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Secretary of Labor Thomas E. Perez
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DOL Annual Report, Fiscal Year 2004
Performance and Accountability Report

Strategic Goal 2: A Secure Workforce

Promote the Economic Security of Workers and Families

Protecting workers' wages and working conditions, providing unemployment compensation and other benefits when workers are unable to work, and retirement and health benefit security are central to the DOL mission. This strategic goal captures these priorities and consists of two outcome goals: Increase Compliance With Worker Protection Laws, which focuses on safeguarding employees' wages, working conditions, and union democracy and financial integrity; and Protect Worker Benefits, which deals with relief in the form of unemployment, disability, and pension and health care insurance benefits. Agencies supporting this strategic goal are the Employment and Training Administration (ETA), the Employment Standards Administration (ESA), the Employee Benefits Security Administration (EBSA), and the Pension Benefits Guaranty Corporation (PBGC).

Outcome goals 2.1 and 2.2 contain six performance goals (see table below), of which two were achieved, two substantially achieved and two not achieved in FY 2004. The Department performed well, with significant progress in improving worker protection and union compliance, recovery of erroneous payment of unemployment benefits, improved effectiveness of pension and health benefit plan enforcement and workers' compensation program administration. Results for several performance indicators were shy of their targets but there were no major disappointments or reversals in our workforce security performance this past year.

Outcome Goal 2.1 — Increase Compliance With Worker Protection Laws
1 performance goal achieved & 1 substantially achieved

ESA Wage and Hour Division (2.1A) — substantially achieved

The Department reached targets for increasing compliance with the Fair Labor Standards Act (FLSA) in the chronically delinquent garment manufacturing, long-term health care, and agricultural commodities industries. The target to reduce recidivism of prior FLSA violators was not reached, however.

ESA Office of Labor Management Standards (2.1B) — achieved

The Department reached targets to increase unions' financial integrity and transparency.

Outcome Goal 2.2 — Protect Worker Benefits
1 performance goal achieved, 1 substantially achieved & 2 not achieved

ETA Unemployment Insurance (2.2A) — not achieved

ETA reached targets for recovery of estimated overpayments, facilitating reemployment and establishing tax accounts but failed to reach its target for timeliness of first payments.

EBSA Pension and Health Benefit Security (2.2B) — achieved

EBSA reached all targets, including those for successful conduct of civil and criminal cases against benefit plan malfeasance, and customer satisfaction with participant assistance received.

ESA Office of Worker Compensation Programs (2.2C) — substantially achieved

ESA reached nine of ten targets. ESA reduced the lost production days for USPS employees, but failed to do so across the Government. ESA also kept Federal Employee Compensation Act medical costs inflation below the national healthcare inflation rate and reached targets for the timeliness of processing Energy Employees Occupational Illness Compensation initial claims.

PBGC Pension Plan customer satisfaction (2.2D) — not achieved

PBGC reached its target for customer satisfaction of participants in trusteed plans but not for sponsors of covered plans.

The following charts illustrate DOL's strategic goal net costs in FY 2004, with A Secure Workforce shares set apart. The first allocates total Departmental costs of $56.676 billion; the second allocates an adjusted net cost of $11.102 billion that excludes major non-discretionary items associated with this goal.15 Net costs of this goal in FY 2003 (less Income Maintenance) were $1.969 billion. The decrease occurred in part because of relocation of the WIA Dislocated Worker and TAA programs from Goal 2 to Goal 1; together, these two programs cost approximately $2 billion annually.

2004 strategic goal 2 percent of net cost graph

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2004 strategic goal 2 percent of net cost graph not including income maintenance

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The outcome goals and programs listed above, along with their results, costs, and future challenges are discussed in more detail on the following pages.

15The excluded costs are referred to as Income Maintenance — unemployment benefit payments to individuals who are laid off or out of work and seeking employment ($41.424 billion) plus disability benefit payments to individuals who suffered injury or illness on the job ($4.150 billion).


Outcome Goal 2.1 — Increase Compliance with Worker Protection Laws

In a global economy, the Employment Standard Administration's (ESA) primary challenge in building a competitive workforce is to ensure that protections for workers are appropriate for — and keep pace with — the changes occurring in the American workforce. Virtual workplaces, aging workers, more women and minorities in the workforce, immigration, organized labor, the growth of small businesses, and the ongoing shift from a manufacturing to a service economy will all be important factors as U.S. businesses strive to comply with worker protection laws in the future.

Under the Fair Labor Standards Act, the Migrant and Seasonal Agricultural Worker Protection Act, the Family and Medical Leave Act and the Service Contract Act, ESA's Wage and Hour Division (WHD) administers standards for wages and working conditions: the minimum wage, overtime, youth employment, and field sanitation standards in the agriculture industry. Under the Davis-Bacon Act, WHD determines prevailing wages in the construction industry. The key to ensuring worker protections is to focus on industries and employers with the most persistent and serious violations; to quickly resolve employee complaints; and to ensure accuracy in established wage rates. ESA's Office of Labor-Management Standards (OLMS) ensures union transparency, financial integrity, and democracy by administering and enforcing the Labor-Management Reporting and Disclosure Act (LMRDA). OLMS responsibilities under the Act include compliance assistance; civil and criminal investigations and enforcement; union compliance audits; and reports/public disclosure administration. OLMS' strategies are aimed at improving timeliness and quality of union reports filed for public disclosure and strengthening LMRDA compliance through union audits and outreach efforts.

Goal (Agency) — Period
Goal Statement [Achievement]

Performance Summary

2.1A (ESA) — FY 2004
Covered American workplaces legally, fairly, and safely employ and compensate their workers.
[Substantially Achieved]

The Department reached targets for customer service and for increasing compliance with the Fair Labor Standards Act (FLSA) in the garment manufacturing, long-term health care, and agricultural commodities industries — industries with chronic FLSA violations. DOL did not reach its targets for reduction of FLSA recidivism and for increasing the percent of nursing home workers employed in compliance. The target for timely and accurate prevailing wage determinations was reached.

2.1B (ESA) — FY 2004
Advance safeguards for union financial integrity and democracy and the transparency of union operations.
[Achieved]

The Department reached targets increasing union financial integrity and for increasing union transparency.

 

"A new way of doing business, where government goes directly to the people in an effort to better serve and protect." This is how operation COACH (Compliance Outreach to Asian Communities and Hispanics) has been described by northern New Jersey local media. This innovative program has also sparked positive response from community groups. The Wage and Hour Division (WHD) instituted this program in December 2003 to promote awareness of WHD laws and programs in the Asian and Hispanic communities, and to work directly with employers and workers who traditionally have been reluctant to seek WHD's services. Under COACH, WHD investigators have visited over 650 businesses that employ more than 4,540 workers. Seventy-four percent of the businesses reached were either Asian or Hispanic owned. Fifty-nine percent of all the businesses visited indicated that prior to COACH, they had no knowledge of or experience with WHD. Over ninety-five percent offered that they did not know how to reach the local WHD office or even how to access the DOL web page. Much of the operation's success is attributed to a non-adversarial compliance assistance based strategy that emphasizes face—to-face contact and bilingual investigators.
Image of a man using an ATM machine
Photo credit: Nancy Vazquez-Gunatilaka, DOL Investigator

Net Cost of Programs
FY 2004 program costs of $296 million supported ESA's Wage and Hour Division (WHD) and Office of Labor-Management Standards (OLMS) programs. This is an increase of 8% ($23 million) over FY 2003. The WHD budget increased to cover operating expenses. Approximately 75 percent of WHD's resources are devoted to complaint investigations and resolution. The success of this effort is reflected in the FY 2004 performance results that show ESA decreased the average number of days to conclude a complaint from 108 to 92 days.

outcome goal 2.1 net costs graph

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Results Summary
DOL achieved one performance goal and substantially achieved the other. WHD decreased the average number of days to conclude a complaint from 108 days to 92 days, greatly improving performance, and also increased compliance in industries with chronic violations in the garment manufacturing, long-term health care, and agricultural commodities industries. A FY 2004 survey found 55 percent of nursing homes in compliance and 90 percent of industry employees paid in compliance with the FLSA. WHD added ten compliance assistance programs to the three previous ones, affecting over 900,000 agricultural employers. Following WHD investigations 335 agricultural housing providers corrected violations, an increase from 256 in FY 2003. WHD did not reach its target for reduction of employer FLSA violation recidivism. The Davis-Bacon Act (DBA) wage determination program reached targets to establish a wage determination processing baseline and to issue 80 percent of all survey-based DBA wage determinations within 60 days.

DOL reached both of its union financial integrity targets. OLMS established a fraud baseline of nine percent of those unions filing reports under LMRDA; and the percentage of union reports meeting standards of acceptability increased in to 92 percent. Better union public disclosure reports resulted from agency compliance assistance efforts and increasing use of electronic reporting formats.

Future Challenges
ESA faces many challenges to meeting its goal of achieving compliance with worker protection laws. In FY2005, WHD will continue working within established employer partnerships; seeking new such agreements; and continuing compliance assistance to employers and employees. WHD will also transition to goals and measures that more fully capture compliance in a broad spectrum of low-wage industries; continue its targeted compliance assistance programs; continue self-directed investigations in industries with chronic violations; and reinvestigate employers where future compliance is uncertain.

Performance success in the wage determination program depends on upgrades in information technology. WHD is working to combine the DBA Wage Determination Generation and Automated Survey Distribution Systems into one automated data processing system that should greatly enhance the program's ability to obtain, store and distribute construction wage determinations.


Protect Workers' Wages
Performance Goal 2.1A (ESA) — FY 2004

Covered American workplaces legally, fairly, and safely employ and compensate their workers.

Indicators
Ensuring continued customer service by maintaining the average number of days to conclude a complaint;

Reducing employer recidivism by increasing the percentage of prior violators who achieved and maintained FLSA compliance following a full FLSA investigation;

Increasing compliance in industries with chronic violations; and

Ensuring timely and accurate prevailing wage determinations.

Program Perspective
ESA's Wage and Hour Division (WHD) enforces laws establishing minimum standards for wages and working conditions. These include the minimum wage, overtime and youth employment provisions of the Fair Labor Standards Act; the Migrant and Seasonal Agricultural Worker Protection Act; and the Family and Medical Leave Act. WHD is also responsible for enforcing field sanitation standards in agriculture, and administers wage determination provisions of the Davis-Bacon Act.

The key to ensuring worker protections is to focus on industries and employers with the most persistent and serious violations; to resolve employee complaints expeditiously; and to ensure that established wage rates are accurate. By focusing compliance efforts in low-wage industries like agriculture, health care, and garment manufacturing, WHD seeks to protect those low-wage workers most likely to be paid less than legally required or unsafely housed. By reducing repeat violations, WHD can achieve lasting compliance on behalf of many employees. WHD ensures responsiveness by reducing the time it takes to resolve employee complaints. Timely and accurate prevailing wage determinations encourage efficiency and help ensure government contract workers receive the wages to which they are entitled.

A number of external factors influence WHD's program outcomes. As the supply of vulnerable immigrant workers increases, the potential for violations increases. Compliance levels in many low-wage industries are also heavily influenced by competitive pressures and by subcontracting arrangements in which smaller companies have little opportunity to influence market prices.

Results, Analysis and Future Plans
The goal was substantially achieved. Eight of ten targets were reached. The average number of days to conclude a complaint declined from 108 days to 92 days, reaching the complaint response target. DOL did not reach its target to reduce recidivism of prior violators; compliance for this group fell by two percentage points from the FY 2003 baseline of 73 percent. WHD reached all but one of the targets associated with increasing compliance in industries with chronic violations: garment manufacturing, long-term healthcare, and agricultural commodities. In the health care industry, WHD increased the percent of workers employed in compliance by 1.2 percentage points — just under the 2 percentage point target. Targets and results appear in the table below.

Industry

Action

Target

Performance

Achieved?

Garment

Increase employees "on the payroll" in NYC

1 Percentage Point

6 Percentage Points

Y

Garment

Increase manufacturers' monitoring of their Southern CA shops

2 Percent

2 Percent

Y

Long-term Health Care

Increase nursing home FLSA compliance

5 Percentage Points

15 Percentage Points

Y

Long-term Health Care

Increase employees paid in compliance with FLSA

2 Percentage Points

1.2 Percentage Points

N

Agricultural Commodities

Increase compliance among employers subject to DWHaT

2 Percent

Result are nearly 200 times baseline

Y

Agricultural Commodities

Increase corrected housing violations after intervention

1 Percent

31 Percent

Y

WHD also reached its timely and accurate prevailing wage determinations targets, establishing a baseline of 1491 wage determination data submission forms processed per 1,000 hours, and issuing 86 percent (13 of 15) wage surveys within 60 days, against a target of 80 percent.

WHD improved customer service responsiveness by updating complaint intake procedures, regular review of complaint inventories, streamlining procedures to ensure early contact with complainants, and through good fact development. WHD has established three key effective strategies to increase compliance in industries with a history of chronic FLSA violation: compliance assistance, enforcement and collaborative partnerships. In garment manufacturing, monitoring through unannounced visits, payroll record and timecard reviews, employee interviews have all proven effective. In the long-term care industry, compliance assistance, partnerships and enforcement have been effective in increasing FLSA compliance. Across the board, compliance assistance has been effective — dissemination of industry-specific fact sheets and employee rights cards, face-to-face employer consultations, and entering into compliance partnerships with several major nursing homes. In the agricultural industry, targeted compliance assistance and compliance partnerships have worked especially well. A FY 2004 partnership with the Tennessee Farm Bureau accounts for the greatest increase of employers impacted by a compliance partnership, with just over 500,000 members.

Over the last several years, the DBA wage determination program took steps to improve the accuracy and timeliness of prevailing wage determinations for the construction industry. Following OMB's PART review of the DBA wage determination program, WHD added timeliness and accuracy performance indicators — the two aspects of the DBA wage survey program that significantly impact wage determination performance.

WHD is using a new complaint indicator in FY 2005 and will concentrate on the number of days it takes to resolve violation complaints. This will prevent any unintentional emphasis on speed at the cost of finding and correcting violations. To reduce FLSA violation recidivism, WHD will promote long-term compliance among employers through detailed compliance agreements outlining agreed-upon steps for compliance; and reinvestigating cases where future compliance is uncertain. WHD will continue its transition to goals and measures that more fully capture compliance in a broad spectrum of low-wage industries. As a result, there will not be specific indicators for the health care and agriculture industries. However, WHD will continue its targeted compliance assistance programs and enforcement activities to promote housing and transportation compliance.

Performance success in the wage determination program depends on upgrades in information technology. WHD is working to combine the DBA Wage Determination Generation and Automated Survey Distribution Systems into one automated data processing system. This software development will greatly enhance the program's ability to obtain, store and distribute construction wage determinations.

Management Issues
Data used in reporting performance against goals are derived largely from the WHD Investigative Support and Reporting Database (WHISARD). An independent analysis conducted by the University of Tennessee this year found high levels of consistency between WHISARD data and case file information, with 90% or greater consistency on 25 of the 33 data elements. Other performance data sources are Wage Hour's statistically valid investigation-based compliance surveys, which are tabulated and reviewed by independent sources to ensure accuracy and completeness.

WHD has undertaken four program evaluations in FY 2004 focusing on: (1) identifying new compliance measures in low-wage industries; (2) integrating budget and performance information; (3) conducting a cost/benefit analysis of recommendations to update the Youth Employment Hazardous Occupations rules; and (4) an assessment of WHD compliance assistance efforts. WHD will undertake two new evaluations next year: 1) the development of models to employ common compliance strategies across low-wage industries; and 2) an evaluation of the agency's compliance assistance web information.

In the spring of 2004, the Office of Inspector General issued a final report on WHD's Davis-Bacon Act wage determination program. A summary of the findings is included in Appendix 2 (Study 5). In the spring of 2003, WHD's Davis Bacon wage determination program was assessed through a Program Assessment Rating Tool (PART) review. The assessment found that the program did not demonstrate results. In response, WHD has developed overarching goals to ensure program performance improvements in determining and issuing prevailing wage rates with specific numeric targets. In addition, WHD contracted with an outside company to evaluate the Davis Bacon wage survey process.


When major revisions of annual reporting requirements for labor unions were announced on October 9, 2003, DOL's Office of Labor-Management Standards (OLMS) took extraordinary steps to make sure union officials would clearly understand the changes. OLMS hosted 155 seminars in 44 states, explaining to more than 5,000 union representatives the changes designed to promote union democracy and financial safeguards for millions of American union members. OLMS also issued 10,000 compliance guides; hosted a seminar in Washington, D.C. for 130 certified public accountants; held 29 special briefings for international unions; set up dedicated sections on its web site where unions can download reporting software and Power Point presentations, and find answers to frequently asked questions (FAQ's). OLMS has established an e-mail message service to notify interested subscribers of new FAQ's, compliance assistance materials, and other developments. The photo was taken at an OLMS seminar in May for members of the Transport Workers Union (TWU) at The George Meany Center for Labor Studies in Silver Spring, Md.
Image of a man holding a lecture
Photo credit: Jerry Frishman

Union Financial Integrity and Transparency
Performance Goal 2.1B (ESA) — FY 2004

Advance safeguards for union financial integrity and democracy and the transparency of union operations.

Indicators
Increasing union financial integrity: Baseline information on unions with fraud will be developed and performance targets will be established; and

Increasing union transparency. The percentage of union reports meeting standards of acceptability for public disclosure will increase to 75%.

Program Perspective
OLMS ensures union transparency, financial integrity, and democracy by administering and enforcing the Labor-Management Reporting and Disclosure Act (LMRDA). The Act requires annual publicly available union financial reports; establishes standards for union officer elections; and imposes criminal sanctions for union fund embezzlement. OLMS assists union compliance; conducts civil and criminal investigations, and compliance audits; and administers public disclosure of required reports. Improving the timeliness and quality of union reports filed for public disclosure and strengthening compliance through audits and outreach efforts are key strategies.

Results, Analysis and Future Plans
DOL reached both indicator targets for this performance goal.

Union Financial Integrity
OLMS audited a randomly selected sample of reporting unions to establish a baseline measure of union fraud. The survey established that fraud is indicated in nine percent of unions subject to the LMRDA. An audit finding of a criminal LMRDA violation, predominantly union funds embezzlement, was counted as an indicator of fraud. OLMS will seek to reduce the percentage of unions with fraud to 7.5 percent in FY 2005. Strategies to achieve the goal are union outreach, a visible audit presence, and a strong criminal enforcement program.

Union Transparency
Union reports meeting standards of acceptability increased to 92 percent. This resulted from agency compliance assistance efforts and increasing use of electronic reporting formats, which include error checks and report validation to assist filers in preparing complete and accurate reports. Increased union transparency is critical to promoting union democracy and financial integrity. In FY 2005, OLMS will increase compliance rates to 95 percent by continuing outreach and compliance assistance efforts, and increasing use of electronic forms.

Management Issues
Performance data comes from two systems. The Case Data System includes comprehensive information about OLMS investigations, audit findings, and subsequent enforcement actions. The labor organization report system (e.LORS) includes timeliness and LMRDA union report sufficiency information.

Maintaining effective union outreach and a visible audit presence will be essential to increasing union financial integrity. Timely, accurate union financial reports are essential to promoting union democracy and financial integrity. Completeness and accuracy of union reports are markedly increasing as a result of compliance assistance efforts and increasing use of the electronic union annual reporting. Timely public disclosure reporting remains a continuing challenge in spite of OLMS' comprehensive program efforts to correct a persistent delinquent report problem. To address this challenge, DOL supports amendment of the LMRDA to authorize civil monetary penalties for late filing.


Outcome Goal 2.2 — Protect Worker Benefits

Protecting the benefits earned and promised to U.S. workers is a central feature of DOL's secure workforce strategic goal. DOL helps increase the economic security of America's working families by temporary protecting wages for the unemployed; protecting private employee pension plans, health plans and other benefits plans against fraud and abuse; protecting Federal and certain other workers from the economic effects of work-related injuries and illness; and protecting against lost or interrupted pension payments of workers whose companies terminate their defined benefit plan. Three DOL agencies and one government corporation chaired by the Secretary of Labor create a more secure U.S. workforce by protecting worker benefits — the Employment and Training Administration (ETA), the Employee Benefits Security Administration (EBSA), the Employment Standards Administration (ESA), and the Pension Benefit Guaranty Corporation (PBGC).

ETA temporarily replaces the wages of the unemployed through the Unemployment Insurance (UI) program, which provides grants to State-operated programs and manages the Unemployment Trust Fund. ETA ensures that States' programs are administered efficiently according to Federal standards and requirements, and manages the trust fund to provide a buffer to volatile cycles in tax revenues and benefit claims. EBSA protects private employee pension plans, health plans and other benefits plans against fraud and abuse by enforcing Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA); through compliance assistance, and through education. Where there has been malfeasance, EBSA restores benefits and assets by bringing civil and criminal cases.

ESA protects Federal and certain other workers from the economic effects of work-related injuries and illness's through the Office of Workers' Compensation Programs' (OWCP) four disability compensation programs. OWCP provides wage replacement and cash benefits, medical treatment, vocational rehabilitation, and other benefits to covered workers, their dependents and survivors. PBGC protects the pension benefits of participants in defined benefit plans that have been terminated, usually due to the sponsoring employer's bankruptcy, by serving as both insurer and administrator. As an insurer, PBGC collects insurance premiums from employers that sponsor insured pension plans. As an administrator, PBGC pays monthly retirement benefits to the participants in terminated plans.

Goal (Agency) — Period
Goal Statement [Achievement]

Performance Summary

2.2A (ETA) — FY 2004
Make timely and accurate benefit payments to unemployed workers, facilitate the reemployment of Unemployment Insurance claimants, and set up Unemployment tax accounts promptly for new employers.
[Not Achieved]

ETA reached targets for recovery of estimated overpayments, facilitating reemployment and establishing tax accounts. ETA failed to reach its target payment timeliness for first payments.

2.2B (EBSA) — FY 2004
Enhance pension and health benefit security.
[Achieved]

EBSA reached all targets, including those for successful conduct of civil and criminal cases against benefit plan malfeasance, and customer satisfaction with participant assistance received.

2.2C (ESA) — FY 2004
Minimize the human, social, and financial impact of work-related injuries for workers and their families.
[Substantially Achieved]

ESA reached nine of ten targets. Lost production days fell for USPS employees, but not for all other agencies. ESA also kept Federal Employee Compensation Act medical costs inflation below the national healthcare inflation rate.

2.2D (PBGC) — FY 2004
PBGC will improve customer satisfaction according to the American Customer Satisfaction Index (ACSI).
[Not Achieved]

PBGC reached its target for customer satisfaction of participants in trusteed plans, but not for sponsors of covered pension plans.

The Oregon Employment Department is making life easier for its unemployment insurance customers through its new debit card option. The ReliaCard Visa functions like a debit card and allows recipients a new level of security in obtaining their benefits by avoiding the possibility of stolen, lost, or destroyed checks — another initiative to guard the Unemployment Insurance program against fraud. This new option has benefited both the state and unemployment insurance recipients. Oregon has saved a considerable amount of money on the printing, mailing, and processing costs associated with payment by paper checks. In addition, customers benefit from faster, easier access to benefits. One happy customer noted, "I have done my banking at U.S. Bank for many years, and when the Oregon Employment Department offered the opportunity to receive my benefits by debit card, I jumped at the chance. It is very convenient."
Image of a man using an ATM machine.
Photo credit: Craig Spivey

Net Cost of Programs
FY 2004 program costs of $46.7 billion supported ETA's unemployment insurance and foreign labor certification programs, EBSA efforts to ensure that individuals receive promised benefits, and ESA programs to reduce the consequences of work-related injuries. PBGC is not included in the Consolidated Statement of Net Costs, hence the costs of its programs are not reflected here.

FY 2004 program costs decreased by approximately $11 billion, or 20%, from FY 2003. Unemployment Insurance program costs account for the entire decrease in costs and account for 93 percent of FY 2004 expenditures for this outcome goal. UI Program costs are largely driven by average weekly insured unemployment (AWIU) — the average number of people filing claims for continuing UI benefits each week. The AWIU figure decreased from 3.646 million in FY 2003 to an estimated 3.167 million in FY 2004. UI benefits paid decreased from $54.0 billion in FY 2003 to an estimated $42.1 billion in FY 2004.

The considerable decreased costs for Outcome Goal 2.2 were minimally offset by increased costs to ESA's Black Lung program. In FY 2004, the Special Benefits for Disabled Coal Miners was transferred to ESA from the Social Security Administration. The amount apportioned for this account in FY 2004 is $403 million.

outcome goal 2.2 net costs graph

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Results Summary
ETA did not meet its UI performance goal, which saw its intrastate first payment timeliness (within three weeks) fall from 88.9% to a projected 88.7%. However, ETA did improve payment accuracy, facilitation of reemployment, and quick determination of UI claimants' tax liability. Of particular importance is the improved detection of overpayments, which is crucial to the integrity of UI administration. ESA substantially achieved its goal for Office of Workforce Compensation Programs' four disability compensation programs. ESA successfully placed 62 injured USPS employees who were vocational rehabilitation program participants with new employers and produced $23.4 million in savings by carefully reviewing cases for continued disability status, and reemployment potential. The savings resulted from benefit adjustment and roll reduction. ESA also become more efficient in resolving disputed Longshore and Harbor Workers' program cases and in processing Initial claims of the Energy Employees Occupational Illness Compensation claims.

Meeting its performance goal, EBSA saw its ratios for successful civil and criminal cases improve. Success in the case ratio indicators demonstrates EBSA's improved selection and conduct of investigations. A successful closed civil investigation is one in which rightful assets are protected or returned to plans and participants. A successful criminal investigation is one that is referred for prosecution. While PBGC managed to improve its customer service score for participants in trusteed plans, it did not reach its target for improving customer service to plan sponsors.

Future Challenges
Many of the challenges the Department faces in protecting worker benefits are associated with the dynamic nature of the 21st Century workforce. UI program administration must maintain its integrity by preventing tax avoidance and reducing overpayments. In FY 2005, ETA will focus on reducing UI tax avoidance and benefit overpayments, and EBSA will make programmatic adjustments to achieve the right mix of targeted enforcement, compliance assistance, and education in protecting nearly 7,000,000 employee pension, health, and other benefit plans.

Other challenges for DOL's workforce compensation programs include increasing medical costs and a large expected influx of claimants. As general medical costs continue to rise in line with expanding medical technologies, the compensation programs' medical costs will also rise. DOL strives to ensure that the inflation rate for these medical costs increases more slowly than the comparable national healthcare rate. The number of Defense Base Act Longshore claims from injured civilian contractors in Iraq and Afghanistan is increasing, and could increase dramatically should the potentially large pool of Iraqi civilians employed by American contractors begin to file claims. PBGC continues to face an unprecedented influx of terminated plans. Meanwhile, participants' and practitioners' expectations for speed and accuracy of services continue to rise, specifically in the demand for electronic transactions and information. PBGC will identify opportunities to improve customer service in the face of an increased customer base that demands improved speed, accuracy, and information.


Pay Unemployment Insurance Claims Accurately and Promptly
Performance Goal 2.2A (ETA) — FY 2004

Make timely and accurate benefit payments to unemployed workers, facilitate the reemployment of Unemployment Insurance (UI) claimants, and set up unemployment tax accounts promptly for new employers.

Indicators
Payment Timeliness: 89.2% of all intrastate first payments will be made within 14/21 days;

Payment Accuracy: Establish for recovery at least 59% of the amount of estimated overpayments that the States detect;

Facilitate Reemployment: A method for establishing an entered-employment rate for UI claimants was pilot tested in FY 2003, and a baseline will be established using pilot data; and

Establish Tax Accounts Promptly: 82.2% of determinations about Unemployment Insurance tax liability of new employers will be made within 90 days of the end of the first quarter they become liable for the tax.

Program Perspective
By temporarily replacing part of lost wages, the Federal-State Unemployment Insurance (UI) system ameliorates personal financial hardship due to unemployment and stabilizes the economy during economic downturns. For both workers and employers, the program's success depends upon: timely payment of benefits; prevention or prompt detection of erroneous payments; timely establishment of new employers' tax accounts to ensure the reporting of workers' wages and payment of taxes to fund benefits; and promoting and facilitating workers' return to suitable work. States operate their own programs under their own laws. As the Federal partner, DOL provides program leadership, allocates administrative funds, provides technical assistance, and exercises performance oversight to help ensure that the system efficiently provides the greatest security to workers and that States meet requirements of federal UI laws and regulations.

Economic conditions and the resulting program workloads affect many aspects of UI performance. For example, when unemployment rises, more claims are filed, and UI payment timeliness generally declines. On the other hand, slower new business creation reduces the number of new employer tax accounts, and the timeliness of tax liability determinations generally goes up. Higher levels of claims and payments tend to increase the number/dollar amount of overpayments — often temporarily outpacing detection and recovery efforts.

Results, Analysis and Future Plans
The goal was not achieved, but three of the four targets were reached:

  • Payment Timeliness: 88.7 percent of first payments were made within three weeks, just short of the target of 89.2 percent.
  • Payment Accuracy: States established for recovery 61 percent of the estimated amount of overpayments they could detect and recover.
  • Facilitate Reemployment: After completion of a successful 6-state pilot and establishment of a baseline of 51.5 percent based on pilot results, DOL began to seek Office of Management and Budget (OMB) approval to collect data from all states on re-employment of UI claimants. States' reporting would begin no earlier than the first quarter of FY 2006.
  • Establish Tax Accounts Promptly: 83 percent of determinations establishing employers as newly liable for filing UI reports and paying UI taxes were made within 90 days of the end of the quarter they became liable.

The UI system performed extremely well in the face of high claims workloads. The number of beneficiaries, 8.7 million, was lower than in FY 2003 (10.3 million), but one million of them received over $4 billion in extended benefits — mostly Temporary Extended Unemployment Compensation — as well as regular benefits. Benefit payments totaled $40.8 billion, down from $53.3 billion in FY 2003. States maintained first payment and new employer status determinations timeliness at a high level and improved detection of overpayments.

ETA continues to emphasize payment integrity. In March, 2004, ETA signed a memorandum of understanding with the Social Security Administration (SSA) to allow State Workforce Agencies (SWAs) and SSA to exchange data in real time. SWAs that have met the system security requirements and have established a data-sharing agreement will have access to SSA data to verify personal information, such as name, social security number, and date of birth for those applying for unemployment benefits. In August, the President signed a law giving States access to the National Directory of New Hires, an additional tool for swiftly detecting and preventing payments to claimants who have returned to work. For FY 2005, targets for all indicators will be raised.

UI Indicators and total unemployment rate graph

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Management Issues
DOL is seeking authorization to collect data for the Facilitate Reemployment indicator for reporting in FY 2006. Because of established reporting schedules, 4th quarter data for the Payment Accuracy and Establish Tax Accounts Promptly indicators were not available in time for publication in this report. The results reported are projections of fiscal year performance using regression models that incorporate the latest available performance data and reflect OMB's mid-FY 2004 economic assumptions.

In its FY 2004 report listing DOL's top management challenges, the Office of Inspector General (OIG) listed identity theft, UI overpayments, and State UI trust fund solvency. OIG recommended that ETA enhance investigative training for State UI personnel to focus on fraud prevention and detection. ETA provided funding to States to: (1) implement data exchanges with the Social Security Administration for the purpose of matching Social Security Numbers to identify false numbers; and (2) access data from other States to verify identities. ETA also provided States with a written alert suggesting action that States could take to combat identity theft problems.

A recent OIG study found that the new hire detection method is better for establishing UI overpayments than the wage/UI benefit cross-match (Study 6 in Appendix 2). In response to OIG's recommendation, ETA provided funds and encouraged States to access their new hire directories and other State databases. In August 2004, the President signed into law a bill giving States access to the National Directory of New Hires, thereby removing a critical barrier to improved overpayment detection. ETA is pilot testing cross-matching of its Benefit Accuracy Measurement (BAM) investigation case database against State wage records to more completely detect overpayments. If this process proves cost-effective, it will be incorporated into the BAM methodology.

OIG remains concerned that States' trust funds may not have adequate reserves to meet projected UI compensation demands. ETA has developed and regularly publishes various measures of State solvency to help inform and guide State decisions on tax rates. In the short term, the system loans funds to States that have encountered serious cash flow problems, thus enhancing UI's impact as an automatic economic stabilizer.

DOL also commissioned a study, Internet Initial Claims Evaluation (Study 22 in Appendix 2) that evaluated service delivery; security; fraud and abuse controls; and cost effectiveness, and concluded that Internet initial claims filing is a convenient and cost-effective method of claims taking, and that there is no evidence that this method leads to increased erroneous payments or system security breaches. In its 2003 Program Assessment Rating Tool (PART) review, the Administration concluded that the UI program is effectively managed. Among recommendations was completion of efforts to reduce the overpayment rate. As noted above, the Department has made significant progress in this area.


Provide for Secure Pension and Health Plans
Performance Goal 2.2B (EBSA) — FY 2004

Enhance Pension and Health Benefit Security

Indicator
Enforcement
Achieve greater than a 50% ratio of closed civil cases with corrected violations to civil closed cases;

Achieve greater than a 25% ratio of criminal cases referred for prosecution to total criminal cases; and

Participant Assistance
Achieve a Customer Satisfaction Index of 61, or comparable measurement, for participants and beneficiaries who have contacted EBSA for assistance.

Program Perspective
EBSA is responsible for enforcing the Employee Retirement Income Security Act (ERISA), and the main challenge is to maintain trust and confidence in the employee benefits system. By achieving successful civil and criminal case closure and referral rates, DOL shows its success in targeting wrongdoers. DOL also combines an aggressive outreach and education program with a highly motivated and trained staff of customer assistance experts in the field of pension and health laws. By directly assisting plan participants and beneficiaries in understanding their rights and protecting their benefits, we help workers monitor their own benefit rights.

EBSA has steadily improved its performance in the respective areas improving from a civil ratio of 46 percent in FY 1999 to 69 percent in FY 2004, a criminal ratio of 26 percent in FY 2001 to a 45 percent in FY 2004 and a customer satisfaction baseline of 53 in FY 2001 to a satisfaction score of 62 in FY 2004.

EBSA oversees benefit security for nearly seven million plans, 150 million participants and beneficiaries, and in excess of $4 trillion in assets. Externalities, such as the economy and tax policy, have a significant impact on whether employers opt to offer benefits, and whether employees choose to participate and to what extent.


After receiving a telephone call from a worker alleging that a Connecticut employer had failed to credit him with years of service toward his pension, DOL investigated the participant's retirement plan and determined that the participant's complaint was valid and that other workers were improperly excluded from the plan for an assortment of invalid reasons. As a result of this intervention, the company agreed to increase the pensions of 101 employees by more than $63,000.

Results, Analysis, Future Plans
The goal was achieved. The Department achieved a civil ratio of 69 percent and a criminal ratio of 45 percent while receiving a customer satisfaction score of 62 percent from the Gallup Organization. DOL obtained monetary results of over $3.1 billion as a result of its investigative and participant assistance activities; a record year. While monetary results can fluctuate significantly from year to year, monetary results have followed an upward trend over the past several years. DOL investigated a number of high profile, resource intensive cases with far reaching effects on the participant benefits community. Benefit Advisors responded to over 99 percent of all written inquiries within 30 days of receipt and responded to over 99 percent of telephone inquiries by the close of the next business day.

civil ratio - cases with corrected violations graph

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criminal ratio - cases referred for prosecution

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customer satisfaction graph

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In addition to long-term targets for our civil and criminal ratios, we have added annual targets to reflect our success with respect to national enforcement initiatives, consistent with national priorities, which may change from year-to-year, taking into account new enforcement problems. EBSA has worked with Gallup to refine the long-term target consistent with other industry standards and experience. EBSA also added a internal compliance assistance measure that will demonstrate success in voluntary compliance programs such as the Voluntary Fiduciary Correction Program and our Delinquent Filer Voluntary Correction Program. EBSA has also developed an efficiency measure that will provide, as a ratio, costs per enforcement result.


A plan participant needed a lung transplant and filed a pre-service claim to determine if the transplant would be approved. If approved, he would be first on the transplant list. Without the approval, his prognosis was not good. After being told that it might take several weeks to receive a response, the participant contacted DOL. We explained to the employer that the law requires a response within 72 hours for urgent or emergency requests. The employer quickly reviewed the claim and determined that the transplant procedure was covered. As a result, the participant was placed at the top of the waiting list.

Management Issues
EBSA's Enforcement Management System (EMS) provides the data used to measure the enforcement ratios. EMS and EBSA continually receive high marks from the Office of Inspector General for data integrity and quality. EBSA's quality assurance processes require that individuals not directly involved with the investigation at hand approve all case openings. Cases with monetary results receive several levels of scrutiny including national office oversight and review. Additionally, EBSA uses a peer review method to conduct quality assurance reviews on randomly selected closed cases. In the participant assistance area, The Gallup Organization performed the customer satisfaction evaluation and provided the customer satisfaction score.

EBSA has acted on recommendations from its PART assessments in FY 2004 and FY 2005 by establishing proactive evaluation initiatives and a regulatory review program. Specifically, EBSA is conducting a follow-up of its FY 1995 audit quality study to determine the level of compliance of pension plan audits to professional accounting standards. In FY 2005, EBSA expects results from the investigative portion of a baseline compliance study being conducted to measure ERISA compliance in contributory pension plans, focusing on the timeliness and remittance of employee contributions.

In FY 2004, OIG completed audits of EBSA's participant and compliance assistance program and of the process used by EBSA to identify and correct substandard audits of employee benefit plans (Studies 2 and 3 in Appendix 2). Also, EBSA concluded program evaluations of its participant assistance and enforcement programs with the assistance of The Gallup Organization and Mathematica Policy Research, respectively (Studies 16 and 17 in Appendix 2). In FY 2005 Gallup will perform a follow-up study of EBSA's participant assistance program.

EBSA is establishing a regulatory review program that will: (a) set forth a process for identifying initiatives for review, (b) provide for cost and benefit evaluation of identified regulations and exemptions and, (c) explore modifying or eliminating those rules for which costs and administrative burdens outweigh benefits. EBSA and DOL's Assistant Secretary for Policy are developing a Departmental Federal Register notice to seek public input on which pension and benefit regulations should be reviewed.


Reduce the Consequences of Work-Related Injuries
Performance Goal 2.2C (ESA) — FY 2004

Minimize the human, social, and financial impact of work-related injuries for workers and their families.

Indicators
For Federal Employees' Compensation Act (FECA) cases of the United States Postal Service, reduce the lost production days rate (LPD per 100 employees) by 1% from the FY 2003 baseline;

For FECA cases of All Other Governmental Agencies, reduce the lost production days rate (LPD per 100 employees) by 1% from the FY 2003 baseline;

Increase FECA Vocational Rehabilitation placements with new employers for injured USPS employees by 15% over FY 2002;

Through use of Periodic Roll Management, produce $38 million in cumulative (FY 2003-FY 2004) first-year savings in the FECA program;

The trend in the indexed cost per case of FECA cases receiving medical treatment will remain below the comparable measure for nationwide health care costs;

Meet 60% of the annual targets for five communications performance areas;

Reduce by 4% over the FY 2002 established baseline the average time required to resolve disputed issues in Longshore and Harbor Worker's Compensation Program contested cases;

Increase by 8% over the FY 2001 established baseline the percentage of Black Lung benefit claims filed under the revised regulations for which, following an eligibility decision by the district director, there are no requests for further action from any party pending one year after receipt of the claim;

77% of Initial Claims for benefits in the Energy Program; and

77% of Final Decisions in the Energy Program are processed within standard timeframes

Program Perspective
ESA protects Federal and certain other workers from the economic effects of work-related injuries and illness's through OWCP's four disability compensation programs. OWCP accomplishes this by providing wage replacement and cash benefits, medical treatment, vocational rehabilitation, and other benefits to covered workers, their dependents and survivors. These programs are:

  • Federal Employees' Compensation for civilian Federal workers;
  • Longshore and Harbor Workers' Compensation for private-sector maritime workers;
  • Black Lung Benefits program for coal miners;
  • Energy Employees Occupational Illness Compensation for nuclear weapons employees of the Department of Energy or its contractors.

Results, Analysis and Future Plans
The performance goal was substantially achieved. Discussion of results at the performance indicator level is organized into three categories: Returning Injured Federal Employees to Work, Reducing Program Expenses and Customer Service.

Returning Injured Federal Employees to Work
OWCP continued to reduce average time loss in cases receiving FECA benefits through its early intervention strategy, Quality Case Management and active partnerships with postal and other government employers. Despite this, LPD rates continued to rise.16 The USPS LPD rate rose to 148 days against a target of 146 days. Declining employment and greater challenges on reemploying injured USPS workers remain factors in this result. The target for the non-postal agencies also was not reached, as LPD increased by 12 percent to 63, compared to the target of 55 days. The Department of Homeland Security accounted for 90 percent of this increase.

federal employees lost production days graph

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periodic roll management savings graph

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The majority of injured workers who return to work do so with their previous employers, but that has been made more difficult with declining employment levels at USPS. So, beginning in FY 2003, OWCP began emphasizing placement of injured postal workers with new employers. In FY 2004 OWCP reached the target for placing USPS employees who participate in the vocational rehabilitation program into new jobs, placing 62 USPS workers compared to a target of 56. The emphasis on assistance to Postal Service employees will continue in FY 2005.

Reducing Program Expenses
The use of Periodic Roll Management (PRM) to generate savings target was also reached. PRM includes careful review of cases to determine if continued disability status is warranted, and to determine the reemployment potential of those current receiving compensation. DOL saved $49 million over the two-year period (FY 2003 — 2004) compared to a target of $38 million. FY 2004 savings from PRM were $24.4 million compared to a target of $18 million. In FY 2005, DOL has set a target of achieving an $additional $17 million in PRM savings.

DOL also reached its target of keeping the inflation of Federal Employees' Compensation Act (FECA) medical costs below the Nation's rate of healthcare inflation (according to the Milliman USA Health Cost Index, which is updated quarterly). FECA experienced a medical cost inflation of 2.4 percent, while the Milliman Index predicts a national rate of healthcare inflation of 8.8 percent. Responding to recent medical care cost increases, in August 2003 FECA converted medical bill processing from district offices to a centralized operation under contract to Lockheed Martin. More stringent bill reviews under this system are expected to further reduce average FECA medical costs.

16In FY 2004, OWCP changed the way it measures LPD, and thereby changed its FY 2003 baseline data for the USPS and all other government agencies' lost production days rate measures. LPD's are now measured in real-time rather than with accumulated data, as they were in the past. Please see Appendix 1 for the changes to the baseline data.

Customer Service
OWCP reached four of the five sub-targets to improve communications with benefit recipients, including increased use of electronic services, reducing average caller wait times, increasing response timeliness and resolving more inquiries without call-back. OWCP did not reach the communications sub-target for handling calls according to program quality standards. OWCP also reached its target to reduce the time required to resolve disputed issues in Longshore and Harbor Workers' Program contested cases. Disputed issues were resolved, on average, in 247 days. The target was 273 days. Further, OWCP reached its target to reduce requests for further action following Black Lung benefit eligibility decisions (for claims subject to revised regulations). Performance for this indicator was 82.2 percent, against a target 74.5 percent. DOL also reached its Energy program targets for initial claims processing and for reaching a final decision. This program processed 92 percent of initial claims and 99 percent of final decisions within standard time frames, against targets of 77 percent for both indicators.

For FY 2005, OWCP will have a more ambitious target for communications with customers: reaching four of the five sub-targets. Strategies are in place to improve communications with customers through greater Internet access for claims purposes. The indicator for timely Longshore and Harbor Worker's dispute resolution is intended to measure OWCP's success in serving as mediator injured workers and their employers. To continue the positive trend in this indicator, OWCP will provide claims staff with further training to improve mediation skills.

The revised regulations for Black Lung benefit claims did not change eligibility requirements, but were designed to produce faster and fairer final benefit determinations. The result has been an increase in the number of stakeholders who accept the district director's initial decision and decide not to pursue the claim further. The Energy Program's success in efficient initial claims processing and final decisions results from attention to customer communications, accurate claims processing, and automated data processing. We are committed to improving the employment verification process by obtaining access to former worker program records, sharing more data for dual claims and enhancing working relationships with DOE facility contacts. Based on performance that far exceeded targets, the Energy Program has set more ambitious targets of seven percent increases for both indicators in FY 2005.

Management Issues
Performance data used for OWCP's indicators are extracted from the four benefit programs' automated case management systems, benefit payment systems, internal managerial audits or other reviews. OWCP maintains strict management oversight of data entry, including regular on-site review by district directors to ensure accuracy, and periodic reviews that sample and assess data quality and accuracy.

A FY 2003 Office of Inspector General financial audit found ineffective medical evidence controls (Study 4 in Appendix 2). To remedy this, in December 2004 DOL will begin using an automated tracking mechanism that will alert claims staff when medical evaluations are due. ICF Consulting recently completed a broad review of the FECA program's effectiveness (Study 18 in Appendix 2). OWCP is currently reviewing its recommendations. Provisions which create disincentives for returning to work as opposed to remaining on full disability are built into the Federal Employees' Compensation Act, which has not been significantly amended in 30 years. DOL has developed a legislative proposal which would reform these provisions.

The number of Defense Base Act Longshore claims from injured civilian contractors in Iraq and Afghanistan is increasing, and this trend is projected to continue. There is also a potentially very large pool of Iraqi civilians employed by American contractors who may not be reporting injuries or may not be aware they are entitled to coverage. Should this group begin to file claims, Longshore cases could increase dramatically.


Provide Timely and Responsive Services to Customers
Performance Goal 2.2D (PBGC) — FY 2004

PBGC will improve customer satisfaction according to the American Customer Satisfaction Index (ACSI).

Indicators
Achieve an ACSI of 71 for sponsors of covered pension plans who have contacted PBGC for assistance

Achieve an ACSI of 77 for participants in trusteed plans who have contacted PBGC for assistance

Program Perspective
The Secretary of Labor chairs the Pension Benefit Guaranty Corporation's Board of Directors, and PBGC provides timely and uninterrupted payment of pension benefits to participants whose defined benefit pension plans were terminated. Plan termination most frequently results from the sponsoring employer's bankruptcy. For participants in plans for which PBGC has become the trustee, benefit determinations tell them what pension benefits they will receive. PBGC pays estimated benefits to all eligible participants retiring prior to the issuance of a benefit determination, thus ensuring that retirees receive their benefits when due and without interruption.

Results, Analysis and Future Plans
PBGC did not achieve this goal. The overall rating for practitioners remained at 69 — only slightly lower than the national ACSI of 71 for the Federal government as a whole, and higher than other agencies with similar financial collection responsibilities. Although practitioners are generally satisfied with many aspects of the service they receive, PBGC has identified several opportunities for improvement: improve written communication and handling of calls; and simplify the premium payment form and promote use of e-filing. Some of these efforts are underway and others will get started in 2005. PBGC achieved an ACSI score of 78 Score for participants in trusteed plans, exceeding the target of 77. This is one point higher than the 2003 score of 77 and seven points higher than the current national ACSI of 71 for the Federal government.

acsi for practitioners graph

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acsi for participants graph

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Overall, the scores for components that PBGC has tracked in the past three years are all performing very well. By using the ACSI, PBGC can identify the service elements that have a greater impact on customer satisfaction. For example, there is a direct correlation between satisfaction and customer complaints, meaning that as satisfaction increases, the rate of complaints would likely decrease. PBGC experienced a significant decrease in complaints in 2004 over the previous two years through improved responsiveness to customers.

Management Issues
For both indicators, data is collected by the Federal Consulting Group, a franchise of the U.S. Department of Treasury. The Federal Consulting Group uses the American Customer Satisfaction Index (ACSI) to determine the satisfaction of PBGC plan sponsors and participants. Developed by the University of Michigan, the ACSI is a national measure for customer satisfaction, and is recognized as a credible and valid independent, third party measure. As mentioned above, PBGC continues to face an unprecedented influx of terminated plans. Meanwhile, participants' and practitioners' expectations for speed and accuracy of services continue to rise, specifically in the demand for electronic transactions and information.

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