The newspaper said the disability payments amounted to hundreds of millions of dollars.
The rate peaked at 97 percent in 2004 and last year was 94 percent, according to the paper, which went on to describe a state-owned golf course on Long Island where it said former LIRR workers gather by the dozens to play golf free, and even walk the course although officially listed as having been disabled on the job.
The Times said the LIRR disability rate "suggests it is one of the nation's most dangerous places to work," even though the railroad has earned national awards for worker safety in recent years.
The head of the Long Island Rail Road says the company has no role in the granting of federal disability pensions.
Responding to the Times report, president Helena Williams described the awards by the U.S. Railroad Retirement Board pension system as "alarming and out of sync with our workplace safety record," and "inconsistent with social security disability rates."
In a statement, Williams said she asked the inspectors general of both the Railroad Retirement Board and the Metropolitan Transportation Authority, the LIRR's parent body, to review the situation.
Gov. David Paterson called on Attorney General Andrew Cuomo to look into the disability payments.
"At a time when our state and national economies are facing unprecedented strain and families are worried about meeting the cost of basic necessities, we must ensure the most appropriate, efficient use of taxpayer dollars," the governor said.
Cuomo said he was "troubled" by the allegations in the report and would be "aggressively investigating the issue."
Williams said a "sustained effort" to improve safety had led to a decline in injury rates, and less than 1 percent of employees had received disability pensions from the MTA. She said the MTA has taken the position that it could save millions yearly by having its pensions under Social Security rather than the rail board.