MEMORANDUM FOR THE HONORABLE GREGORY H. FRIEDMAN
INSPECTOR GENERAL
DEPARTMENT OF ENERGY

SUBJECT: Federal Employees' Compensation Act: A Nationwide Review of Federal Employees Who Received Compensation for Lost Wages for Periods When "Earned Wages" Were Reported on the Social Security Administration's Master Earnings File (A-15-06-16037)

Federal Employees' Compensation Act (FECA) recipients who have wage postings during the same period for which they receive FECA payments raise concerns about the propriety of such payments. The widespread concern expressed by members of the President's Council on Integrity and Efficiency prompted our Office to coordinate with the Department of Labor (DOL) Office of Inspector General (OIG) to identify the extent to which Federal Employees were receiving FECA payments while earning wages. Specifically, we agreed to perform an evaluation to identify the number of FECA recipients who received compensation for lost wages for periods when "earned wages" were reported on the Social Security Administration's (SSA) Master Earnings File (MEF). In December 2005, SSA/OIG met with DOL Office of Workers' Compensation Programs (OWCP) officials to discuss our objectives and use of OWCP data. With assistance from DOL/OIG, we obtained Calendar Year 2004 OWCP data on FECA recipients. We appreciate the cooperation and support provided by DOL/OIG. We provided a draft copy of this report to the DOL/OIG for comment. We appreciate their contribution and have incorporated comments as appropriate. This evaluation could not have been completed without DOL/OIG's support.

The attached report provides the results of our comparison of FECA data to various SSA databases. This evaluation was conducted for research and statistical purposes. As such, SSA/OIG will not take any action that may affect the rights, benefits or privileges of specific individuals identified during the course of our evaluation.

If you wish to discuss the final report, please call me or have your staff contact Steven L. Schaeffer, Assistant Inspector General for Audit, at (410) 965-9700.

Patrick P. O'Carroll, Jr.

Report to The Honorable Gregory H. Friedman
Inspector General
Department of Energy

Federal Employees' Compensation Act: A Nationwide Review of Federal Employees Who Received Compensation for Lost Wages for Periods When "Earned Wages" Were Reported on the Social Security Administration's Master Earnings File

Social Security Administration
Office of the Inspector General
May 18, 2007

Introduction

Objective Our objective was to determine the number of Federal Employees' Compensation Act (FECA) recipients, classified as not having a wage earnings capacity or whose wage earnings capacity had not yet been determined, (OWCP case status codes PN or PR, respectively), that received compensation for lost wages when "earned wages" were reported on the Social Security Administration's (SSA) Master Earnings File (MEF). This evaluation was conducted for research and statistical purposes. As such, our office will not take any action that might affect the rights, benefits or privileges of specific individuals identified during the course of the evaluation.

Background FECA (5 United States Code (U.S.C.) § 8101, et seq.) provides income and medical cost protection to covered Federal civilian employees injured on the job, employees who have incurred a work-related injury or occupational disease and beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. It provides payment as compensation for lost wages, monetary awards for medical care, vocational rehabilitation, and survivor's compensation. FECA is administered by the Office of Workers' Compensation Programs (OWCP), within the U.S. Department of Labor's (DOL) Employment Standards Administration.

Federal agencies are responsible for continuing an employee's regular wages, without charging annual or sick leave for up to 45 days while the employee is recovering from a FECA covered injury or disease. When the 45-day period lapses, DOL provides compensation for lost wages and medical benefits.

In Federal Fiscal Years (FFY) 2004 and 2005, DOL reported approximately $2.4 and $2.5 billion, respectively, in compensation for lost wages and medical benefits for approximately 163,000 FECA recipients. Approximately, 60,000 of the 163,000 recipients were on the periodic roll.

The United States Postal Service (USPS) pays more in FECA costs than any other Federal agency. From July 1, 2003 to June 30, 2004, USPS paid approximately $852 million dollars in FECA costs. During this period the Departments of the Navy and Army paid the second and third highest amount in FECA costs, paying approximately $245 and $177 million dollars, respectively. See Appendix D which details 18 Federal agencies with Federal workers compensation costs in CBY 2004.

Scope & Methodology

The DOL/OIG assisted in providing two data files containing FECA recipient case data, the case management file and the CY 2004 compensation file. The source of the files is the Office of Workers Compensation Programs (OWCP). The case management file included recipient information such as name, case number, Social Security number (SSN), date of injury, etc. The CY 2004 compensation file contained compensation information for lost wages, monetary awards for medical care, vocational rehabilitation, or survivor's compensation and other compensation paid to periodic roll recipients in CY 2004.

These files were merged to obtain a complete record for each FECA recipient for CY 2004 and yielded a total of 57,268 FECA recipient cases. This merged file was compared against SSA's MEF. The 57,268 recipient cases represented 56,643 unique SSNs. Using the merged file, we determined 26,057 of 57,268 FECA recipient cases were classified by OWCP as PN or PR for the entire CY 2004.

The Privacy Act of 1974, as amended, places limitations on the use of records. According to the Privacy Act, "…no record which is contained in a system of records may be disclosed to a recipient agency or non-Federal agency for use in a computer matching program except pursuant to a written agreement between the source agency and the recipient agency or non-Federal agency...." However, the term "matching program" does not include "…matches performed to support any research or statistical project, the specific data of which may not be used to make decisions concerning the rights, benefits, or privileges of specific individuals." This applies to our computerized comparison of data, which was performed for research and statistical purposes only. See Appendix B - Scope and Methodology.

Results of Evaluation

We determined 1,795 out of 26,057 individuals (6.9 percent) earned wages and received compensation for lost wages in CY 2004. These individuals were classified by OWCP as long-term disabled recipients who have no wage earnings capacity or reemployment potential for the indefinite future; or, their reemployment or earnings capacity had not yet been determined. The risk of improper compensation for lost wages increases when a recipient who is considered to have a long-term disability without wage earnings capacity then earns wages. Although 1,795 individuals were identified, we did not review their individual case files to determine whether improper payments occurred.

DOL reported that a possible reason individuals without an earnings capacity or an undetermined earnings capacity are possibly earning wages was because:

…Claims Examiners are not consistently following up with claimants to ensure that a Form CA-1032 is received annually for each claimant, as applicable; however, payments continued to be made to non-responsive claimants.

The total amount of compensation for lost wages paid to these individuals in CY 2004 was $48,751,751. The total amount of wages earned by these individuals in CY 2004 was $12,607,480. The wages ranged from about $100 to $115,502. See Chart 1.

CHART 1 - Wages Earned by Recipients

Total Recipients .38 - $500 $501 - $10,000 $10,001 - $25,000 $25,001 - $50,000 $50,001 - $100,000 $100,001 and Greater 1795 538 871 247 111 27 1

We sampled 78 of the 1,795 recipients to trace their name, address, employer's identification and CY 2004 earnings to their Internal Revenue Service Form W-2 to gain assurance that the named recipient actually earned the CY 2004 wages stated on the MEF. The name, address, employer's identification and CY 2004 earnings agreed to the W-2's of the 78 recipients.

See Appendices E and F for details of Federal agencies of FECA recipients who earned wages and received compensation for lost wages while classified by OWCP as long-term disabled recipients who have no wage earnings capacity; or, reemployment capacity or reemployment or earnings capacity has not yet been determined. The majority of these recipients' earnings were from regular wages (see Appendix F).

Comparisons to Other SSA Data Bases

During our evaluation, we performed five additional analyses using the data provided by DOL OWCP. These analyses or comparisons identified:

1. recipients with a death indicator or annotated date of death on the Numident, Death Master File (DMF), or Master Beneficiary Record (MBR), who received potential excess payments in CY 2004;

2. recipients with invalid SSNs who received FECA payments in CY 2004;

3. recipients at or above full retirement age (FRA) who received compensation payments in CY 2004;

4. recipients with a closed case status code prior to CY 2004 who received compensation payments in CY 2004; and

5. the most common injuries sustained by the recipients noted in our MEF comparison.

The results of these additional analyses are as follows:

Death Indicator

Two hundred forty four recipients had a death indicator or an annotated date of death on their Numident, DMF or MBR prior to CY 2004 and received potential excess payments in CY 2004.

We did not verify whether these recipients were deceased. However, SSA verifies the death of Social Security beneficiaries by either obtaining a death certificate, or a statement of death by a funeral director. Also, verification is performed through receiving an Electronic Death Registration of state death records, death records from the Department of Veterans Affairs and the Centers for Medicare and Medicaid Services. A determination of a recipient's death status is performed to ensure that all Social Security benefits to deceased beneficiaries are terminated when appropriate.

It is DOL's practice that:

...upon notification of the death of a FECA claimant, the district office is to immediately terminate compensation benefits in the Automated Compensation Payment System (ACPS).

However, DOL indicated, a possible reason why recipients may be receiving excess payments after their date of death could be:

…excess payments were made because FECA [DOL] had not been timely notified of a claimant's death, or upon notification of a claimant's death, FECA failed to promptly terminate compensation benefit payments…. Therefore, ...FECA's failure to promptly terminate compensation benefit payments resulted in additional excess payments being made.

The total amount of excess payments made to these individuals was $1,940,729. The payments ranged from $183 to $146,490. See Appendix G for detail of Federal agencies recipients with a date of death annotated on their Numident, DMF, or MBR, who received potential excess payments.

Invalid and Incorrect SSNs

Of the 57,268 recipient cases, we noted 34 recipient cases with invalid SSNs and approximately 1,000 cases with incorrect SSNs.

Invalid SSNs are SSNs that were never issued by SSA. They can be a result of input errors, or Claim Examiners entering invalid SSNs to facilitate claims processing when an individual's SSN is not available. An example of an invalid SSN entered to facilitate a claim would be 123-45-6789. Total compensation paid to the 34 invalid SSNs in CY 2004 was $516,625.

Incorrect SSNs represent recipients whose name (as reported by DOL) is associated with an SSN that does not match the name. Total compensation paid to the 1,000 incorrect SSNs in CY 2004 was $20,141,875.

In a 2000 audit report, DOL reported instances of incorrect SSNs:

Almost 5 percent of the Social Security numbers (SSNs) in our sample taken from OWCP's benefit payment system were incorrect.

The total amount of compensation paid to recipients with invalid or improper SSNs in CY 2004 was $20,658,500. The payments ranged from $46 to $98,290. Invalid and incorrect SSNs pose a risk that individuals could receive benefit payments under a false identity.

Full Retirement Age

We determined 15,439 individuals were at FRA and received compensation for lost wages, monetary awards for medical care, vocational rehabilitation, or survivor's compensation and other compensation payments in CY 2004. Total FECA compensation paid to these recipients in CY 2004 was $400,662,356. Of these individuals, 11,849 (76.7 percent) received SSA Title II retirement benefits in CY 2004. Total SSA Title II retirement benefits paid to these individuals in CY 2004 was $91,680,044. Receipt of Social Security benefits is an indicator that FECA recipients may be retired. Presently, there is no DOL policy restricting or reducing FECA compensation upon the attainment of retirement age.

Federal agencies have argued for many years that once FECA beneficiaries reach what would have been their normal retirement eligibility point, those persons should be switched to the retirement rolls. FECA-related costs are charged back to the employing agency, limiting the money it has available for other purposes, where annuity costs are borne by the Federal retirement trust fund. FECA benefits typically exceed Federal retirement benefits because they are tax free, which constitutes an incentive for individuals to remain on FECA past when they would otherwise have retired.

Three thousand five hundred ninety recipients (23 percent) never applied for Title II retirement benefits; therefore no MBR will exist for these recipients.

Other Information

Closed Cases

Two hundred seventy three recipient cases that were closed prior to CY 2004 received FECA payments in CY 2004. The dates that the cases were closed ranged from CY 1980 to CY 2003. The total amount of FECA compensation paid to these recipients was $2,164,746. The payments ranged from $7 to $45,458. According to DOL's definition of a closed case, all entitled benefits have been paid and no further payments are anticipated, therefore, no payment should be made to closed cases. Because these recipients' cases are closed, we cannot determine the type of payment made to them in CY 2004.

Injury Type

The most common injuries sustained by the 1,795 recipients noted in our MEF comparison were back injuries (32 percent). See Appendix H for a detailed breakdown of injuries sustained by 1,795 FECA recipients noted in our MEF comparison.

Conclusion

Based on the results of our analyses, the potential exists for a substantial amount of improper payments to occur and continue to be paid if Federal agencies do not implement corrective action to improve oversight and monitoring of their FECA programs. Unfortunately, because of restrictions of the Computer Matching Privacy Protection Act of 1988 (CMPPA) we cannot communicate the identities of the individuals noted in our comparisons. DOL/OIG stated, "DOL recognizes a legislative change is needed because the Privacy Act of 1974 prohibits agencies, including SSA, from disclosing earnings without claimant's authorization. DOL's FY 2008 budget request includes proposed legislative reform of the FECA." We believe the OIGs should work with their respective agencies to resolve the issues identified in this report.

Appendices

APPENDIX A - Acronyms
APPENDIX B - Scope and Methodology
APPENDIX C - Data Reliability, Internal Controls, and Review Standards
APPENDIX D - Participating Agencies - Federal Workers Compensation Costs for CBY 2004
APPENDIX E - Recipients Without or an Undetermined Wage Earnings Capacity Who Earned Wages
APPENDIX F - Types of Earnings Breakdown for the 1,795 Recipients Noted in the Master Earnings File Comparison
APPENDIX G - Recipients Annotated as Deceased Prior to CY 2004 That Received Potential Excess Payments
APPENDIX H - Frequency of Injury by Body Part for the 1,795 Recipients Noted in the Master Earnings File Comparison

Appendix A
Acronyms

ACPS Automated Compensation Payment System
CBY Charge Back Year
CMPPA Computer Matching Privacy Protection Act
CY Calendar Year
DMF Death Master File
DOL Department of Labor
FECA Federal Employees' Compensation Act
FFY Federal Fiscal Year
FR Federal Register
FRA Full Retirement Age
IRS Internal Revenue Service
MEF Master Earnings File
MBR Master Beneficiary Record
NCMF National Case Management File
Numident Numident Master File
OIG Office of Inspector General
ORSIS Office of Retirement and Survivors Insurance Systems
OS Office of Systems
OSR Office of System Requirements
OWCP Office of Workers' Compensation Programs
SSA Social Security Administration
SSN Social Security Number
U.S.C. United States Code
USPS United States Postal Service

Appendix B
Scope and Methodology

The Department of Labor (DOL), Office of Inspector General assisted in providing two data files from the Office of Workers' Compensation Programs (OWCP) containing Federal Employees' Compensation Act (FECA) recipient data. The data files included case management and Calendar Year (CY) 2004 compensation payment information. The FECA recipients were compared to Social Security Administration's (SSA) Numident Master File (Numident), Death Master File (DMF), Master Earnings File (MEF), and Master Beneficiary Record (MBR). A description of the data files, and methodologies used to perform our comparisons and analyses follow:

Data Files

Case Management File - This file contains general case information for all active and inactive FECA recipients. The types of information included are the recipient's name, address, Social Security number (SSN), type of injury, date of injury, etc. There are approximately 1.1 million recipient cases included in the file. These cases represent 766,953 individuals.

CY 2004 Compensation File - This file contains CY 2004 compensation payment data for 59,163 recipient cases on the periodic roll.

We merged the Case Management and CY 2004 Compensation files. We combined these files to obtain a complete FECA record for each recipient for CY 2004. During this process we encountered the following problems:

1. Case numbers that could not be matched between the case management file and the compensation file. There were 858 of these instances.

2. SSNs that were 1) invalid, never issued by SSA; or 2) incorrect, representing recipients whose name (as reported by DOL) is associated with an SSN that does not match the name. There were 34 recipient cases with invalid SSNs and approximately 1,000 cases with incorrect SSNs.

As a result, we obtained CY 2004 case management and compensation payment information for 57,268 recipient cases on the periodic roll. These cases represent 56,643 individuals. Using the merged file, we determined 26,057 of 57,268 FECA recipient cases were classified by the OWCP as PN or PR for the entire CY 2004.

MEF Comparison

We compared 26,057 FECA recipient cases (which represent 25,865 individuals) included in the merged file and classified by OWCP as PN and PR for the entire CY 2004 to SSA's MEF to determine if there were recipients who earned wages and received compensation for lost wages.

DMF Comparison

We compared 56,643 FECA individuals included in the compensation file to SSA's Numident, DMF, and MBR to determine if they had a death indicator or annotated date of death prior to CY 2004.

Numident Comparison

We compared the SSNs of 56,643 individuals included in the CY 2004 compensation file to SSAs Numident to determine if the individuals' SSNs were valid and correct.

Recipients at Full Retirement Age

We extracted recipient cases that were at or above full retirement age (FRA) from the merged file of 56,643 recipient cases. The basis of our extraction was to select recipients born on or before September 1, 1938.

Closed Cases

From the total population of 57,268 recipient cases contained on the compensation file we extracted recipients with a closed case status code dated prior to CY 2004.

Frequency of Injuries

We counted the type of injury codes annotated by DOL for the 1,795 recipients noted in our MEF comparison. We then sorted the codes and categorized the injuries into seven categories: Back, Arms, Legs, Injury Other, Head, Middle Body, and Internal Organs.

Sampling Methodology

To gain assurance that the 1,795 recipients noted in our MEF comparison actually earned wages in CY 2004, we sampled 50 recipients from a population of 1,229 who earned between $501 and $50,000. We also reviewed all 28 recipients who earned greater than $50,000. For these 78 recipients, we traced their names, addresses, and CY 2004 earnings to their Internal Revenue Service Form W-2.

Appendix C
Data Reliability, Internal Controls and Review Standards

We determined the computer-processed data to be sufficiently reliable for its intended use. We tested the Social Security number (SSN) data element included in the Office of Workers' Compensation Programs data files obtained with the assistance of the U.S. Department of Labor (DOL), Office of Inspector General (OIG). The test performed determined the accuracy, and validity of the SSNs. We did not review recipient case files to determine if any additional Federal Employees' Compensation Act data provided by the DOL's OIG was accurate, complete and valid.

The data elements obtained from the Numident Master File (Numident), Death Master File (DMF), Master Earnings File (MEF), and Master Beneficiary Record (MBR) used for our comparisons were sufficiently reliable. Any data limitations were minor and should not lead to an incorrect or unintentional message.

We did not assess individual Federal agencies internal controls used to administer its FECA program. We performed our fieldwork from September 2006 through February 2007. Our evaluation was conducted in accordance with the Quality Standards for Inspections issued by the President's Council on Integrity and Efficiency.

Appendix D
Participating Agencies - Federal Workers Compensation Costs for Charge Back Year 2004
Agency Federal Workers Compensation Costs Paid in Charge Back Year (CBY) 2004(1) Number of Employees
United States Postal Service 852 Million 790,000
Department of the Navy 245 Million 176,768
Department of the Army 177 Million 202,357
Department of Veterans Affairs 155 Million 237,384
Department of the Air Force 129 Million 164,178
Homeland Security TSA 121 Million 50,000
Department of Transportation 92 Million 55,000
Department of Justice 74 Million 105,000
Department of Defense 63 Million 700,000
Tennessee Valley Authority 58 Million 13,000
Department of Interior 57 Million 70,500
Social Security Administration 23 Million 64,400
Department of Labor 19 Million 17,000
General Services Administration 15 Million 12,579
Department of Commerce 14 Million 35,000
Peace Corps (2) 11 Million 8,000
Department of Housing and Urban Development 8 Million 10,000
Railroad Retirement Board 142,000 1,000
Source: U.S. Department of Labor

Note
(1) Charge Back Year 2004 represents the time period of July 1, 2003 through June 30, 2004.
(2) The 8,000 stated as "Number of Employees" actually represent volunteers for the Peace Corps.

Appendix E

Recipients Without or an Undetermined Wage Earnings Capacity Who Earned Wages
Agency Recipients Without Wage Earnings Capacity or Wage Earnings Capacity Has Not Been Determined Who Earned Wages Total Paid for Compensation for Lost Wages in CY 2004
1 UNITED STATES POSTAL SERVICE 876 $22,102,148
2 DEPARTMENT OF VETERANS AFFAIRS 117 $3,082,919
3 DEPARTMENT OF HOMELAND SECURITY 107 $2,971,450
4 DEPARTMENT OF THE ARMY 106 $2,792,253
5 DEPARTMENT OF THE NAVY 106 $2,633,747
6 DEPARTMENT OF JUSTICE 76 $3,360,884
7 DEPARTMENT OF THE AIR FORCE 58 $1,611,207
8 DEPARTMENT OF TREASURY 51 $1,556,438
9 DEPARTMENT OF INTERIOR 42 $1,060,828
10 DEPARTMENT OF AGRICULTURE 39 $912,878
11 DEPARTMENT OF DEFENSE 34 $934,905
12 DEPARTMENT OF HEALTH and HUMAN SERVICES 26 $762,727
13 SOCIAL SECURITY ADMINISTRATION 21 $525,730
14 DEPARTMENT OF TRANSPORTATION 21 $1,089,404
15 GENERAL SERVICES ADMINISTRATION 19 $654,144
16 DEPARTMENT OF COMMERCE 16 $230,094
17 PEACE CORPS 13 $222,000
18 SMITHSONIAN INSTITUTION 8 $204,962
19 GOVERNMENT PRINTING OFFICE 8 $267,712
20 ARCHITECT OF THE CAPITOL 7 $197,549
21 FEDERAL JUDICIARY 6 $249,171
22 TENNESSEE VALLEY AUTHORITY 6 $213,382
23 DEPARTMENT OF LABOR 5 $179,473
24 ENVIRONMENTAL PROTECTION AGENCY 4 $210,025
25 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 4 $145,611
26 AGENCY NO LONGER EXISTS 3 $119,765
27 OTHER AGENCIES (1) 16 $460,342
Total 1795 $48,751,751

Note
(1) This line represents 13 other Federal agencies who had either one or two recipients without wage earnings capacity or wage earnings capacity has not been determined and earned wages.

Appendix F
Types of Earnings Breakdown for the 1,795 Recipients Noted in the Master Earnings
File Comparison

Appendix G
Recipients Annotated as Deceased Prior to Calendar Year 2004 that Received Potential Excess Payments

Agency Recipients Annotated as Deceased That Received FECA Compensation Total Compensation for Lost Wages Paid in CY 2004 to Recipients Annotated as Deceased
1 UNITED STATES POSTAL SERVICE 54 $448,810
2 DEPARTMENT OF THE NAVY 44 $348,107
3 DEPARTMENT OF THE ARMY 28 $215,307
4 AGENCY NO LONGER EXISTS 5 $182,230
5 DEPARTMENT OF VETERANS AFFAIRS 23 $124,300
6 DEPARTMENT OF THE AIR FORCE 14 $90,695
7 DEPARTMENT OF STATE 2 $68,796
8 DEPARTMENT OF TRANSPORTATION 8 $60,574
9 DEPARTMENT OF AGRICULTURE 10 $54,484
10 DEPARTMENT OF INTERIOR 9 $44,323
11 GENERAL SERVICES ADMINISTRATION 4 $44,244
12 TENNESSEE VALLEY AUTHORITY 9 $42,182
13 DEPARTMENT OF COMMERCE 4 $40,751
14 DEPARTMENT OF HOMELAND SECURITY 7 $36,789
15 SOCIAL SECURITY ADMINISTRATION 2 $33,014
16 DEPARTMENT OF DEFENSE 4 $28,653
17 DEPARTMENT OF HEALTH AND HUMAN SERVICES 5 $16,402
18 FEDERAL HOME LOAN BANK BOARD 1 $16,143
19 DEPARTMENT OF JUSTICE 2 $12,640
20 PEACE CORPS 2 $11,242
21 DEPARTMENT OF THE TREASURY 1 $8,960
22 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 2 $5,706
23 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 1 $2,447
24 SMITHSONIAN INSTITUTION 1 $2,185
25 SMALL BUSINESS ADMINISTRATION 1 $1,447
26 ARCHITECT OF THE CAPITOL 1 $302
Total 244 $1,940,729

Appendix H
Frequency of Injury by Body Part for the 1,795 Recipients Noted in the Master Earnings File Comparison (illustrating percentage by body part)