A small number of states, including California, require employers to provide disability benefits to employees for non-work-related illnesses or injuries. In California, employers are required to participate in the State Disability Insurance (SDI) program, which includes disability insurance and paid family leave benefits.
Instead of participating in the SDI program, California employers may apply to a state agency for approval of a voluntary plan that pays disability insurance and paid family leave benefits. A voluntary plan must include all of the SDI program’s benefits and at least one more generous benefit.
Self-employed individuals who are not required to contribute to the SDI program may participate in California’s Disability Insurance Elective Coverage (DIEC) program to receive disability insurance and paid family leave coverage.
|State Disability Insurance (SDI) program includes the following benefits:
Disability Insurance (DI) – provides short-term benefits to eligible workers who suffer a loss of wages when they are unable to work due to a non-work-related illness or injury, pregnancy or childbirth.
Paid Family Leave (PFL) – provides wage replacement benefits for eligible workers when they need to take time off from work to care for a seriously ill child, spouse, parent, grandchild, grandparent, sibling or registered domestic partner, or to bond with a new minor child (including newly fostered and adopted children). Effective Jan. 1, 2021, benefits are also provided to participate in a qualifying exigency related to the covered active duty or call to covered active duty of the worker’s spouse, domestic partner, child or parent in the Armed Forces of the United States.
|Benefits are funded through mandatory employee payroll deductions.
The SDI withholding rate for 2020 is 1.0 percent. The taxable wage limit is $122,909 per employee for the calendar year 2020, year, and the maximum withholding amount for each employee is $1,229.
|DI Benefits: An individual may receive up to 52 weeks of DI benefits. The weekly benefit amount is approximately 60 to 70 percent (depending on income) of wages earned 5 to 18 months prior to an individual’s claim start date, up to the maximum weekly benefit amount.
Weekly benefits range from $50 to a maximum of $1,300. To qualify for the maximum weekly benefit amount ($1,300) an individual must earn at least $28,145.01 in a calendar quarter during his or her base period.
PFL Benefits: An individual may receive up to six weeks of PFL benefits during a 12-month period. Effective July 1, 2020, the maximum benefit period increases to eight weeks. The weekly benefit amount is approximately 60 to 70 percent (depending on income) of wages, up to the maximum weekly benefit amount. Weekly benefits range from $50 to a maximum of $1,300.
|Voluntary Plan (VP)
California law allows employers or a majority of employees to apply to the Employment Development Department (EDD) for approval of a VP for the payment of DI and PFL insurance benefits in place of the mandatory SDI coverage. To be approved for a VP, the employer must post a security deposit with the EDD to guarantee that it meets all obligations of the VP.
|Once a VP is approved, the employer is no longer required to send SDI withholdings to EDD. When an employer requires contributions from employees under the VP, the employer must place the contributions in a separate account to pay claims and approved expenses. A VP cannot cost employees more than the current SDI plan rate.||A VP must provide all the benefits of SDI coverage and at least one benefit that is better than SDI.|
|Disability Insurance Elective Coverage (DIEC)
California’s DIEC program serves as a safety net for self-employed individuals who are not required to pay into the SDI but want to be covered by DI and PFL.
|DIEC premiums are based on net profit reported on IRS Form 1040 Schedule SE or Schedule C. Each quarter, one-fourth of this amount is reported as “wages.” Premiums are calculated at a percentage of these “quarterly wages.”
The premium includes contributions for the DI and PFL programs.
|Individuals who are covered by the DIEC program may be eligible for DI and PFL benefits. Eligible individuals may receive up to 39 weeks of DI benefits. Under the PFL program, eligible individuals may receive up to six weeks of benefits in a 12-month period to care for a seriously ill family member or to bond with a new child.
The weekly benefit amounts are the same for DI and PFL claims. For claims beginning on or after Jan. 1, 2020, the minimum weekly benefit is $50 and the maximum weekly benefit is $1,300.
For More Information
For more information regarding disability insurance benefits for employees, please contact Next Generation Payroll a local black-owned business in Dallas. We are one of the top payroll processing companies based in Dallas, TX however, we provide multiple services that are designed to create a level playing field for local businesses to thrive in a global economy. In other words, our services are centered around risk management, operational efficiency, and strategies that improve market penetration by improving business opportunity leads. We build up small businesses making sure your business is solvent, and it operates efficiently in all economic climates.
At Next Generation Payroll, we are not interested in fulfilling quotas and meeting monthly sales goals. We focus on goals that are centered around fulfilling our client’s aspirations. Our top priority is to simply provide a strategy to help your business reach full potential. For more information, feel free to reach out to us at 214-396-2200. Stay in touch with us by signing up below for our monthly updates and newsletters