Changes are coming to California State Disability Insurance (SDI) as Senate Bill 951 removed the taxable wage limit and maximum withholdings for each employee subject to SDI contributions.
Before January 1, 2024, the State Disability Insurance (SDI) had a wage cap indexed by the state. This wage cap meant that only a portion of an employee's wages, up to $153,164 (as of 2023), were subjected to SDI taxation, and the maximum amount that could be withheld from each employee was $1,378.48. However, starting in 2024, this wage cap will be eliminated, and all wages subject to SDI taxation will be taxed at a rate of 1.1%.
Implications for Employers
It is the responsibility of employers to ensure that their team members are kept up to date with the latest changes in employment laws and benefits. Companies must inform their employees about any upcoming changes in payroll withholding, especially as they prepare to modify the amount of SDI withholding they will send to the Employment Development Department (EDD). It is important to note that the removal of the wage cap means that higher-earning employees will now be subject to increased withholding, which may impact their overall take-home pay and financial planning.
About California's Short-Term Disability Program
California SDI is a state-run program that provides partial wage replacement to employees who are unable to work due to a non-work-related illness, injury, or pregnancy. California employers are legally required to withhold and send SDI contributions to the California EDD. Ongoing changes to the program may present some challenges for employers and employees, but they also bring potential benefits. The elimination of the wage cap means that as early as 2025, employees may have access to more SDI benefits if they cannot work due to a covered condition. This can provide more financial support during times of illness or injury.
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