Disability Insurance with Prefunding and Private Participation: the Chilean Model
Estelle James and Augusto Iglesias Palau
Many countries have adopted old age systems that include individual accounts—funded, privately managed defined contribution plans. Such a system has been under discussion in the US. It is particularly difficult to figure out how to incorporate disability benefits into a social security system with a defined contribution component, since disabled people may not work long enough to accumulate large balances. This note describes how Chile, the country that pioneered individual account systems, handles disability insurance, and draws lessons from this experience for other countries.
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