Will disability benefits affect my pension?
Although disability benefits will not generally affect your pension, your pension may affect the amount of monthly disability payments you receive. How a pension changes Social Security Disability (SSD) depends on the type of disability benefits you receive and the kind of pension you have.
Disability Benefit Programs
The Social Security Administration’s (SSA’s) disability benefits come in two forms:
Each program has its own rules for qualifying and for how benefits are calculated.
Pensions and SSI
SSI is more likely to be affected by a pension, because this is a need-based program with strict income and asset limits. The SSA must review your finances to determine eligibility. The amount of money you receive each month from various sources can affect eligibility.
If you are approved for SSI, the amount of your monthly pension may decrease the amount of your monthly SSI payments. This is known as an “offset,” because the SSA offsets the amount of disability pay based on income from other sources. SSDI and Your Pension
SSDI benefits are not financial need-based. To qualify though, you must have worked in the past and paid into the Social Security system through payroll taxes. In some cases, pension contributions that you and an employer made were exempt from Social Security taxes. This means no Social Security taxes were paid on pension contributions or on the earnings on which your pension contributions were based. This is less common today than it once was, but it can affect SSDI.
If you do have a pension based on earnings for which no Social Security taxes were paid, then the SSA considers your monthly pension payments differently. Disability benefits to which you are entitled may be decreased because of your pension. This does not mean you cannot get disability. It just means the monthly benefits you get will be offset by your pension payments.
Pensions that do Affect SSDI Benefits
Most private pensions and government pensions will have no affect on SSDI eligibility or the amount of monthly SSDI benefits you receive. This is because most pensions are not exempt from Social Security taxes, which in turn means you can receive pension payments along with full monthly SSDI benefits. There are occasional exceptions to this rule however, including:
- Some civil service retirement benefits
- Certain disability pensions or long-term disability plans
SSD Benefits and Long-Term Disability Benefits
Although long-term disability (LTD) benefits are not technically a pension plan, this type of coverage can provide ongoing income for disabled workers, similar to a pension or annuity. LTD plans can be from private insurance companies or through employer-sponsored coverage.
Whichever type of LTD you may have, your insurance provider will usually require you to apply for SSD benefits if you begin collecting LTD. This is because monthly benefit payments through long-term disability insurance can be reduced or offset dollar-for-dollar by the amount of SSD benefits you receive.