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Thursday, June 14, 2012
by Stefanie S. Trilling
Witnesses pushed for defined contribution plans to
incorporate qualified disability benefits June 12 at an ERISA Advisory Council
meeting on the interaction between disability and security in retirement.
Long-term disability leave can have a devastating impact on
affected individuals' retirement savings, and qualified disability benefits in
defined contribution plans can bridge that gap, they said.
“Prolonged disability can be economically devastating to an
employee's retirement savings. Long-term disability benefits typically will
replace the employee's current income but generally do not make up for the
employee's lost retirement savings as a result of a prolonged disability,” said
Richard C. Shea, a senior partner at Covington & Burling in Washington.
Shea further outlined two ways in which a defined
contribution plan, such as a Section 401(k) plan, may accomplish qualified
disability benefits: actual replacement contributions and insured replacement
The qualified disability benefit “is really a critical
benefit that hasn't gotten much attention,” said Louis T. Mazawey, a principal
at Groom Law Group in Washington.
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