The 2009 Legislature directed the Institute to study the disability benefits provided to members of Plans 2 and 3 of the state’s Public Employees’, Teachers’, and School Employees’ Retirement Systems (PERS, TRS, and SERS), and to examine options to improve coverage.
Due to the structure of these pension plans, disability retirement benefits for some Plan members may be considerably smaller than benefits provided to similar employees in other retirement systems. The average disability retirement pension of Plans 2 and 3 members is $369 per month. Eligibility for other income replacement sources, such as workers compensation and long-term disability (LTD) insurance, has considerable influence on the financial status of a Plan member who retires early due to disability. A 50-year-old Plan 2 member with pre-disability earnings of $4,000 a month would collect from $384 to about $3,200 per month, depending on his or her eligibility for other disability benefits. At greatest risk of receiving the low disability benefit are plan members (1) who are under the age of 55 and with fewer than 30 years of service, (2) experiencing non-duty disabilities that do not meet Social Security disability standards, and (3) who have inadequate or no LTD insurance benefits.
The report provides a range of options to improve the availability and level of disability benefits for members of Plans 2 and 3.