Federal Employees' Compensation Act:

Issues Associated With Changing Benefits for Older Beneficiaries

GGD-96-138BR: Published: Aug 14, 1996. Publicly Released: Aug 14, 1996.

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Pursuant to a congressional request, GAO reviewed issues related to possible changes to the Federal Employees' Compensation Act (FECA), focusing on: (1) a profile of long-term FECA beneficiaries; (2) supporting and opposing views on changing FECA benefits for retirement-age beneficiaries; and (3) issues for congressional consideration in revising FECA benefits.

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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