FEDERAL EMPLOYEES’

COMPENSATION ACT

Analysis of Benefits Under 

Proposed Program Changes

Statement of Andrew Sherrill, Director,

Education Work Force and Income Security

Testimony 

Before the Subcommittee on Workforce 

Protections, Committee on Education 

and the Workforce, U.S. House of 

Representatives

For Release on Delivery 

Expected at 10 a.m. EDT

Wednesday, July 10, 2013

GAO-13-730T

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-730T, a testimony 

before the Subcommittee on Workforce 

Protections, Committee on Education and the 

Workforce, U.S. House of Representatives

July 10, 2013

FEDERAL EMPLOYEES’ COMPENSATION ACT

Analysis of Benefits Under Proposed Program 

Changes 

Why GAO Did This Study

In 2012, the FECA program provided

more than $2.1 billion in wage-loss 

compensation to federal workers who 

sustained injuries or illnesses while 

performing federal duties. Totaldisability beneficiaries with an eligible 

dependent are compensated at 75 

percent of gross wages at the time of 

injury and those without are 

compensated at 66-2/3 percent. 

Benefits are adjusted for inflation and 

are not taxed nor subject to age 

restrictions. Some policymakers have 

raised questions about the level of 

FECA benefits, especially compared to 

federal retirement benefits. Proposals

to revise FECA for future total- and 

partial- disability beneficiaries include: 

setting initial FECA benefits at a single 

rate (66-2/3 or 70 percent of applicable 

wages at time of injury), regardless of 

whether the beneficiary has eligible 

dependents; and converting FECA 

benefits to 50 percent of applicable 

wages at time of injury—adjusted for 

inflation—once beneficiaries reach full 

Social Security retirement age.

This testimony presents results of 

GAO’s four recent reports on FECA 

issues. It summarizes (1) potential 

effects of the proposals to compensate 

total-disability FECA beneficiaries at a 

single rate; (2) potential effects of the 

proposal to reduce FECA benefits to 

50 percent of applicable wages at full 

Social Security retirement age for totaldisability beneficiaries; and (3) how 

partial disability beneficiaries might

fare under the proposed changes. To 

do this work, GAO conducted 

simulations comparing FECA benefits 

to income (take-home pay or 

retirement benefits) a beneficiary 

would have had absent an injury, and

conducted seven case studies of 

partial disability beneficiaries.

What GAO Found

GAO’s simulation found that under the current Federal Employees’ 

Compensation Act (FECA) program, the median wage replacement rate—the 

percentage of take-home pay replaced by FECA—for total-disability beneficiaries

was 88 percent for U.S. Postal Service (USPS) beneficiaries and 80 percent for 

non-USPS beneficiaries in 2010. GAO also found that proposals to set initial 

FECA benefits at a single compensation rate would reduce these replacement 

rates by 3 to 4 percentage points under the 70-percent option and 7 to 8 

percentage points under the 66-2/3 percent option. Beneficiaries with 

dependents would receive reduced FECA benefits under both options. The 

decreases in wage replacement rates were due to the greater proportion of 

beneficiaries who had a dependent—over 70 percent of both USPS and nonUSPS beneficiaries. 

In GAO’s simulation comparing FECA benefits to retirement benefits, GAO found 

that under the current FECA program, the median FECA benefit package for 

total-disability retirement-age beneficiaries was 37 and 32 percent greater than 

the median 2010 retirement benefit package for USPS and non-USPS 

beneficiaries, respectively. This analysis focused on individuals covered under 

the Federal Employees Retirement System (FERS), which generally covers 

employees first hired in 1984 or later, and covered about 85 percent of the 

federal workforce in 2009. GAO also found that the proposal to reduce FECA 

benefits at the full Social Security retirement age would result in a median FECA 

package roughly equal to the median FERS retirement package in 2010. 

However, the median years of service for the FERS annuitants GAO analyzed

was about 16 to 18 years, so these simulations did not capture a fully mature 

retirement system and likely understated the future FERS benefit level. 

Consequently, GAO also simulated a mature FERS system—intended to reflect 

future benefits of workers with 30-year careers—and found that the median 

FECA benefit package under the proposed change would be from 22 to 35 

percent less than the median FERS retirement package. 

Partial-disability beneficiaries are fundamentally different from total-disability 

beneficiaries, as they receive reduced FECA benefits based on a determination 

of their earning capacity. GAO’s seven case studies of partial-disability 

beneficiaries showed that how they might fare under the proposed FECA 

changes can vary considerably based on their individual circumstances, such as 

their earning capacity and actual levels of earnings. For example, among GAO’s

case studies, those beneficiaries with high earning capacities may elect to retire 

under FERS and would likely not be affected by the proposed FECA reduction at 

retirement age because their potential retirement benefits were substantially 

higher than their current or proposed reduced FECA benefit levels. In contrast, 

those beneficiaries with low earning capacities had potential retirement benefits 

that were lower than their current FECA benefits and the proposed FECA 

reduction at retirement age would reduce their FECA benefits. 

View GAO-13-730T. For more information, 

contact Andrew Sherrill at (202) 512-7215 or 

sherrilla@gao.gov
Page 1 GAO-13-730T 

441 G St. N.W.

Washington, DC 20548

Chairman Walberg, Ranking Member Courtney and Members of the 

Subcommittee:

I am pleased to be here today to discuss our work on proposed changes 

to benefit levels in the Federal Employees’ Compensation Act (FECA) 

program. We recently issued three reports on how proposed changes 

would affect FECA beneficiaries covered under the Federal Employees 

Retirement System (FERS) and a prior report that examined the 

characteristics and income of FECA beneficiaries in comparison to retired 

annuitants under the Civil Service Retirement System (CSRS).1

In 2010, the FECA program paid $1.9 billion in cash benefits to federal 

workers who sustained injuries or illnesses while performing federal 

duties.2 The U.S. Department of Labor (Labor) administers FECA and 

bases FECA benefits on an employee’s wages at the time of injury and 

whether the employee has eligible dependents. In addition, consideration 

is given to the beneficiary’s ability to work after the injury. 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. 3

 

1

GAO, Federal Employees’ Compensation Act: Effects of Proposed Changes on Partialdisability Beneficiaries Depend on Employment After Injury, 

These benefits are adjusted for inflation 

and are not taxed nor subject to age restrictions. Some policymakers 

have raised questions about the level of FECA benefits, especially 

compared to the retirement benefits under FERS, which generally covers 

GAO-13-143R (Washington, 

D.C.: December 7, 2012), GAO, Federal Employees’ Compensation Act: Analysis of 

Proposed Changes on USPS Beneficiaries, GAO-13-142R (Washington, D.C.: November 

26, 2012), GAO, Federal Employees’ Compensation Act: Analysis of Proposed Program 

Changes, GAO-13-108 (Washington, D.C.: October 26, 2012), and GAO, Federal 

Employees’ Compensation Act: Benefits for Retirement-Age Beneficiaries, GAO-12-309R 

(Washington, D.C.: February 6, 2012).

2

The receipt of FECA benefits is generally the exclusive remedy for being injured on the 

job and a federal employee is prohibited from recovering damages for such injury under 

another statute.

3

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 in a suitable job. 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-13-730T 

employees first hired in 1984 or later. As of September 30, 2009, about 

85 percent of the federal workforce was covered by FERS.

Proposals to revise FECA include the following changes to the benefits 

for future total and partial-disability beneficiaries:4

• Set initial FECA benefits at a single rate (either 66-2/3 or 70 percent 

of applicable wages at time of injury), regardless of whether the 

beneficiary has eligible dependents.

• 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.

My statement today will focus on our findings regarding (1) the potential 

effects of the proposals to compensate total-disability FECA beneficiaries 

at a single rate regardless of having dependents; (2) the potential effects 

of the proposal to reduce FECA benefits for total-disability beneficiaries to 

50 percent of applicable wages at Social Security retirement age; and (3) 

how partial-disability beneficiaries might fare under the proposed 

changes. This statement is drawn primarily from our four prior reports 

analyzing the effects of proposed changes to FECA.

To consider the effect of compensating total-disability FECA beneficiaries 

at the single rate of either 66-2/3 or 70 percent, we conducted simulations 

that compared the extent to which FECA and the proposed revision would 

replace a FECA beneficiary’s take-home pay by analyzing a set of federal 

employees who had never been injured and who were employed at the 

end of fiscal year 2010. 5

 

4

The proposals analyzed are Labor’s “Federal Injured Employees’ Reemployment Act of 

2010” technical assistance discussion draft, January 13, 2011 and S. 1789, 112th Cong., 

tit. III (2012). Both proposals include setting initial FECA benefits at a single rate—Labor 

proposed 70 percent and S. 1789 proposed 66-2/3 percent. Both proposals would reduce 

benefits at full Social Security retirement age to 50 percent of applicable wages.

We used a matching methodology, which allows 

us to capture the counterfactual of having never been injured and use it to 

5

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. The analyses were based on snapshots in 

2010 and did not consider any cumulative effects of the proposed FECA revisions on 

lifetime income.
 

Page 3 GAO-13-730T 

benchmark the adequacy of benefits. 6 We conducted separate 

simulations for non-USPS and USPS beneficiaries because their data 

were organized differently in separate databases and the USPS FECA 

population is substantial—43 percent of FECA beneficiaries in 2010 were 

employed by USPS at the time of injury. Once we matched the FECA 

beneficiaries to the relevant set of federal workers, we calculated their 

hypothetical FECA and hypothetical revised FECA benefits, and projected 

these initial benefits to 2010.7 We calculated the proportion of 2010 takehome pay replaced by the simulated FECA benefit, or wage replacement 

rate.8

 

6

We matched recent total disability FECA beneficiaries to these employees in order to 

ensure the two groups of individuals were similar. Our matches were based on workrelated characteristics—such as employing agency and blue collar versus white collar 

classification. We also included personal characteristics that may be important in terms of 

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

federal careers, as well as their wage histories prior to the injury. For more details on the 

similarity of the matched set of FECA beneficiaries and federal employees, see appendix 

II of GAO-13-108 (non-USPS) and enclosure I of GAO-13-142R (USPS). 

7

After matching, we focus solely on the federal worker—rather than the FECA 

beneficiary—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. We calculated 

initial benefits to reflect the timing of the corresponding FECA beneficiary’s injury.

8

At the time of injury, wage replacement rates are actually greater than FECA 

compensation rates. For example, given a dependent and gross wages of $50,000, the 

FECA benefit is $37,500 (75 percent). Assuming 15 percent taxes, take home pay would 

be $42,500, and the wage replacement rate would be 88 percent (37,500/42,500). 

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 4 GAO-13-730T 

By using 2010 take-home pay, we factored in missed career growth into 

the wage replacement rates we calculated. Although FECA was not 

designed to compensate for missed career growth, we used a matching 

methodology that allowed us to measure the adequacy of benefits with 

respect to the counterfactual. Specifically, we captured the extent to 

which FECA beneficiaries are able to maintain the standard of living they 

would have had absent an injury.9

To compare FERS to total-disability FECA benefits, we also relied on a 

matching technique,10 and conducted our analysis for both the current 

FECA program and the proposal to reduce benefits at full retirement 

age.11 We projected simulated FECA benefits to 2010 and compared 

these FECA benefits, supplemented by a Thrift Savings Plan (TSP) 

annuity, to the actual FERS benefit packages. 12

 

9

Alternatively, one could use a method that does not account for missed career growth. 

For instance, in our 1998 FECA report (

The FERS benefit 

package includes the FERS annuity, Social Security benefits, and TSP 

GAO/GGD-98-174), we 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. We took 

that approach in part because of the data available at the time of the report, 

GAO/GGD-98-174.The report found that, on average, FECA benefits replaced over 95 

percent of wages at the time of injury for beneficiaries, including both USPS and nonUSPS beneficiaries. In its comments on our 1998 report, Labor took issue with the fact 

that we did not take account of missed promotions. Labor stated that it is almost certain 

that some percentage of injured workers would have received promotions, thus lowering 

the wage replacement rate. The availability of additional data and the improved methods 

employed in our recent analysis allow us to present an assessment of the adequacy of 

benefits that includes career growth. For additional discussion of the merits of accounting 

for missed career growth in assessing the adequacy of benefits, see Hunt, 2004.

10For details on the match and subsequent analysis, see appendix II of GAO-13-108 

enclosure I of GAO-13-142R. 

11This approach captures retirement benefits in the counterfactual case of having never 

been injured and is consistent with our February 2012 FECA report, which compared 

FECA benefits to retirement benefits under the Civil Service Retirement System. See 

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

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

12FECA beneficiaries cannot receive FECA benefits concurrently with the FERS annuity. 

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

retirement. 
 

Page 5 GAO-13-730T 

annuities. 13 However, FERS had only been in place 26 years in 2010, so 

we did not capture a fully mature system. 14 To capture future FECA 

beneficiaries, we conducted another 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.15

To determine the effects on partial-disability beneficiaries, we used 

different methods to analyze how they might fare under proposed FECA 

revisions. We did not conduct the types of simulations we used for totaldisability beneficiaries, in part because Labor does not keep data about 

their total income (including any earnings) in an electronic database. 

Instead, we reviewed partial-disability beneficiary case files to examine 

how their post-injury employment outcomes varied (e.g., re-employed by 

the federal government, re-employed in the private sector, or 

unemployed) and changed over time and judgmentally selected 7 

beneficiaries to present as case studies.16

The work on which this testimony was based was conducted in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

The results from these case 

studies are not generalizable to all partial-disability beneficiaries.

 

13To conduct our simulations, we used data from the 2010 Integrated Federal Employees’ 

Compensation System (iFECS); 1988- 2010 data from the Central Personnel Data Files 

(CPDF); 1995-2010 data from USPS Human Capital Enterprise System (HCES); 2010 

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

benefit data from the Master Beneficiary Record (MBR). We determined that the data we 

used were sufficiently reliable for the purposes of the reports. 

14By mature FERS, we mean a retirement system in place at least 30 years to give a full 

range of income levels and investment growth. 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. 

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. 

15We then simulated different scenarios by varying the percentage an individual 

contributed to the TSP and the rate of growth for TSP balances. Please see appendix II of 

GAO-13-108 for more details about our simulation of a mature FERS. 

16We selected the 7 case studies to show variation in wage earning capacity and postinjury job outcomes, including 4 beneficiaries who returned to work (2 to federal service 

and 2 to private sector jobs) and whose wage earning capacity was based on their actual 

wages, and 3 beneficiaries whose wage earning capacity was based on a Labor estimate 

of what the beneficiary could earn in an appropriate job placement. 
 

Page 6 GAO-13-730T 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions 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.

FECA provides cash benefits to eligible federal employees who suffer 

temporary or permanent disabilities resulting from work-related injuries or 

diseases. Labor’s Division of Federal Employees’ Compensation in the 

Office of Workers’ Compensation Programs (OWCP) administers the 

FECA program and charges agencies for whom injured employees 

worked for benefits provided. These agencies subsequently reimburse 

Labor’s Employees’ Compensation Fund from their next annual 

appropriation. FECA benefits are adjusted annually for cost-of-living 

increases17

Table 1: Number of FECA Beneficiaries per Agency in 2010

and are neither subject to age restrictions nor taxed. USPS

has large FECA program costs. At the time of their injury, 43 percent of 

FECA beneficiaries in 2010 were employed by USPS, as shown in table 

1.

All FECA beneficiaries

Agency Number Percentage

USPS 130,483 43 

Department of Veterans Affairs 26,157 9 

Department of Homeland Security 25,408 8 

Navy 19,919 6 

Army 19,852 6 

Air Force 12,728 4 

Department of Justice 11,001 4 

Department of Agriculture 10,691 3 

Department of the Interior 9,205 3 

Defense agenciesa 6,101 2 

 

17FECA and Social Security are adjusted by the same price index (CPI-W). 

Background 

FECA 
 

Page 7 GAO-13-730T 

All FECA beneficiaries

Agency Number Percentage

Other agenciesb 35,360 12 

Total 306,905 100 

Source: GAO analysis of Labor data.

a

Defense Agencies covered include the Defense Contract Audit Agency, Defense Logistics Agency, 

and the Defense Contract Management Agency, among others.

b

The remaining agencies listed each have less than 2 percent of the total number of beneficiaries 

receiving workers’ compensation benefits, and fewer than 5,275 beneficiaries each.

One way to measure the adequacy of FECA benefits is to consider wage 

replacement rates, which are the proportion of pre-injury wages that are 

replaced by FECA. Wage replacement rates that do not account for 

missed career growth capture the degree to which a beneficiary is able to 

maintain his or her pre-injury standard of living whereas wage 

replacement rates that account for missed career growth capture the 

degree to which a beneficiary is able to maintain his or her foregone 

standard of living (i.e., standard of living absent an injury). Data limitations 

can preclude calculating wage replacement rates that account for missed 

career 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; however, there is no consensus on what wage 

replacement rate policies should target.18

FECA beneficiaries receive different benefits past retirement age than 

workers who retire under a federal retirement system. Specifically, under 

FERS, federal retirees have a benefit package comprised of three 

components: the FERS annuity, which is based on years of service; the 

TSP, which is similar to a 401(k); and Social Security benefits.19

 

18H. 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). 

FECA 

benefits do not change at retirement age and beneficiaries cannot receive 

a FERS annuity and FECA benefits simultaneously. In addition, FECA 

19FERS, which generally covers employees first hired in 1984 or later, replaced the Civil 

Service Retirement System (CSRS). According to OPM, about 80 percent of federal 

annuitants that were on OPM’s rolls in 2011 were CSRS annuitants. Among those CSRS 

annuitants, the average years of federal service was almost 30 years. 

FECA and Retirement 

under FERS
 

Page 8 GAO-13-730T 

beneficiaries cannot contribute to their TSP accounts post-injury, but they 

can receive benefits accrued from contributions made to their TSP 

accounts prior to being injured. In addition, Social Security benefits 

attributable to federal service are offset by FECA.

If an individual has an extended disability and no current capacity to work, 

OWCP determines that he or she is a total-disability beneficiary and 

calculates long-term FECA benefits as a proportion of the beneficiary’s 

entire income at the time of injury.20 In 2010, 31,880 FECA beneficiaries 

received long-term total-disability cash benefits.21

Alternatively, if an individual recovers sufficiently to return to work in some 

capacity, OWCP determines that he or she is a partial-disability 

beneficiary and reduces his or her FECA benefits from the total-disability 

amount. For such partial-disability beneficiaries, OWCP calculates longterm benefits based on any loss of wage earning capacity (LWEC), as 

compared to their pre-injury wages.22 A beneficiary’s LWEC may be 

based on the difference between their pre-injury wages and their actual 

post-injury earnings if the beneficiary has found employment that OWCP 

determines to be commensurate with their rehabilitation. Alternatively, 

OWCP constructs a beneficiary’s LWEC based on the difference between 

pre-injury wages and OWCP’s estimate of what the FECA beneficiary 

could earn in an appropriate job placement (constructed earnings). In 

2010, 10,594 FECA beneficiaries received long-term partial-disability 

cash benefits.23

 

20The amount of time a beneficiary receives these long-term total-disability benefits varies 

depending on the extent and speed of recovery. 

21See GAO, Federal Employees’ Compensation Act: Benefits for Retirement-Age 

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

on the number and types of FECA beneficiaries in 2010. In this report we found that, 

compared to their federal CSRS retired counterparts, non-USPS long-term, full-time FECA 

beneficiaries typically received higher benefits in 2010. The median annual FECA benefit 

of $35,614 was about 26 percent higher than the median annual annuity received by 

retirees, which was $28,289, after adjusting for the effects of taxes.

22We use the term “pre-injury wages” for clarity. OWCP calculates long-term benefits 

based on the current pay rate—at the time of this calculation—of the job the beneficiary 

held at the time of injury.

23See GAO-12-309R for more information on the number and types of FECA beneficiaries 

in 2010. 

Partial and Total-disability
 

Page 9 GAO-13-730T 

In addition to our work on FECA benefit levels, we have also conducted 

work on program integrity and management. We have identified several 

weaknesses in these areas.24 Most recently, in April 2013, we found 

examples of improper payments and indicators of potential fraud in the 

FECA program, which could be attributed, in part, to oversight and dataaccess issues. We also found that FECA program requirements allow 

claimants to receive earnings, and earnings increases, without 

necessarily resulting in adjustment of FECA compensation. We 

recommended that the Secretary of Labor assess the feasibility of 

developing a cost-effective mechanism to share FECA compensation 

information with states. Labor agreed with the recommendation and 

stated that it will undertake a review to determine whether such data 

sharing and reporting is feasible.

Our simulations of the effects of compensating non-USPS and USPS 

total-disability beneficiaries at the single rate (regardless of the presence 

of dependents) of either 66-2/3 or 70 percent of wages at injury, reduced 

the median wage replacement rates. Median wage replacement rates 

overall, and within the subgroups we examined, were generally lower 

under the 66-2/3 percent compensation proposal.

 

24GAO, Federal Employees’ Compensation Act: Case Examples Illustrate 

VulnerabilitiesThat Could Result in Improper Payments or Overlapping Benefits, 

GAO-13-386 (Washington, D.C.: April 3, 2013). GAO, Federal Employees’ Compensation 

Act: Status of Previously Identified Management Challenges, GAO-12-508R (Washington, 

D.C.: March 21, 2012). GAO, Federal Employees’ Compensation Act: Preliminary 

Observations on Fraud-Prevention Controls, GAO-12-402 (Washington, D.C.: January 25, 

2012). GAO, Federal Employees’ Compensation Act: Preliminary Observations on FraudPrevention Controls, GAO-12-212T (Washington, D.C.: November 9, 2011). GAO, Federal 

Employees’ Compensation: Better Data and Management Strategies Would Strengthen 

Efforts to Prevent and Address Improper Payments, GAO-08-284 (Washington, D.C.: 

February 26, 2008).

FECA Operations

Proposed FECA 

Revisions Would 

Reduce Median Wage 

Replacement Rates 

and Increase the 

Difference between 

Total-Disability 

Beneficiaries With 

and Without a 

Dependent 
 

Page 10 GAO-13-730T 

Compared to the current FECA program, both proposals reduced 2010 

median wage replacement rates for total-disability non-USPS and USPS 

beneficiaries, as shown in figure 1. The decreases in the overall median 

wage replacement rates were due to the greater proportion of 

beneficiaries who had a dependent—73 percent of non-USPS 

beneficiaries and 71 percent of USPS beneficiaries. Beneficiaries with a 

dependent received lower compensation under both proposals whereas 

beneficiaries without a dependent saw their compensation increase or 

stay the same.

Figure 1: 2010 Wage Replacement Rates under FECA and the Proposed Revisions

Note: Wage replacement rates are calculated based on 2010 take-home pay and account for missed 

income growth. Postal refers to USPS and non-postal refers to non-USPS.

As shown in the middle group of bars in figure 1, the results of our 

simulation indicate that median wage replacement rates for USPS 

beneficiaries were generally higher than those for non-USPS 

beneficiaries. In both cases, the wage replacement rates account for 

missed income growth, as they are simulated based on 2010 take-home 

pay. All else equal, FECA beneficiaries who would have experienced 

Proposed Single Rates 

Would Reduce Wage 

Replacement Rates
 

Page 11 GAO-13-730T 

more income growth—from the time of injury through 2010—had lower 

wage replacement rates than did those beneficiaries who would have 

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

beneficiaries missed less income growth due to their injury than did nonUSPS beneficiaries. Consequentially, USPS beneficiaries had higher 

wage replacement rates than non-USPS beneficiaries. For example, 4 out 

of 5 USPS beneficiaries in our analysis would have had less than 10 

percent income growth had they never been injured. In contrast, 2 out of 

5 non-USPS beneficiaries would have had less than 10 percent income 

growth, absent an injury.

Under our simulations, both proposals increased the difference in wage 

replacement rates between beneficiaries with and without a dependent, 

increasing the magnitude and reversing the direction of the difference in

median wage replacement rates, as shown in figure 2. Had we been able 

to account for the actual number of dependents, beneficiaries with 

dependents would have had lower wage replacement rates and thus the 

difference between median wage replacement rates would have been 

smaller under FECA and larger under both proposals.25

 

25 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 takehome pay (because of smaller tax liabilities) and therefore result in lower wage 

replacement rates. For more information, see GAO-13-108. 
 

Page 12 GAO-13-730T 

Figure 2: 2010 Median Wage Replacement Rates for Beneficiaries With and Without 

a Dependent

Note: Wage replacement rates are calculated based on 2010 take-home pay and account for missed 

income growth. Postal refers to USPS and non-postal refers to non-USPS.

For other beneficiary subgroups we examined, the proposals did not 

reduce wage replacement rates disproportionately to the reduction in the 

overall median.26

 

26We examined subgroups of beneficiaries by state tax rates, General Schedule (GS) 

level at injury and GS level growth (non-USPS), and income percentile category at injury 

(USPS). The GS 

However, we found that under current FECA policy and 

both proposals, wage replacement rates for some beneficiaries, such as 

those who, due to injury earlier in their careers, missed out on substantial 

income growth, were substantially lower than the overall median. FECA 

was not designed to account for missed income growth and thus totaldisability beneficiaries who missed substantial income growth had lower 

wage replacement rates—outweighing the cumulative effect of FECA’s 

annual cost of living adjustments—as shown in figure 3.

classification and pay system covers the majority of civilian white-collar 

Federal employees.
 

Page 13 GAO-13-730T 

Figure 3: 2010 Median Wage Replacement Rates by Missed Income Growth

Note: Intervals do not include the upper endpoints. In addition, not enough USPS beneficiaries had 

missed income growth over 50% to report their wage replacement rates. Wage replacement rates are 

calculated based on 2010 take-home pay and account for missed income growth. Postal refers to 

USPS and non-postal refers to non-USPS.
 

Page 14 GAO-13-730T 

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) for both USPS and non-USPS 

FECA beneficiaries was greater than the current median FERS retirement 

benefit package (FERS annuity, TSP annuity, and Social Security).

Specifically, the median FECA benefit package for non-USPS 

beneficiaries was 32 percent greater than the current median FERS—and 

37 percent greater for USPS FECA beneficiaries.27 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.

Although the overall median FECA benefit was substantially higher than 

the median FERS benefit for 2010 annuitants, the difference between the 

two varies based on years of service. Our simulations showed that 

median FECA benefit packages were consistently greater than median 

FERS benefit packages across varying years of service; however, the 

gap between the two benefits narrowed as years of service increased. 

This occurred in large part because FERS benefits increase substantially 

with additional years of service. For example, under our simulation nonUSPS 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, non-USPS 

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. For USPS beneficiaries, those whose total 

federal career would have spanned less than 10 years had a median 

 

27In our datasets, non-USPS FERS annuitants had a median of about 16 years of service, 

while USPS annuitants had a median of 18 years. 

Years of Service Play 

a Key Role in the 

Comparison between 

FECA and FERS 

Benefits 

Current Median FECA 

Benefit Packages Exceed 

2010 FERS Benefit 

Packages

Increased Years of Service 

Were Associated with 

Increased FERS Benefits 

Relative to FECA Benefits 

for 2010 Annuitants
 

Page 15 GAO-13-730T 

FECA benefit that was about 65 percent greater than the corresponding 

FERS benefit, while beneficiaries whose total federal career would have 

spanned between 20 and 24 years had a median FECA benefit that was 

23 percent greater than the corresponding FERS benefit.

Based on our simulation, we found that 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 was about 6 percent less 

than the median FERS benefit package for non-USPS annuitants. Under 

our simulation, for USPS annuitants, the reduced FECA benefit package 

would be approximately equal to the median 2010 FERS benefit package. 

This implies that under the proposed reduction, both USPS and nonUSPS FECA beneficiaries would have similar income from their FECA 

benefit package in comparison to their foregone FERS benefit.

In addition, under our simulation reduced FECA benefits were similar or 

less than FERS benefits across varying years of service.28 However, as

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

example, we found that non-USPS 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, those non-USPS 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. Similarly, USPS beneficiaries whose total federal career would 

have spanned less than 10 years had a median reduced FECA benefit 

that was about 13 percent greater than the corresponding FERS benefit. 

In contrast, USPS beneficiaries whose total federal career would have 

spanned 25 to 29 years had a median reduced FECA benefit that was 20 

percent less than the corresponding FERS benefit.29

 

28 In other words, under the proposed reduced FECA, based on our simulations, 

beneficiaries would have similar or less income in retirement than they would have had 

absent an injury. 

29 Because few people in our dataset had more than 25 years of federal service at the 

time of retirement, we do not capture those who would choose to work 30 or more years in 

the federal government before retiring. 

Proposals would Roughly 

Equalize FECA and FERS 

Benefit Packages for 2010 

Annuitants 
 

Page 16 GAO-13-730T 

Because FERS had only been in place for 26 years in 2010, our 

simulation did not capture the “mature” FERS benefit that an annuitant 

could accrue with more years of service. Consequently, it is likely that our 

analysis understates the potential FERS benefit when we consider 2010 

benefit levels. As a result, we conducted a simulation of a “mature” FERS 

that was coupled with the assumption that individuals have 30-year 

federal careers. Based on this simulation, we found that the median 

current FECA benefit packages for non-USPS beneficiaries were on par 

or less than the median FERS benefit package—depending on the 

amount an individual contributes toward their TSP account for retirement.

As shown on the right sides of figures 4 and 5, under the default 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. 

Similarly, our simulation showed that for USPS annuitants, the median 

FECA benefit package was about 13 percent greater than the median 

FERS benefit package under the 1 percent agency contribution scenario, 

and about 4 percent less than the median FERS benefit package under 

the 10 percent contribution scenario.

Median Reduced FECA 

Benefit Packages Would 

Likely Be Less Than 

Median FERS Benefit 

Packages for Federal 

Annuitants with 30-Year 

Careers
 

Page 17 GAO-13-730T 

Figure 4: Median FECA and FERS Benefit Packages by Years of Service (Non-USPS) 

Source: GAO analysis of simulation results.
 

Page 18 GAO-13-730T 

Figure 5: Median FECA and FERS Benefit Packages by Years of Service (USPS)

Our simulation also found that, for both non-USPS and USPS annuitants, 

the median reduced FECA benefit package under the proposed changes 

was less than the median FERS benefit package—regardless of the 

simulated contributions to TSP accounts. Specifically, under a scenario 

where there is no employee contribution—and a 1 percent contribution 

from the employing agency—the median reduced FECA benefit package 

is about 31 percent less than the median FERS benefit package for nonUSPS annuitants and 22 percent less than the median FERS benefit 

package for USPS annuitants. Under a scenario where each employee 

contributes 5 percent—and receives a 5 percent agency match—the 

median reduced FECA benefit package is about 35 percent less than the 

FERS benefit package for non-USPS annuitants and about 29 percent 

less than the FERS benefit package for USPS annuitants.

Effects of Proposed FECA Revisions on Partial-disability Beneficiaries 

Depend on Post-Injury Earning Capacity and Employment Over Time
 

Page 19 GAO-13-730T 

We found partial-disability beneficiaries to be fundamentally different from 

total-disability beneficiaries, as they receive reduced benefits based on 

their potential to be re-employed and have work earnings. However, there 

is limited information available about the overall population of partialdisability beneficiaries. They do not all find work and their participation in 

the workforce may change over time, and their individual experiences will 

determine how they would fare under the proposed revisions.

Partial-disability beneficiaries in the case studies we examined fared 

differently under both FECA and the proposed revisions to pre-retirement 

compensation, depending on the extent to which they had work earnings 

in addition to their FECA benefits. To consider this larger context, we 

conducted total income comparisons for the partial-disability case studies 

we examined. We defined the post-injury total income comparison to be 

the sum of post-injury FECA benefits and any gross earnings from 

employment at the time of the LWEC decision, as a percentage of preinjury gross income.30

Among the seven partial-disability case studies we examined, those 

beneficiaries with constructed earnings LWECs had post-injury total 

income comparisons that were substantially less than those with actual 

earnings LWECs. As shown in table 2, the beneficiaries in case studies 5-

7 had constructed earnings LWECs and had post-injury total incomes that 

ranged from 29 to 65 percent of their pre-injury income under current 

FECA policy. This range was substantially lower than the total income 

comparisons for the beneficiaries in case studies 1-4 with actual earnings 

LWECs (77-96 percent). We found that by definition, at the time of their 

LWEC decision, those beneficiaries with constructed earnings LWECs 

earned less than the income OWCP used to calculate their LWECs. 

Consequently, their total income comparisons—FECA benefits plus 

earnings, as a percentage of pre-injury wages—are necessarily lower 

than those with actual earnings LWECs.

 

30This total income comparison is not the same as the wage replacement rate used in our 

prior analysis for total-disability beneficiaries. Total income includes FECA benefits and 

any gross earnings from work (not accounting for taxes). Post-injury earnings and FECA 

benefits are deflated to the time of injury to conduct a consistent comparison at a single 

point in time. For further details on the methodology, see enclosure I of GAO-13-143R. 

Total Income Comparisons 

for Partial-Disability 

Beneficiaries Under SingleRate Proposals Depend on 

the Extent to Which Each 

Is Reemployed
 

Page 20 GAO-13-730T 

Table 2: GAO Case Studies of Total Income Comparisons at Time of Loss of Wage Earning Capacity (LWEC) Decision

Total Income Comparisons Under

Case Study 

c

Has a 

Dependent 

Wages @ 

Injury

Wages 

PostInjury @ 

LWEC a 

Post-Injury 

Earning 

Capacityb

FECA 

Benefit @ 

Injury 

Current FECA 

Benefit 

Structure 

(preretirement) 

Labor 

Proposal (preretirement 

compensation) 

Senate 

Proposal(preretirement 

compensation) 

1 - Returned to 

Agency 

Yes $52,684 $16,472 26% $29,240 81.5% 77.8% 75.3% 

2 - Returned to 

Agency 

No $28,691 $25,829 88% $2,295 96.0% 96.4% 96.0% 

3 - Private 

Sector Job 

Yes $75,724 $8,320 9% $51,682 77.3% 72.7% 69.7% 

4 - Private 

Sector Job 

No $38,675 $33,097 82% $4,641 94.0% 94.6% 94.0% 

5 - Constructed 

LWEC 

Yes $58,033 $5,383 26% $32,208 64.5% 60.8% 58.3% 

6 - Constructed 

LWEC 

Yes $35,082 $0 49% $13,419 38.3% 35.7% 34.0% 

7 - Constructed 

LWEC 

No $34,936 $0 56% $10,248 29.3% 30.8% 29.3% 

Source: GAO analysis of partial-disability case studies.

a

The dollar amounts for wages and benefits are in nominal terms from the year of the injury or 

OWCP’s LWEC decision; they are thus not comparable for each beneficiary or across beneficiaries. 

Dollars are standardized in the income comparisons and are thus comparable across beneficiaries 

(see enclosure I of GAO-13-143R for details on the methodology).

b

Post-injury earning capacity represents OWCP’s determination of a beneficiary’s potential to earn 

wages. For instance, OWCP determined that the beneficiary in case study 1 had the potential to earn 

26 percent of her wages at the time of injury.

c

We also found that beneficiaries in our case studies were affected 

differently by the proposed revisions to pre-retirement benefits. As 

expected, the beneficiaries who did not have a dependent (case studies 

2, 4, and 7) experienced either slight increases or no change in their postinjury total income comparisons under the proposed revisions to preretirement benefits. Under both proposals, the beneficiaries in our case 

studies who had a dependent (case studies 1, 3, 5, and 6) experienced 

Total income comparisons represent each beneficiary’s post-injury FECA benefits plus any gross 

earnings from employment at the time of the LWEC decision, as a percentage of his or her pre-injury 

gross income, under current FECA policy and the proposed revisions to pre-retirement benefits.
 

Page 21 GAO-13-730T 

declines in their post-injury total income comparisons.

31

Due to the importance of actual work earnings on partial-disability 

beneficiaries’ situations, we have previously concluded that a snapshot of 

post-injury total income comparisons is insufficient to predict how 

beneficiaries fare over the remainder of their post-injury careers. 

Employment at the time of OWCP’s LWEC decision does not necessarily 

imply stable employment over time, as beneficiaries can find, change, or 

lose jobs over time.

However, these 

decreases in total income comparisons were relatively small compared to 

the impact of not having actual earnings. For instance, the beneficiary 

with a constructed earnings LWEC in case study 6 experienced declines 

in total income comparisons of about 3 to 4 percentage points between 

current FECA policy and the proposals. However, the beneficiary’s total 

income comparisons under current FECA policy and the proposals were 

over 30 percentage points lower than those of the beneficiary in case 

study 3 who had the lowest total income comparisons of those 

beneficiaries with actual earnings LWECs.

We have also found that the proposals to reduce FECA benefits at 

retirement age would primarily affect those partial-disability beneficiaries 

who continue to receive FECA benefits past retirement age. As we 

reported in December 2012, among those partial-disability beneficiaries 

who stopped receiving FECA benefits in 2005-2011, 68 percent did so 

due to their election of OPM retirement or other benefits, such as 

Veterans Affairs disability benefits. At that time, Labor officials told us that 

because many variables affect retirement benefits, they cannot predict 

why partial-disability beneficiaries would potentially choose to retire 

instead of continuing to receive FECA benefits. Only 17 percent of partialdisability beneficiaries who stopped receiving FECA benefits were 

beneficiaries who died (i.e., received benefits from injury until death). 

These aggregate numbers do not track individual beneficiaries’ decisions 

to elect retirement or to continue receiving FECA benefits past retirement 

age, but they suggest that there is a substantial percentage of partial-

 

31The proposals to compensate FECA beneficiaries at the single rate of 70 percent or 66-

2/3 percent of wages at injury, regardless of the presence of dependents, would reduce 

pre-retirement FECA benefits for partial-disability beneficiaries with a dependent and 

would increase or have no effect on pre-retirement FECA benefits for those without a 

dependent, respectively. 

Effects of Proposals to 

Reduce FECA at 

Retirement Age Depend on 

Whether Partial-Disability 

Beneficiaries Remain on 

FECA or Elect OPM 

Retirement Benefits
 

Page 22 GAO-13-730T 

disability beneficiaries that elects other benefits instead of FECA at some 

point post-injury.32

Since those beneficiaries who elect FERS retirement would not be 

affected by the proposed revisions to FECA compensation at retirement 

age, the overall effects of the proposals on partial-disability beneficiaries 

should be considered in the larger context of retirement options. To do so, 

in our December 2012 report, we used data from the seven partialdisability case studies to simulate and compare FERS and FECA benefits 

and to highlight various retirement options these partial-disability 

beneficiaries may face.33

• The beneficiaries in case studies 2, 4, and 6 had potential FERS 

benefit packages that were higher than their FECA benefits under 

current policy and the proposed revision—they would likely not be 

affected by the proposed revision.

As shown in table 3, we found:

• The beneficiaries in case studies 1, 3, and 7 had potential FERS 

benefit packages that were lower than their FECA benefits under 

current policy and the proposed revision—they would likely face a 

reduction in FECA benefits in retirement under the proposed revision.

 

32While those beneficiaries who elect OPM retirement would not be affected by the 

proposals, they would receive lower retirement benefits than they would have had they 

never been injured, all else equal. Their federal careers were either shortened or they 

returned to federal employment at a reduced capacity—both of which would reduce their 

FERS annuities and Social Security benefits attributable to federal service. 

33We compared potential FERS and FECA benefits for each beneficiary in the case 

studies at age 62—a common decision point for electing to retire and also consistent with 

our prior work—which measures what each beneficiary would actually receive though the 

beneficiaries were not actually retired. This comparison is thus not the same as the 

retirement counter-factual analysis conducted for total-disability beneficiaries that 

compared FECA benefits to retirement benefits if never injured. Although the proposed 

reduction would only go into effect once a beneficiary reaches full Social Security 

retirement age, we simulated the benefit reduction for all case studies, regardless of age. 

We did so to be consistent with our prior work, to present the comparison under each 

compensation rate, and to avoid imputing additional unknown years of service. Had we 

conducted the comparison at full Social Security retirement age, FECA benefits would 

have been larger due to additional cost of living adjustments and FERS benefits may have 

been larger due to additional years of service. We did not include Thrift Savings Plan 

(TSP) benefits or Social Security benefits attributable to non-federal service in the 

comparison because each beneficiary would have received those benefits whether they 

elected FERS retirement or chose to remain on FECA. 
 

Page 23 GAO-13-730T 

• The beneficiary in case study 5 had a potential FERS benefit package 

that was lower than his FECA benefits under current policy, but higher 

than his benefits under the proposed FECA reduction—he would likely 

face a reduction in FECA benefits in retirement under the proposed 

revision.

Table 3: GAO Case Studies: Benefits Comparisons at Retirement

Total Benefits Under Retirement:

Case Study 

Has a 

Dependent 

Wages @ 

Injurya

Wages 

PostInjury @ 

LWEC 

PostInjury 

Earning 

Capacityb

Years of 

Federal 

Servicec

Potential FERS 

Retirement 

Package 

Current FECA 

Benefit 

Structure 

Labor and 

Senate 

Proposals to 

Reduce FECA 

1 - Returned to 

Agency 

Yes $52,684 $16,472 26% 14 $15,823 $34,554 $23,023 

2 - Returned to 

Agency 

No $28,691 $25,829 88% 29 $24,410 $3,575 $2,678 

3 - Private Sector 

Job 

Yes $75,724 $8,320 9% 17 $19,843 $75,023 $50,011 

4 - Private Sector 

Job 

No $38,675 $33,097 82% 17 $13,513 $6,318 $4,758 

5 - Constructed 

LWEC 

Yes $58,033 $5,383 26% 23 $25,518 $38,077 $25,376 

6 - Constructed 

LWEC 

Yes $35,082 $0 49% 20 $17,132 $16,536 $11,011 

7 - Constructed 

LWEC 

No $34,936 $0 56% 6 $7,905 $15,808 $11,830 

Source: GAO analysis of partial-disability case studies.

a

The dollar amounts for wages are in nominal terms from the year of the injury or OWCP’s LWEC 

decision; they are thus not comparable for each beneficiary or across beneficiaries. Benefit 

comparison dollars are in nominal terms, but as of the same year for each individual; FERS and 

FECA benefits are thus comparable for each beneficiary, but not across beneficiaries (see enclosure I 

of GAO-13-143R for details on the methodology).

b

Post-injury earning capacity represents OWCP’s determination of a beneficiary’s potential to earn 

wages. For instance, OWCP determined that the beneficiary in case study 1 had the potential to earn 

26 percent of her wages at the time of injury.

c

Years of federal service includes any additional years of service added to advance beneficiaries who 

were not yet 62 to age 62—the point of benefit comparison. See enclosure I of GAO-13-143R for 

additional details on the methodology.

d

Total benefits in retirement compares the potential FERS retirement package if a beneficiary elects 

OPM retirement, FECA benefits under current FECA policy, and FECA benefits under the Labor and 

Senate proposals. Social Security benefits not attributable to federal service and TSP benefits were 

not included in the analysis because they cancel out on both sides of the comparison; whatever TSP 

balance and Social Security benefits attributable to non-federal employment a beneficiary had 

accrued would be theirs whether they elected FECA benefits or FERS retirement.
 

Page 24 GAO-13-730T 

Based on our prior work, we have concluded that the differences in 

retirement options that individual beneficiaries face stem from two key 

factors: (1) OWCP’s determination of their earning capacities, and (2) 

their total years of federal service. Partial-disability beneficiaries with 

greater potential for earnings from work receive relatively lower FECA 

benefits to account for their relatively lower loss of wage earning capacity, 

all else equal. In table 2, beneficiaries with:

• low earning capacities post-injury (case studies 1, 3, and 5) had 

FECA benefits that were more favorable than FERS benefits;

• high earning capacities post-injury (case studies 2 and 4) had FECA 

benefits that were less favorable than FERS benefits; and

• mid-range earning capacities post-injury (case studies 6 and 7) had 

FECA benefits whose favorability depended on their total years of 

federal service. Fewer years of federal service resulted in a lower 

FERS annuity and lower Social Security benefits attributable to 

federal service, all else equal.

We have also found that partial-disability beneficiaries who choose to 

remain on FECA past retirement age currently face lower FECA benefits 

in retirement as compared with total-disability beneficiaries, and would 

experience a reduction in benefits under the proposals. Partial-disability 

beneficiaries receive FECA benefits that are lower than those of 

otherwise identical total-disability beneficiaries to account for their 

potential for work earnings. As long as they work, their income is 

comprised of their earnings and their FECA benefits. However, once they 

choose to retire, partial-disability beneficiaries who choose to stay on 

FECA likely no longer have any work earnings and are not eligible to 

simultaneously receive their FERS annuity.34

 

34Eligible total and partial-disability FECA beneficiaries may elect OPM retirement, such 

as under FERS, in lieu of FECA benefits. 

Thus, we found that 

because of the way FECA benefits are currently calculated, such partialdisability beneficiaries may have less income in retirement than otherwise 

identical total-disability beneficiaries, and the proposals would reduce 

benefits in retirement without differentiating between partial and total-
 

Page 25 GAO-13-730T 

disability beneficiaries.35 The proposed reduction may serve as a longterm incentive for partial-disability beneficiaries to return to work,36

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

compensation to federal employees who are unable to work because of 

injuries sustained while performing their federal duties and FECA benefits 

generally serve as the exclusive remedy for being injured on the job. Our 

simulations of the potential effects of proposed changes to FECA benefit 

levels incorporated the kinds of approaches used in the literature on 

assessing benefit adequacy for workers’ compensation programs, such 

as taking account of missed career growth. More specifically, we 

assessed the proposed changes by simulating the level of take-home pay 

or retirement benefits FECA beneficiaries would have received if they had 

not been injured, which provides a realistic basis for assessing how 

beneficiaries may be affected. However, we did not recommend any 

particular level of benefit adequacy. As policymakers assess proposed 

changes to FECA benefit levels, they will implicitly be making decisions 

about what constitutes an adequate level of benefits for FECA 

beneficiaries before and after they reach retirement age. While our 

analyses focused on how the median FECA beneficiary might be affected 

by proposed changes, it also highlighted how potential effects may vary 

for different subpopulations of beneficiaries, which can assist 

policymakers as they consider such changes to the FECA program.

particularly because their initial FECA benefits are lower than those of 

total-disability beneficiaries.

This concludes my statement and I would be happy to answer any 

questions.

 

35Those partial-disability beneficiaries who were re-employed in non-federal jobs (e.g., in 

the private sector) can remain on FECA and receive any non-federal retirement benefits 

they may have accrued; similarly, those who were re-employed in federal jobs and remain 

on FECA in retirement may receive greater TSP benefits from any additional contributions 

during their re-employment. 

36For example, by returning to work, partial-disability beneficiaries would be able to 

increase their potential FERS benefits with additional years of federal service and 

contributions to TSP, or obtain non-federal retirement benefits through other employment 

that could supplement their lower FERS or FECA benefits (depending on their retirement 

elections). Not all partial-disability beneficiaries return to work. 
 

Page 26 GAO-13-730T 

For further information regarding this testimony, please contact Andrew 

Sherrill 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 statement. Individuals who made key contributions to 

this testimony include: Nagla’a El-Hodiri, Assistant Director; James 

Bennett, Jessica Botsford, Sherwin Chapman, Michael J. Collins, Melinda 

Cordero, Holly Dye, Michael Kniss, Gene Kuehneman, Kathy Leslie, 

James Rebbe, Jeff Tessin, Walter Vance, and Rebecca Woiwode.

Contacts and Staff 

Acknowledgments 

(131266)
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