Federal Employees' Compensation Act

Issues Associated With Changing Benefits for Older Beneficiaries Gao ID: GGD-96-138BR August 14, 1996

The Federal Employees' Compensation Act (FECA) now allows beneficiaries who are at or beyond retirement age to receive worker's compensation benefits. Possible changes to the legislation would reduce these benefits. This briefing report provides (1) a profile of beneficiaries on the long-term FECA rolls, (2) views of proponents and opponents of changing FECA benefits for older beneficiaries, and (3) questions and issues that Congress might consider if crafting benefit changes.

GAO found that: (1) in June 1995, persons age 55 and older comprised 60 percent of long-term FECA beneficiaries and 37 percent of FECA beneficiaries were 65 years or older; (2) $611 million of the $1.28 billion in 1995 FECA benefits went to older long-term beneficiaries who would most likely be affected by proposed FECA changes; (3) proponents of changing benefits for older FECA beneficiaries believe that lifetime income replacement under FECA is too generous because it does not reflect typical lower retirement income and that excessive FECA costs put an undue burden on federal agencies' discretionary program budgets; (4) beneficiaries' survivors would more likely receive survivor benefits if the long-term beneficiaries are switched from FECA benefits to retirement benefits; (5) opponents believe that high FECA compensation for older beneficiaries is justified and that reducing benefits for older recipients constitutes age discrimination and could cause economic hardships; (6) opponents believe that charging federal agencies with FECA costs may motivate them to comply with FECA objectives and that implementing injury prevention programs and returning injured workers to productive employment would be more cost-effective and equitable approaches; and (7) issues for consideration include the equity, cost savings, complexity, and tax consequences of converting FECA benefits to retirement benefits, the permanence of a FECA annuity, and potential legal challenges on the basis of alleged age discrimination.

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