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California SDI tax rate to
remain at 0.5%
EDD calculations may contradict decision
November 1999
Sacramento, California – The Director of the EDD has announced that the
Governor has determined the contribution rate for SDI is to remain at .5% for
the year 2000.
There had been previous indications from the EDD
that the contribution rate was going to be .7% and perhaps even as high as .8%
but the Governor surprised everyone by keeping it once again at .5%.
Although the new rate announced by the Governor
appears to conflict with the provisions of the California Unemployment
Insurance Code (we are inquiring on how the rate setting formula in the CUIC
could have possibly allowed for such a low SDI rate for 2000) and we will keep
you posted on the results of our inquiry.
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.
Tax Rate for SDI
Until late in October, most officials with the
Employment Development Department were predicting that the SDI tax would
increase above the current 0.5%. However, we have received notice that the rate
will remain at 0.5%. This will increase the maximum tax
contribution from $158.84 (at annual earnings of $31,767) to $231.64
(at the new wage base maximum).
Developments in the State Disability Insurance Plan (SDI)
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.
Indexing to Workers' Compensation Wage Benefits
Until 1992, the SDI benefit and certain wage
replacement provisions of Workers’ Compensation were indexed. Effective January
1, 2000, the indexation between Workers’ Compensation Total Temporary
Disability wage replacement and the maximum weekly benefit under SDI is
reestablished.
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.
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