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Performance and Accountability Report Fiscal Year 2007
Financial Section

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NOTE 7. Actuarial Liability

The FECA provides income and medical cost protection to covered Federal civilian employees injured on the job and for those 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 paid ultimately 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 actuarial liability is updated annually.

The DOL method of determining the liability uses historical benefit payment patterns for a specific incurred period to predict the ultimate payments for that period. Consistent with past practice, these projected annual benefit payments have been discounted to present value using the OMB’s economic assumptions for ten-year Treasury notes and bonds. Interest rate assumptions utilized for discounting were as follows:

Interest Rate Assumptions Utilized for Discounting to Present Value
For FY 2007 and FY 2006
2007 2006
4.93% in year 1,
5.08% in year 2,
and thereafter
5.17% in year 1,
5.31% in year 2,
and thereafter

Based on information provided by the DOL, the U.S. Department of Commerce estimated the USPTO’s liability as of September 30, 2007 and 2006 was $7,929 thousand and $7,470 thousand, respectively.

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