comparing the dollar value of the FECA benefit with take-home 

pay has two main advantages. First, it is a useful way to measure benefit 

adequacy because it captures the extent to which an individual can 

maintain the standard of living he or she had prior to being injured. 

 

5

Individuals with these characteristics were identified in the SSA administrative data as 

those with an “A” for primary claimant in the field called “Beneficiary Identification Code” 

and a “C” for current payment status in the field called “Ledger Account File.” 

6

We used take-home pay to be consistent with GAO-98-174. 

Data reliability 

Section 2: Analysis of 

Effects of 

Compensating Total 

Disability FECA 

Beneficiaries At a 

Single Rate 

Regardless of Having 

Dependents 

Wage replacement rate 
Appendix II: Objectives, Scope and 

Methodology 

Page 58 GAO-13-108 Federal Employees' Compensation Act 

Second, it allows for easy comparison over time and across subpopulations of individuals with different salary levels. 

We computed wage replacement rates for a sample of federal employees 

working in September 2010 that resembled full disability FECA 

beneficiaries. To select this sample, we used a multivariate matching 

technique. Specifically, we drew a simple random sample of 10 percent of 

federal workers in the 2010 CPDF who were covered by FERS. We then 

matched each FECA beneficiary to the 2010 employee who was most 

similar to him or her, based on the following characteristics: employing 

agency; occupation type (blue v. white collar); the minimum, median, and 

maximum basic pay level prior to the date of injury for the FECA 

beneficiary; first year of employment; age when first employed and at 

simulated injury; number of spells of employment; education; sex; and 

years of service at simulated injury.7

 To ensure that the matches were 

sufficiently similar, we compared the distributions of these characteristics 

between FECA beneficiaries and the matched federal employees. Figure 

1 and Table 2 present the distributions of and descriptive statistics on 

some of these characteristics for the FECA beneficiaries and the federal 

employees after matching. 

 

7

To construct the matched sample, we used a computer algorithm that selected the single 

closest 2010 employee for each FECA beneficiary. The “closest” employee was 

determined based on Mahalanobis distance, which is a function of multiple characteristics 

of the annuitants and FECA beneficiaries. Each 2010 employee could match multiple 

FECA beneficiaries. Collectively, these methods are known as one-to-one Mahalanobis 

matching with replacement. This is different from another method—probability propensity 

score matching—that is also used to select matched samples. The Mahalanobis measure 

avoids the potential drawback of the probability propensity score because computing the 

Mahalanobis distance does not require estimating the probability of injury for each 

employee and FECA beneficiary. For more information on this technique and the 

characteristics that were used in the matching process, see GAO-12-309R, page 17. 

Matching population 
Appendix II: Objectives, Scope and 

Methodology 

Page 59 GAO-13-108 Federal Employees' Compensation Act 

Figure 1: Distributions of key characteristics of matched FECA beneficiaries and federal employees 
Appendix II: Objectives, Scope and 

Methodology 

Page 60 GAO-13-108 Federal Employees' Compensation Act 

Table 2: Distributions of covariates in matched wage replacement analysis sample 

2010 Federal employees FECA beneficiaries 

1st 

Quartile Median Mean 

3rd 

Quartile

1st 

Quartile Median Mean 

3rd 

Quartile

Minimum income before injury (2010 dollars) 29,054 35,078 38,521 43,633 29,180 35,280 39,068 44,681

Median career income before injury (2010 dollars) 34,277 42,794 46,466 53,219 34,236 43,420 47,100 54,345

Maximum career income before injury 

(2010 dollars) 

37,918 48,335 52,808 61,516 38,013 48,711 53,190 62,309

First year working 1983 1988 1990 1998 1982 1988 1989 1998

Years of service 5.5 12.5 12.7 18.8 5.4 12.7 13.1 19.5

Age in first year of work (years) 25.4 31.8 33 39.1 25.5 32 33.3 39.8

Age in last year of work (years) 40.3 46.5 46.1 51.9 40.8 47.3 46.9 53

Age in 2010 (years) 48.2 54.4 53.7 60.2 48 55 54 61

Number of employment spells 1 1 1.1 1 1 1 1.1 1

% Male 55 54.2

% No high school degree 10.6 10.6

% High school degree 44.4 44.4

% Some college 27.9 27.9

% College degree 10.2 10.1

% Graduate degree 7.1 6.9

% Blue collar occupation 28 28.1

Source: GAO analysis of OPM and DOL data. 

Our matched sample allowed us to estimate the salaries FECA 

beneficiaries might have earned if they had never been injured. We did 

not use the salaries of actual FECA beneficiaries because that would 

have required making assumptions about their career paths and resulting 

salary trajectory—as salary growth would have likely included GS step 

increases and promotions in addition to cost of living adjustments. In 

order to proxy the counterfactual salary, we used the actual salaries of 

the federal employees whom we matched to the FECA beneficiaries. 

Implicitly, we assumed that the FECA beneficiaries would have continued 

to the career path that his or her matched employee achieved in practice. 

This is a reasonable assumption, given that the matched employees 

resembled the FECA beneficiaries on key characteristics at all times prior 

to the FECA beneficiaries’ injuries, including tenure and salary. 
Appendix II: Objectives, Scope and 

Methodology 

Page 61 GAO-13-108 Federal Employees' Compensation Act 

For the matched 2010 employees who resembled FECA beneficiaries, we 

estimated what the wage replacement rate would have been at the end of 

2010, assuming each employee was injured when the matched FECA 

beneficiary was injured.8

 In other words, we estimated a counterfactual 

wage replacement rate by simulating an injury for each matched 2010 

employee to compute a hypothetical FECA benefit. Then we computed 

the wage replacement rate under the two policy scenarios in three steps. 

First, we computed the hypothetical FECA benefit at the time of injury 

under the two scenarios. Labor uses adjusted base pay to determine 

benefits, so the formulas under each scenario are: 

Under the current structure: 

 with beneficiaries for ݕܽ݌ ݁ݏܾܽ ݁݀ݐݏݑ݆݀ܣ ൈ 0.75 ൌ ݐ݂݁݊݁݅ܤ ܣܥܧܨ

dependents; and 

 without beneficiaries for ݕܽ݌ ݁ݏܾܽ ݁݀ݐݏݑ݆݀ܣ ൈ 0.6667 ൌ ݐ݂݁݊݁݅ܤ ܣܥܧܨ

dependents. 

Under the proposed revised structure: 

 or with beneficiaries for ݕܽ݌ ݁ݏܾܽ ݁݀ݐݏݑ݆݀ܣ ൈ 0.70 ൌ ݐ݂݁݊݁݅ܤ ܣܥܧܨ

without dependents. 

Second, we projected the benefit amounts from the time of simulated 

injury through fiscal year 2010, using FECA’s annual cost-of-living 

adjustments during this period, which were based on the Consumer Price 

Index (CPI).9

 

8

We did not include long-term partial disability beneficiaries in this analysis because we 

lack data on the employment histories of partial disability beneficiaries since they began 

receiving FECA benefits. Partial disability beneficiaries represented approximately onequarter of all FECA full and part-time beneficiaries in chargeback year 2010. We will 

analyze this population using a different approach in a follow-on report. 

9

The cost of living adjustments granted to compensation recipients under the FECA are 

based on the “Consumer Price Index for Urban Wage Earners and Clerical Workers” (CPIW) figures published by the Bureau of Labor Statistics (BLS). 

Computing the 

components of the wage 

replacement rate 
Appendix II: Objectives, Scope and 

Methodology 

Page 62 GAO-13-108 Federal Employees' Compensation Act 

Third, we computed “take home pay” by subtracting the mandatory FERS 

retirement contribution (0.8 percent of adjusted gross pay) and tax 

deductions from adjusted base pay for 2010:10

ሻݕܽ݌ ݁ݏܾܽ ݁݀ݐݏݑ݆݀ܣ ൈ 0.008ሺ െ ݕܽ݌ ݁ݏܾܽ ݁݀ݐݏݑ݆݀ܣ ൌ ݕܽ݌ ݉݁݋݄ ܶܽ݇݁

ݏ݊݋݅ݐܿݑ݀݁݀ ݔܽݐെ 

Finally, we computed the wage replacement rate for 2010: 

଴ଵ଴ଶݐ݂݁݊݁݅ܤ ܣܥܧܨ ൬ ൌ଴ ଵ଴ଶ݁ݐܽݎ ݐ݈ܽܿ݁݉݁݊݌݁ݎ ܹܽ݃݁

଴ଵ଴ଶݕܽ݌ ݉݁݋݄ ܶܽ݇݁

൰ ൈ 100

To understand how the change from the first to second scenario impacted 

certain groups, we partitioned the sample into sub-groups based on a 

number of characteristics and compared the wage replacement rate for 

each scenario and group. The characteristics we used to determine the 

comparison groups included: whether the employee had dependents, 

residency state tax level, the GS level at the time of the simulated injury, 

GS level in 2010, GS level change between the simulated injury and 

2010, income growth between the date of the simulated injury and 2010, 

and the number of years on FECA. Because the CPDF does not contain 

data on whether the federal employees have dependents, the matched 

federal worker was “assigned” dependents based on the FECA 

beneficiary. That is, if the FECA beneficiary had a dependent, the 

matched federal worker was treated as having a dependent.11 Also, 

because GS levels are not consistent across all federal agencies covered 

in the CPDF data, we did not use the GS level in the CPDF but instead 

created categories of GS levels that corresponded with base salary in 

 

10We 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. 

11We assigned only 1 dependent per worker with dependents because the data do not 

indicate the number of dependents. This method is consistent with GAO-98-174. 

Comparison of sub-groups 
Appendix II: Objectives, Scope and 

Methodology 

Page 63 GAO-13-108 Federal Employees' Compensation Act 

2010.12 We then compared the wage replacement rate under the two 

scenarios by sub-group, which are presented in the body of this report. 

This analysis has several limitations. First, the assumptions that we made 

to simulate tax deductions in our computations of take-home pay (such as 

the number of dependents and other deductions) will affect our estimates 

of wage replacement rates. For example, due to data limitations, we 

assumed one dependent in instances in which there might have been 

more than one dependent. Accounting for additional dependents would 

have lowered wage replacement rates. Similarly, by assigning 

dependents based on the matched FECA beneficiary, we cannot account 

for differences in individual choices to pursue different career paths as a 

result of having dependents. However, we lacked data on the particular 

circumstances of each matched federal employee, and accounting for 

such variation would unnecessarily complicate our methods. Second, 

these analyses were limited to benefits and income in 2010 and did not 

consider any cumulative effects of the proposed FECA revisions on 

lifetime income. For example, these would include the foregone savings 

that potentially would have been accrued as a result of having a higher 

salary over the course of additional years in the workforce. Finally, we 

assume that the tenure and income earned by the actual 2010 employees 

accurately simulate what their matched FECA recipients would have 

earned if they had not been injured. Although it is reasonable to assume 

that employees having nearly identical career histories prior to injury 

would have had approximately similar career outcomes after injury, the 

validity of our results depends on the accuracy of this counterfactual.13

 

12Specifically, we created the following categories. GS level 1-4 pertained to base salaries 

< 27,431. GS level 5-8 pertained to base salaries >= $27,431 and < $41,563. GS level 9-

12 pertained to base salaries >=$41,563 and <$71,674, and GS levels 13-15 pertained to 

base salaries>=71,674. 

13Specifically, FECA beneficiaries may have unobserved characteristics, such as a 

propensity to take risk, which affect their likelihood of becoming disabled. If these 

characteristics also affect labor market decisions, then using non-disabled federal 

employees as matches may not accurately reflect the career trajectories of FECA 

beneficiaries had they never been injured. 

Limitations 
Appendix II: Objectives, Scope and 

Methodology 

Page 64 GAO-13-108 Federal Employees' Compensation Act 

This section presents the methods we used to answer the question: How 

do 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 this question, we selected a sample of federal annuitants, who 

were similar to recent FECA beneficiaries nearing retirement age, and 

then compared FERS and simulated FECA retirement benefits for these 

annuitants in 2010, under the current and reduced FECA benefit 

structures.14

To compare FECA benefits to FERS retirement benefits before and after 

the proposed revisions, we computed a ratio of the retirement benefits 

under FECA as a proportion of retirement benefits under FERS. This ratio 

measures the extent to which the FECA benefit may or may not exceed 

the FERS retirement benefit under the current program and proposed 

revisions. The ratio also allows for easy comparisons between subgroups that may have different benefit levels. 

As in our wage replacement analysis, we used matching methods to 

simulate the benefit ratio for a set of hypothetical FECA beneficiaries near 

retirement. This was necessary because we did not know what the actual 

FECA beneficiaries would have earned and saved towards retirement in 

their years after being injured, if they had continued working instead of 

being injured. To simulate what those counterfactual earnings and 

retirement benefits would have been, we selected a set of retired federal 

employees in 2010 that resembled FECA beneficiaries who were near 

retirement age. Specifically, we matched FECA beneficiaries who were 

injured recently (after 2000), who were covered by FERS,15 and were 

older than 55—the minimum retirement age under the FERS program—

with federal annuitants under FERS. We used the same matching 

 

14FECA benefits do not change when a beneficiary reaches retirement age. However, 

similar to other federal employees covered under FERS, a FECA beneficiary can receive 

returns from any TSP balances accrued prior to injury. We refer to the combination of 

FECA benefits and any TSP returns as “FECA retirement benefits.” 

15We excluded FERS annuitants with TSP balances that had “roll-ins” or “roll-overs,” 

which comprise a relatively small proportion of the population of FERS annuitants. In a 

prior report, we present results of a similar analysis for federal employees covered under 

CSRS. See GAO-12-309R. 

Section 3: 

Comparison of FERS 

and Total Disability 

FECA Benefits under 

Current and Reduced 

FECA 

Benefit ratio 

Matching population 
Appendix II: Objectives, Scope and 

Methodology 

Page 65 GAO-13-108 Federal Employees' Compensation Act 

methods as in the analysis of wage replacement, in order to produce a 

sample of annuitants who were similar to FECA recipients in the following 

characteristics: agency, whether the occupation is blue-collar, base pay, 

first year of employment, age in the first year of employment, length of 

spells of employment, years of service, age at exit, age in 2010, and 

salary by tenure. To ensure that the matched annuitants were sufficiently 

similar to the FECA recipients, we compared the distributions of these 

characteristics for the two groups. Figure 2 and Table 3 present the 

distributions of and descriptive statistics on some of these characteristics 

for the FECA beneficiaries and the FERS annuitants after matching. 
Appendix II: Objectives, Scope and 

Methodology 

Page 66 GAO-13-108 Federal Employees' Compensation Act 

Figure 2: Distributions of key characteristics of matched FECA beneficiaries and FERS annuitants 
Appendix II: Objectives, Scope and 

Methodology 

Page 67 GAO-13-108 Federal Employees' Compensation Act 

Table 3: Distributions of covariates in matched FECA-FERS analysis sample 

FERS annuitants FECA beneficiaries 

1st 

Quartile Median Mean 

3rd 

Quartile

1st 

Quartile Median Mean 

3rd 

Quartile

Minimum income before injury (2010 dollars) 28608 34034 38448 44713 28438 34384 38576 44189

Median career income before injury 

(2010 dollars) 

33437 41267 45564 52510 32631 42274 45969 52895

Maximum career income before injury 

(2010 dollars) 

36943 46478 50954 59285 36137 46971 51358 60421

First year working 1985 1988 1990 1995 1985 1989 1990 1996

Years of service 6.3 11.9 11.9 16.9 5.4 11.3 11.5 16.8

Age in first year of work (years) 34.7 40.5 41.2 47.2 34.9 40.3 41.3 48

Age in last year of work (years) 49.6 53.6 53.6 57.7 49.3 53.3 53.4 57.3

Age in 2010 (years) 58.2 61.4 61.9 64.4 57 60 61.1 64

Number of employment spells 1 1 1.1 1 1 1 1.1 1

% Male 55.3 54.9

% No high school degree 11.9 11.9

% High school degree 42.8 42.6

% Some college 26.9 27

% College degree 9.1 9.1

% Graduate degree 9.4 9.4

% Blue collar occupation 30.4 30.9

Source: GAO analysis of OPM and DOL data. Finally, we simulated injuries for each annuitant at the time of his or her matched FECA 

beneficiary’s actual injury, calculated FECA benefits based on salary at injury, and projected the benefit forward to 2010 using the 

FECA cost-of-living adjustment in this period. 

We computed benefit ratios under two scenarios: (1) under the current 

FECA benefit structure, and (2) a reduced benefit of 50 percent at 

retirement age.16

For each of these scenarios, we estimated the hypothetical FECA benefit 

that FERS retirees in 2010 would have received in that year. We used 

 

16Specifically, the proposed reduction calls for the FECA benefit to be converted to 50 

percent of the monthly pay of the employee when the injured employee reaches ‘retirement 

age’ as defined in section 216 of the Social Security Act, or one year after the employee 

begins receiving compensation, whichever is later. However, due to data limitations, we 

analyzed the proposed reduction at the time of the injury and inflated that amount to 2010 

dollars, effectively assuming that the beneficiaries are at retirement age in 2010. 

Computing benefit ratios 
Appendix II: Objectives, Scope and 

Methodology 

Page 68 GAO-13-108 Federal Employees' Compensation Act 

this hypothetical FECA benefit and the retiree’s actual FERS benefits—

TSP, Social Security, and FERS annuity—to calculate benefit ratios. 

However, because most FERS annuitants in 2010 had not accrued 30 

years of federal service (since FERS began in 1984), FERS and FECA 

benefit estimates for retirees in 2010 may vary substantially from such 

benefits under a “mature” retirement system. The typical FERS benefit 

would be higher than our estimate of the FERS benefit because under a 

mature system, most employees would retire under FERS at age 62 with 

30 years of federal service. In contrast, the current population of FERS 

annuitants retired at the younger ages and with shorter tenures, which 

decreases their FERS benefits accordingly. For this reason, we also 

conducted an analysis comparing estimated FECA and FERS benefits 

under a “mature” FERS system. 

To estimate FECA retirement benefits as of June 30, 2010, we added two 

components—the FECA benefit and a TSP annuity.17 Computing each 

component required several steps, which are summarized below and 

depicted on the left side of figure 3. 

 First, we computed the gross FECA benefit at the time of injury based 

on the matched FERS retiree’s adjusted pay at the time of the 

simulated injury.18

 Second, we projected the FECA benefit from the time of simulated 

injury to 2010, under each scenario, using the appropriate annual 

cost-of-living adjustment based on the Consumer Price Index (CPI). 

 Third, we added the annuitized amount of the matched FECA 

beneficiary’s pre-injury accrued TSP balance to the simulated FECA 

benefit for the FERS retiree. We computed this annuity by using the 

TSP balance at the date of the matched FECA beneficiary’s injury and 

assumed that the annuitant elected a “single life annuity” without 

 

17We did not add in Social Security benefits for FECA beneficiaries because any Social 

Security benefits that are based on work in the federal government are deducted from the 

FECA benefit. FECA beneficiaries could receive additional Social Security benefits based 

on past earnings outside of the federal government. However we did not have the data to 

determine the proportion of Social Security attributable to federal work. As a result, total 

retirement benefits for FECA beneficiaries would be higher than those presented in the 

results. 

18The adjusted pay in the CPDF is most representative of what a worker actually received 

and is the figure Labor uses to compute its benefit determinations. 
Appendix II: Objectives, Scope and 

Methodology 

Page 69 GAO-13-108 Federal Employees' Compensation Act 

additional add-on benefits.19 We used the formula that the TSP 

program uses to calculate the amount of the annuity.20 To compute an 

equivalent of take-home pay, we subtracted taxes from the TSP 

annuity.21

Similarly, to estimate FERS benefits as of June 30, 2010, we added three 

components—the actual FERS annuity, TSP benefit, and Social Security 

benefit. Computing each of these components required several steps, 

which are summarized below and depicted on the right side of figure 3. 

 First, we obtained the monthly FERS annuity payment as of June 30, 

2010 and converted it to an annual benefit by multiplying by 12. 

 Second, we added an estimate of the annuitized amount of the FERS 

retiree’s TSP balance at the time of the worker’s separation from 

federal service.22 We did not have data on the TSP balance at the 

time of worker’s separation from federal service, so we estimated it by 

recreating a balance history going back in time from the 2012 balance 

(available in the TSP data) to the date of separation.23 To estimate the 

annuity, we assumed that the annuitant will elect a “single life annuity” 

with no add-on benefits, and used the TSP formula for computing the 

annuity. 

 

19This simplifying assumption results in TSP balances greater than other TSP annuity 

options, such as joint-life benefits. Further, some FERS annuitants might choose not to 

annuitize their TSP balances, in which case their TSP benefits could be higher or lower 

depending on their investment choices, market conditions, and the rate at which they 

draw-down their account balance. 

20We followed the methodology specified in the contract the FRTIB uses to establish life 

annuities for TSP participants and beneficiaries. 

21As with the analysis of wage replacement, we deduct federal and state income taxes 

using the NBER TAXSIM model. 

22Again, we excluded beneficiaries with roll-ins or rollovers in their TSP accounts. 

23We created a balance for each year by beginning with the current balance in 2012, 

subtracting withdrawals for each year and adjusting for growth by dividing by 1+ the 

growth rate for the year. (Since 2012 was a partial year, we combined the 2011 and 2012 

transactions and applied the growth rate for 2011.) We followed the same algorithm back 

in time, beginning with an estimated balance at time t, adding withdrawals at time t-1 and 

adjusting for growth by dividing by (1+ growth rate for time t-1). This results in an 

estimated balance at time t-1. We adjusted this method to account for working a partial 

year in the year of separation as appropriate. We estimated the balances using the growth 

rate from the G and C funds in TSP. Because the results were quite similar, we presented 

only the results of the G fund. 
Appendix II: Objectives, Scope and 

Methodology 

Page 70 GAO-13-108 Federal Employees' Compensation Act 

 Third, we added Social Security benefits. We calculated workers’ 

annual Social Security benefit by assuming that all annuitants began 

drawing Social Security upon retirement.24 We used the annuity date 

as a proxy for the retirement date. We adjusted the monthly benefit 

level to account for the timing of the receipt of Social Security 

benefits.25

Figure 3: Components of FECA and FERS Retirement Packages 

a

Calculated for two scenarios: Current benefit structure and reduced benefit structure. 

 

24To simplify the analysis and avoid having to account for individual choices to delay 

receiving Social Security benefits, as well as compounded benefits resulting from spousal 

earnings, and bulk payments from SSA, we calculated a benefit level that was based on 

SSA’s primary insurance amount (PIA) as opposed to using the actual payment a 

beneficiary received in a given month of 2010. 

25Specifically, we accounted for the timing of the receipt of benefits in the calculation of 

the Social Security benefit in the following way. We first computed the number of months 

in early retirement—early retirement months or ERM—by subtracting the retirement date 

from the full Social Security retirement age and adjusting the benefit by 0.555 percent for 

each month before SSA full retirement age, up to 36 months and by an additional 0.416 

percent per month for each month exceeding 36 months. In other words, if the ERM is 

greater than 36, then we calculated the benefit reduction as 0.00555(36)+0.00416(ERM36). The monthly benefit would then be PIA – (PIA X benefit reduction), rounded down to 

the nearest dollar. If the annuitant retired or separated from government service prior to 

age 62, we computed their Social Security benefits as if they were 62. 
Appendix II: Objectives, Scope and 

Methodology 

Page 71 GAO-13-108 Federal Employees' Compensation Act 

Finally, to estimate the “mature” FERS benefit package as of June 30, 

2010, we used the same matched FERS annuitants that we used to 

compute the FERS package above. However, for this analysis, we 

simulated each of the three components of the package as though the 

matched FERS annuitants’ careers spanned 30 years and they retired at 

age 62.26 To simulate each of these components, we took the following 

steps: 

 First, we simulated the “mature” FERS annuity based on a 30-year 

work history by constructing a 30-year wage history for the FERS 

annuitant. We constructed the work history with a combination of real 

income data and imputations. Specifically, we retained the real 

income data for career years actually observed in the CPDF. We 

imputed income data for career years that were either (1) not 

observed in the CPDF or (2) non-existent because the length of the 

federal career was less than 30 years. For example, a person may 

have started working for the government in 1986 and retired early in 

2006 with 20 years of service. For this person, we imputed her 

earnings for years 21 through 30. We imputed earnings by assuming 

that income in any missing year equals the most recent observed or 

imputed income multiplied by the average yearly proportional change 

in income across the observed years.27 Building on the previous 

example, suppose the average yearly proportional change of the 

worker’s income were 2 percent. We would impute her income in year 

21 to equal her income in year 20 multiplied by (1+.02). Therefore, 

income in year 22 would equal: 

ܫଶଶ ൌ ܫଶ଴ ൈ ሺ1 ൅ .02ሻଶ

and so on, to the 30th year, where ܫ௧ is income in year t. 

 

26Using 30 years of service and retirement at age 62 is consistent with simulations 

conducted by the Congressional Research Service. See, for example, Isaacs, Katelin P., 

“Federal Employees’ Retirement System: The Role of the Thrift Savings Plan,” 

Congressional Research Service, January, 2012. 

27We trimmed a small number of outliers – approximately 1 percent of the data – where 

the average yearly increase exceeded 15 percent. 
Appendix II: Objectives, Scope and 

Methodology 

Page 72 GAO-13-108 Federal Employees' Compensation Act 

We used the constructed work history to simulate the FERS annuity. We 

computed the annuity with the FERS annuity formula for a federal career 

of at least 30 years: 

ܣிாோௌ ൌ 0.011 ൈ 30 ൈ ൫ܵሺଵሻ ൅ ܵሺଶሻ ൅ ܵሺଷሻ൯

3

Where: 

ܣிாோௌ represents the FERS annuity; 

ܵሺ௧ሻ represents salaries of rank t, where ܵሺଵሻis the highest salary. 

Taken together the S terms should represent the “high three salaries,” 

which are used to compute the FERS annuity benefit.28

 Second, we simulated the TSP annuity by using the 30-year work 

history created above to simulate 30 years of TSP contributions for 

three contribution levels. The low level was a 1 percent contribution by 

the agency only. The mid level was a 10 percent contribution where 

the agency matches the employee’s 5 percent contribution. And the 

high level was a 15 percent contribution where the agency contributes 

5 percent and the employee contributes 10 percent. 

Under each of these contribution levels, we simulated three TSP growth 

rates of 4, 6, and 8 percent. 

For example, at time period t, the TSP balance for the mid-level 

contribution with a mid-level growth rate of 6 percent would be: 

TSP = (Balance(t-1) + 0.1(St))×1.06 

Where: 

ݐ represents the number of years of work; and 

ܵ௧ represents the salary in year ݐ. 

 

28This formula differs slightly from the formula used in FERS, which is based on the 

consecutive high-three salaries, but for most federal employees the high-three years will 

likely occur in consecutive years. 
Appendix II: Objectives, Scope and 

Methodology 

Page 73 GAO-13-108 Federal Employees' Compensation Act 

We annuitized the simulated TSP balance at retirement using the same 

steps and assumptions as described in the preceding section to compute 

the annuity. 

 Third, we use the simulated wage history to calculate simulated Social 

Security benefits as of June, 2010. For this calculation, we assumed 

that all workers retire in 2010, at age 62, with 30 years of federal 

service; have no other creditable Social Security service; and elect to 

draw Social Security benefits immediately at age 62 (thereby 

receiving a lower benefit than they would have received had they 

waited to receive benefits until the full retirement age). We calculated 

the simulated Social Security payment by following the steps that the 

Social Security administration uses to compute Social Security 

benefits.29

 Finally, we added the simulated FERS annuity, the TSP annuity, and 

the Social Security benefit to arrive at the FERS retirement package 

under a mature FERS. 

To ensure the mature FERS benefits package was comparable to the 

FECA benefits package, we also simulated FECA benefits under a 

“mature” 30-year time frame. The method we used to simulate the mature 

FECA benefit package was identical to our method of simulating FECA 

benefits in 2010 (described above) with the following two exceptions: 

(1) For workers with less than 30 years of combined work and disability in 

2010, we added additional years of FECA benefits so the total years of 

 

29Specifically, we took the following steps. First, we set the worker’s “Social Security 

wage” at the lower of the worker’s simulated wage or the maximum allowable wage under 

Social Security. The maximum allowable wage in any given year can be found at 

http://www.ssa.gov/oact/COLA/cbb.html. Second, we calculated the wage index for each 

year from 1981-2008 by dividing the national average wage for 2008 by the national 

average wage for each year from 1981 to 2008 (e.g. yielding a wage index of 1.00 for 

2008 and multipliers for prior years). Third, we multiplied the “Social Security wage” by the 

wage index for each year from 1981 to 2008. We did not index the “Social Security wage” 

for 2009 and 2010. Third, we calculated the average indexed monthly earnings (AIME) by 

summing all the indexed wages and dividing the sum by 420 (the number of months in 35 

years, since SSA uses the highest 35 years of earnings to compute the benefit). Fourth, 

we calculated the primary insurance amount using the Social Security bend points found 

at http://www.socialsecurity.gov/OACT/COLA/bendpoints.html, which yields the worker’s 

full monthly benefit. Finally, we adjusted the full monthly benefit downward because the 

worker was assumed to have retired early (at age 62) following SSA’s rules on calculating 

benefit reductions. 
Appendix II: Objectives, Scope and 

Methodology 

Page 74 GAO-13-108 Federal Employees' Compensation Act 

combined work and disability added to 30. For example, a matched 

annuitant who was simulated to be injured in 2005 with 20 years of 

federal service at that time would have a total of 25 years of combined 

work and disability in 2010. To reflect a “mature” 30-year scenario, we 

added an additional 5 years of FECA benefits. We adjusted the additional 

years of FECA benefits by increasing them by the average cost of living 

adjustment received from 2000 through 2010 for the additional years. 

(2) Similarly, we calculated balances for the TSP based on 30 years of 

work or disability, and annuitized using the same method as we used in 

calculation of the “mature” FERS TSP annuity, except that, as with the 

simulation of the FECA package above, we assume that the FECA 

beneficiary does not contribute to TSP after being injured. 

To understand how reducing FECA benefits at retirement age affected 

certain groups, we compared the FECA and FERS retirement packages 

by sub-groups. Again, we assigned a dependent to the FERS annuitant 

based on whether the matched FECA beneficiary had a dependent. We 

also used the same GS level categories as in objective 1. In addition to 

these characteristics, we compared the effects of the policy revision 

based on the number of years annuitants had been retired. To compute 

the number of years since retirement, we subtracted the retirement date 

from 2010.30 We then compared the benefit ratios under the two 

scenarios by sub-group. 

This analysis has several limitations. First, the assumptions that we made 

in calculating Social Security and TSP benefits approximate and may not 

precisely reflect reality for any given FECA beneficiary or FERS 

annuitant. For example, we make assumptions about how funds are 

invested that do not account for differences in individual investment 

choices that may result from having dependents. Nonetheless, we feel 

that our assumptions are based on sound logic and account for available 

data. Second, although we include an annuity based on the TSP balance 

at the time of injury in our computation of total benefits for FECA 

beneficiaries, we lack data on any other retirement accounts that the 

 

30We used OPM”s “annuity date” variable—the date at which the annuitant began 

receiving benefits as a proxy for the annuitant’s retirement date. 

Comparison of sub-groups 

Limitations 
Appendix II: Objectives, Scope and 

Methodology 

Page 75 GAO-13-108 Federal Employees' Compensation Act 

FECA beneficiary or FERS annuitant may have. For example, some 

FECA beneficiaries could have invested their FECA cash benefits in other 

retirement accounts. This might have produced greater income at 

retirement for FECA beneficiaries. However, federal workers might also 

choose to invest wages in a supplemental retirement account, thus 

potentially offsetting this limitation. Third, as with our analysis of wagereplacement rates, these analyses were based on an estimate of the 

retirement packages in 2010 and did not consider any cumulative effects 

of the proposed FECA revisions on lifetime income. These would include 

the foregone retirement savings that potentially would have been accrued 

as a result of having a higher salary over the course of additional years in 

the workforce. In addition, our simulation of the injury process may not 

accurately represent the counterfactual scenario in which FECA 

recipients never became disabled. However, as with our simulation of 

wage replacement rates, it is reasonable to approximate the careers that 

FECA recipients would have experienced with the actual careers of highly 

similar workers who did not become disabled. Finally our simulation of the 

“mature” FERS package assumes a 30-year work history. In reality, some 

employees will work more and some will work less than 30 years. 
Appendix IV: GAO Contact and Staff 

Acknowledgments 

Page 76 GAO-13-108 Federal Employees' Compensation Act 

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

In addition to the contact named above, the following staff members 

made important contributions to this report: Michael J. Collins, Assistant 

Director; Melinda Cordero, Nagla’a El-Hodiri, Erin Godtland, Michael 

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

Botsford, Carla Craddock, Danielle Giese, Jennifer Gregory, Gene 

Kuehneman, Kathy Leslie, Grant Mallie, Sheila McCoy, Rhiannon 

Patterson, James Rebbe, Suzanne Rubins, Kate Van Gelder, and Sonya 

Vartivarian contributed to the report. 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(131143)
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