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Income security > 9. Federal Employees' Compensation and Unemployment Benefits

Changes to enhance the sharing of compensation and wage information between state and federal agencies could improve the Department of Labor’s ability to identify potentially improper payments, including inappropriately overlapping payments from the Federal Employees’ Compensation Act program and the Unemployment Insurance program administered by the states.

Why This Area Is Important

The Federal Employees’ Compensation Act (FECA) program provides workers’ compensation coverage to approximately 2.8 million federal and postal employees for work-related injuries and illnesses. Benefits include wage-loss benefits, medical benefits, vocational-rehabilitation benefits, and survivors’ benefits. In fiscal year 2012, the FECA program made more than $2.1 billion in wage-loss compensation payments to claimants. The program, administered by Department of Labor (DOL), provides benefits to federal employees who sustain injuries or illnesses while performing their federal duties. For those claims that are approved, employing agencies reimburse DOL for payments made to their employees, while DOL bears most of the program’s administrative costs. GAO and federal agencies’ Offices of the Inspector General have identified programmatic deficiencies at some employing departments and at DOL that may make the program vulnerable to fraud and abuse.[1] For example, in a January 2012 report, GAO identified potential vulnerabilities in the FECA program’s design and controls both within employing agencies and at DOL that could increase the risk for fraud, and also identified promising practices that could help to reduce that risk.

Under a separate program, the Unemployment Insurance (UI) program, federal and state governments temporarily and partially replace the lost earnings of those who become unemployed through no fault of their own. To be eligible for UI benefits, unemployed workers must meet eligibility requirements established by state laws that conform to federal law, including that they have worked recently, are involuntarily unemployed, and are able and available for work. Whereas federal statutes and DOL regulations provide broad guidelines on UI eligibility, the specific provisions of UI eligibility are determined by each state. In fiscal year 2012, over $90 billion was spent in unemployment insurance benefits.

While the FECA and UI programs generally serve separate populations and provide separate services, some individuals may be eligible for both programs, and the concurrent cash benefit payments made to such individuals are an overlapping service for the replacement of their lost earnings, which may or may not be allowable under UI program requirements. For instance, some individuals may have a disability under federal law but still be able and available for work under state law, and thus would be eligible to receive concurrent UI and FECA benefits. However, other claimants, especially those receiving compensation for total disability, may not be eligible to receive both types of payments because their disability may render them unable and unavailable to work.[2] In some states, claimants receiving FECA benefits are required to disclose their FECA income to the state when applying for UI benefits. Failure to disclose this information or failure of states to identify FECA income may result in improper UI payments.

[1]For example, see Office of the Inspector General, Social Security Administration, Federal Employees Receiving Both Federal Employees’ Compensation Act and Disability Insurance Payments, A-15-09-19008 (October 2010), and U.S. Department of Labor, Office of Inspector General–Office of Audit, Mechanisms Used to Identify Changes in Eligibility Are Inadequate at the FECA District Office in Jacksonville, Florida, 04-07-004-04-431 (Washington, D.C.: Sept. 28, 2007).

[2]Temporary total disability is defined as the inability to return to the position held at the time of injury or earn equivalent wages, or perform other gainful employment, because of the work-related injury. An individual who is partially disabled is not able to return to the position held at the time of injury or earn equivalent wages, but is not totally disabled for all gainful employment.

What GAO Found

In April 2013, GAO identified examples of claimants receiving overlapping FECA and UI benefits, which may be allowable under certain circumstances but could also be potentially improper payments. GAO identified 50 individuals who received concurrent FECA compensation and UI benefits of at least $5,000 each between July 2009 and June 2010 in the five selected states that GAO reviewed.[1] Specifically, GAO’s review of a nongeneralizable sample of 19 individual cases identified claimants who received overlapping UI and FECA benefits totaling over $1.3 million from January 2008 to June 2012. Of these 19 cases, GAO identified nine claimants who potentially committed fraud or improperly obtained UI benefits because they did not properly disclose their FECA benefits to the state on their UI applications, as required by some states.[2] In addition, four claimants who resided in states that require UI payments to be offset by FECA payments received more income from the combined UI and FECA benefits than they would have received from their federal salary alone. At least two of these claimants were former FECA claimants who attempted to return to the federal agency to perform work within their medical restrictions. However, the claimants were subsequently discharged because they did not meet the federal agency requirements for continuing employment, at which point they resumed collecting FECA benefits. Accordingly, although these claimants were entitled to their FECA benefits, they also applied for and received UI benefits that were not offset by their respective states.[3]

In April 2013, GAO reported that DOL lacks a process to share the necessary data with states to help the states determine whether FECA claimants may be improperly receiving overlapping benefits. Specifically, DOL does not systematically report information on claimants receiving FECA benefits to states, which would help states identify overlapping FECA and UI payments as well as UI payments that might need to be offset. Accordingly, states currently must rely on obtaining this information either directly from the UI applicant or from the UI applicant’s recent employers. DOL is not required to, and thus does not, report FECA payments to the National Directory of New Hires (NDNH), which is a primary mechanism that most states use to verify employee wage levels.[4] Were DOL to report FECA payments to this database, states would more easily be able to identify such payments in their review, which could help reduce the risk of improper overlapping payments.  

GAO also reported in April 2013 that DOL does not have statutory authority to directly access private or public wage data that are reported to both the Social Security Administration (SSA) and the NDNH databases. DOL therefore relies heavily on claimants’ self-reporting of earnings to identify potential fraud. Data validation, such as data-sharing agreements between federal agencies, is a key preventive control identified in GAO’s framework for fraud prevention, detection, and prosecution.[5] Reliance on self-reported data is a vulnerability within the FECA program. For example, GAO compared FECA data with quarterly wage (QW) data from five selected states and randomly selected 32 FECA case files for an in-depth review in a separate analysis in the April 2013 report. Of these 32 FECA cases, eight FECA claimants had significantly underreported employment wages in comparison with the wages reported in the state’s QW reports for the same period. DOL has proposed legislative reforms to FECA that would enhance the agency’s ability to assist FECA beneficiaries and also enhance program oversight. As part of this reform, DOL sought authority to match SSA wage data directly with FECA files. Having access to wage data sources would allow DOL to verify claimants’ self-reported employment income and better position the agency to identify potential fraud. As of February 2014, DOL did not have the statutory ability to directly access the NDNH or SSA wage data. However, the President’s Fiscal Year 2015 Budget does propose legislation that would authorize DOL to cross-match FECA records with Social Security records to reduce improper payments.

[1]GAO reviewed files from California, Florida, Maryland, New York, and Virginia. This nonprobability sample is not representative of all states or FECA recipients.

[2]GAO subsequently referred potential fraud cases to DOL’s Office of the Inspector General to investigate, as appropriate.

[3]Although claimants are entitled to UI benefits, certain states require the offset of UI benefits against certain workers’ compensation payments, including FECA.

[4]NDNH was established as a depository for wage reporting that, among other things, enables state child-support agencies to be more effective in enforcing child-support orders.

[5]See GAO, Individual Disaster Assistance Programs: Framework for Fraud Prevention, Detection, and Prosecution, GAO‑06‑954T (Washington, D.C.: July 12, 2006).

Actions Needed

To help identify whether claimants are inappropriately receiving overlapping UI and FECA payments, GAO recommended in April 2013 that the Secretary of Labor take the following action:

  • assess the feasibility of developing a cost-effective mechanism to share FECA compensation information with states, such as reporting information to NDNH.

To help verify claimants’ reported income and help ensure the proper payment of benefits, GAO also suggested in April 2013 that Congress should consider taking the following action:

  • grant DOL the additional authority to access wage data.

According to the extent of potentially fraudulent or improper payments GAO identified, the federal government could realize significant benefits from implementing these actions. A cost-effective mechanism to share FECA compensation information with states to help identify whether claimants are inappropriately receiving overlapping UI and FECA payments could help determine the extent to which improper payments or potential fraud is occurring. In addition, DOL’s access to wage data sources would allow DOL to verify claimants’ self-reported employment income and better position the agency to identify potential fraud. Although GAO was able to identify instances of potentially fraudulent or improper payments, each individual case requires a detailed file review, and such findings cannot be generalized to other FECA claimants who also received quarterly wages. For these reasons, GAO cannot quantify the total amount of such payments.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the April 2013 report listed in the related GAO products section. For that work, GAO matched QW and unemployment files from five selected states (California, Florida, Maryland, New York, and Virginia) with FECA payment files for the period of July 2009 to June 2010.[1] GAO identified 530 individuals who received concurrent FECA compensation payments and wages of at least $5,000 between July 2009 and June 2010. In addition, GAO identified 50 individuals who received concurrent FECA compensation and UI benefits of at least $5,000 each during the same period. GAO randomly selected up to seven recipients from each state for an in-depth review, for a total of 32 QW and 19 UI cases, respectively. The specific findings from the selected cases cannot be generalized to other, or all, FECA claimants who also received quarterly wages or UI benefits. GAO also reviewed DOL’s policies, guidelines, and procedures for managing claims.

Table 8 in appendix IV lists the programs GAO identified that might have similar or overlapping objectives, provide similar services, or be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.

[1]The specific states were selected because of (1) the size of the census population within the state and, in part, (2) the proximity to the Washington, D.C., metropolitan area. This nonprobability sample is not representative of all states or FECA recipients.

Agency Comments & GAO Contact

In commenting on the April 2013 report on which this analysis is based, DOL agreed with the recommendation to assess the feasibility of developing a cost-effective mechanism to share FECA compensation information with the states, such as reporting information to NDNH, to help identify whether claimants are inappropriately receiving overlapping UI and FECA payments. DOL stated that it would undertake a review to determine whether such data sharing and reporting are feasible. GAO provided a draft of this report section to DOL for review and comment.  DOL did not provide comments on this issue.

For additional information about this area, contact Steve Lord at (202) 512-4379 or

Related Products

Federal Employees' Compensation Act:

Case Examples Illustrate Vulnerabilities That Could Result in Improper Payments or Overlapping Benefits
Published: Apr 3, 2013. Publicly Released: May 3, 2013.

Federal Employees' Compensation Act:

Status of Previously Identified Management Challenges
Published: Mar 21, 2012. Publicly Released: Apr 27, 2012.


Preliminary Observations on Fraud-Prevention Controls
Published: Jan 25, 2012. Publicly Released: Jan 25, 2012.

Federal Workers' Compensation:

Better Data and Management Strategies Would Strengthen Efforts to Prevent and Address Improper Payments
Published: Feb 26, 2008. Publicly Released: Feb 26, 2008.

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