Seeking Good Definition of Disability for DB PLan

[Guest Jim Edens]

Does anyone have an effective definition of disability for a Defined Benefit retirement plan? Would appreciate e-mail at jedens@surfsouth.com, or reference to aan available source.

Thanks

JE

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[Guest Keith N]

The def. of disability is typically defined by the plan document to be as loose or tight as the ER wants. Probably the easiest is to let Soc. Sec. make the determination. The Plan would require that the participant demonstrate that he has qualified for disability benefits from Soc. Sec. That way you are using a unrelated third party to make the determination.

Another common technique is the use of a physcian, hired by the ER, to make the call. If you use this approach, your Plan should also give the EE the right to appeal with his own physcian. Then you would need arbitration language in case they can't come to a conclusion.

Social Security solves all these problems.

I have also seen different benefits for different disabilities. ie: loss of arm is X, loss of eye is Y, etc...

[Larry M]

As Keith points out, the definition of disability and the resultant benefits are the end products of what the plan sponsor intends to provide.

For tax free distributions, the language must follow certain rigorous regns.

For taxable distributions it can be as loose as "can't perform one or more of his or her ordinary functions" or as tight as "..loss of limbs and organs with death imminent".

Do you want to provide the normal accrued db benefit? Can benefits start immediately? Is the disability benefit greater than or less than the accrued normal db benefit? Does disability just trigger a continuation of particpation?

Therefore, you must decide what you want and then use language which is appropriate.

[Guest tom h]

Keith is correct that relying on the Social Security Administration's determination is the "easiest" in the sense that it allows the plan administrator to defer to a third party and not have to address the question of whether the person is truly disabled. However, as the U.S. Supreme Court's recent decision addressing the impact of SSA disability determinations on ADA claims points out, the SSA lacks adequate resources to handle the huge volume of claims it receives. Consequently, SSA decisions are not infrequently incorrect -- people who are truly disabled are denied benefits while others who could work if they were inclined (or even are working a cash job) are awarded benefits. Under these circumstances, relying on the SSA to effectively determine who gets a disability benefit under a private pension plan is a poor choice.