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FECA changes could harm those with dependents, warns GAO

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Federal workers disabled on the job and who have dependents would see the largest reduction in compensation benefits under the proposed changes to the Federal Employees' Compensation Act, says the Government Accountability Office.

In a report (.pdf) dated Oct. 26 but not published until Nov. 26, GAO says the Labor Department's proposed FECA changes could widen the wage gap between disabled beneficiaries without and with dependents at the time of their on-the-job disabling injury.

Under current FECA rules, federal workers are eligible for 66.7 percent of their pre-injury salary, but this rises up to 75 percent if they had dependents at the time they were injured. Labor has proposed changing this to a uniform 70 percent of pre-injury salary regardless of dependents.

GAO cautions the impact this could have on those with dependents and says "consideration needs to be given to the impact the change will have on the adequacy of benefits and the ensuing fairness across beneficiaries, both at the time of injury and over the lifetime of the beneficiary."

Currently, says GAO, recipients with dependents have a median wage-replacement that's 3 percentage points higher than for those without dependents. Under the changes, roles would reverse and those without dependents would see a 6 percentage point higher wage-replacement rate than those with dependents.

Labor has also proposed reducing benefits to a flat 50 percent when an employee reaches retirement age, and again GAO raises concerns.

Under the existing model, says the report, the median FECA benefits after a 30-year career are roughly equal to or 10 percent less than the median Federal Employee Retirement System benefits, depending on Thrift Savings Plan contributions.

If the proposed changes were enacted,  the median FECA package would drop to between 69 percent and 65 percent of the median FERS retirement package.

GAO says there are no easy or quick fixes. It provides an alternative to the changes in the form of an across-the-board reduction in FECA compensation that would keep replacement rates mostly equal between beneficiaries with and without dependents, but warns such a move could harm beneficiaries with low wage replacement rates.

For more:
- download the report, GAO-13-108 (.pdf)

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