Federal Employees' Compensation Act: Analysis of Benefits Under Proposed Program Changes
Published: 2013-07-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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. Total-disability 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 total-disability 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.
section_title: What GAO Found
paragraphs: 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 non-USPS 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.

section_title: Letter
paragraphs: 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).
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. 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:
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   We used a matching methodology, which allows  end of fiscal year 2010. us to capture the counterfactual of having never been injured and use it to  benchmark the adequacy of benefits.  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. We calculated the proportion of 2010 take- home pay replaced by the simulated FECA benefit, or wage replacement  rate.
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.
To compare FERS to total-disability FECA benefits, we also relied on a  matching technique, and conducted our analysis for both the current  FECA program and the proposal to reduce benefits at full retirement  age. 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.  The FERS benefit  package includes the FERS annuity, Social Security benefits, and TSP  annuities.  However, FERS had only been in place 26 years in 2010, so  we did not capture a fully mature system.  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.
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 total- disability 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. The results from these case studies are not generalizable to all partial-disability beneficiaries.
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  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.
subsections: section_title: Background
paragraphs: 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   and are neither subject to age restrictions nor taxed. USPS  increaseshas 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.
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.
subsections: section_title: FECA and Retirement under FERS
paragraphs: 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. FECA  benefits do not change at retirement age and beneficiaries cannot receive  a FERS annuity and FECA benefits simultaneously. In addition, FECA  beneficiaries cannot contribute to their TSP accounts post-injury, but they  can receive benefits accrued from contributions made to their TSP  accounts prior to being injured. In addition, Social Security benefits  attributable to federal service are offset by FECA.
section_title: Partial and Total-disability
paragraphs: 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. In 2010, 31,880 FECA beneficiaries  received long-term total-disability cash benefits.
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 long- term benefits based on any loss of wage earning capacity (LWEC), as  compared to their pre-injury wages. 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.
section_title: FECA Operations
paragraphs: 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. 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 data- access 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.
section_title: Proposed FECA Revisions Would Reduce Median Wage Replacement Rates and Increase the Difference between Total-Disability Beneficiaries With and Without a Dependent
paragraphs: 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.
subsections: section_title: Proposed Single Rates Would Reduce Wage Replacement Rates
paragraphs: 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.
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  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 non- USPS 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.
For other beneficiary subgroups we examined, the proposals did not  reduce wage replacement rates disproportionately to the reduction in the  overall median. 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 total- disability 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.
section_title: Years of Service Play a Key Role in the Comparison between FECA and FERS Benefits
subsections: section_title: Current Median FECA Benefit Packages Exceed 2010 FERS Benefit Packages
paragraphs: 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. 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.
section_title: Increased Years of Service Were Associated with Increased FERS Benefits Relative to FECA Benefits for 2010 Annuitants
paragraphs: 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 non- USPS 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  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.
section_title: Proposals would Roughly Equalize FECA and FERS Benefit Packages for 2010 Annuitants
paragraphs: 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 non- USPS 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. 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.
section_title: Median Reduced FECA Benefit Packages Would Likely Be Less Than Median FERS Benefit Packages for Federal Annuitants with 30-Year Careers
paragraphs: 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.
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 non- USPS 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  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 partial- disability 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.
section_title: Total Income Comparisons for Partial-Disability Beneficiaries Under Single- Rate Proposals Depend on the Extent to Which Each Is Reemployed
paragraphs: 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 pre- injury gross income.
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.
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 post- injury total income comparisons under the proposed revisions to pre- retirement benefits. Under both proposals, the beneficiaries in our case  studies who had a dependent (case studies 1, 3, 5, and 6) experienced  declines in their post-injury total income comparisons.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.
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.
section_title: Effects of Proposals to Reduce FECA at Retirement Age Depend on Whether Partial-Disability Beneficiaries Remain on FECA or Elect OPM Retirement Benefits
paragraphs: 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 partial- disability 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- disability beneficiaries that elects other benefits instead of FECA at some  point post-injury.
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 partial- disability case studies to simulate and compare FERS and FECA benefits  and to highlight various retirement options these partial-disability  beneficiaries may face. As shown in table 3, we found:
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.
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.
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.
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. Thus, we found that  because of the way FECA benefits are currently calculated, such partial- disability 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- disability beneficiaries. The proposed reduction may serve as a long- term incentive for partial-disability beneficiaries to return to work,particularly because their initial FECA benefits are lower than those of  total-disability beneficiaries.
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.
This concludes my statement and I would be happy to answer any  questions.
section_title: Contacts and Staff Acknowledgments
paragraphs: 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.
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