Public-Sector Disability is Fairly Generous

About one in four state and local government employees – some 6.5 million people – do not participate in the Social Security system. They get their disability insurance, as well as their pensions, from their employers.

Whether the coverage is more or less generous than Social Security disability depends on the individual worker’s circumstance and how the state or local employer calculates benefits. But a new study concludes that public-sector workers who have a disability generally receive benefits that are at least as generous as the federal benefits.

To compare them, researchers at the Center for Retirement Research had to construct a database with each state’s and locality’s eligibility requirements and benefit payments. The sample consisted of 67 different disability programs, which cover a majority of the U.S. workers who don’t pay into Social Security.

The main thing Social Security and the public-sector have in common is eligibility – a 35-year-old must have five years of employment to receive federal disability and four to six years under most public-sector programs. One way they differ is that most state and local governments have a more liberal definition of what qualifies as a disability. Social Security pays benefits to a worker who can no longer do any job. Public-sector benefits go to a worker who can’t continue doing his current job.

The disability benefits are also calculated differently. Social Security’s progressive formula is the most generous to low-wage workers, because it replaces a higher percentage of their past earnings. But each state and local government uses the same formula for all of its workers, regardless of their earnings, and the formula gives more credit to employees who have been with their employer the longest.

What does all this add up to? The older public-sector workers, who are most at risk of developing a disability, receive relatively generous protection under the state and local programs, because the eligibility requirements are less strict than Social Security’s and because the benefits for most long-tenured employees replace a higher percentage of their earnings.

Older people who moved into the public sector late in their careers are in a different situation.

As short-tenure workers, they receive smaller benefits from the state and local programs. But they may also be eligible for Social Security if, say, they previously worked for many years in the private sector. If they develop a disability, the federal benefits would supplement their current employer’s benefits.

The bottom line conclusion from the researchers is that disability benefits for most public-sector workers provide adequate protection.  

To read this brief, authored by Anek Belbase and Laura Quinby, see “How do DI Benefits for Uncovered Public Workers Compare to SSDI?”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.