Retirement

Does Temporary Disability Insurance Help or Hurt the Social Security Disability Program? – Center for Retirement Research

It reduces Social Security applications and new beneficiaries.

Excitement for family and medical leave programs seems to be at an all-time high. My thoughts are mixed: as a human I can see some benefit. As someone trying to run a small organization, extended addresses are just annoying.

Some critics have a specific concern—namely, that Temporary Disability Insurance (TDI), which is typically included in these programs, could serve as an on-ramp to Social Security’s Disability Insurance (DI) program. . Because TDI benefits are not considered earnings, they can provide needed funds during the lengthy application process, encourage workers to apply, and ultimately increase DI rolls.

In contrast, proponents of a national paid leave program argue that TDI workers—especially older workers who are most at risk—will be able to adjust to a health shock and return to work. will allow, thereby reducing reliance on DI.

In a recent studyMy colleagues tried to sort through the evidence. They began with a sample of full-time workers aged 50–60 who experienced a new work-limiting shock and tracked these workers for two to four years, allowing them to submit DI applications. There is plenty of time to do it. They divided the sample into two groups: 1) those with permanent and severe disabilities who were potential DI applicants; and 2) those with less severe impairments who are unlikely to qualify for DI.

And they took advantage of the fact that workers can only access TDI if they live in states with a TDI mandate or if their employer voluntarily offers these benefits. Because data on employer coverage is limited, they compared workers living in states with TDI mandates — California, New Jersey, New York, and Rhode Island — to similar workers in other states.

The effect of TDI for the severely disabled

By four years after disability onset, 39 percent of potential DI applicants had submitted a claim for DI in non-mandate states, compared with only 27 percent in TDI mandate states (see Figure 1). This reduction in applications, however, produces only a small reduction in actual benefit receipt – suggesting that many of those who are no longer applying will not be eligible. By Employment – ​​By four years later, only 39 percent of potential DI applicants are employed in non-mandate states, compared to 61 percent in TDI mandate states. These results confirm that the reduction in applications not only reduces the administrative burden for the Social Security Administration, but also allows applicants to continue working.

Effect of TDI for workers with less severe impairments

As expected, access to TDI has no effect on the share of workers with less severe impairment who apply for or receive DI (see Figure 2). However, TDI appears to reduce employment. While the employment rate in non-mandate states was 65 percent—up to four years after disability onset—it was only 50 percent in states with a TDI mandate.

Bar graph showing the share of workers age 50–60 with less severe impairments covered by Social Security Disability Insurance and employment outcomes four years after onset, 1992–2020

This study will address concerns that expanding TDI will negatively impact Social Security DI. For people with severe disabilities, TDI appears to greatly reduce DI application rates, reduce disability somewhat, and increase employment up to four years after the health shock. For those with less severe conditions, TDI has no effect on DI applications or acceptance. The only somewhat worrisome finding is that TDI leads to early retirement for people with less severe impairments.


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