SHORT-TERM DISABILITY COMPENSATION

BENEFIT REFORM
This year, New Jerseys legislature has the opportunity to reform our states
short-term disability compensation benefits in a way that protects workers
rights, provides options and flexibility for employers, and saves state funds.

Why do New Jerseys Disability Benefits Need Reform?

Currently, our disability compensation does not allow beneficiaries to work and receive benefits,
even if they are able to work part time before ultimately returning to work full time. This puts
workers and employers in a tight spot: workers may want to work part time to keep their skills
fresh before they return to full time work, and most employers would much rather have their
employees back to work sooner, even if only on a part time basis temporarily.

A reform has been proposed (Assembly Bill 1131/Senate Bill 1072) that would allow beneficiaries
to keep getting their benefits while working part time. While this is a step in the right direction,
unfortunately the bill provides that an individuals benefits will be reduced dollar-for-dollar based
on the part time wages he or she receives. Because the worker is no better off financially by
working part time than receiving full disability benefits, the worker has no incentive to work part
time, even if he or she is able.

This is a bad outcome for both the beneficiaries and the taxpayers. If beneficiaries who could do
some work opt not to work at all, the state will continue to use taxpayer dollars to pay their full
benefits. Meanwhile, beneficiaries who want to work miss out on that opportunity simply because
it doesnt make financial sense to try and return to work part time.

How Would the New Disability Benefit Reform Work?

The reform would change how short-term disability benefits are distributed by changing the
formula used to determine how much assistance disability beneficiaries receive. The amount
beneficiaries would receive would be based on how much they normally make when working full
time, and whether they are working part time. The benefits schedule below details how these
benefits would work.

Looking at the chart, we can see that, if a disabled person works in an occupation making $1,000
per week full-time, then he or she would receive $615 per week in disability benefits when not
working at all. If the beneficiary is able to work half time, he or she would receive $500 in wages
from the half time work, plus another $365 from the state, for a total of $865 per week.

Because of this sliding scale approach, the beneficiary has access to a solid baseline benefit if he
or she is not able to work at all. However, the beneficiary can also work part time without feeling
a financial crunch for doing so.
 AMOUNT THE TOTAL AMOUNT DISABILITY
FULL 1/2 TIME PAY
FULL TIME PAY [Amount earned if working STATE SAVES EMPLOYEE EARNS BENEFIT PAID
DISABILITY PAY half time while on disability] when recipient works (when working half time TO PART TIME WORKER
half time and receiving benefits) (vs amount in Column 2)

200 132 100 50 182 82

400 264 200 100 364 164
600 396 300 150 546 246
800 528 400 200 728 328
1000 615 500 250 865 365
1200 615 600 300 915 315
1400 615 700 350 965 265
1600 615 800 400 1015 215
1800 615 900 450 1065 165
2000 615 1000 500 1115 115
2200 615 1100 550 1165 65

What are the Benefits of this Reform?

Recipients of disability benefits are able to go back to work without facing financial
disincentives or penalties for doing so. Workers may desire to ease back into their jobs by
working part time while still eligible for benefits, or may need extra income above and beyond
their benefits to get by. This proposed reform will give workers the choices they need to make the
right decisions for their families.

Employers get their employees back sooner, saving time and money. Employers, too, will benefit
from the increased flexibility that comes with this reform. By being able to continue working with
their employees on a part time basis, employers are able to plug the gaps in their staffing needs
more easily and make sure their employees are up to speed and ready to get back to work full time
when the short-term disability period ends.

Tax dollars are saved. When beneficiaries work part time rather than relying solely on their
benefits, the state saves tax dollars.

To carry over from the previous example, if a person worked in an occupation making
$1,000 per week full time, if he or she receives full disability, the state pays $615 per week.
If that same beneficiary opts to work part time, the states obligation to that individual will
fall to $315 per week, saving taxpayers $300 per week.

Under the new scale, the state will save anywhere from $50 to $550 per week per disabled
worker who opts to work part time while receiving benefits.

Reforming New Jerseys short-term disability benefits is a bipartisan effort that helps the workers who
rely on this temporary assistance, as well as their employers and does so in a fiscally responsible way.
By enacting this reform, New Jerseys lawmakers can ensure that the right resources are reaching our
residents at the time they need it most, while making sure that taxpayer resources are protected and
available to meet the needs of New Jerseys families.