Income Replacement for Long-Term Disability: The Role of Workers’ Compensation and SSDI.

This report presents the basic data needed to inform policymaking on benefits for longer-term disabilities (those lasting more than one year). The report addresses several key questions:

  • How much of a worker’s after-tax income is replaced by workers’ compensation benefits by themselves and in combination with social security disability insurance (SSDI) benefits?
  • How do patterns of income replacement vary for different types of workers, different state systems, and disabilities of different duration?
  • How can these data be used to evaluate the adequacy and equity of benefits?

Among the major findings:

  • No single number can describe income replacement for all workers and disabilities. The income replacement rate differs for different workers, disabilities, and workers’ compensation programs.
  • For a typical worker, workers’ compensation disability benefits replace 86 percent of after-tax income in the first year, but successively smaller percentages in succeeding years. Without cost-of-living adjustments, in the fifth year, income replacement falls to 68 percent; in the fifteenth year, to 40 percent.
  • The addition of SSDI benefits to workers’ compensation benefits raises income replacement substantially for each year of disability. For example, the addition of SSDI benefits raises income replacement by 23 points in the fifth year of disability, 30 points in the tenth year, and 37 points in the twentieth.

Income Replacement for Long-Term Disability: The Role of Workers’ Compensation and SSDI. Dr. Karen R. DeVol. December 1986. SP–86–2.


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