NCPA - National Center for Policy Analysis

Disability Benefits And Social Security Reform

June 30, 1999

In addition to retirement benefits, Social Security provides income for disabled workers. Any plan to substitute private retirement accounts for the current Social Security program needs to take these additional benefits into consideration.

Fortunately, we have the experience of three Texas counties which changed to a private system nearly 20 years ago that funds both retirement and disability benefits. Under the private plan, employees of Galveston, Brazoria and Matagorda counties pay a percentage of their salary, matched by the counties, roughly equivalent to Social Security payroll taxes. However, they receive more benefits.

Disabled workers get 60 percent of their pay, or benefits up to $5,000 per month -- generally more than the benefit under Social Security disability insurance. Also, the private insurer continues paying life insurance premiums for a death benefit that is three times the employee's annual salary. And disabled workers' retirement savings keep accumulating due to a "self- completion" premium paid by the private insurer.

  • Thus, a disabled 60-year-old low-income worker is likely to receive more than twice as much as from Social Security ($2,106 vs. $1,013), while a high-income worker is likely to receive 3.4 times as much ($6,304 vs. $1,869).
  • A single, 40-year-old middle-income worker receives $1,169 monthly under Social Security, and $1,753 if there is a dependent spouse, but that worker gets $2,201 a month under the private plan, regardless of marital status.
  • A low-income, 21-year-old disabled worker under the private plan gets $829 a month, compared to $2,479 for a high-income worker, but a 21-year-old disabled worker under Social Security gets nothing.

If Congress reforms Social Security, it should consider remodeling the disability program to resemble the private plan.

Source: Merrill Matthews Jr. (NCPA vice president of domestic policy), "Would a Private Social Security System Be Good for the Disabled?" Brief Analysis No. 296, June 30, 1999, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.

For text


Browse more articles on Tax and Spending Issues