Employer-sponsored long-term disability insurance, (EXCERPT), Monthly Labor Review Online, July 1987

Employer-sponsored long-term
disability insurance

Diane B. Hill

Long-term disability insurance provides income to workers whose earnings are interrupted by lengthy periods of disability. Benefits usually are payable until retirement, a specific age, or recovery from disability. However, benefits do not usually begin until short-term disability payments (sick leave or sickness and accident insurance) cease. Long-term disability plans thus provide a bridge between short-term disability benefit and retirement income.

Long-term disability insurance is not the only source of extended income replacement for disabled workers. State workers' compensation programs provide benefits to workers disabled through occupational injuries or sicknesses. Similarly, most employees are covered by the disability insurance portion of Social Security, which provides income to workers and their families for both occupational and nonoccupational disabilities.

In addition, private pension plans commonly provide for disability retirement benefits.¹ Under plans with immediate disability benefits, payments to eligible workers start at the time the injury or sickness occurs. Plans with deferred benefits, however, postpone payments until the normal or early retirement age specified in the pension plan. Under deferred plans, employees who qualify for long-term disability payments usually continue to earn credits for service in their pension plans until the formal retirement date is reached. At that time, the disability payments cease and pension payments begin.

Long-term disability plans are almost always coordinated with these other sources of long-term disability income. This article describes the provisions of the plans and how coordination is achieved.

This excerpt is from an article published in the July 1987 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnote

1 For a detailed discussion of disability retirement provisions, see Donald Bell and William Wiatrowski, "Disability benefits for employees in private pension plans," Monthly Labor Review, August 1982, pp. 36-40.

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