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Policy: Labor

Fraud rampant in fed disability program

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Watchdog,Mark Flatten,Labor,Federal Budget,Entitlement Reform,Corruption,Entitlements,Inspectors General,Waste and Fraud,Follow the Money

Federal employees who were receiving monthly disability benefits thanks to workplace injuries have been caught running marathons, scuba diving, skiing in Switzerland and doing flips on a trapeze.

One even used her disability income to buy a boat she named "Free Ride."

Welcome to the world of fraud in the $3 billion program meant to compensate federal workers hurt on the job. Lucrative benefits and lax enforcement have made the disability fund, created almost a century ago through the Federal Employees' Compensation Act, vulnerable to creative scammers.

And too little is being done to stop it, according to Government Accountability Office and agency inspector general's reports.

"If you are motivated in such a way to take advantage of the system, you can come up with a way to get hurt as a federal worker and get 75 percent of your pay for the rest of your life, tax free, and keep your other benefits," said Sen. Tom Coburn, R-Okla., who wants to overhaul the law.

"You have to err a little bit on the side of giving the benefit of a doubt. But you don't have to be completely stupid about it," Coburn said.

FECA is supposed to help injured federal employees maintain their income as they recover, then return to their old jobs if possible, or a different one that will accommodate their disabilities.

About 250,000 people are drawing benefits under FECA, which can include full or partial disability, medical care or vocational retraining. Most workers return to the job within a year or two.

But about one in five people in the system are on long-term disability, meaning there is little prospect of them returning to the job. A third of those on the long-term rolls, roughly 15,000 people, are at least 66 years old, according to congressional reports.

The federal program is far more generous than comparable plans for state employees. Most state plans, for example, cap benefits at two-thirds of an employee's old salary, tax-free, and limit how long a disabled worker can draw benefits.

The federal plan pays 75 percent of pre-injury wages, tax-free, for most workers for as long as they live.

A half-dozen federal workers drawing disability benefits are older than 100. More than 10,000 of them are at least 71 years old.

FECA also has few anti-fraud controls common in state plans. Employees claiming to be injured can pick their own doctors, and are trusted to provide accurate information on side jobs, outside income and dependents that can augment their disability paychecks.

Most agencies have little reason to pursue fraud aggressively, including the Department of Labor, which manages the program for the rest of the government, according to a series of IG reports.

The exception is the U.S. Postal Service, which accounts for about 40 percent of all FECA claims. For most federal agencies, the money for FECA recipients is automatically passed through to the Department of Labor.

But the postal service is supposed to operate like a private business, so FECA payments come out of its bottom line. As a result, the postal service has been the most aggressive in pursuing fraud claims and seeking changes in the law.

"The risk is just through the ceiling," said David Williams, the postal service IG. "If your claim is baseless or fraudulent, you can just go again. Even if your previous claim was fraudulent, you are not banned from the program. You just learn and adapt."

Attempts to reform FECA by cutting benefits once an employee reaches retirement age failed last year, despite the backing of the Obama administration and bipartisan support in the Senate.

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