SOCIAL SECURITY 

DISABILITY 

INSURANCE

Information on 

Potential Implications 

of Expanding Private 

Disability Insurance

Report to Congressional Requesters

April 2018

GAO-18-248

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-248, a report to 

congressional requesters

April 2018

SOCIAL SECURITY DISABILITY INSURANCE

Information on Potential Implications of Expanding

Private Disability Insurance

What GAO Found

GAO’s analysis found that coverage and key features of Social Security 

Disability Insurance (SSDI) and long-term employer-sponsored private disability 

insurance (PDI) differ in a number of ways. Key differences include the number 

of workers covered; characteristics of covered workers; and eligibility, benefits, 

and return to work assistance. For example: 

• According to GAO’s analysis of Bureau of Labor Statistics and Social 

Security Administration (SSA) data, SSDI covers an estimated 96 

percent of workers, while 33 percent of workers have PDI coverage 

through their employers. Also, PDI coverage is more prevalent among 

workers with higher wages (e.g., management positions) and in certain 

business sectors (e.g., finance). 

• GAO’s review of SSDI and PDI policies found that some PDI policies 

may pay benefits for medical conditions that SSDI would not. However,

these PDI policies may time limit payments for mental health and 

musculoskeletal disorders, while SSDI does not. In addition, while both 

SSDI and PDI policies include features designed to help beneficiaries 

return to work, PDI policies may provide such supports more quickly than 

SSDI.

GAO’s review of the literature identified three distinct proposals for expanding 

PDI that the proposals’ authors believe would address SSDI’s fiscal challenges. 

Specifically, all three proposals suggest that cost savings for the Disability 

Insurance Trust Fund could be expected by expanding PDI. According to the 

proposals, this would happen because expanding PDI would provide workers 

earlier access to cash and employment supports, which would reduce the 

number of SSDI claims or the length of time SSDI benefits are paid to claimants. 

However, GAO’s review of the three proposals noted that none of them provide 

enough information to assess how SSDI enrollment and costs might be affected 

with an expansion of PDI. Therefore, it is unclear whether cost savings to the 

Disability Insurance Trust Fund would actually be realized. For example, the 

proposals do not provide information on the type and timing of return-to-work 

services that would be provided under expanded PDI, nor do they take into 

account the differences in the populations served by SSDI and PDI policies. 

Moreover, stakeholders that GAO interviewed about these proposals raised a 

number of issues about other implications of PDI expansion that the proposals 

do not explicitly or fully address. For example:

• Insurers told GAO that is was unclear how expanding PDI would affect 

PDI premiums and the impact this would have on enrollment.

• Employers told GAO they were concerned about potential additional 

requirements or administrative burdens that would be placed on them if 

PDI were expanded.

• Employee and disability advocacy groups told GAO they were concerned 

about whether PDI expansion would provide standard services or 

employee protections currently available under SSDI, especially with 

respect to PDI expansion proposals that would replace SSDI for 2 years.

View GAO-18-248. For more information, 

contact Elizabeth H. Curda at (202) 512-7215 

or curdae@gao.gov.

Why GAO Did This Study

SSDI, which is administered by SSA, 

provides financial and other assistance 

to qualifying individuals who are unable 

to work due to their disabilities. SSDI is 

primarily funded by employee and 

employer payroll taxes that are placed 

in the Disability Insurance Trust Fund, 

which is currently projected to not be 

able to pay full benefits starting in 

2028. While there are a number of 

ways to address the fiscal condition of 

the Disability Insurance Trust Fund,

some researchers have proposed

expanding employer-provided PDI.

GAO was asked to review whether 

expanding PDI could result in potential 

savings to the Disability Insurance

Trust Fund.

This report examines (1) what is known 

about how coverage and key features 

of SSDI and PDI compare, and (2) the 

potential implications of three distinct 

proposals to expand employersponsored PDI on the Disability 

Insurance Trust Fund and various 

stakeholders.

GAO analyzed data on SSDI and PDI 

coverage from SSA and BLS for 2016 

and 2017; reviewed relevant federal 

laws, regulations, and guidance; 

reviewed three PDI policies that three 

large insurers we selected described 

as typical for their companies; 

reviewed three distinct proposals to 

expand PDI identified through a 

literature review; and interviewed SSA 

and Department of Labor officials, 

authors, researchers, and 

representatives of insurance, 

employer, employee, and disability

groups for a range of perspectives.
Page i GAO-18-248 Social Security Disability Insurance

Letter 1

Background 3

SSDI Covers a Much Larger Portion of the Workforce than PDI, 

and Features of Coverage Differ 7

Implications of Proposals to Expand Private Disability Insurance 

Cannot Be Assessed Due to Incomplete Information 23

Agency Comments 44

Appendix I GAO Contact and Staff Acknowledgments 45

Tables

Table 1: Comparison of Eligibility Features of Social Security 

Disability Insurance (SSDI) and Typical Private Disability 

Insurance (PDI) Policies 14

Table 2: Comparison of Benefit Features of Social Security 

Disability Insurance (SSDI) and Typical Private Disability 

Insurance (PDI) Policies 18

Table 3: Comparison of Selected Return-to-Work Features of 

Social Security Disability Insurance (SSDI) and Typical 

Private Disability Insurance (PDI) Policies 23

Table 4: Key Features of Proposals to Expand Private Disability 

Insurance (PDI) 25

Figures

Figure 1: Private Disability Insurance (PDI) Participation Rates by 

Income Category, 2017, Paid In Whole or In Part by 

Employers 8

Figure 2: Percentage of Civilian Workers with Private Disability 

Insurance (PDI) Paid In Whole or In Part by Employers, 

for Selected Occupations, March 2017 9

Figure 3: Percentage of Private-Sector Workers with Private 

Disability Insurance (PDI) Paid In Whole or In Part by 

Employers, for Selected Industries, March 2017 10

Figure 4: Social Security Disability Benefit Amounts at Different 

Income Levels 16

Contents
Page ii GAO-18-248 Social Security Disability Insurance

Abbreviations

ACLI American Council of Life Insurers

ADA Americans with Disabilities Act

AHIP America’s Health Insurance Plans

BLS Bureau of Labor Statistics

DOL Department of Labor

EBEI evidence-based early intervention

EBRI Employee Benefit Research Institute 

ERISA Employee Retirement Income Security Act of 1974

FECA Federal Employees’ Compensation Act

OASI Old-Age and Survivors Insurance

PDI private disability insurance

SOA Society of Actuaries

SSA Social Security Administration

SSDI Social Security Disability Insurance

SSI Supplemental Security Income

TTW Ticket to Work

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Page 1 GAO-18-248 Social Security Disability Insurance

441 G St. N.W.

Washington, DC 20548

April 10, 2018

The Honorable Orrin Hatch

Chairman

Committee on Finance

United States Senate

The Honorable Mike Lee

United States Senate

The Disability Insurance Trust Fund, primarily funded by employers and 

workers through payroll taxes and administered by the Social Security 

Administration (SSA), is used to provide cash benefits to people no longer 

able to work as a result of their disabilities and to their dependents. In 

calendar year 2016, SSA paid $142.7 billion in Social Security Disability 

Insurance (SSDI) benefits to more than 10.6 million beneficiaries. Over 

time, demographic and other factors have reduced the Disability 

Insurance Trust Fund’s reserves and the fund’s projected depletion in 

2016 was delayed when Congress passed a law that temporarily 

reallocated a share of payroll tax revenues from the trust fund for the OldAge and Survivors Insurance (OASI) to the Disability Insurance Trust 

Fund. As of July 2017, the Social Security Board of Trustees projects that 

the Disability Insurance Trust Fund will be depleted in 2028, at which time 

incoming payroll tax revenues may not be sufficient to support paying full 

benefits.

In prior work, we identified various types of proposals made by 

researchers and others to address the fiscal condition of the Disability 

Insurance Trust Fund and related challenges, including proposals to slow 

the flow of people applying for SSDI; target finite resources more 

efficiently and effectively; and better align SSDI eligibility criteria with 

changes in the labor market, advances in medicine and technology, and 

modern concepts of disability.1 We also previously reported that some 

researchers have suggested that one way to help address the fiscal 

condition of the Disability Insurance Trust Fund is to expand employersponsored private disability insurance (PDI). We reported that to the 

extent PDI expansion options encourage workers to forgo applying for 

 1 GAO, Social Security’s Future: Answers to key questions, GAO-16-75SP (Washington, 

D.C.: October 2015).

Letter
Page 2 GAO-18-248 Social Security Disability Insurance

SSDI or limit the amount of time workers receive SSDI, they also have the 

potential to reduce the number of SSDI beneficiaries and program costs.

You requested that we review the potential savings to the Disability 

Insurance Trust Fund and other implications associated with proposals to 

expand PDI coverage.

This report describes: (1) what is known about how coverage and key 

features of SSDI and PDI compare, and (2) the potential implications of 

three distinct proposals to expand employer-sponsored PDI on the 

Disability Insurance Trust Fund and various stakeholders.

To compare access to and features of SSDI and PDI, we reviewed 

relevant federal laws, regulations, and guidance; analyzed SSDI data and 

Bureau of Labor Statistics data on disability insurance coverage; and 

reviewed insurance industry surveys on PDI coverage. Our work mainly 

focused on employer-sponsored, long-term PDI—which we refer to as 

PDI in this report—because it most closely mirrors the SSDI program.2

We requested and reviewed PDI policies from three large insurance 

companies, which company representatives told us were typical policies 

for their companies, and we interviewed SSA and Department of Labor 

(DOL) officials, as well as representatives of an association and a nonprofit organization that conduct insurance industry surveys, and insurance 

associations and insurance companies.

To understand the potential implications of expanding PDI, we conducted 

a literature search to identify any proposals to expand PDI and that 

evaluated the potential effect of expansion on the number of SSDI 

beneficiaries and the amount of SSDI expenditures. We identified three 

proposals that evaluated long-term, employer-provided PDI. We 

interviewed the authors of the proposals and assessed the proposals for 

the soundness of their methodologies, the reliability of any data used, and 

limitations. We also spoke with SSA and DOL officials, as well as other 

researchers in the disability field to get their views on the identified 

proposals. To understand the potential implications of the three proposals

to expand PDI for stakeholders, we spoke with representatives of groups 

that might be affected by such proposals, including insurance 

 2 Employers may also offer short-term disability insurance; however, this typically covers a 

period before SSDI benefits would begin. Also, individuals can purchase individual 

disability insurance outside of their employment, but we do not address this in this report 

because the focus of this report is on proposals to expand employer-sponsored disability 

insurance.
Page 3 GAO-18-248 Social Security Disability Insurance

associations and insurance companies, employer associations and 

employers, unions and employee/disability advocacy groups, a states’

insurance association and organization, and DOL and SSA officials.3

This report does not examine the extent to which the provisions in 

pension plan disability benefits or other disability protections may promote 

work and help lower SSDI take-up rates or costs. Rather, we focus on the 

relationship between SSDI and long-term employer-sponsored PDI, which 

were the focus of the proposals we examined and because PDI most 

closely mirrors the SSDI program.

We conducted this work from November 2016 to April 2018 in accordance 

with generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives.

In recent decades, economic and demographic factors have contributed 

to an increase in the number of SSDI beneficiaries and increased 

program costs, which has reduced the size of the Disability Insurance 

Trust Fund reserves from a peak of $215.8 billion in 2008 to $46.3 billion 

in 2016. Over the past 26 years, the total number of SSDI beneficiaries 

more than doubled, from 4.2 million in calendar year 1990 to nearly 11 

million in calendar year 2016. By contrast, during that same time, the 

number of workers covered by SSDI increased by less than a third—from 

133 million to 171 million. In calendar year 2016, around 8.8 million 

workers with disabilities and 1.8 million dependents (spouses and 

children) received SSDI payments, totaling $142.7 billion, of which $133.6 

billion was paid to the workers and $9.1 billion to their dependents.

 3 We spoke with representatives of two insurance associations, three employer 

associations, three employee advocacy/disability groups, two unions, a states’ insurance 

association, and a states’ insurance organization. We also spoke with representatives of 

eight employers and five insurance companies who participated in discussion groups (two 

employer groups and two insurance company groups) that we organized at the Disability 

Management Employer Coalition Annual Conference on August 2, 2017.

Background

Social Security Disability 

Insurance (SSDI)
Page 4 GAO-18-248 Social Security Disability Insurance

As we have reported previously, the growth in the number of SSDI 

beneficiaries to date can be mostly attributed to demographic factors such 

as the aging of the working population, the increase in the percentage of 

women in the workforce who are insured for SSDI benefits, and the 

growth in disability incidence rates for women to a level similar to men.4

Since 2010, these demographic factors have begun to stabilize, resulting 

in much smaller projected increases in the number of SSDI beneficiaries 

in the future. However, few beneficiaries exit the program once they have 

qualified for benefits, and beneficiaries generally receive benefits until 

they reach retirement age or die. According to SSA’s 2016 Annual 

Statistical Report, of the 8.8 million individuals receiving SSDI benefits in 

calendar year 2016, about 9 percent (820,372) exited the program that 

year. Of those exiting SSDI, more than half (470,320 or 57.3 percent) 

exited because they reached the full retirement age and began receiving 

Social Security retirement benefits instead, fewer than a third (251,492 or 

30.7 percent) exited because they died, and a relatively small portion 

(47,887 or 5.8 percent) exited the program due to earnings exceeding the 

allowable limit. Of the rest of those who exited the program (50,673 or 6.2 

percent), most did so because their medical condition improved5

In most cases, long-term employer-sponsored private disability insurance 

(PDI) is paid for by the employer and provided as part of a package of 

benefits for employees, although sometimes employees are required to 

pay some of or the entire PDI premium. According to one industry survey 

(the most recent available), in 2013, 19 PDI companies covering about 75 

percent of the PDI market policies provided PDI benefits to around 

653,000 individuals, with annual payments totaling around $9.8 billion.6

 4 The proportion of the insured population receiving SSDI benefits has increased even 

when adjusting for demographic factors such as age and sex. Researchers have 

suggested various non-demographic factors that may have contributed to this increase, 

but consensus is lacking. For example, changes in program eligibility rules and 

employment opportunities may have increased the pool of workers likely to apply for 

SSDI. See GAO-16-75SP.

5 SSA. “Annual Statistical Report of the Social Security Disability Insurance Program, 

2016.” (Washington, D.C.: October 2017.) Other SSA-funded research, using longitudinal 

data rather than measures from only one point in time, found that 3.7 percent of SSDI’s 

beneficiaries who entered the program in 1996 had left the program after finding work by 

2006. See Liu, Su and David Stapleton. “How Many SSDI Beneficiaries Leave the Rolls 

for Work? More Than You Might Think.” Disability Policy Research Brief Number 10-01. 

(Washington, DC: Mathematica Policy Research, April 2010).

6 Council for Disability Awareness. 2014 Long Term Disability Claims Review. 2014 

(Portland, Maine: Council for Disability Awareness).

Private Disability 

Insurance (PDI)
Page 5 GAO-18-248 Social Security Disability Insurance

Another industry survey estimated that the five largest insurers in the PDI 

market held about half of the market share of premiums paid.7 PDI 

policies can be offered either on an opt-in basis, in which employees who 

choose to pay for PDI receive it, or on an opt-out basis, where employees 

are automatically enrolled in PDI, but can decline (opt-out of) the 

insurance.8

Beyond the insurance market for PDI, workers may be eligible for other 

types of disability protection through their employment. For example, 38 

percent of workers have employer-sponsored short-term disability 

coverage according to BLS, but unlike SSDI, this coverage typically lasts 

6 months. In addition, state workers’ compensation programs generally 

provide payments and assistance to individuals who are injured on the 

job, while both SSDI and PDI are designed to replace lost income from 

the onset of any disability regardless of whether it was work-related.9

Also, some workers may be eligible for disability payments through 

defined benefit pension plans. These benefits, commonly known as 

disability retirement benefits, provide eligible workers with early retirement 

payments if they can no longer work because of the onset of a disability.10

According to BLS data, many workers covered by defined benefit pension 

plans are state and local workers, though these data do not show what 

portion of them are not covered by SSDI.11

 7 LIMRA. U.S. Group Disability Insurance 2016 Annual Review. 2017 (Hartford, 

Connecticut: LIMRA).

8 A large insurer with whom we spoke told us that opt-out PDI plans were increasingly 

common, but still a small percentage—around 2 percent—of its applicable PDI plans.

9 In addition, the Federal Employees’ Compensation Act (FECA) provides compensation 

benefits to civilian employees of the United States for disability due to personal injury 

sustained while in the performance of duty or to employment-related disease. See 5 

U.S.C. §§ 8101-8193.

10 We previously reported that coverage through defined-benefit pension plans has 

decreased in recent decades. GAO, The Nation’s Retirement System: A Comprehensive

Re-evaluation Is Needed to Better Promote Future Retirement Security, GAO-18-111SP 

(Washington, D.C.: Oct., 2017). 

11 According to BLS officials, in 2016 about 13.4 million state and local workers and in 

2014 about 9.6 million private sector workers had a disability retirement option in their 

pension plan.

Other Disability 

Protections for Workers
Page 6 GAO-18-248 Social Security Disability Insurance

From our literature review, we identified three distinct proposals for 

expanding PDI in order to potentially alleviate financial challenges facing 

the SSDI program. These proposals were made in studies authored by: 

David Babbel and Mark Meyer (Babbel and Meyer) of Charles River 

Associates, Rachel Greszler (Greszler) of The Heritage Foundation, and 

David Autor and Mark Duggan (Autor and Duggan) for The Center for 

American Progress and the Hamilton Project.12 While the proposals 

differed in how PDI expansion might be achieved, each proposal 

assumes or requires that PDI coverage would provide vocational 

assistance, workplace accommodations, and partial income replacement 

to employees with work-limiting disabilities.13 Each proposal assumed that 

PDI expansion would result in the provision of effective return–to-work 

assistance earlier than would occur under SSDI. According to the 

authors, their proposals would slow the growth of the SSDI program by 

increasing work attachment of potential applicants or beneficiaries of 

SSDI and reversing the decline in employment rates of work-capable 

adults with disabilities, thereby improving the long-term solvency of the 

Social Security system.14 Two of the proposals suggested piloting the 

approaches to assess potential savings and implementation issues.

 12 We identified a fourth proposal that would—in addition to giving employers and insurers 

an expanded role in providing disability benefits in lieu of SSDI for a 2 year period—

change SSDI benefits from permanent to temporary and provide SSDI partial disability 

awards, as well. Since the proposal was not solely focused on expanding PDI and its 

provisions for expanding PDI were similar to other proposals we identified, we did not 

include it in our review. See Jason J. Fichtner and Jason S. Seligman, “Beyond All Or 

Nothing: Reforming Social Security Disability Insurance To Encourage Work and Wealth”

(chapter 13) in SSDI Solutions: Ideas To Strengthen The Social Security Disability 

Insurance Program, by Jim McCrery and Earl Pomeroy (West Conshohocken, PA: Infinity 

Publishing, March 2016).

13 Based on discussions with insurers and our review of three sample policies, PDI may 

provide vocational assistance and workplace accommodations or reimburse the employer 

for such services.

14 The proposals also cited additional benefits beyond potential savings for SSDI. For 

example, all three proposals cited potential gains in financial security for the individual, 

two cited potential psychological benefits or individual well-being benefits, and one cited 

potential improvements to the overall economy and an increase in government revenue.

Proposals to Expand PDI
Page 7 GAO-18-248 Social Security Disability Insurance

According to our analysis of SSA and BLS data, nearly all American 

workers pay Social Security taxes and are potentially covered by SSDI, 

while only a third of workers have PDI coverage. For SSDI, an estimated 

96 percent of American workers, along with their employers, pay Social 

Security payroll taxes, a portion of which are used to fund SSDI.15 Of 

individuals aged 20 or older in 2016, 87 percent met the SSA work 

requirements to be eligible for benefits in the event of a disability.16

By contrast, as of March 2017, the Bureau of Labor Statistics (BLS) 

estimates that approximately 33 percent of the workforce is insured by 

employer-sponsored PDI where the employer pays at least some of the 

premium.17 Employees may also pay the entire premium of employersponsored PDI—and researchers we interviewed from three private 

sector organizations that survey the PDI market told us that these plans 

are a minority of the PDI market. However, neither BLS nor industry 

 15 The remaining 4 percent not covered by SSDI are mostly public sector workers in state 

and local government. About one-fourth of public-sector employees do not pay Social 

Security taxes on the earnings from their government jobs. Also, individuals who began 

working for the federal government starting in 1984 have been covered by Social Security 

though federal employees hired before 1984 are generally not covered. See GAO, Social

Security: Issues Regarding the Coverage of Public Employees, GAO-08-248T 

(Washington, D.C.: Nov. 6, 2007).

16 In order to be eligible for SSDI payments, an individual generally needs 40 quarters of 

credits, 20 of which were earned in the last 10 years ending with the year the individual 

becomes disabled. In 2017, a work credit is earned for each $1,300 of wages or selfemployment income. Up to four credits can be earned each year.

17 BLS also tracks employee access to PDI, which is defined as the number of employees 

who have a PDI benefit that is available for their use. For March 2016, BLS reported that 

34 percent of workers had access to PDI and that 33 percent of workers participated in 

PDI, a 97 percent take-up rate.

SSDI Covers a Much 

Larger Portion of the 

Workforce than PDI, 

and Features of 

Coverage Differ

SSDI Covers Almost All 

Workers, Whereas PDI 

Covers About One-Third of 

Workers, Who Are 

Generally Higher-Paid
Page 8 GAO-18-248 Social Security Disability Insurance

surveys comprehensively track the extent of PDI coverage where 

employees pay 100 percent of the premium cost.18

In addition, while SSDI coverage is higher across all industries and 

income levels, PDI coverage is much more prevalent at higher wage 

levels and in certain occupations and industries than others. In particular, 

as of March 2017, 60 percent of those in the highest 10 percent of wage 

earners had PDI, whereas 4 percent of those in the lowest 10 percent did 

(see fig. 1).

Figure 1: Private Disability Insurance (PDI) Participation Rates by Income Category, 

2017, Paid In Whole or In Part by Employers

Note: PDI totals in this figure refer to employer-sponsored long-term private disability insurance, as 

reported in the National Compensation Survey. This survey includes workers in civilian nonfarm 

industries (except those employed in private households and workers in the federal government).

This survey does not include PDI plans where the employer does not pay any of the cost of the 

premiums.

 18 Benefits that are employer-sponsored but that are paid for entirely by employees are 

not captured as part of the National Compensation Survey conducted by BLS, and 

therefore are not included in these totals. Other industry surveys include queries regarding 

employer-sponsored PDI that is paid entirely by employees, but the nationwide proportion 

of employees that pay the entire premium is not fully captured by these surveys. For 

example, the Employee Benefit Research Institute (EBRI) surveys employees about 

benefits and asked employees who pays for PDI, regardless of whether the employee 

participated in PDI. According to EBRI researchers with whom we spoke, among those 

surveyed and who have an employer-sponsored PDI policy, 21 percent of employees said 

that the employer pays nothing toward their PDI premium. LIMRA, which is a privatesector research firm, has reported that for insurers that can break out their premium data, 

23 percent of the premiums insurance companies receive for employer-sponsored PDI 

policies were from employees that paid the entire premium.
Page 9 GAO-18-248 Social Security Disability Insurance

Our analysis of BLS data found that differences in PDI coverage also 

exist by occupation and industry. Specifically, 60 percent of workers in 

business and financial operations occupations have PDI coverage, 

compared to 16 percent of workers in construction, extraction, farming, 

fishing, and forestry occupations that have PDI (see fig. 2). Broad 

differences in PDI coverage also exist by industry; for example, 83 

percent of workers in utilities have PDI, but only 5 percent of workers in 

leisure and hospitality have PDI (see fig. 3). According to researchers 

from one organization with whom we spoke, the higher rates of PDI 

coverage reflect areas where labor markets are more competitive, leading 

employers to offer PDI to attract employees.

Figure 2: Percentage of Civilian Workers with Private Disability Insurance (PDI) Paid In Whole or In Part by Employers, for 

Selected Occupations, March 2017

Note: PDI totals in this figure refer to employer-sponsored long-term private disability insurance, as 

reported in the National Compensation Survey. These occupational categories were selected 

because they correspond to the high-level occupational categories used in the survey. These 

occupation data include workers employed in the civilian nonfarm industries (except those in private 

households and workers in the federal government). Workers in agricultural occupations in nonfarm 

industries, such as those on a farm operated by a non-profit organization, are included in the survey.
Page 10 GAO-18-248 Social Security Disability Insurance

Figure 3: Percentage of Private-Sector Workers with Private Disability Insurance (PDI) Paid In Whole or In Part by Employers, 

for Selected Industries, March 2017

Note: PDI totals in this figure refer to employer-sponsored long-term private disability insurance, as 

reported in the National Compensation Survey. These industry categories were selected because 

they correspond to high-level industry categories used in the survey. These data include workers 

employed in private nonfarm industries except those in private households.

Our review of SSDI program rules and PDI policies indicates that 

eligibility for PDI is similar in some ways to eligibility for SSDI. For 

example, both allow individuals with many types of disabilities to receive 

benefits until retirement, recovery, or death. However, there are also 

some significant differences, as SSDI and PDI have different definitions 

SSDI and PDI Differ in 

Many Respects, Including 

Eligibility, Benefit Level, 

and Approach to Return to 

Work

Eligibility
Page 11 GAO-18-248 Social Security Disability Insurance

and employment requirements. According to SSDI program rules, to meet 

SSDI’s definition of disability, an individual must have a medically 

determinable physical or mental impairment that (1) has lasted or is 

expected to last at least 1 year or to result in death and (2) prevents the 

individual from engaging in substantial gainful activity.19 SSA uses a list of 

medical conditions—established in regulations—that it considers severe 

enough to entirely prevent an individual from working. Benefits can also 

be provided for medical conditions that are not on the list if the medical 

condition or combination of medical conditions meets or equals the 

severity of those on the list.20 SSA also considers additional factors—

such as an individual’s residual functional capacity, relevant past work, 

age, education, and work experience. SSA can determine that the 

medical conditions combined with the applicable factors preclude the 

individual from performing his or her prior work or any other work in the 

national economy.21 Eligibility for granted SSDI benefits continues until 

retirement or death, or until SSA deems that the underlying medical 

conditions have sufficiently improved or that the individual has become 

gainfully employed.

In contrast, typical PDI policies have provisions related to inability to work 

that may compensate workers in a wider range of circumstances than 

SSDI does, although these provisions become more strict after 2 years.22

For the first 2 years of PDI benefits, policies generally define disability as 

the inability of an individual to work his or her own occupation. For 

disabilities that last for more than 2 years, a typical PDI policy changes 

how it defines disability from the inability to work in one’s previous 

occupation, to the inability to work in any occupation offering a 

 19 42 U.S.C. § 423(d). Substantial gainful activity is generally work activity involving 

significant physical or mental activities that are done for pay or profit, whether or not a 

profit is realized. 20 C.F.R. § 404.1572. The substantial gainful activity earnings amount in 

2018 is $1,180 per month or $1,970 if blind.

20 However, on March 29, 1996, Congress passed the Contract with America 

Advancement Act of 1996, which amended the Social Security Act to specify that an 

individual shall not be considered to be disabled for purposes of SSDI payments if 

alcoholism or drug addiction would be a contributing factor material to the individual’s 

disability determination.

21 See 20 C.F.R. § 404.1520. 

22 Our description of PDI features refers to employer-sponsored long-term private 

disability insurance and is based on our review of three PDI policies that three large 

insurers identified as typical, a literature review, and interviews with agency officials and 

various industry stakeholders
Page 12 GAO-18-248 Social Security Disability Insurance

reasonable income, which was 60 percent of pre-disability earnings in the 

three sample policies we examined. Similar to SSDI, PDI benefit 

payments generally continue for the length of the disability or until 

retirement; however, unlike SSDI, benefits paid for certain conditions, 

such as mental health conditions, are generally limited to 2 years. Also 

unlike SSDI, PDI policies typically include a pre-existing condition 

provision, whereby benefits are not paid if the applicant received 

treatment, services, or consultation or took medication for the condition in 

the 3 months prior to being insured.23

The requisite time period between the onset of a disability and when 

benefits can begin is comparable between SSDI and PDI, according to 

our review of SSDI program rules and PDI policies; however, the time it 

takes to process and make decisions on claims may run longer for SSDI.

For both SSDI and PDI, benefits do not usually start immediately upon 

disability onset. SSDI and PDI applicants must apply for benefits and 

usually wait for a period of time—known as a waiting period for SSDI and 

as an elimination period for PDI—for payments to begin.24 The waiting 

period for SSDI benefits is 5 months after disability onset. For the PDI 

policies we examined, the elimination period ranged from 3 to 6 months 

after onset.25 Another factor affecting the time to receipt of benefits is the 

time it takes to award the benefit. For PDI, federal regulations under the 

Employee Retirement Income Security Act of 1974 (ERISA) that govern 

claims in ERISA-covered plans, including disability claims, generally 

require initial claims to be decided within 45 days after receipt of the claim 

by the plan, with some ability to extend for two 30 day periods based on 

reasons beyond the plan’s control.26 PDI claimants may also appeal the 

 23 Generally, based on PDI policies we reviewed, after someone has been covered under 

a policy for 12 consecutive months and has not made a claim, the pre-existing exclusion 

no longer applies.

24 In this report, we use the term elimination period to encompass both the SSDI “waiting 

period” and the PDI “elimination period.” PDI policies we examined use the term “waiting 

period” differently, to describe a period before coverage begins. Therefore, to avoid 

confusion we use the term elimination period throughout this report to describe the time 

before benefits may begin.

25 For policies we examined, PDI benefits would begin when either the elimination period 

or, if applicable, short-term PDI coverage ended.

26 ERISA applies to most private sector employee benefit plans, including welfare plans 

(plans established or maintained to provide benefits such as health benefits or disability 

benefits) and retirement plans (plans established or maintained to provide retirement 

income or defer income until a later time).
Page 13 GAO-18-248 Social Security Disability Insurance

initial decision.27 On the other hand, based on our review of SSDI 

program rules, claims for SSDI are not subject to timing requirements 

established by law.28 Further, denied claimants may appeal the initial 

decisions. The average decision time for appeals before Administrative 

Law Judges in fiscal year 2017 was 605 days, according to SSA’s fiscal 

year 2017 performance report.29

Our review of SSDI program rules and PDI policies also indicates that 

individuals are required to have longer employment periods for SSDI 

eligibility than for PDI, but PDI is generally not portable if the individual 

leaves the employer offering PDI. According to SSA guidance, individuals 

become eligible to receive SSDI payments after they have paid the Social 

Security payroll tax long enough—about 10 years for many—and recently 

enough to accumulate the required number of credits.30 In contrast, the 

three sample PDI policies we reviewed contained 30-day waiting periods 

for coverage to begin. Further, part-time status and job changes affect 

PDI more than SSDI eligibility. SSDI’s program rules generally allow for 

the work credits that an individual has accumulated to continue to count 

toward SSDI eligibility even if the individual is working part-time, changes 

jobs, or becomes unemployed or otherwise leaves the workforce. In 

comparison, PDI coverage, which is offered at the discretion of 

employers, is not generally portable, and may exclude part-time workers 

altogether—as was the case for the three “typical” PDI policies we 

 27 Normally a claimant must complete the plan’s internal claims procedures before filing 

an action in court.

28 SSA does track timeliness against performance targets. In its fiscal year 2017 

performance report, SSA reported that SSDI initial decisions in fiscal year 2017 took 111 

days on average from the date of application, thereby meeting its target for average 

disability claims processing time of 113 days in fiscal year 2017.

29 SSA program rules generally allow for four levels of appeal: reconsideration, hearing by 

an administrative law judge, review by the Appeals Council, and Federal Court review. 

According to SSA, individuals approved for SSDI at any of these levels are eligible for 

retroactive payments. 

30 The requisite number of work credits depends on the individual’s age when they 

become disabled. Specifically, workers aged 31 and older generally must have 40 

quarters of work credits with at least 20 quarters of coverage during the 40 calendar 

quarter period ending with the quarter in which their disability began. Workers under age 

31 need quarters of coverage in at least one-half (not less than six) of the quarters in the 

period beginning with the quarter after the quarter they attained the age of 21 and ending 

in the quarter in which their disability began. 
Page 14 GAO-18-248 Social Security Disability Insurance

reviewed.31 Nationally, PDI coverage is much more prevalent among fulltime workers than part-time workers. According to BLS data, 42 percent 

of full-time workers and 5 percent of part-time workers have PDI where 

the employer pays for all or part of the premiums. See Table 1 for a 

comparison of SSDI and PDI eligibility features.

Table 1: Comparison of Eligibility Features of Social Security Disability Insurance (SSDI) and Typical Private Disability 

Insurance (PDI) Policies

Eligibility features SSDI program rules PDI (typical policy)

Employment requirements Must have enough and recent qualifying quarters of 

employment paying the relevant payroll tax—

changes depending on age at onset of disability.

Coverage continues if individual changes employers.

Covers part-time workers.

Waiting period—typically 30 days—before 

coverage begins.

Coverage generally ends if individual changes 

employers.

Excludes part-time workers.

Exclusions Conditions for which drug addiction or alcoholism 

are a contributing factor material to the 

determination of disability.

Conditions that arise in connection with the 

commission (after October 19, 1980) by an 

individual of an offense which constitutes a felony 

under applicable law and for which such individual is 

subsequently convicted, or which is aggravated in 

connection with such an offense (but only to the 

extent so aggravated).

Pre-existing conditions and conditions that arise 

from risky behaviors (such as self-inflicted injuries, 

participation in a riot, committing criminal acts).

Benefit period Benefits last until retirement, recovery, or death. Benefits generally last until retirement, recovery, 

or death, but are time-limited for certain 

conditions, such as drug and alcohol illness, 

mental health conditions, musculoskeletal or 

connective tissue illnesses, chemical and 

environmental illness, fibromyalgia, and chronic 

fatigue.

Definitions of disability Inability to engage in any substantial gainful 

activity—perform any work that exists in the national 

economy and (in 2018) earn no more than $1,180 a 

month or $1,970 if blind—due to a medically 

determined impairment that has lasted or is 

expected to last at least 1 year or to result in death.

Inability to perform work in their prior occupation.

After 2 years of receiving benefits, unable to work 

any occupation and earn 60 percent of predisability income.

Elimination period 5 months after disability onseta 3 to 6 months after disability onset, or after a 

short-term disability policy ends, whichever is 

longer.

Source: GAO analysis of federal laws and regulations, Social Security Administration guidance; interviews with insurance representatives and sample PDI policy documents. | GAO-18-248

 31 For PDI, individuals become eligible under the terms of the contract between their 

employer and an insurance provider, which define which employees are eligible for 

coverage. According to industry groups with which we spoke, employers may also choose 

PDI optional features in addition to standard features. These options can include different 

eligibility standards, cost-of-living adjustments, and different benefit levels.
Page 15 GAO-18-248 Social Security Disability Insurance

a

This 5-month waiting period can be applied retroactively, but for no more than 17 months from the 

time of the application.

Note: Our description of PDI features refers to employer-sponsored long-term private disability 

insurance and is based on our review of three PDI policies that three large insurers identified as 

typical, a literature review, and interviews with agency officials and various industry stakeholders.

Our review of SSDI program rules and PDI policies indicates that SSDI 

benefit levels for individuals are generally lower than PDI but are 

designed to provide more income replacement for low-income workers 

than higher-income workers. Under federal law, SSA determines benefit 

amounts using a progressive formula, whereby low-income beneficiaries 

receive relatively higher benefit payments based on their average monthly 

earnings over the course of their career.32 For calendar year 2018, the 

formula pays 90 percent of the first $896 of the individual’s average 

monthly earnings, plus 32 percent of the earnings between $896 and 

$5,399, plus 15 percent of earnings over $5,399. (See fig. 4 for the 

amount of benefits SSA paid in 2018 according to prior income levels.) 

Using the formula, we calculated that at an average indexed annual 

earnings of $44,000, the monthly benefit would be $1,693, which is 46 

percent of prior average monthly earnings.33 Under the formula, workers 

earning less would receive a higher proportion of their prior average, 

while workers earning the taxable maximum (set at $128,400 for 2018) or 

more would be eligible to receive $3,042 per month, which is at most 28 

percent of their earnings.34 Under federal law, disabled workers with 

qualifying dependents may receive additional SSDI payments, up to 50 

percent of their individual benefit amount.35 Therefore, according to our 

calculations, the maximum family benefit for average annual indexed 

 32 SSDI’s benefit formula averages a worker’s highest 35 years of earnings, which are 

indexed to reflect the change in general wage levels that occurred during the worker’s 

years of employment. For further details, see GAO-16-75SP.

33 The percentage of the insured worker’s earnings replaced would also be higher under 

certain circumstances if a minor dependent child, spouse, and/or adult dependent were 

included as beneficiaries.

34 Social Security limits the amount of earnings subject to taxation for a given year. The 

same annual limit also applies when those earnings are used in a benefit computation. 

This limit changes each year with changes in the national average wage index.

35 According to SSA data, around a million disabled workers received dependent benefits 

in 2016, and most of them received the maximum family benefit amount. More than half 

(649,321) of these families were families with one dependent child. 

Benefit Level
Page 16 GAO-18-248 Social Security Disability Insurance

earnings of $44,000 would be $2,540, which is 69 percent of prior 

average monthly earnings.36

Figure 4: Social Security Disability Benefit Amounts at Different Income Levels

By contrast, up to certain income levels, PDI policies typically replace 60 

percent of an employee’s current salary if the employee is unable to 

continue working his or her prior job.37 Therefore, a worker earning 

$44,000 annually in their prior job would receive $2,200 per month. For 

high-income workers, PDI policies typically have a monthly maximum 

payment. In one PDI policy we reviewed, this monthly maximum was 

$5,000. Employers and employees pay for SSDI through payroll taxes on 

employees’ wages and salaries, so the cost to employers and employees 

only varies based on employees’ wages and salaries. Federal law also 

determines the part of the payroll tax that is allocated for SSDI, half of 

 36 Under federal law, for lower-income beneficiaries, maximum family benefits are capped 

at the workers’ individual benefit amount. As benefits replace less income, the maximum 

is the smaller of either 85 percent of the workers’ average monthly earnings or 150 

percent of their individual benefit amount, but cannot be less than the individual’s benefit 

amount.

37 When calculating a covered individual’s current salary. PDI policies may not include 

commissions, bonuses, and overtime.
Page 17 GAO-18-248 Social Security Disability Insurance

which is contributed by the employee and half by the employer.38 For PDI, 

either employers, employees, or a combination of the two make premium 

payments, depending on the policy negotiated between the insurer and 

the employer. According to industry representatives with whom we spoke, 

premiums may vary based on many factors, such as wages and salaries, 

the length of the elimination period, rate of income replacement, type of 

industry, and a company’s prior claim experience.39

Another difference between SSDI and PDI benefit levels is their treatment 

of partial benefits or partial disability determinations. SSDI program rules 

do not provide partial payments to individuals who have lost some but not 

all of their ability to earn income in the national economy. In contrast, 

some PDI policies may pay benefits for a partial disability. For example, in 

one of three policies we examined, workers could qualify for partial 

benefits, at lower levels, if they were partially unable to achieve their 

previous earnings because of a disability.

PDI policies generally require beneficiaries to apply for SSDI and, if found 

eligible, PDI payments are typically adjusted downward (offset) by the 

amount of SSDI payments.40 There is no similar requirement or payment 

adjustment for SSDI beneficiaries.41 In cases where PDI beneficiaries are 

not required to or do not apply for SSDI, PDI policies we reviewed would 

still reduce their PDI payment by the SSDI amount that the beneficiaries 

may have been entitled to receive. The PDI payments would be reduced 

for the full amount of the SSDI payments, including any SSDI payments 

 38 For 2016 through 2018, the combined payroll tax rate allocated for SSDI is 2.37 

percent. This is the result of a temporary reallocation of the Social Security payroll tax rate 

between the OASI and Disability Insurance Trust Funds. For 2019 and later, the Disability 

Insurance Trust Fund share is scheduled to return to its 2015 level of 1.80 percent.

39 We did not obtain current premium information for PDI, although a 2016 industry survey 

of 30 disability insurance companies reported average in-force annual premiums of $256 

per person and new sales annual premiums per person of $233.

40 One policy we reviewed required individuals who are or become eligible for such 

income (either from SSDI or other benefits) to apply; another policy required the PDI 

beneficiary to provide proof that they applied for SSDI benefits.

41 SSDI benefits may be adjusted for other sources of income, though not for PDI 

payments. For example, according to SSA guidance, SSDI beneficiaries in most states 

may be subject to a reduction in their SSDI payments if they also receive workers’

compensation or other public disability benefits and the total amount of these benefits 

would exceed 80 percent of the worker’s average earnings before the worker became 

disabled. In this situation, SSDI benefits would be reduced so the benefits from these 

sources would not exceed the threshold.
Page 18 GAO-18-248 Social Security Disability Insurance

for the worker’s spouse and dependents, but will typically maintain a 

minimum PDI benefit. The three PDI policies we reviewed provide a 

minimum $100 monthly benefit when the SSDI offset would otherwise 

totally eliminate the PDI benefit or reduce it below $100 a month.

According to insurers we interviewed and PDI policies we reviewed, 

insurers will assist PDI beneficiaries with their SSDI applications, and if 

necessary, provide legal assistance for SSDI appeals processes. 

According to one industry survey, 72 percent of PDI beneficiaries also 

qualified for SSDI.42 PDI benefits may also be reduced by the amount of 

income from other sources such as workers’ compensation payments, 

sick leave, or severance pay from an employer.

Additionally, under federal law, SSDI confers Medicare eligibility after 2 

years. In contrast, insurance associations and our review of PDI policies 

indicate that PDI policies do not typically provide health care benefits. 

Table 2 provides a summary of SSDI and PDI benefit features.

Table 2: Comparison of Benefit Features of Social Security Disability Insurance (SSDI) and Typical Private Disability 

Insurance (PDI) Policies

Benefit features SSDI program rules PDI (typical policy)

Rate of Income Replacement Progressive formula based on average indexed 

earnings, which results in proportionally higher 

benefits (up to 90 percent of prior earnings) for 

lower-income beneficiaries. 

60 percent of the salary of the applicant’s 

last occupation (may not include 

commissions, bonuses, and overtime). 

Monthly benefits capped for higher earners.

Partial benefits Not available. May be available for individuals whose 

disabilities affect some but not all of their 

ability to earn income.

Effect of SSDI and PDI Payments 

on the Other

SSDI payment is not affected by PDI payments. PDI payment is reduced by the amount of 

any SSDI payments to worker, spouse, and 

dependents. Minimum PDI payment of 

$100 per month.

Coverage of dependents Spouses, children, and widows and widowers may 

be eligible for benefits. Benefits for a disabled 

worker plus dependent family members are capped 

at 150 percent of the worker’s individual benefit.

Not covered.

Medical benefits Medicare eligibility conferred after 2 years. Not included.

Cost of Coverage Payroll tax on employees’ wages and salaries, paid 

by employers and employees.

Annual premiums paid by employers and/or 

employees. Premiums vary based on 

multiple factors.

Source: GAO analysis of federal laws and regulation, Social Security Administration guidance, interviews with insurance representatives, and sample PDI policy documents. | GAO-18-248

 42 Council for Disability Awareness, 2014 Long Term Disability Claims Review (Portland, 

Maine: Council for Disability Awareness).
Page 19 GAO-18-248 Social Security Disability Insurance

Note: Our description of PDI features refers to employer-sponsored long-term private disability 

insurance and is based on our review of three PDI policies that three large insurers identified as 

typical, a literature review, and interviews with agency officials and various industry stakeholders.

Both SSDI and PDI policies include incentives to return to work, such as 

allowing beneficiaries to retain some earnings when they return to work, 

but PDI policies may provide return-to-work services sooner than SSDI. 

As long as they continue to meet SSDI’s eligibility criteria, beneficiaries 

can earn up to the substantial gainful activity amount each month, without 

any impact on their SSDI benefit, according to SSDI program rules.43

SSDI program rules also provide work incentives in the form of a trial 

work period, which allows the beneficiary to receive full disability benefits 

while potentially earning more than the substantial gainful activity amount, 

for up to 9 months.44 SSDI beneficiaries who earn above the substantial 

gainful activity threshold after 9 months of a trial work period will no 

longer receive SSDI cash benefits, but will continue to receive Medicare 

coverage, if enrolled, for up to 7 years and 9 months. After the trial work 

period ends, the 36-month extended period of eligibility begins, during 

which SSDI beneficiaries are entitled to receive benefits so long as they 

continue to meet the definition of disability and their earnings are below 

the substantial gainful activity monthly earnings limit. Moreover, 

individuals whose benefits stopped due to work may have their benefits 

reinstated under an expedited reinstatement if for medical reasons they 

are unable to work again at some point within 5 years. Under this 

expedited reinstatement, beneficiaries receive up to 6 months of 

 43 According to Mathematica an estimated 11.4 percent of beneficiaries in December 2011 

were working with earnings under the substantial gainful activity amount while receiving 

SSDI benefits. See Employment, Earnings, and Primary Impairments Among Beneficiaries 

of Social Security Disability Programs, Mathematica Policy Research (Washington, D.C.: 

November 7, 2013).

44 For 2018, a month in which an SSDI beneficiary earns more than $850 or works more 

than 80 hours in self-employment is considered a “month of services” for that beneficiary’s 

trial month period. During the trial work period, the beneficiary receives full SSDI benefits, 

regardless of how high their earnings might be as long as they report their work activity 

and have a disabling impairment. The 9 months of the trial work period do not need to be 

consecutive, but must take place within the same 60 month period. As an additional 

financial incentive, when SSA assesses a beneficiary’s gross earnings to determine if they 

have reached substantial gainful activity, the beneficiary can deduct the cost of 

impairment-related work expenses, which are items and services that because of 

impairment the beneficiary needs to work. For example, service animals, structural or 

operational modifications to a vehicle, and medical devices such as a wheelchair or a 

respirator can count as expenses that enable a beneficiary to work. See Social Security 

Administration, 2016 Red Book: A Summary Guide to Employment Supports for Persons 

with Disabilities Under the Social Security Disability Insurance (SSDI) and Supplemental 

Security Income (SSI) Programs. (Baltimore, MD: 2016).

Return to work incentives and 

assistance
Page 20 GAO-18-248 Social Security Disability Insurance

temporary cash benefits while SSA conducts a medical review. Despite 

these SSDI provisions, participants of a 2013 Social Security Advisory 

Board Forum have criticized the SSDI program for having poorly 

structured work incentives,45 and we have previously reported that 

complex SSDI rules related to these work incentives may result in 

overpayments to beneficiaries.46

PDI policies we reviewed also provide for continued payments while 

beneficiaries participate in the insurer’s return-to-work program or find 

other employment. However, in contrast to what is referred to as SSDI’s 

“cash cliff,” PDI payments are gradually reduced in some ways to account 

for the beneficiaries’ earnings. For example, in one policy we reviewed, if 

the beneficiary participates in the insurer’s return-to-work program, the 

beneficiary may continue receiving benefit payments in addition to any 

employment earnings. However, unlike SSDI, the combination of the 

employment earnings plus the PDI payment would be capped at 110 

percent of the beneficiary’s pre-disability earnings. Under this same 

policy, after the first 12 months that the beneficiary is disabled and 

working at a reduced capacity, the partial PDI payment decreases 

proportionally as the employment earnings increase until the beneficiary 

earns 80 percent of their pre-disability earnings, at which point they are 

no longer considered to be disabled. The other two policies we reviewed 

provided pro-rated PDI payments as soon as a beneficiary had some 

work earnings, until those earnings reach a threshold, such as 80 or 100 

percent of their pre-disability earnings.47

 45 In particular, participants of the forum cited the marked reduction in SSDI benefits—

referred to as the “cash cliff”—after completion of the trial work period. See Social Security 

Advisory Board, 2013 Forum Summary. Social Security Disability: Time for Reform. 

(Washington, D.C.: March 8, 2013). For additional details on SSDI’s work incentives, see 

Social Security Administration, 2016 Red Book: A Summary Guide to Employment 

Supports for Persons with Disabilities Under the Social Security Disability Insurance 

(SSDI) and Supplemental Security Income (SSI) Programs. (Baltimore, MD: 2016).

46 See Disability Insurance: SSA Could Do More to Prevent Overpayments or Incorrect 

Waivers to Beneficiaries, GAO-16-34 (Washington, D.C.: Oct. 29, 2015). In that report, we 

recommended that SSA take steps to enhance beneficiary understanding of program 

requirements, including clarifying work reporting requirements provided to beneficiaries 

and increasing the frequency of reporting reminders to SSDI beneficiaries so that they are 

more similar to those available to Supplemental Security Income beneficiaries. SSA has 

not implemented this recommendation. 

47 In one policy we examined, work earnings used to reduce PDI benefits would take into 

account commissions, bonuses, and overtime, even though these types of earnings are 

not be included when initially determining PDI benefits levels.
Page 21 GAO-18-248 Social Security Disability Insurance

Both SSDI and PDI policies offer services and supports to beneficiaries to 

help them return to work, but PDI policies may focus more on early 

provision of services and, depending on the policy, earlier intervention 

and case management. SSDI program rules allow beneficiaries access to 

return-to-work services and supports through the Ticket to Work (TTW) 

program, which helps interested beneficiaries transition to self-sufficiency 

through work.48 When individuals become eligible for SSDI, SSA 

guidance calls for sending them information about public or private 

employment networks or state vocational rehabilitation agencies. 

According to SSA’s guidance, beneficiaries can choose to work with one 

of these service providers and develop a plan for work goals that may 

involve services such as training, career counseling, vocational 

rehabilitation, and job placement. The TTW program then pays for those 

services and ensures that participating beneficiaries will not be subject to 

a review of their disability while they continue to work with the service 

provider. However, the SSA Office of the Inspector General reported that 

fewer than 3 percent of beneficiaries were participating in TTW in 2015.49

In addition, SSA-funded evaluations have found that TTW has had limited 

success in returning SSA beneficiaries to work and reducing their 

dependence on SSDI.50

In addition to return-to-work services through TTW, SSA officials told us 

that beneficiaries may use services provided through or by other federal, 

 48 The Ticket to Work and Self Sufficiency Program, established in 1999, provides eligible 

beneficiaries (ticket holders) with a ticket they may assign to SSA-approved public or 

private providers (referred to as employment networks) or from traditional state vocational 

rehabilitation agencies. Employment networks or state agencies are to provide 

employment services, vocational rehabilitation services, or other support services to help 

ticket holders obtain and retain employment and reduce dependence on SSA benefits. 

See also, GAO, Social Security Disability: Ticket to Work Participation Has Increased, but 

Additional Oversight Needed, GAO-11-324 (Washington, D.C.: May 6, 2011).

49 See Social Security Administration Office of the Inspector General, The Ticket to Work 

Program: Informational Report (Baltimore, MD: September 2016). According to this report, 

436,613 beneficiaries participated in the Ticket to Work (TTW) program in 2015, and SSA 

paid around $237 million for these services, which averaged $543 per participant. This 

report also noted that, of the 65,702 beneficiaries who participated in the Ticket to Work 

program in 2004, 13,277 had earned enough income to have their benefits suspended for 

at least 1 month between 2004 and 2014.

50 A SSA-funded series of evaluations of Ticket to Work found that although it is targeting 

individuals interested in employment, rigorous impact analyses failed to provide strong 

evidence of its impact on employment. However, the evaluators also noted that changes 

in Ticket to Work regulations and the national unemployment rate may influence the 

impact of the program in the future. Mathematica Policy Research, Executive Summary of 

the Seventh Ticket to Work Evaluation Report. (Washington, D.C: July 20, 2013).
Page 22 GAO-18-248 Social Security Disability Insurance

state, and local programs or provider networks, such as the Department 

of Labor’s Stay-at-Work/Return-to-Work initiative. However, we have 

previously reported that the large number of federal agencies and 

programs providing employment supports to individuals with disabilities 

represents a fragmented system of services, and little is known about 

their effectiveness.51

In contrast, according to insurance representatives and the three PDI 

policies we reviewed, PDI policies may provide early interventions, 

funding for workplace accommodations, and case management to help 

beneficiaries return to work. For example, one policy we reviewed 

explicitly offered an early intervention program to covered employees 

even when the PDI insurer was not also the short-term disability insurer, 

to identify workers who might benefit from vocational analyses and 

rehabilitation services before they are eligible for long-term disability 

benefits.52 Separately, this policy also had a return-to-work program with 

case managers who coordinate services and refer beneficiaries to clinical 

specialists, such as nurse consultants, psychiatric clinical specialists or 

vocational rehabilitation consultants. According to this policy, if the insurer 

determined that beneficiaries were capable of participating in the returnto-work program, but did not, their benefits could cease.

Information on how many PDI beneficiaries receive work assistance, such 

as worksite modifications, and insurers’ aggregate expenditures for such 

assistance is also generally unknown. While participation in and the 

impact of SSA’s TTW program has been extensively evaluated, the 

insurance representatives and researchers with whom we spoke could 

not provide us with data or studies showing the extent or cost of work 

assistance provided by PDI insurers, so the impact of these investments 

is not publicly known. See Table 3 for a comparison of SSDI and PDI 

policies’ work incentives and assistance.

 51 GAO, Employment for People with Disabilities: Little Is Known about the Effectiveness 

of Fragmented and Overlapping Programs, GAO-12-667 (Washington, D.C.: June 29, 

2012).

52 According to an employer group with which we spoke, employers with long-term PDI 

often also offer short term disability coverage, which may provide such assistance before 

the long-term PDI policy becomes effective.
Page 23 GAO-18-248 Social Security Disability Insurance

Table 3: Comparison of Selected Return-to-Work Features of Social Security Disability Insurance (SSDI) and Typical Private 

Disability Insurance (PDI) Policies

Selected Return-to-work 

features

SSDI program rules PDI (typical policy)

Work incentives Full payments continue if beneficiary has earnings 

below Substantial Gainful Activity, and for 9 months 

during a trial work period.

Post-trial work period: payments cease but Medicare 

coverage continues for up to 7 years and 9 months; 

individual is entitled to a 36-month extended period 

of eligibility if the individual continues to meet the 

disability definition and earn less than the substantial 

gainful activity monthly earnings limit; and may 

qualify for expedited reinstatement for 5 years. 

Payments may continue during a return-to-work 

period—on a pro-rated and/or capped basis 

according to the beneficiary’s earnings—until 

the beneficiary reaches a pre-disability earnings 

threshold set by the policy.

Work assistance The Ticket to Work (TTW) program funds work 

assistance provided by state vocational rehabilitation 

agencies and other employment networks. 

Rehabilitative services and workplace 

accommodation assistance for return- to-work 

available at insurer’s discretion. Insurers may 

have case management staff and/or early 

intervention efforts as part of standard benefits. 

Sources: GAO analysis of federal laws and regulations, Social Security Administration guidance, interviews with insurance representatives, and sample PDI policy documents. | GAO-18-248

Note: Our description of PDI features refers to employer-sponsored long-term private disability 

insurance and is based on our review of three PDI policies that insurers identified as typical, a 

literature review, and interviews with agency officials and various industry stakeholders.

Our literature review identified three distinct proposals to expand PDI—

through some type of federal action—as a way to provide savings for 

SSDI; however, we were unable to assess the implications of these 

proposals on SSDI. Based on our review, there is an array of complex 

factors that could influence PDI expansion and SSDI cost savings—

factors for which data, methods, and assumptions for projecting SSDI 

savings are either unreliable and unsupported, or unavailable. In addition, 

insurer, employer, and employee stakeholders we spoke with identified 

other implications of expanding PDI—but these implications cannot be 

ascertained because the proposals are not sufficiently detailed.

53

 53 We have previously reported that in evaluating reform proposals it is important to 

consider implementation, administration, and public understanding because they have the 

potential to delay—if not derail—reforms if not specifically taken into account in the 

proposals. For example, reforms that are not well understood could face difficulties in 

achieving broad public acceptance and support. See, GAO, Social Security: Criteria for 

Evaluating Social Security Reform Proposals, GAO/T-HEHS-99-94 (Washington D.C.: 

March 25, 1999).

Implications of 

Proposals to Expand 

Private Disability 

Insurance Cannot Be 

Assessed Due to 

Incomplete 

Information
Page 24 GAO-18-248 Social Security Disability Insurance

The three distinct PDI expansion proposals we identified include the 

following:

• David Babbel and Mark Meyer (Babbel and Meyer) of Charles River 

Associates proposed that voluntary employer-sponsored PDI 

coverage could be extended to more working Americans through 

congressional action and the federal government facilitating education 

and outreach efforts.54 Specifically, they recommended the enactment 

of legislation to make it clear to employers that automatic enrollment 

with “opt-out” arrangements under employer-sponsored group 

disability plans is legal. The authors believe this will address 

confusion and uncertainty that is holding employers back from 

providing PDI.

• Rachel Greszler (Greszler) of The Heritage Foundation proposed 

encouraging employers to voluntarily provide PDI in exchange for a 

payroll tax credit.55 Under this proposal, participating employers would 

qualify for the tax credit by covering the first 2 or 3 years of PDI 

benefits at least equivalent to SSDI benefits to employees. Workers 

awarded benefits under the employers’ PDI would transfer to the 

SSDI program if their disability continued beyond the first 2 or 3 years 

and they qualified for SSDI. PDI would then cease to provide benefits, 

unless employers chose to extend the PDI policies. According to the 

author, if an individual is denied PDI benefits, the individual could 

apply for SSDI.

• David Autor and Mark Duggan (Autor and Duggan) proposed 

extending coverage of PDI to all workers through a statutory 

mandate.56 Employers would be required to provide PDI benefits for 2 

 54See David F. Babbel and Mark F. Meyer, “Expanding Private Disability Insurance 

Coverage to Help the SSDI Program” (chapter 9) of SSDI Solutions: Ideas to Strengthen 

the Social Security Disability Insurance Program, The McCrery-Pomeroy SSDI Solutions 

Initiative, A Project of the Committee for a Responsible Federal Budget (West 

Conshohocken, PA: Infinity Publishing, March 2016). The study was prepared and 

submitted at the request of and with funding by America’s Health Insurance Plans (AHIP) 

and the American Council of Life Insurers (ACLI). The proposal used a similar analysis to 

establish that PDI results in SSDI cost savings in a previous paper prepared by these 

authors on behalf of AHIP, Private Disability Insurance and Return-to-Work: Cost Savings 

to SSDI and Other Federal Programs.

55 See, Rachel Greszler, BACKGROUNDER: Private Disability Insurance Option Could 

Help Save SSDI and Improve Individual Well-being (Washington, D.C.: The Heritage 

Foundation, July 2015).

56 See David H. Autor and Mark Duggan, Supporting Work: A Proposal for Modernizing 

the U.S. Disability Insurance System (Washington, D.C.: Center for American Progress 

and The Hamilton Project, December 2010).

PDI Expansion Proposals 

Foresee Savings
Page 25 GAO-18-248 Social Security Disability Insurance

years to individuals with disabilities who are unable to work. At the 

end of this period, PDI benefits would cease and SSDI would provide 

benefits for individuals qualifying for SSDI. Under the proposal, 

individuals with extremely disabling conditions with very limited 

prospects of returning to work (e.g. stroke, late stages of certain 

cancers, etc.) would be eligible to apply for SSDI at the onset of their 

disability, in lieu of PDI.57

Table 4 summarizes key features of the three proposals to expand PDI 

that we identified.

Table 4: Key Features of Proposals to Expand Private Disability Insurance (PDI)

Key feature

Three proposals to expand PDI

Babbel and Meyer Greszler Autor and Duggan

PDI Expansion Mechanism Voluntary.

Encourage employers to 

cover workers through autoenrollment.

Voluntary.

Encourage employers to cover 

workers in lieu of Social 

Security Disability Insurance 

(SSDI) for a time, through 

financial incentives. 

Mandatory.

Require employers to cover workers 

in lieu of SSDI for a time.

Employee Premium 

Contribution

Not specified Not specified Up to 40 percent of premium

Employer Payroll Tax Credit No Yes No

Required Period of PDI 

Benefits

Not specified 2 – 3 years 2 years

Restriction on Applying for 

SSDI

No. Individuals can receive 

SSDI and PDI concurrently.

Yes, for 2-3 years. Except if 

denied PDI benefits.

Yes, for 2 years. Except for workers 

with severe disabilities.

Estimated SSDI Savings The authors estimate $5 - $7 

billion federal savings over 

10 years, but the SSDI and 

PDI data are not 

comparable.

The author asserts significant 

potential savings, but does not 

provide an estimate.

The authors assert that savings 

would greatly improve Social 

Security’s financial health and could 

allow for a lower payroll tax rate or 

an increase in the longevity of the 

Disability Insurance Trust Fund, but 

do not provide an estimate.

Source: GAO analysis of proposals. | GAO-18-248

Note: The term PDI in this table refers to employer-sponsored long-term disability insurance.

 57 Under this proposal, conditions covered by SSA’s list of Compassionate Allowance 

Conditions would be eligible for immediate SSDI application at the onset of the disability. 

According to the authors, the PDI policy should not shoulder claims costs except during 

the relatively brief Compassionate Allowance determination period.
Page 26 GAO-18-248 Social Security Disability Insurance

Existing differences in the SSDI and PDI covered populations may play a 

role in determining the potential impacts of expanding PDI. As previously 

noted, SSDI covers almost all workers, whereas PDI coverage tended to 

be for those with higher wages and was more prevalent in certain 

industries. Based on our review of BLS data, in order to expand 

significantly, PDI would need to cover more lower-wage workers and 

other occupations and industries where it is currently less common, such 

as in retail and construction. However, as indicated in the Autor and 

Duggan proposal, expanding PDI to workers currently not covered could 

affect PDI premiums, based on the type of industry and wage levels. 

According to various stakeholder groups we interviewed, changes in PDI 

premiums would, in turn, have implications for the attractiveness of PDI to 

employers and employees under voluntary proposals.

The overlap in PDI with the SSDI beneficiary population also plays a role 

in determining any potential impact of expanding PDI. As previously 

noted, one industry survey reported that 72 percent of PDI beneficiaries 

of its member companies also received SSDI. One insurer told us that the 

longer PDI beneficiaries remain on PDI, the more likely they will also 

receive SSDI. In fact, for beneficiaries on PDI for 2 years, 58 percent also 

get SSDI benefits; and for beneficiaries on PDI for more than 5 years, 

more than 90 percent also receive SSDI.58 Our review of these data 

suggests that for those receiving both SSDI and PDI benefits, it may be 

difficult to attribute return to work and other changes in circumstances, 

such as changes in health, to either PDI or SSDI. For example, it is 

possible that any differences in return-to-work outcomes for SSDI 

beneficiaries who receive PDI versus those who do not may have more to 

 58 This increasing percentage of PDI beneficiaries also receiving SSDI may be 

attributable, in part, to the convergence of the SSDI and PDI disability definitions over 

time. Workers covered by PDI can be approved for benefits even if they are expected to 

recover from their disability within 12 months, whereas SSDI requires that a disability be 

expected to last at least 12 months to qualify for benefits. Also, PDI policies may provide 

coverage for up to 2 years if someone is not able to continue to work in their current 

occupation based on a disability, whereas someone cannot qualify for SSDI unless the 

individual is unable to work in any job in the national economy. 

Many Unknowns Make An 

Assessment of the 

Potential for SSDI Savings 

Uncertain

Differences in Covered 

Populations
Page 27 GAO-18-248 Social Security Disability Insurance

do with the specific characteristics and circumstances of the beneficiaries 

than as a result of having PDI coverage.59

To achieve SSDI cost savings, the three proposals assume that insurers 

will provide or reimburse employers for providing vocational rehabilitation, 

workplace accommodation, and return-to-work services, but the 

proposals provide few, if any details about how this would occur. For 

example, the two proposals that describe voluntary PDI enrollment do not 

explicitly require that such services be provided through PDI.60 The Autor 

and Duggan proposal, which includes a mandate for enrollment, requires 

that PDI provide workplace accommodations consistent with the 

Americans with Disabilities Act (ADA) and vocational rehabilitation 

services. The proposal includes a list of vocational rehabilitation services 

that insurers could provide, but the authors acknowledge that in practice it 

is not always “clear-cut” when a “reasonable accommodation” under the 

ADA is required and what the accommodation should be.61 As noted 

previously, we were unable to find public data on the extent to which PDI 

policies currently provide such services and insurance representatives 

and researchers we contacted that collect and report PDI data said that 

they do not collect such data from insurance companies. According to our 

review of PDI policy provisions that allow for rehabilitation and workplace 

accommodation services, the decision of what assistance will be provided 

through the PDI policy, if any, and the extent of such assistance the 

insurer provides or helps the employer provide, is at the discretion of the 

 59 Researchers have highlighted various factors that may affect individuals’ return to work. 

Such factors include the motivation of the individual and his or her job satisfaction, as well 

as if there are potential obstacles to employment, such as individuals lacking transferable 

skills, having less than a high school education, living in poverty, or lacking reliable 

transportation.

60 Babbel and Meyer stated that their proposal assumes it is in the economic interests of 

the insurers and employers to provide such assistance and that affected individuals desire 

to go back to work.

61 The Autor and Duggan proposal states that its proposed PDI coverage “would not 

extend” the Americans with Disabilities Act (ADA) employer “mandate,” but that it would 

simply require that employers pay ADA compliance costs prospectively through the 

insurance policy rather than on a one-off basis. The authors indicate that a pilot project 

would inform what types of case management, vocational rehabilitation, and workplace 

accommodation supports are most effective in assisting workers with disabilities to remain 

in employment. In addition, the proposal, published in 2010, also expected that medical 

costs would be paid by health insurance, which at the time was expected to become 

available to more people as a result of the Patient Protection and Affordable Care Act.

Types and Timing of Return-toWork Assistance Offered
Page 28 GAO-18-248 Social Security Disability Insurance

insurer.62 It is also possible that insurers would make less of an 

investment in return-to-work services for PDI beneficiaries under the two 

time-limited proposals because the insurers are only responsible for 2 to 

3 years of disability payments, compared to traditional PDI policies where 

the employer may have financial responsibility to make payments to 

beneficiaries until they reach retirement age, unless insurers can help 

them return to work.

Several stakeholders said that additional uncertainty exists with respect to 

effectiveness or attractiveness of PDI expansion proposals for 

populations currently not covered by PDI, such as low-wage workers and 

those with physically demanding jobs. BLS data show that PDI is 

currently less prevalent among these workers, and therefore less is 

known about the type and effectiveness of return-to-work services that 

would be offered to them under PDI expansion.63 For example, 

researchers report that lower-wage workers may have jobs that offer 

limited opportunities to adjust work schedules—a flexibility that one 

research group said could assist workers in the case of disability. In 

addition, researchers stated that lower paying jobs tend to not offer sick 

leave and other key benefits, and the absence of such benefits may 

present another potential obstacle for successful rehabilitation and 

workplace accommodation efforts. According to various stakeholder 

groups we interviewed, employers in low-paying industries or who 

otherwise do not offer these benefits would have less of an incentive to 

offer PDI or other supports to help retain their workers compared to 

employers who compete for skilled employees that are also typically more 

 62 As noted previously, one policy we reviewed stated that benefits may end if an 

employee is capable of participating in a rehabilitation program recommended by the 

insurer but fails to participate. However, according to an insurance association 

representative we spoke with, PDI policies commonly include reasonable accommodation 

and rehabilitation services provisions, but insurers select very carefully for whom and 

when such services are appropriate.

63 According to a Mathematica study, private insurers and others have developed 

proprietary tools and services to target the right services to the right workers at the right 

time and support progress monitoring and service adjustment. However, this study also 

notes that evidence from studies involving workers with PDI may not pertain to likely SSDI 

entrants, because PDI workers tend to have more human capital and work for larger 

employers. It further noted that only a minority of those individuals at risk of entering the 

SSDI rolls are likely to be helped by early intervention services. The study emphasized the 

importance—as well as difficulty—of targeting individuals that share three characteristics:

limited access to evidence-based early intervention (EBEI), likely to exit the labor force 

and enter SSDI rolls without EBEI, and likely to stay in the labor force if given EBEI.

Mathematica Center for Studying Disability Policy, Targeting Early Intervention to Workers 

Who Need Help to Stay in the Labor Force (Washington, D.C.: October 2015).
Page 29 GAO-18-248 Social Security Disability Insurance

difficult to replace.64 These factors—in combination with previously 

discussed unknowns related to the cost of PDI in non-traditional sectors—

reflect complexity and uncertainty about the extent to which PDI may be 

expanded through a voluntary system.

The proposals assert that expanded PDI would provide financial support, 

accommodations, and rehabilitation services much sooner than SSDI. 

However, based on our review, it is not clear if this would happen for two 

of the proposals. As previously noted, the SSDI elimination period is 5 

months, after which SSDI beneficiaries become eligible for return-to-work 

assistance through the TTW program and financial incentives, but lengthy 

SSA decision times may significantly delay when individuals receive 

return-to-work supports.65 The Autor and Duggan mandatory proposal 

has PDI benefits commencing within 3 months of disability onset, which is 

sooner than SSDI, and therefore, depending on the circumstances, may 

allow for the provision of return-to-work services sooner than under SSDI.

The Babbel and Meyer and Greszler voluntary proposals do not specify 

the length of elimination periods.66 While the Babbel and Meyer and 

Greszler proposals indicate PDI will provide return-to-work services 

sooner than SSDI, it is unclear whether or how the timing of return-towork services might evolve under the two voluntary proposals. Moreover, 

while data exist on SSDI initial and appeal decision times, we were 

unable to find current industry-wide data on the average decision period 

for PDI, or on the extent of appeals and how long on average these take 

to decide.67

 64 BLS data and an insurance company also indicated that the size of the employer’s 

workforce affects the likelihood of an employer offering PDI. According to BLS, for 

employees that work for employers with less than 100 employees, 24 percent of 

employees are provided access to PDI, whereas for employees who work for employers 

with more than 500 employees, 54 percent of employees are provided access. This would 

suggest that efforts to expand PDI may also need to consider characteristics and needs of 

smaller employers as well.

65 As noted previously, SSA took an average of 111 days to make initial decisions in fiscal 

year 2017 and, for claims that were appealed to an Administrative Law Judge, the 

decision time in fiscal year 2017 was an average of 605 days.

66 Babbel and Meyer assumed that short-term disability benefits would bridge any time 

between a disabling incident and the commencement of long-term disability benefits.

67 A thorough comparison of decision times should compare similar cases, including 

complexity and other characteristics of the claims. Also, although both SSDI- and PDIdenied claimants can appeal and can file lawsuits, the processes and standards of review 

can differ between SSDI and PDI. 
Page 30 GAO-18-248 Social Security Disability Insurance

Based on our review of the PDI expansion proposals and interviews with 

stakeholder groups, we identified several additional factors that could 

affect the extent to which the PDI proposals could increase PDI coverage 

and result in SSDI cost savings, especially under the two voluntary 

proposals (Babbel and Meyer and Greszler). Such factors include the 

likelihood that efforts to encourage PDI enrollment might be successful, 

the effect of policy premiums and tax credits on employers’ willingness to 

offer PDI policies, and whether expanded PDI might lead to more people 

also going on to SSDI.

Babbel and Meyer asserted that congressional action and federal 

outreach would clarify for employers that automatic enrollment with optout arrangements is legally permissible and thereby result in voluntary 

PDI expansion.68 According to the authors, their approach was motivated 

by the success of similar automatic enrollment provisions in the Pension 

Protection Act of 2006 in raising the participation and savings rates in 

401(k) defined contribution savings programs. However, since PDI 

automatic enrollment is already available, it is not clear how their proposal 

for congressional action and federal outreach would result in more 

employers adopting it and employees participating.69 The Babbel and 

Meyer proposal is also based on requiring employees to pay part or all of 

the insurance premiums. According to employee advocacy groups, 

workers at the lowest end of the wage spectrum in particular may have 

little, if any, disposable income to pay for PDI, and also little incentive to 

 68 According to Babbel and Meyer, the confusion stems from state laws that require 

employers to have an employee’s consent before automatically withholding contributions 

from wages. However, a 2008 Advisory Opinion from the Department of Labor (DOL) 

expressed DOL’s view that such a state law was preempted by ERISA to the extent it was 

interpreted to limit, prohibit, or regulate deductions from wages for contributions to ERISAcovered plans. See DOL Advisory Opinion 2008-02A, Feb. 8, 2008. A 2012 ERISA 

Advisory Council report recommended that DOL issue guidance for plan sponsors and 

plan administrators on the permissibility of auto-enrollment for employee contributory PDI 

plans. Even though the Council stated that automatic enrollment processes are permitted 

under current law and regulatory guidance issued by DOL, the Council concluded that 

such knowledge is not widespread or widely understood. See, 2012 ERISA Advisory 

Council Report: Managing Disability Risks in an Environment of Individual Responsibility, 

December 2012. 

69 An insurance association indicated that this might increase enrollment as was the case 

for 401(k) participation from automatic enrollment after the enactment of the Pension 

Protection Act of 2006, while we heard from an insurer discussion group that employees 

would opt out of PDI at a higher rate than they have with 401(k)s. Three employee 

advocacy groups said that the 401(k) experience is not comparable, since it is a savings 

plan, not a benefit expense, as is a disability insurance premium. Also, an employee 

advocacy group said that auto-enrollment in 401(k) participation has not increased overall 

participation in retirement savings plans.

Other Factors That Could 

Affect PDI Enrollment and 

SSDI Cost Savings
Page 31 GAO-18-248 Social Security Disability Insurance

participate when SSDI already replaces a relatively high proportion of 

their wages.70 Further, in an employer discussion session we heard that 

employees willing to contribute in part or the entire premium may also 

have a greater risk of needing PDI benefits, and adverse selection could 

result in higher premiums, which in turn, fewer workers may be willing to 

pay.71

The Greszler proposal anticipates potential significant savings for SSDI 

assuming that employers who had not previously offered PDI to their 

employees would opt to offer PDI in exchange for a payroll tax credit. 

According to an employer association, in making this choice, employers 

would need to compare the financial benefit of a payroll tax credit with the 

cost of PDI premiums, among other things—which may evolve under the 

proposal, according to insurers in a discussion group we held. According 

to insurance industry representatives, the direction of possible premium 

changes under the Greszler proposal is unclear because the proposal 

reduces employers’ financial responsibility to 2 to 3 years of potential 

disability benefit costs. This shorter benefit period could reduce premiums 

typical for longer term policies. However, since persons would not 

generally be able to receive SSDI benefits during this period under the 

proposal, there would be no offset of SSDI benefits against PDI benefits 

(as discussed earlier). According to an industry association and an 

 70 However, some workers may not qualify for SSDI benefits, such as those who have not 

worked long enough. Also, workers with PDI may receive other services in addition to the 

PDI cash benefit.

71 The State of Maine and other efforts may provide insight regarding the efficacy of 

voluntary PDI enrollment. The State of Maine passed a law effective January 1, 2017, that 

allows employers to automatically enroll employees in an employee-sponsored group 

disability income protection plan paid for at least in part by employee premiums that allows 

employees to opt-out of coverage. Employers can receive a $30 tax credit for each of 3 

tax years for each employee newly enrolled in such a plan. See Me. Rev. Stat. tit. 24-A, § 

2804-B and Me. Rev. Stat. tit. 36, § 5219-OO (2017). Also, the National Conference of 

Insurance Legislators adopted a model act in November 2016 for Employer-Sponsored 

Group Disability Income Protection for states to consider. The model act would provide 

employers a credit against their annual state income tax liability in an amount equal to 25 

percent of the costs of establishing and administering a group disability plan for 

employees, for each of 3 years. Employers would also receive a state tax credit of $100 

for each employee newly enrolled in a group disability income plan, of not more than 

$10,000 in any year. 
Page 32 GAO-18-248 Social Security Disability Insurance

insurer discussion group we held, the absence of the SSDI offset could 

increase premiums, possibly substantially.72

Another consideration raised by SSA officials is whether PDI expansion 

would increase SSDI applications and benefits paid, which would reduce 

potential SSDI savings from the proposals and could increase the cost of 

the SSDI program. Typical PDI policies may effectively require PDI 

beneficiaries to apply for SSDI, and PDI insurers may assist beneficiaries 

with SSDI applications.73 Insurance association representatives told us 

that in addition to helping keep PDI premiums attractively low,74 such 

practices benefit those who become eligible for SSDI benefits by 

providing health care benefits that they might not otherwise be able to 

access.75 One insurance association further noted that by helping PDI 

beneficiaries complete SSDI applications, SSA may receive wellsupported applications that are more efficient to process. On the other 

hand, researchers and SSA officials indicated that such PDI practices 

may result in some individuals applying for and receiving SSDI who would 

not have otherwise done so.

Each proposal states that expanding PDI would reduce SSDI costs. The 

proposals indicate that this would be achieved mainly through PDI early 

intervention after employees’ onset of disabilities and a resulting 

reduction in the number of SSDI claimants or duration of SSDI 

 72 In comparing the cost of SSDI and PDI, Greszler asserts that PDI would likely increase 

premiums by 111 percent, absent the SSDI offset that reduces the PDI benefit by the 

amount of the SSDI benefit for individuals receiving both benefits. According to Greszler, 

this premium increase was calculated for PDI providing permanent benefits and not 

benefits for 2 to 3 years as she proposes. ACLI has estimated that without a SSDI offset, 

premium costs may become so prohibitive that the employer and/or employee could not 

afford PDI coverage. ACLI has reported estimates of 40 percent to 100 percent increases 

in premiums if SSDI offsets were eliminated in group policies, with the increase depending 

on the demographics of the specific group. In two insurer discussion groups we heard that 

without the SSDI offset, PDI premiums would “skyrocket” and could be three times as 

high.

73 While some PDI policies might not explicitly require someone who is receiving PDI to 

apply for SSDI, policies may allow the insurer to reduce the PDI benefit by the amount that 

the insurer estimates the individual could have received from SSDI if they did apply, 

thereby creating a potentially significant financial incentive for the PDI beneficiary to apply 

for SSDI.

74 The proposals we reviewed, published from 2010 to 2016, cited PDI premiums ranging 

from around $250 to $400 per covered employee, per year. 

75 As noted previously, SSDI beneficiaries have access to Medicare after 2 years.

Cost Saving Estimates Are 

Unreliable or Unsupported
Page 33 GAO-18-248 Social Security Disability Insurance

beneficiaries’ status. Only the Babbel and Meyer proposal developed an 

estimate of potential savings. In forecasting SSDI savings,

• The Babbel and Meyer proposal estimated cost savings by assuming 

that automatic enrollment would result in PDI coverage increasing 

from 33 percent to just over 50 percent of private sector employees. 

Comparing PDI disability termination rates from the Society of 

Actuaries76 with SSDI termination rates, Babbel and Meyer estimated 

that PDI expansion would save the federal government an additional 

$500 million to $700 million per year, with a 10-year cumulative 

savings of $5 billion to $7 billion. They said that because they were 

unable to conduct a rigorous and comprehensive study of disability, 

recovery, and reemployment, their proposal “quantifies the benefits of 

group disability insurance indirectly, using publicly available data that 

are sparse, aggregated, and often difficult to interpret.”77

• The Greszler proposal relied on the Babbel and Meyer analysis in 

concluding that there would be significant SSDI savings. According to 

Greszler, early intervention would keep individuals on the job and 

reduce the number of potential SSDI beneficiaries. Further, Greszler 

assumes that the loss of tax revenue from the proposed payroll tax 

credit would be made up by lower SSDI expenditures incurred during 

the 2 – 3 years that employees are covered by PDI instead of SSDI.

 76 The Society of Actuaries (SOA) is an actuarial professional organization. SOA 

periodically analyzes and publishes data on group long term disability experience using 

claims data that it obtains from insurance companies.

77 Babbel and Meyer, Expanding Private Disability Insurance. The authors noted the 

absence of studies comparing SSDI and PDI outcomes and the difficulty in conducting a 

rigorous evaluation of cost savings. Therefore, Babbel and Meyer developed their cost 

estimate by first estimating how many people would avoid SSDI because of PDI and then 

used the average annual SSDI worker benefit ($13,757) to compute the savings. To 

determine SSDI avoidance due to PDI, Babbel and Meyer compared rates for “SSDI 

Aggregate Termination for Work” with “Group Disability Insured Recovery,” (see table 2, 

Babbel and Meyer, Expanding Private Disability Insurance). The Babbel and Meyer 

analysis of recovery rates has also been used as a basis for estimating savings to states 

from PDI, see Mark F. Meyer and David F. Babbel, Charles River Associates, The 

Benefits of Private Disability Income Protection Coverage to State Budgets: Overview and 

Details for Four States (July 2015).
Page 34 GAO-18-248 Social Security Disability Insurance

However, the Greszler proposal did not quantify the magnitude of the 

tax credit or the overall savings to SSDI.78

• The Autor and Dugan proposal noted that SSDI expenditures would 

be lower because mandated PDI policies would pay the first 2 years 

of benefits, instead of SSDI. The authors also noted that, over the 

longer-term, 2-year mandated PDI for employees has the potential to 

pay for itself and generate SSDI savings if the proposed mandate 

succeeds in allowing 1 in 11 would-be SSDI beneficiaries to remain 

gainfully employed. However, Autor and Duggan’s proposal did not 

include an explanation of how, or data or evidence supporting that, 

the proposed PDI mandate would achieve employment for 1 in 11 

would-be SSDI beneficiaries.

Our analysis of the Babbel and Meyer proposal found that the available 

data used to develop the SSDI cost savings estimates due to PDI 

expansion were not comparable and therefore did not result in a reliable 

estimate of the financial impact of current or expanded PDI on SSDI. In 

their proposal, Babbel and Meyer estimated cost savings by comparing 

SSDI’s and PDI’s recovery rates. For SSDI, Babbel and Meyer used an 

SSDI work termination rate that includes the number of SSDI 

beneficiaries terminated during the year due to having earnings that 

exceeded the substantial gainful activity amount, divided by the total 

number of SSDI beneficiaries during the year. For PDI, Babbel and Meyer 

used a PDI recovery rate that includes the number of PDI benefit awards 

terminated during the year for multiple reasons, divided by the cumulative 

number of months all PDI benefits were received by PDI beneficiaries

who received PDI benefits during the year.

79

However, we found that the numerators and denominators used to 

compare SSDI and PDI recovery rates are not comparable. For example, 

the PDI numerator reflects a much broader definition of recovery than the 

SSDI numerator, which may contribute to overestimating PDI’s relative 

recovery rate. Specifically, the SSDI numerator is limited to those 

 78 When we spoke to the author, she told us that in aggregate, the tax credit should offset 

what the SSDI costs would have otherwise been during the period. She indicated that to 

achieve this for a 3-year period, the tax credit might reduce the SSDI share of the 

employer payroll tax by 0.35 percent, from 0.9 percent to 0.55 percent. However, she did 

not provide supporting data or evidence to us for these estimates.

79 The denominator only includes months of PDI benefits received during the period of 

the experience study for which the recovery rates are being computed. It does not include 

months of benefits received by PDI beneficiaries in prior years who continued to receive 

benefits during the period of the experience study.
Page 35 GAO-18-248 Social Security Disability Insurance

terminated from SSDI for earnings exceeding SGA, whereas the PDI 

numerator includes terminations for reasons besides return to work, such 

as medical improvement (even if an individual did not return to work), 

failure to submit required documents to continue receiving benefits, 

changes in coverage from inability to perform own occupation to any 

occupation coverage, and other non-specified terminations. The 

denominator used in the comparison also differs. For SSDI, it is the 

number of people receiving SSDI benefits during the year. For PDI, it is 

the cumulative number of months of all PDI benefits that were received by 

PDI beneficiaries who received PDI benefits during the year. Because the 

denominators are different, we were unable to determine whether they 

contributed to an under- or overestimate of PDI’s relative recovery rate.

Regardless, we determined that the non-comparable rates in Babbel and 

Meyer’s proposal affect the reliability of its cost savings estimate.80 SSA’s 

Office of the Chief Actuary also reviewed the proposal at our request and 

concluded that the SSDI and PDI termination rates shown in the proposal 

were comparable neither in concept nor in unit of analysis. Even with 

common units of analysis in SSDI and PDI termination rates, estimates of 

the impact of PDI on SSDI would also need to consider the other 

differences that we described above, such as differences in covered 

populations.

The authors of two proposals we spoke to suggested that any proposal to 

expand PDI should be pilot tested before being implemented nationwide 

due to the number and complexity of factors involved and their potential 

effect on SSDI. For example, in their proposal, Autor and Duggan noted 

that, given the inevitable challenges and uncertainties associated with 

rolling out a major program innovation, it would be desirable to phase in 

such a plan and to run pilot programs in a limited number of states.81

They also suggested that pilot programs could be targeted, such as to 

larger firms. In discussing the Greszler proposal with the author, she told 

us that a pilot test of her proposal might help show if the program works 

 80 In the Babbel and Meyer estimate of SSDI cost savings, they used this comparison of 

SSDI and PDI recovery rates to estimate the number of individuals receiving PDI who they 

believe would have received SSDI had they not received PDI benefits. The authors 

applied their recovery rate analysis to data from an industry survey that reported the 

percentage of individuals receiving PDI but not SSDI, and data from yet another source, 

on annual PDI claims and terminations. 

81 In discussing the Autor and Duggan proposal with the authors, they told us that their 

proposal assumed that people covered by PDI would also have access to health 

insurance. They said that without health insurance, PDI would be less effective under their 

proposal.

Authors Suggested Proposals 

Be Pilot Tested
Page 36 GAO-18-248 Social Security Disability Insurance

better in some industries or occupations than others, as well as determine 

how employers respond to the tax incentive and if employees feel they 

are treated fairly by private insurers.82

Similarly, we have previously reported that changes affecting the SSDI 

program may raise particular implementation challenges, given the 

program’s inherent complexity; any changes may require pilot testing to 

evaluate the potential effects or unintended consequences that the 

Congress, the administration, SSA, and the broader public will need to 

know to make an informed decision about whether to implement program 

changes nationwide.83 SSA and DOL have funded and overseen pilot 

programs to test other proposals to help individuals with disabilities 

participate in the workforce.84

Employee advocacy groups,85 employers, and insurance companies we 

spoke with raised various questions and concerns about the potential 

impacts of expanding PDI—implications that the proposals did not 

explicitly or fully address and therefore remain uncertain. The proposals 

also provided few details on any oversight role that would be needed by 

federal or state governments.

 82 For a similar proposal, by authors Jason Seligman and Jason Fichtner, they 

recommended that their proposal be piloted in a few select states. Unlike the other 

proposals we reviewed, Seligman and Fichtner propose that SSDI benefits be temporary 

and that SSDI provide partial disability awards, as well as giving employers an expanded 

role in providing disability insurance in exchange for tax incentives. See SSDI Solutions: 

Ideas To Strengthen the Social Security Disability Insurance Program, by Jim McCrery 

and Earl Pomeroy (Infinity Publishing, West Conshohocken, PA, March 2016), chapter 13. 

Beyond All Or Nothing: Reforming Social Security Disability Insurance To Encourage 

Work and Wealth, Jason J. Fichtner and Jason S. Seligman. We did not include this 

proposal in our review.

83 GAO, Social Security’s Future: Answers to Key Questions, GAO-16-75SP (Washington, 

D.C.: October 2015).

84 The Consolidated and Further Continuing Appropriations Act of 2015 appropriated 

funds to SSA to design, develop, and implement an early intervention demonstration to 

test innovative strategies aimed at helping people with disabilities remain in the workforce. 

SSA is currently conducting a Supported Employment Demonstration to provide 

employment and health support to recently denied applicants alleging mental impairments. 

It is also exploring a demonstration project on how to best support individuals with

musculoskeletal disabilities early. DOL is in the process of implementing pilots to test 

return-to-work strategies for people with disabilities.

85 We use the term “employee advocacy groups” to include disability advocacy groups, 

general employee advocacy groups, and unions.

Missing Details Make 

Identifying the Implications 

of the Proposals for 

Stakeholders Uncertain
Page 37 GAO-18-248 Social Security Disability Insurance

The proposals assert that employees could potentially benefit in the event 

of a disability from PDI cash benefits that may be higher than SSDI 

benefits; however this outcome is not certain. Based on our review of 

SSDI and PDI policies and interviews with employee and advocacy 

groups, whether or not workers would opt for PDI benefits under voluntary 

expansion would depend on the attractiveness of PDI relative to SSDI 

and other benefits. For example, an employee benefits survey and 

several stakeholder groups we spoke with suggested that employees 

tend to value other benefits, such as health insurance, more than 

disability insurance. According to employee groups, lower-wage workers, 

in particular, may opt-out of PDI under the Babbel and Meyer proposal in 

favor of paying for other benefits, or forgo benefits entirely, especially if 

premiums are high. In addition, based on our review, PDI may not provide 

much additional benefit for lower-wage workers, and employee groups 

told us that, given a choice, lower-wage workers might choose not to 

participate in PDI since SSDI benefits replace a relatively high share of 

their wages.86 Based on our review of SSDI and PDI policies, current PDI 

policies typically do not include dependent and spousal benefits offered 

by SSDI, and unlike SSDI have exclusions and pre-existing condition 

provisions, as well as have time limits on benefit payments for some 

conditions, which may result in workers finding SSDI more attractive than 

PDI. To the extent that employees see PDI benefits as less attractive than 

SSDI and their willingness to participate in PDI declines, cost savings to 

SSDI resulting from voluntary PDI proposals would likely be affected.

Two employee advocacy groups also expressed concern that all three 

proposals focus on employer-provided PDI, and two of three proposals do 

not explicitly address self-employed and part-time workers.87 As we have 

previously noted, an increasing number of people are part of the 

contingent workforce, with limited access to employer-sponsored 

 86 Any workers who were covered by PDI, but who had not yet earned enough work 

credits for SSDI, would not have their benefits reduced for SSDI under the three policies 

we reviewed and the Babbel and Meyer proposal. 

87 In an interview with Mr. Autor and Mr. Duggan they said that their proposed system 

could provide graduated benefits for part-time workers. Ms. Greszler also said that she 

would fully support PDI being available to part-time workers through their employers and 

also allowing self-employed workers to receive the same SSDI tax credits as businesses 

for purchasing their own qualified PDI policy.

Potential Impacts on 

Employees
Page 38 GAO-18-248 Social Security Disability Insurance

benefits.88 Other individuals may have already left the workforce or 

otherwise be unemployed and thus have no connection to an employer.89

Further, two employee advocacy groups explained that individuals who 

will eventually be unable to work due to a disability initially experience 

symptoms that may cause them to work part-time or take a different 

position or job, which may affect their access to PDI through their current 

or new employer. On the other hand, the proposals allow for persons not 

covered under the proposals to apply for SSDI.90

Two employee advocacy groups also expressed concern that workers 

who are auto-enrolled under the Babbel and Meyer proposal may not 

make an informed choice about participating due to the complexity of 

disability contracts. One employee advocacy group was particularly 

concerned for low-wage workers who may be struggling financially and 

cannot afford disability insurance, but do not initially opt-out of coverage 

because of inertia, language barriers, or not understanding the product, 

including the tradeoffs involved in choosing to keep it or opt out.91

Employee advocacy groups told us that more needs to be done to get 

SSDI beneficiaries back to work, but noted a range of concerns about 

using PDI to do this. Their concerns included the following:

 88 Contingent workers can include those that do not have standard work arrangements—

permanent jobs with a traditional employer-employee relationship. Rather, they are in 

temporary, contract, or other forms of non-standard employment arrangements in which 

they may not receive employer-provided benefits. GAO, Contingent Workforce: Size, 

Characteristics, Earnings, and Benefits, GAO-15-168R (Washington, D.C.: April 20, 2015).

89 The Autor and Duggan proposal would allow unemployed individuals to purchase 

disability coverage from insurers at no more than 110 percent of the rate paid by the nowunemployed individuals’ previous employers. Individuals without PDI coverage that were 

insured for SSDI would be given access to PDI policies through a market financed by 

insurer surcharges.

90 Even for those covered by the proposals, under each of the proposals, applications for 

SSDI are still allowed. For example, the Autor and Duggan proposal allows employees 

with severe disabilities to apply for SSDI In addition, according to Greszler, under her 

proposal, employees whose PDI claims are denied could apply for SSDI.

91 Three employee advocacy groups also pointed out that auto-enrollment for PDI would 

be less beneficial for the employee than auto-enrollment for retirement, because 

contributions to the latter belong to the employee. Nevertheless, we have previously 

reported concerns about low-earning households being able to save for retirement 

because they feel they cannot afford to make contributions without taking on additional 

debt or postponing important expenditures, such as preventive healthcare expenses. See 

GAO, Retirement Security: Low Defined Contribution Savings May Pose Challenges, 

GAO-16-408 (Washington, D.C.: May 5, 2016).
Page 39 GAO-18-248 Social Security Disability Insurance

• Employers are moving away from providing other key employee 

benefits, such as health care benefits (which may be more important 

to workers than PDI and without which PDI would be less effective).

• Employers are moving away from full-time employment (which is 

usually a stipulation of PDI policies).

• Employers might discriminate in not hiring individuals at higher risk of 

disability under proposals that make employers responsible for the 

first few years of providing disability assistance.

• The transition from receiving PDI to qualifying and getting approved 

for SSDI under the proposals might delay receipt of SSDI.92

• Insurers might not actually provide rehabilitative and accommodation 

services.

• There would not be standardization of PDI eligibility determination, 

coverage, and appeal processes to ensure fair and equitable 

treatment of workers.

All employee advocacy groups we spoke to emphasized the need for 

consumer protections and strong oversight under the PDI proposals. One 

employee advocacy group said that there are too many problems, gaps, 

and concerns with the proposals to expand PDI, when SSDI already 

provides near universal coverage and is a system that is up and running.

Moreover, the employee advocacy group said that SSA could identify the 

key reasons that PDI has had success in getting people back to work and 

incorporate those lessons into SSDI, because more effort needs to be 

spent improving SSDI and increasing its return-to-work efforts.

Individual employers and employer associations we spoke to said that 

more details would be needed to determine how they might be impacted 

by the proposals.

• Regarding the Babel and Meyer proposal (which as previously 

discussed, cites the need for congressional action to address potential

legal uncertainties regarding automatic enrollment) one employer 

association representative expressed concern about whether state 

garnishment laws would prohibit employers from making automatic 

 92 This would apply to individuals receiving PDI for the 2-3 year periods under the Autor 

and Dugan and the Greszler proposals. 

Potential Impact on Employers
Page 40 GAO-18-248 Social Security Disability Insurance

deductions for PDI premiums from employees’ pay without their 

permission.93

• Regarding the Greszler proposal, employers and representatives of 

an employer association we spoke to indicated they would need to 

know more details, such as the exact amount of the tax credits and 

how insurance premiums might be affected.

• Regarding the Autor and Duggan proposal, representatives of the two 

employer associations stated that their members would oppose a

mandate. One employer association said there are often additional 

requirements that come along with any mandates, even for actions 

that employers are already taking, such as offering PDI. The employer 

association also expressed concern that doing more than is required 

under any mandate generally exposes employers to liability, which 

could result in employers providing only the minimum benefits and 

assistance required by law. One employer said that mandated PDI 

could crowd out the amount of other benefits an employer is willing to 

provide, such as the amount of medical coverage that it offers to 

employees.

In addition, one employer association we spoke with was concerned 

about the potential administrative burdens associated with expanding 

PDI, particularly for small employers. They noted that administering any 

benefit requires financial resources to provide, monitor, and maintain the 

benefit, stating that once employers provide a benefit to employees, they 

are generally reluctant to take it away. Employers in one discussion group 

we held were also concerned that providing disability assistance through 

a PDI policy for 2 to 3 years under two of the proposals would require that 

they retain employees and provide benefits even when employees are 

unable to continue work.94 Employers in a discussion group and an 

employer association we spoke to also wanted to know how the PDI 

 93 We have previously reported that although automatic enrollment for retirement savings 

had been addressed and clarified by IRS as permissible, there were still concerns among 

employers about state laws that prohibit withholding employee pay without employee 

consent, until that passage of the Pension Protection Act of 2006 (PPA). PPA provisions 

and subsequent regulations further facilitated the adoption of automatic enrollment by 

providing incentives to do so and by protecting plans from fiduciary and legal liability if 

certain conditions were met. See, GAO, Retirement Savings: Automatic Enrollment Shows 

Promise for Some Workers, but Proposals to Broaden Retirement Savings for Other 

Workers Could Face Challenges, GAO-10-31 (Washington D.C.: October 23, 2009).

94 According to one insurance company, employers generally do not retain employees for 

more than 1 year when employees cannot work due to a disability.
Page 41 GAO-18-248 Social Security Disability Insurance

plans would be overseen at the state and federal levels under the 

proposals, and what additional requirements that would entail.

Insurance companies and associations we spoke to generally supported 

efforts to expand PDI, but also expressed some concerns about related 

unknowns. In particular, insurers in one of our discussion groups and both 

insurance associations we spoke with supported the Babbel and Meyer 

proposal to encourage employers to automatically enroll employees, with 

an opt-out provision, which came out of a study funded by America’s 

Health Insurance Plans (AHIP) and the American Council of Life Insurers 

(ACLI). One insurance association said that, relative to the other 

proposals that provide a tax credit or mandate coverage, the Babbel and 

Meyer proposal to expand PDI would not be a problem for insurers’

capacity. Representatives from this insurance association suggested first 

taking initial steps proposed by Babbel and Meyer through encouraging 

automatic enrollment before considering a more major restructuring of 

PDI that would supplant SSDI for 2 to 3 years. On the other hand, two 

insurance associations expressed concerns about the potential for 

additional requirements that could result from implementing the Babbel 

and Meyer proposal, for example in relation to employee consent or the 

quality of coverage offered.

Insurance associations and insurers we spoke with also raised concerns 

about the other two proposals (Autor and Duggan, and Greszler), 

especially related to how they would fundamentally and unpredictably 

change the PDI market. On the one hand, one insurance association 

pointed out that these proposals would eliminate the SSDI offset from PDI 

payments for the 2 to 3 year period, which could lead insurance 

companies to significantly increase PDI premiums for such policies. On 

the other hand, if the insurance company is only liable for 2-3 years of 

benefit payments and services, this could reduce insurers’ costs.

In addition, in one insurer discussion group that we held, insurers said 

that if there was not an SSDI offset of PDI benefits during the 2 to 3 year 

period, the industry would be more aggressive about return to work 

efforts. However, in another insurer discussion group we heard that they 

would do less for return to work under such policies, because future 

savings to the insurance company are not as great under a 2 to 3 year 

policy as if the insurance company is liable for paying benefits until an 

individual reaches normal SSA retirement age, as with current policies. 

Finally, representatives from one insurance association said that the 

Greszler and Autor and Duggan proposed PDI expansions would create 

Potential Impact on Insurance 

Companies
Page 42 GAO-18-248 Social Security Disability Insurance

extreme capacity problems for insurers. Under the Autor and Duggan 

proposal nearly all employees would need to be covered.

One insurance association also noted its view that SSDI might benefit 

under the proposals to expand PDI. Specifically, the insurance 

association said that after someone goes through the PDI claim process, 

a subsequent claim for SSDI may be of higher quality, potentially 

reducing the administrative costs of a subsequent SSDI determination.95

The three proposals we reviewed did not specify the government’s role in 

overseeing the expanded PDI market. Babbel and Meyer proposed a 

stronger federal role in encouraging automatic enrollment by passing a 

law to clarify its permissibility, but the proposal did not provide details on 

implementation and oversight.96 Greszler proposed that participating 

employers provide benefits at least equivalent to SSDI benefits, but 

provided no other details on how compliance would be overseen. Neither 

the Autor and Duggan nor the Greszler proposals addressed whether 

individuals denied PDI could apply for SSDI within the 2 to 3 year period 

covered by their proposals.97

Stakeholders we spoke to expressed divergent perspectives on whether 

federal and state governments would need to provide additional 

regulation, supervision, and/or oversight related to expanded PDI 

markets.98 One insurance association said that insurance providers are 

already very well regulated by ERISA and by states, and a major insurer 

said that there already exists an array of federal and state laws governing 

employer-sponsored PDI coverage that establishes a robust regulatory 

framework for protecting participants. In contrast, representatives from all 

employee advocacy groups we spoke with cited problems identified with 

 95 The Greszler proposal specifically states that evidence and findings from the private 

determination potentially could be used in the public determination process. 

96 Babbel and Meyer said that there are minimal implementation requirements and costs 

for their proposal because it only requires the passage of legislation allowing for automatic 

enrollment. They said that the benefits of their proposal are independent of, and in 

addition to, other SSDI program specific proposals.

97 Greszler told us that those individuals denied benefits through PDI could still apply to 

SSDI and because the PDI determination process usually takes less than 60 days, they 

would not be far behind in the SSDI process.

98 According to these stakeholders, areas where regulation, supervision, or oversight 

might apply include acceptable contracts and premium levels, and penalties for noncompliance.

Potential Impact on Federal 

and State Governments 

Oversight
Page 43 GAO-18-248 Social Security Disability Insurance

private insurance company practices and stressed the need for additional 

consumer protections and government oversight. We found instances of 

federal and state enforcement actions regarding disability insurance 

improper practices in the past potentially affecting hundreds of thousands 

of people over many years,99 as well as more recent rulemaking by DOL 

that said that “disability cases dominate the ERISA litigation landscape.”

These actions suggest that expanding PDI or including new PDI 

requirements, in lieu of SSDI, would likely involve some degree of 

additional federal and state oversight.100

Any costs associated with expanded state and federal roles would reduce 

potential cost savings from the proposals, although the extent to which 

this might affect the Disability Insurance Trust Fund is unclear. According 

to DOL officials, an expansion in the number of private disability benefit 

plans and an increase in the complexity in the legal requirements 

governing the design and operation of such plans would require DOL to 

 99 For example, in 2004, the insurance regulators for all 50 states, the District of 

Columbia, and American Samoa and the U.S. Department of Labor entered into 

settlement agreements with three UnumProvident companies requiring them to change 

their claims practice and to reassess certain claims going back to 1997. The settlement 

indicated that it could include the re-assessment of approximately 200,000 claims. The 

multi-state examination and DOL investigation that lead to the settlement identified several 

areas of concern pertaining to insurer practices for handling claims, including excessive 

reliance on in-house medical staff to support the denial, termination, or reduction of 

benefits; unfair evaluation and interpretation of attending physician or independent 

medical examiner reports; failure to evaluate the totality of the claimant’s medical 

condition including co-morbid conditions; an inappropriate burden placed on claimants to 

justify eligibility for benefits; and a failure to give weight to Social Security determinations 

of disability. The companies were required to pay a $15 million fine and comprehensively 

revise their operations. According to the subsequent 2008 report of the Multi-State 

Conduct Examination, an additional $676.2 million was paid by the companies to 

claimants immediately upon reassessment or was reserved for future payments.

100 In December 2016, DOL issued a final rule on claims procedures for plans providing 

disability benefits, explaining why it thought it was appropriate to re-examine the rules 

governing ERISA-covered disability benefit claims. “Even though fewer private-sector 

employees participate in disability plans than in group health and other types of plans, 

disability cases dominate the ERISA litigation landscape today. An empirical study of 

ERISA employee benefits litigation from 2006 to 2010 concluded that cases involving 

long-term disability claims accounted for 64.5 percent of benefits litigation, whereas 

lawsuits involving health care plans and pension plans accounted for only 14.4 percent 

and 9.3 percent respectively. Insurers and plans looking to contain disability costs may be 

motivated to aggressively dispute disability claims.” Claims Procedure for Plans Providing 

Disability Benefits, 81 Fed. Reg. 92316 (Dec. 19, 2016). On November 29, 2017, DOL 

published a final rule delaying the applicability date of the 2016 final rule for 90 days, until 

April 1, 2018. Claims Procedure for Plans Providing Disability Benefits; 90-Day Delay of 

Applicability Date, 82 Fed. Reg. 56560 (Nov. 29, 2017).
Page 44 GAO-18-248 Social Security Disability Insurance

provide proportionally more interpretive guidance, compliance assistance, 

and enforcement and oversight activities. Estimating the potential impact 

of the proposals on DOL’s functions and capabilities would require more 

specific information on the statutory and regulatory changes envisioned 

by the proposals and the likely impact of those changes on the private 

disability plan marketplace. SSA officials said that whether or not SSA 

would experience an expanded role would depend on any changes in law 

regarding the proposals.

We provided a draft of this report for review and comment to SSA and 

DOL. Neither SSA nor DOL provided written comments, although both 

provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional 

committees, the Commissioner of Social Security, Secretary of Labor, 

and other interested parties. In addition, the report is available at no 

charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please 

contact me at (202) 512-7215 or curdae@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix I.

Elizabeth H. Curda

Director, Education, Workforce, and Income Security

Agency Comments
Appendix I: GAO Contact and Staff 

Acknowledgments

Page 45 GAO-18-248 Social Security Disability Insurance

Elizabeth H. Curda, (202) 512-7215 or curdae@gao.gov

In addition to the individual named above, key contributors to this report 

included Michele Grgich (Assistant Director), Dan Meyer (Analyst-inCharge), Lucas Alvarez, and Seyda Wentworth. Other contributors 

include: James Bennett, Ramona Burton, Holly Dye, Sarah Gilliland, Emei 

Li, Dan Meyer, Carol Petersen, Monica Savoy, Almeta Spencer, and 

Adam Wendel.

Appendix I: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101217)
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