Some types of private insurance plans offer pensions to disabled employees. But what if you’re also receiving disability benefits? Can you collect your pension while on disability?
Yes, it’s possible to collect pension and disability benefits at the same time. There’s no law that prevents you from doing so unless it’s expressly prohibited in your pension plan policy.
However, depending on the kind of disability benefits you’re receiving, your pension may affect your benefit amount.
Before we can delve deeper into the process of collecting pensions while on disability, let’s first understand what they are.
Defining Pension and Disability Benefits
What is a Pension?
In the US, a pension is a type of workplace insurance plan that’s usually funded by the employer. Nowadays, they are more commonly known as defined-benefit plans and can be claimed either as an annuity or as a lump sum.
While we mostly associate pension plans with retirement, it’s not always the case. As I said, some types of insurance plans provide pensions to employees when they become disabled. So it’s also possible to receive a pension even if you’re not yet retired.
What are Disability Benefits?
As their name suggests, disability benefits are granted to people who cannot work because of their impairment.
There are two types of disability benefits the SSA offers:
- Social Security Disability Insurance (SSDI). This is for disabled people who have paid social security taxes and have earned enough work credits.
- Supplemental Security Income (SSI). This is a needs-based benefit. Meaning, it’s only given to those who are earning below a certain income threshold.
Depending on which type of benefit you’re receiving, getting a pension may reduce your disability payments.
Long-term Disability vs. SSDI/SSI
Upon hearing the term “long-term disability” (LTD), most people assume it’s either SSDI or SSI. But long-term disability actually refers to a type of insurance plan that provides lost wages replacement to employees in case of a long-term illness or impairment.
The biggest difference between SSDI/SSI and long-term disability is the source of funds. SSDI/SSI is funded by the federal government and administered by the SSA. While the latter is privately funded and managed by a private insurance provider.
What Happens If You Collect Pension and Disability at the Same Time?
As mentioned, it’s possible to collect your pension while on disability. However, there are different types of disability benefits. Receiving a pension can affect those benefits in different ways.
Pension and SSDI
In general, the SSA does not take into account benefits from pension plans when computing your SSDI amount. So no matter how much pension you’re getting, your SSDI benefits will remain the same.
However, if the pension and other benefits you’re collecting came from another government agency, your SSDI might be offset. This is usually the case for federal government employees receiving a pension through the Federal Employees Retirement System (FERS).
Pension and SSI
Since SSI is a needs-based benefit, having other sources of income can affect how much benefit you’ll get.
Under SSI, benefits derived from pension plans are considered countable income. This will be deducted from your monthly SSI payment.
For instance, the maximum monthly SSI amount for 2023 is $914 for individuals and $1,371 for couples. So if you’re not married and receiving a pension of $500 per month, you can only receive $414 in SSI benefits.
Remember, however, that this is computed on a monthly basis. So if your pension amount varies per month, your SSI payment will do too.
Pension and Long-Term Disability
Whether your pension can affect your LTD benefits generally depends on your plan. If the policy says that other benefits like pension can decrease your LTD, then you may have to take it up with your insurance provider.
Can You Collect Retirement and Disability Benefits at the Same Time?
It depends on the kind of retirement and disability benefits you’re receiving.
If you’re receiving SSDI, it will automatically convert to retirement benefits once you reach retirement age. But if you’re receiving SSI, you may be able to apply for retirement benefits. Though it will be deducted from your SSI benefits, so the amount you’re receiving will remain the same.
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About The Author
Judy Ponio is a writer and editor for the Victor Malca Law P.A. website and blog. She enjoys helping people in need with questions about social security disability and workers compensation law. She has a passion for helping those in need and the elderly with accurate legal information that can make a positive difference in their lives.