August 26, 2020

California Voluntary Plan

Employee Contribution Rate Projected to Increase from 1% to 1.5%

Recently, our June 12th newsletter advised of the Employment Development Department’s 2021 forecast for the Disability Insurance (DI) Fund. The employee contribution rate is projected to increase from 1% to a whopping 1.5% (for reference, the highest rate in the last 20 years was 1.2% in 2011). Factors in the projected jump are the increased duration for Paid Family Leave (PFL) claims (from six to eight weeks), the addition of military exigency leaves to the PFL program (beginning January 1, 2021), and the COVID-19 pandemic (high unemployment resulting in decreased taxable wages).

While State Disability Insurance (SDI) coverage is mandated in California, employers do have the option to offer a private plan, often at no cost to employers. Voluntary Plans (or Voluntary Disability Insurance) are private, employee-funded plans that require employee approval and must at a minimum mirror SDI- provided benefits with at least one benefit enhancement. Voluntary Plans offer potential cost savings for employers (offsetting top-up pay and/or Short-Term Disability benefit costs) and employees while also allowing for increased flexibility and a better employee experience. The Larkin Company and its principals have administered these Plans for over 30 years, including full implementation and compliance support, writing of plan documents, annual reporting, and claims adjudication.

Don’t Have a Voluntary Plan?

For our clients that do not already have a Voluntary Plan, we are proactively generating feasibility studies to see if a Voluntary Plan is right for you and your employees. Your Larkin Account Manager will reach out to you if a Voluntary Plan might make sense for your company. As always, you can always reach out to us with any questions.

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