Disability benefits for employees in private pension plans.

Although private pension plans are thought of primarily as a source of cash income for the elderly, they typically serve other functions as well . For example, they usually contain early retirement features and often provide pensions to workers who lose their jobs because of disability . The high proportion of pension plans with disability retirement features is dramatized in data from the Bureau of Labor Statistics' annual survey of the incidence and characteristics of employee benefit plans in medium and large establishments .' Of the 1,002 private pension plans found in the 1980 survey, 86 percent had disability retirement features .2 This article analyzes the various eligibility requirements for disability retirement and typical benefit levels, as found in these plans. Disabled workers may have other protection as well . They often are eligible for social security benefits and also may be covered by private long-term disability insurance plans. This study includes retirement benefits and related long-term disability and social security benefits . However, excluded from the study are separate long-term disability plans which would be the only source of private disability income, and general early retirement provisions without specific disability features . Two-thirds of the 861 pension plans with disability provisions offered immediate disability benefits . The remaining third deferred benefits until the employee reached the early or normal retirement age stipulated by the plan . However, immediate long-term disability insurance benefits were typically available to employees under deferred disability retirement plans. (Long-term disability benefits were less common when immediate disability pensions were paid .) Such private benefits are provided in addition to payments under the social security system when a worker is incapacitated. Under retirement plans providing immediate disability pensions, benefits were available to workers meeting plan definitions of disability ; commonly, service or age requirements, or both, were specified as well . Employees covered by deferred-benefit plans also had to reach the stipulated early or normal retirement age to receive benefits . Illustrative benefit levels from all potential sourcesdisability retirement, long-term disability insurance, and social security-were calculated as a percent of pre-retirement earnings for a hypothetical worker disabled at age 55, with 20 years of service . Under these conditions, combined private pension and social security benefits tended to replace about half of pre-disability earnings in instances when private pension plans provided immediate retirement benefits . Replacement rates in many cases were more liberal where retirement packages furnished deferred pensions integrated with long-term disability benefits . As a rule, social security, rather than private plans, was the larger income source for the disabled worker .