One in four 20-year-olds will become disabled before they retire, according to the Council for Disability Awareness. When that happens, people immediately look at the impact it will have on their job and their paycheck. But what about their retirement?
According to the Employee Retirement Income Security Act, a person who ends up on long-term disability and is no longer on a company’s payroll is prohibited from making contributions to a 401(k) or other defined contribution retirement plan.
The Air Line Pilots Association International, the world’s largest pilots union with 50,000 members, asked Pension Advisory Group to build a plan for its commercial airline pilots. It also is building a plan for a flight attendants union. The company now plans to market its product to lawyers, accountants, engineers and universities.
If a person suffers long-term disability, “it really makes sense to cover this because if you lost your job to disability, you are going to receive 60 or 70 percent of your income, which is still taxable, and now you don’t have the money to save for retirement,” Hinson said.