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Governor Davis signs SDI increase bill
California maximum SDI benefit will increase to $490 from $336
October 1999
Sacramento, California – California Governor Gray Davis has signed new
legislation that will dramatically increase benefits payable under the State
Disability Insurance Plan (SDI) and under many California Voluntary
Plans. In addition, the new legislation will require a study of the
feasibility of expanding the definition of "disabled" under the state
disability program, including Voluntary Plans, to include persons who take
leave under the California Family Rights Act, but who may not themselves be
physically disabled.
The state disability plan provides partial wage
replacement benefits to employees who are unable to perform their jobs because
of pregnancy or non-industrial illness or injury. The benefit formula until
January 1, 2000 is 55% of base period earnings up to a maximum weekly benefit
of $336. Benefits under the SDI are tax-free. Benefits under Voluntary
Plans are also tax-free unless the employer contributes to the plan.
New Maximum Benefit and Higher Taxable Wage Base
The new benefit formula effective January 1,
2000, is 55% of base period earnings up to a maximum benefit of $490 per
week. Under California law, this change in the benefit formula requires an
increase in the wage base against which the SDI tax is levied from $ 31,767
to $ 46,327. This will increase the SDI tax for approximately 25% of
workers. There is strong indication that the SDI tax rate will increase in 2000
from the current 0.5% to 0.7% (from $158.84 to $324.29 annual maximum tax) of
covered wages as the Disability Insurance Fund reserves dip to a level
triggering a tax increase. (The rate could go as high as 0.8%) The State will
announce the actual rate in late October or early November.
Indexing to Workers’ Compensation Wage Benefits
Until 1992, the SDI benefit and certain wage
replacement provisions of Workers’ Compensation were indexed. This new law will
reestablish the index between Workers’ Compensation Total Temporary Disability
wage replacement and the maximum weekly benefit under SDI.
The current Workers’ Compensation benefits
established under the 1993 Workers’ Compensation reform act includes temporary
disability wage benefits of two thirds of the employee’s average weekly wage at
the time of injury. The current maximum benefit is $490 per week. Legislation
to further increase Workers’ Compensation wage replacement benefits in 2000 and
beyond was earlier vetoed by the Governor.
Feasibility Study
The most intriguing provision of the new law is
the requirement that the Employment Development Department conduct a study to
be reported to the Legislature by July 1, 2000 of the feasibility of expanding
the definition of "disabled" for the purpose of qualifying for SDI benefits, to
individuals who exercise their rights to take family leave under the California
Family Rights Act.
The California Family Rights Act makes it an
unlawful employment practice for all public employers and any private industry
employer of 50 or more employees, to refuse to grant a request by an employee
to take unpaid family leave of up to 12 workweeks in a
year. The employee can request leave for birth or adoption of a child; or to
care for the serious health condition of the employee, child, spouse or parent.
For the full text of the bill, click here > SB656
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