NOTE 6. ACTUARIAL LIABILITY
The FECA provides income and medical cost protection to covered federal civilian employees injured on the job who have contracted a work-related occupational disease, and beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. Claims incurred for benefits under the FECA for the USPTO’s employees are administered by the DOL and are ultimately paid by the USPTO.
The DOL estimated the future workers compensation liability by applying actuarial procedures developed to estimate the liability for FECA benefits. The actuarial liability estimates for FECA benefits include the expected liability for death, disability, medical, and miscellaneous costs for approved compensation cases, plus a component for incurred but not reported claims.
The DOL method of determining liability uses historical benefit payment patterns for a specific incurred period to predict the ultimate payments for that period. During FY 2000, the DOL updated the FECA liability projection to include claims incurred but not reported and extended the duration of the model. Also, during FY 2000, the DOL eliminated the use of mortality tables to reduce the life pension aspects of the model and make the FECA model more comparable to a private-sector casualty insurance model. Consistent with past practice, these projected annual benefit payments have been discounted to present value using the OMB’s economic assumptions for 10-year Treasury notes and bonds. Interest rate assumptions utilized for discounting were as follows:
| 2001 | 2000 |
|---|---|
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5.21% in year 1,
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6.15% in year 1,
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5.21% in year 2,
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6.28% in year 2,
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and thereafter
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6.30% in year 3,
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and thereafter
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Based on information provided by the DOL, the DOC determined that the estimated liability of the USPTO as of September 30, 2001 and 2000 was $5,526 thousand and $4,581 thousand, respectively.
