President Sides with Republicans to Propose Changes in Federal Benefits

Department of Labor logoTo the surprise of some Democrats, President Obama has joined with some House Republicans to push for changes in federal workers’ compensation benefits, expressing concerns that the payouts are “too generous” and that they may “discourage an employee’s return to work.”

The proposed changes come from the U.S. Department of Labor. Foremost among them is a change in the rate at which injured workers will be compensated. Currently, a worker with no dependents is entitled to 66.67% of pre-injury wages and employees with dependents receive 75% of wages (more than 60% of injured workers have dependents). One proposal would establish a uniform rate of 70% for everyone.

Labor Department officials say the current 75% rate can be a disincentive to return to work, as it can actually allow a worker to take home more pay than if he or she was working. Workers’ compensation benefits are not taxable, and income over $37,451 is taxed at 25%. With the combination of state, federal and local withholding, a workers’ compensation benefit of 75% can exceed take-home pay after taxes. Though Labor Department officials expressed concern that the current law may be a disincentive to return to work, their own statistics showed that over 90% of workers went back to their jobs within two years.

Postal union officials say the concerns that workers will prefer to collect workers’ compensation benefits are unfounded, notwithstanding the fact that nine out of ten go back to work. Ron Watson, the director of retired members for the National Association of Letter Carriers, noted that employees receiving workers’ compensation benefits lose “tens of thousands of dollars in overtime,” as well as banked sick and leave hours, not to mention matching of retirement funds.

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For an appointment with an experienced New Jersey federal workers’ compensation lawyer, contact us online or call our office at (856) 310-9002. We meet with clients weekdays between 9 a.m. and 5 p.m. We offer a free consultation for injured workers.