How Do DI Benefits for Uncovered Public Workers Compare to SSDI?

Roughly one in four state and local government workers are not covered by Social Security and, unless they have a sufficient work history in the private sector, will rely solely on their employer for pensions and disability insurance. An important question is how these employer-provided benefits compare to the benefits that these workers might have received through Social Security. In other words, do workers who are outside of the Social Security system receive an adequate level of protection against old-age poverty and long-term disability? While prior work has examined the adequacy of pension benefits for workers who are not covered by Social Security, little is known about the disability insurance (DI) that these workers receive. This brief fills the gap by analyzing the rules governing DI benefits in 67 state and local programs (referred to as ÒSocial Security-replacementÓ programs), which encompass around 70 percent of all uncovered public sector workers. The discussion proceeds as follows. The first section provides background on Social Security disability insurance (SSDI) benefits and the types of state and local workers who are not covered by the program. The second section describes a new dataset of state and local DI programs for uncovered workers that was created for this study. The third section uses this dataset to compare eligibility requirements across state and local programs with those of SSDI, while the fourth section analyzes how benefit levels may differ for eligible workers. The last section concludes that state and local DI programs provide relatively generous protection to older workers who are most at risk of experiencing a disability. Specifically, state and local eligibility requirements are less strict than SSDI, and most long-tenured employees earn higher replacement rates.