USPS OIG: White Paper on Federal Employees’ Compensation Act Reform

White Papers – HR-WP-14-003

Executive Summary
Enacted in 1916, the Federal Employees’ Compensation Act (FECA) provides medical, compensation, death, and vocational rehabilitation benefits to civilian federal employees who sustain injuries — including occupational disease — because of their employment with the federal government. The U.S. Congress amended FECA in 1974 to provide continuation of pay (COP), authorize employees to select their own physicians, and eliminate reduced benefits after age 70. Since then, Congress has not significantly reformed FECA.

The U.S. Department of Labor (DOL) Office of Workers’ Compensation Programs has the exclusive authority to administer, implement, and enforce FECA. The DOL compensates providers, claimants, and beneficiaries. The U.S. Postal Service later reimburses the DOL for all workers’ compensation claims, including administrative fees, through a process known as “chargeback billings.”

The U.S. Bureau of Labor Statistics calculates private industry workers’ compensation costs per employee workhour as 73 cents for the production, transportation, and material moving occupational group, which is the occupational category most aligned with postal workers.

Postal Service management calculated workers’ compensation expenses to be significantly higher at about $1.163 per employee hour for FY 2013.

The Postal Service paid about $1.3 billion in workers’ compensation claims and $67 million in administrative fees in chargeback year 2013. In addition, as of December 31, 2013, the estimated long-term workers’ compensation liability was about $15.9 billion; and as of June 2013, the Postal Service had about 16,380 disabled employees on the periodic roll. To address declining revenue and mail volume, the Postal Service has successfully decreased its number of employees from 765,088 in 2008 to 617,714 in 2013 through attrition and retirement incentives. Despite the Postal Service’s efforts to decrease the number of employees, its workers’ compensation costs have increased 35 percent.

The higher workers’ compensation expense could be attributed to a number of factors, including: (1) the reduced number of light/limited duty positions available because of automation and lower mail volume; (2) an older workforce, which experience greater impairments from injuries and take longer time to recover; and (3) increased costs due to cost of living adjustments. In addition, workers’ compensation fraud is costly to the Postal Service. In FYs 2012 and 2013, U.S. Postal Service Office of Inspector General special agents obtained $51.9 million in medical and disability judgments and halted future workers’ compensation losses of $289.7 million.

The Postal Service has limited cost containment options without legislative changes to FECA. To control workers’ compensation costs, FECA reform should include practices used in state government and the private sector, such as:

■ Limits on the duration and amount of benefits.
■ Settlements and buyouts.
■ Employer-selected physicians.
■ Return to work and rehabilitation programs.
■ Generic drug requirements.

In addition, reform should include collection of COP in cases involving third-party liabilities, changes to the assessment of administrative fees, and the use of predictive modeling and nurse case managers. However, there are political, employee, and union considerations that could make it challenging to amend FECA to include these reforms. If these changes could be adopted, these significant workers’ compensation costs would become much more in line with those of state governments and the private sector.


Leave a Reply

Required fields are marked *