Many companies offer temporary disability insurance as a paid benefit to their employees. California, on the other hand, is one of five states that requires an employee-paid state disability insurance (SDI) tax (the other four are Hawaii, New Jersey, New York, and Rhode Island). This tax is levied in addition to the standard required payroll taxes, which include federal income tax, state income tax, Social Security tax, Medicare (and additional Medicare depending on income) tax, and in some instances local tax.
What is CA SUI/SDI Tax?
California’s state unemployment insurance, or SUI, is an employer-paid tax used to provide temporary benefits when an employee is laid off. State disability insurance, or SDI, is an employee-paid tax that covers temporary disability.
What is CA SDI Tax Used For?
In California, the funds from this mandatory payroll tax provide financial aid to employees who can’t work as a result of a non-work-related physical (generally covered by Workers’ Compensation benefit) or mental disability, as well as paid family leave for eligible workers. In 2022, eligible California employees can receive an SDI benefit equal to 60-70% of their regular wages, up to $1,540 per week and up to $80,080 in total.
What is a Voluntary Plan?
If they prefer, companies that have employees in California can apply to the California Employment Development Department (EDD) for approval of their own private short-term disability insurance and family leave plan, called a Voluntary Plan (VP) rather than using the state’s program.
To qualify, the VP must:
- Provide identical employee benefits as the state’s program
- Provide at least one benefit that is better than what the state’s program offers
- Cost the same or less than the state’s plan
- Match the state’s yearly benefits increase
In 2022, companies with their own programs must pay the EDD an administrative fee of 0.154% to cover expenses.
2022 Contribution and Benefit Rates
The employee contribution rate, maximum contribution per employee, and the maximum benefit payments or amount changes on January 1 of every year.
In 2022, employees in California who are covered by SDI and PFL are required to contribute 1.1% of their first $145,600 in taxable wages, up to a maximum contribution of $1,601.60 per year. The administrative assessment rate is calculated by multiplying the employee contribution rate by 14% or 1.1% x 14% = 0.154% (CUIC 3252 [b]).
|Employee Contribution Rate (CA SDI Rate 2022)||1.1%|
|Taxable Wage Limit (PEPY)||$145,600|
|Maximum Contribution (PEPY)||$1,601.60|
|Maximum Weekly Benefit Amount||$1,540|
|Maximum Benefit Amount||$80,080|
What is the Difference between Social Security Disability Insurance and SDI?
California’s SDI program is intended to serve as a temporary measure when an employee will be off work for a short period of time following a non-work-related injury, such as breaking a leg falling down the stairs at home. Social Security Disability Insurance (SSDI) is a federal program for permanent disability that is expected to last for at least 12 months.
What Does SDI Tax Mean?
SDI Tax is a term that means State Disability Insurance tax.
Which States Have an SDI Tax?
Five states have SDI Tax, California (CA SDI Tax), Hawaii, New Jersey, New York, and Rhode Island.
What is the SDI Tax Rate?
Each state with a disability tax sets its own rates. Here are the tax rates for 2022 for each state that runs its own program:
- California’s SDI tax rate is 1.1% of SDI taxable wages per employee per year. The maximum tax is $1,601.60 per employee per year.
- Hawaii employers can elect to cover the insurance cost (called temporary disability insurance or TDI in Hawaii), or they can withhold up to 0.5% of an employee’s weekly wage up to a maximum of $6.00.
- New Jersey employees’ temporary disability benefits is paid for by employees and employers. In 2022, employers contribute $39.80–298.50 (0.10–0.75%) on the first $39,800 earned by each employee during the calendar year. Employees contribute 0.14% of their wages with a maximum contribution of $212.66 per year.
- New York employers can choose to cover the cost of state disability insurance for their employees, or they can withhold 0.05% of an employee’s wages up to $0.60 per week.
- The Rhode Island Temporary Disability Insurance tax is 1.1% of the first $81,500 of an employee’s pay.
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