What is CA SDI? Who Qualifies and Eligible?

CA SDI provides short-term disability insurance for employees in California, and the program is sponsored by state income taxes that employers withhold from workers’ paychecks. CA SDI is short for California State Disability Insurance.  Through SDI, eligible California employees receive insurance through a wage-replacement plan.

In this article, our employer defense attorney explains the purpose of CA SDI and answer the most common employer questions about SDI in California and how the program works for all parties.

Who Is Eligible for CA SDI?

California workers who qualify can collect tax-free payments every week when they cannot work.

CA SDI provides these workers compensation for up to one year, and individuals can usually earn 60% to 70% of their normal gross pay per quarter.

Below are the parameters workers must meet to qualify for CA SDI benefits. California employees must meet all these requirements to receive benefits under CA SDI.

Employers in California must:

• Be unable to complete their normal duties for a minimum of eight consecutive days

• Be already employed or actively seeking employment when they become disabled.

• Be bereft of wages due to their disability

• Have had CA SDI deductions withheld from their earnings of over $300 in the past 12 months

• Have been treated or under the care of a licensed doctor, physician, or religious expert during the first eight days of their disability

• Have filled out and sent in an official CA SDI claim within 49 days of becoming disabled.

• Possess a medical certification of disability filled out by a physician.

If workers fit the above criteria, CA SDI benefits may suit their needs. They can apply through the EDD’s website.

Who pays for CA SDI?

It is important to note that workers in California pay for CA SDI, as opposed to their employers.

California companies deduct CA SDI taxes from their workers’ monthly paychecks. They do so in the same manner that they deduct California Paid Family Leave taxes.

When employees enter their CA SDI information on their W2s, they are asked to enter a specific dollar amount into Box Fourteen, allowing them to claim the amount as a deduction for local and state taxes.

Next, the employer deducts that amount from workers’ gross pay, lowering their tax bills.

Are Independent Contractors Eligible For CA SDI?

Independent contractors, freelancers, or other self-employed workers can pay into the Employment Development Department of California’s Disability Insurance Elective Coverage Program (DIEC).

DIEC offers paid family leave time and disability coverage to employees who do not pay CA SDI. Independent contractors in California pay for their coverage and benefits by paying quarterly premiums.

More information for freelancers is available online on the EDD’s website.

What Employers’ Responsibilities to CA SDI?

California business owners do not pay for CA SDI directly.

However, they must agree to withhold employee earnings and send these contributions to the EDD.

California companies must also provide their workers with specific information regarding the laws related to working conditions, employee benefits, and overall employment tasks.

For example, all California business owners must publicly post notices for their employees explaining their rights to family leave, unemployment insurance (UI) benefits, and other programs covered by the state and federal government.

Is CA SDI Mandatory?

CA SDI is a mandatory tax for California’s workers.

Employers withhold the correct amounts and ensure employees pay for CA SDI when entering their W2s.

The amount is then deducted with payment of local and state taxes.

Can Businesses Opt Out of CA SDI?

Businesses can choose to opt out of CA SDI, but they must create a voluntary disability insurance plan for their employees.

Plus, the business must meet certain requirements:

• The plan must replicate all of SDI’s benefits

• The plan must feature a minimum of one benefit that is more favorable than SDI’s benefits

• The plan must be the equivalent price or cost less than SDI

• The majority of workers must approve the plan before it goes into action

What is the Benefit of Creating a Voluntary Plan for Employers?

Voluntary plans allows companies to provide workers with advanced coverage with no added costs.

For example, if a business’s workers possess a low claim rate, the employer can use the extra money to supply better benefits.

To apply for a voluntary plan, employers must send a deposit to the EDD along with information showing that their new plan satisfies all requirements.

Is CA SDI Tax-Free?

When California workers are disabled and qualify for SDI benefits, they do not need to pay taxes on those benefits. SDI is tax-free for qualified California workers.

Who is Exempt from CA SDI?

Federal workers are exempt from SDI, UI, and ETT.

The federal government also withholds personal income taxes from California’s federal workers and military servicemen who are state residents and stationed there.

Is CA SDI Beneficial Overall?

CA SDI helps California’s disabled employees enjoy temporary relief from difficulty at work.

When workers cannot carry out their duties due to disability, SDI supports them until they recover.

Therefore, CA SDI aids California’s workers when they need it most.