Social Security Bulletin, Vol. 65 No. 4

(released May 2005)
by Virginia P. Reno, Cecili Thompson Williams, and Ishita Sengupta

This article offers a brief summary of the workers' compensation and Social Security Disability Insurance programs. Information highlighted includes the differences between the two programs' types and terms of coverage. It compares the differing patterns in workers' compensation and Social Security disability benefits as a percentage of wages over the past few decades and considers the potential causes for such trends. The article also explains the offset provision included in the 1965 Social Security Amendments, the intention behind the offset, and how and when offsets are applied.

by Ann Clayton

This article provides a brief history and background of workers' compensation programs for occupationally injured and ill workers in the United States. It presents the basic principle involved in workers' compensation and briefly discusses the disability benefits to which workers are generally entitled. It also discusses why there are settlements in this disability program and the availability of information about the amounts paid in workers' compensation cases for obtaining an offset for Social Security Disability Insurance benefits paid to the worker. Finally, the article explains the rationale behind the public policy on coordination of Disability Insurance and workers' compensation in the new paradigm of disability and return to work.

by Peter S. Barth

There is substantial variability in how state workers' compensation laws provide benefits to workers who have a permanent partial disability. The basic approaches used by the states can be classified into four groupings, although important differences exist within each group. Depending on the approach used, workers with similar injuries can receive substantially different amounts of benefits. Because compensating permanent partial disabilities frequently involves contention, the matters in dispute will depend on the approach used to determine benefits. The continuation of such differences in approach suggests that the states have not found a single "best practice" for determining what such benefits should be.

by H. Allan Hunt

This article summarizes several different methods used to measure the adequacy of wage replacement in state workers' compensation systems in the United States. Empirical research casts serious doubt on benefit adequacy, especially in the case of more serious disabilities.

[Errata: The electronic versions of this article that were originally posted contained incorrect labels on the lines in Chart 3. The labels have been updated in the electronic versions and are correct in the print publication.]

by Robert T. Reville and Robert F. Schoeni

Disability has high societal and personal costs. Various disparate federal and state programs attempt to address the economic and social needs of people with disabilities. Presumably workplace injuries and accidents are an important source of disability. Yet separate public policies and research literatures have evolved for these two social problems—disability and workplace injuries—despite their relatedness. This article seeks to document the overlap between these two phenomena in estimating the proportion of the disabled population whose disability was caused by workplace injury, accident, or illness using the Health and Retirement Study of 1992. The results point toward the need for initiatives to reduce disability that focus on work-related causes, which are a common pathway to disability, and that may result in substantial savings in federal programs.

by R. Kent Weaver

Sweden's new multipillar pension system includes a system of mandatory fully funded individual accounts. The Swedish system offers contributors more than 600 fund options from a variety of private-sector fund managers. However, in the most recent rounds of fund choice, more than 90 percent of new labor market entrants have not made an active choice of funds and thus have ended up in a government-sponsored default fund.

The Swedish system offers a number of lessons about implementing a mandatory individual account tier. Centralized administration keeps administrative costs down but requires considerable lead time. A very large number of fund options are likely to be offered unless strong entry barriers are in place. Engaging new labor market entrants in fund choice is likely to be difficult. A significant percentage of those making an active fund choice may choose funds that are very specialized and risky. Finally, special care must be devoted to designing a default fund and continual consumer communication.

Introduction and Overview from—2005 Annual Report of the Board of Trustees of the Federal OASDI Trust Funds

The full report is available at http://www.socialsecurity.gov/OACT/TR/TR05.