The California Employment Development Department (EDD) has announced that the 2021 employee contribution rate for State Disability Insurance (SDI) will increase to 1.2%. The taxable wage base from which the contributions will be taken will increase from $122,909 to $128,298 and the maximum cost to an employee will be $1,539.58.
SDI provides disability and Paid Family Leave (PFL) benefits equal to 60% or 70%* of the employee’s base period earnings. For 2021, the maximum weekly benefit will increase from $1,300 to $1,357.
*SDI will provide disability and PFL benefits equal to 70% for employees with an annual income less than ~$5,993 (1/3 of the State Average Quarterly Wage).
As we mentioned in our August 26, 2020 newsletter, California permits employers to opt out of SDI and establish a private plan for Voluntary Disability and Paid Family Leave Insurance (known as a “Voluntary Plan”), provided certain requirements are met. Among these requirements are that the Voluntary Plan’s cost to employees be no more than the cost for SDI and that benefits paid by the plan are at least equal to what the EDD would pay.
If you think a Voluntary Plan would be a good option for your company and employees or would like to find out more information, please reach out to your Account Manager. The Larkin Company will reach out to our current Voluntary Plan clients to assist them in planning for 2021.