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Shifting from Defined Benefit (DB) to Defined Contribution (DC) Benefits: Implications for Workers' Disability and Survivor Benefits

By: Peter A. Diamond, Stephen C. Gross, and Virginia P. Reno
Published: October 1998

This paper focuses on the implications for disabled workers and the families of deceased workers of a shift from defined benefits to defined contributions for Social Security. Proposals to “privatize” Social Security would substitute individual savings accounts for all or part of traditional Social Security benefits. The individual accounts are designed for retirement. Traditional Social Security also provides disability benefits and survivor benefits to families of workers who die before retirement. They are based on the same formula used for retirement benefits. Thus, any privatization plan needs to take account of how it would apply to disabled workers and families of workers who die before retirement. The benefit design issues are important because they would affect significant numbers of workers and their families.