Federal Employee Short-Term Disability Insurance Act of 2026
- Sponsor
- Del. Norton, Eleanor Holmes [D-DC-At Large]
- Committees
- Oversight and Government Reform Committee (primary)
- Last action
- May 11, 2026
Bottom line
The bill creates an optional, employee-funded short-term disability insurance program for federal workers, aiming to provide financial security during various types of non-work-related leave or disability.
What it actually does
This bill establishes a voluntary short-term disability insurance program for federal employees, administered by the Office of Personnel Management (OPM). It provides income replacement for non-work-related injuries or disabilities, leave to care for family members (including birth or adoption of a child, or becoming a foster parent), with employees paying 100% of the premiums. Benefits are capped at 70% of annual pay or 70% of the maximum GS-15 basic pay, whichever is less, for up to 12 months per instance.
Proponents argue
Proponents argue that this bill addresses a significant gap in federal employee benefits, bringing them more in line with those offered in the private sector. They contend it provides crucial financial security for federal workers facing unexpected short-term disabilities or family care needs, promoting work-life balance and improving federal workforce recruitment and retention. The voluntary, employee-funded nature ensures no direct cost to taxpayers, making it a fiscally responsible enhancement to federal employment.
Opponents contend
Opponents might argue that while voluntary, the establishment of a new federal insurance program, even if employee-funded, adds to the administrative burden and scope of the Office of Personnel Management. Concerns could be raised about potential adverse selection if only higher-risk employees enroll, leading to higher premiums for all participants. Some may also contend that federal employees already have access to private market disability insurance options, making a government-sponsored program redundant or potentially distorting the market.
The bill is relatively short and clearly structured, making it accessible for an informed reader to understand its core provisions within a reasonable timeframe.
Section 3, new 5 U.S.C. Chapter 88, Section 8802
Establishment of Voluntary Short-Term Disability Insurance Program
This provision directs the Director of the Office of Personnel Management (OPM) to establish and administer a program offering voluntary short-term disability insurance to federal employees. The insurance covers non-work-related injuries or disabilities, leave to care for a family member (including childbirth), or leave related to adoption or becoming a foster parent. It explicitly excludes disabilities caused by willful misconduct, intentional self-harm, or intoxication.
Supporters argue
Supporters argue this program fills a critical gap in federal employee benefits, offering financial stability during life events or health challenges not covered by workers' compensation or long-term disability. They emphasize its voluntary nature and broad applicability to various family and personal needs.
Critics contend
Critics might express concern about the expansion of OPM's administrative duties, even for a voluntary program, and question whether the federal government should be directly involved in providing such insurance when private market options exist.
Tradeoffs
The tension lies between providing a comprehensive benefits package to federal employees and limiting the scope of government programs. The voluntary nature and employee-funded premiums aim to mitigate concerns about government overreach or taxpayer burden.
Section 3, new 5 U.S.C. Chapter 88, Section 8803
Contracting Authority and Carrier Requirements
This section grants OPM authority to contract with one or more insurance carriers to provide the disability insurance. Contracts will be awarded based on qualifications, price, and reasonable competition, without requiring competitive bidding. Each contract must detail benefits, premiums, enrollment periods, and include procedures for internal and independent third-party dispute resolution for claims. Contracts are for 3-7 years, with automatic annual renewals, and coverage can only be terminated for separation from service or non-payment of premiums.
Section 3, new 5 U.S.C. Chapter 88, Section 8804
Benefit Structure and Waiting Periods
This section outlines the benefits provided, stating that OPM may set minimum standards. Benefits will offset other income sources like workers' compensation. Crucially, contracts cannot include preexisting condition exclusions or charge higher premiums based on such conditions. Benefits are payable for up to 12 months per instance, at 70% of the employee's annual pay (excluding bonuses) or 70% of the maximum GS-15 basic pay, whichever is less. Employees choose from four waiting periods (8, 31, 91, or 181 days), with shorter periods incurring higher premiums. Contracts must also include incentives for employees to return to work.
Section 3, new 5 U.S.C. Chapter 88, Section 8805
Employee-Funded Premiums and Administrative Accounts
This section mandates that eligible employees obtaining insurance coverage are responsible for 100% of the premiums, which will be withheld from their pay. It establishes a Non-Work Related Disability Insurance Administrative Account within the existing Employees' Life Insurance Fund. This account will cover OPM's administrative expenses for the program, with carriers making periodic contributions to ensure these costs are defrayed. Initial implementation costs for OPM will be covered by the Employees' Life Insurance Fund and reimbursed by carriers. The provision also allows for underwriting standards to be applied if an individual enrolls after their first opportunity.
Section 3, new 5 U.S.C. Chapter 88, Section 8806
Federal Preemption of State Laws
This section establishes that the terms of any insurance contract under this chapter, particularly those related to coverage, benefits, and payments, will supersede and preempt any conflicting State, territorial, tribal, or local laws or regulations concerning non-work-related disability insurance. It also prohibits States, territories, tribes, or localities from imposing taxes, fees, or other monetary payments on premiums paid for policies under this chapter, with an exception for general net income or profit taxes applicable to a broad range of business activity. State laws regarding subrogation or reimbursement only apply if expressly adopted by the OPM Director.
This subsection states that underwriting standards may be applied for individuals seeking to enroll in the program after their first opportunity to do so has expired.
Section 3, new 5 U.S.C. Chapter 88, Section 8805(e)
Why it matters:This is standard legislative practice for managing risk in voluntary insurance programs. It's a technical detail that ensures the financial stability of the program by preventing adverse selection from individuals who wait until they have a health issue to enroll.
Case for: Supporters would argue this provision is crucial for the financial viability of the program, preventing individuals from waiting until they are sick or injured to enroll, which would drive up costs for all participants. It encourages timely enrollment and helps maintain stable premiums.
Case against: Critics might argue that this provision could create a barrier for federal employees who initially opt out due to financial constraints or lack of awareness, but later wish to enroll when their circumstances change. It could be seen as penalizing those who didn't enroll immediately, especially if their health status changes unexpectedly.
Estimated impact: This provision could significantly impact the accessibility of the program for federal employees who do not enroll during their initial eligibility window, potentially excluding those who develop health conditions later in their careers.
This section explicitly states that the cost accounting standards issued pursuant to section 1502 of title 41 (which generally apply to federal contracts) shall not apply with respect to an insurance contract under this new chapter.
Section 3, new 5 U.S.C. Chapter 88, Section 8810
Why it matters:This is a technical exemption likely intended to streamline the contracting process with insurance carriers, who may have different accounting practices than those typically required for other federal contractors. It's a practical measure to facilitate carrier participation.
Case for: Proponents would argue that exempting insurance contracts from standard federal cost accounting standards simplifies the contracting process, making it more attractive for a wider range of insurance carriers to participate. This could lead to more competitive bids and better options for federal employees.
Case against: Critics might express concern that waiving these standards could reduce transparency and oversight regarding the costs incurred by insurance carriers, potentially leading to less favorable terms for the government and, indirectly, for federal employees through higher premiums. It removes a layer of financial scrutiny.
Estimated impact: This provision could reduce administrative burden for participating insurance carriers, potentially encouraging more bids and affecting the overall cost structure of the program by allowing carriers to use their standard accounting practices.