California, Hawaii, New Jersey, Rhode Island, New York and Puerto Rico have state mandated short-term disability programs which provide wage replacement to eligible employees. Each state funds their disability program differently, whether it be through employee wage deductions and/or employer contributions. New York and Puerto Rico have set their contribution and benefits amounts by statute, while the other states annually increase their rates. The 2021 contribution and benefit rates are outlined below.
Contributions: California State Disability Insurance is funded through employee wage deductions. Starting January 1, 2021, deductions increase to 1.2% on the first $128,298 in taxable wages (from $122,909 in 2020), increasing the maximum deduction to $1,539.58 (from $1,229.09 in 2020) annually.
|Employee (EE) wage deductions||1.2% from EE’s wages, up to $128,298 (max $1,539.58 annually)||1% from EE’s wages, up to $122,909 (max $1,229.09 annually)|
|Maximum Weekly Benefit||$1,357||$1,300|
Maximum Benefit: The 2021 maximum weekly benefit increases to $1,357 per week (from $1,300 per week in 2020).
Contributions: Hawaii Temporary Disability Insurance (TDI) requires employers to maintain private TDI coverage or set up an approved self-insured plan. Employers can deduct up to 0.5% of employees’ weekly wages, up to a maximum set annually, to help pay for TDI coverage. For 2021, the maximum weekly wage decreases to $1,102.90 (from $1,119.44 in 2020), decreasing the maximum deduction to $5.51 per week (from $5.60 in 2020). This means employers can deduct up to $5.51 per week from employees’ wages to pay for TDI coverage.
|Employee (EE) wage deductions||0.5% of EE’s wages, up to $1,102.90 weekly (max $5.51 weekly)||0.5% of EE’s wages, up to $1,119.44 weekly (max $5.60 weekly)|
|Maximum Weekly Benefit||$640||$650|
Maximum Benefit: The 2021 maximum weekly benefit decreases to $640 per week (from $650 per week in 2020).
Contributions: New Jersey Temporary Disability Benefits (TDB) are funded by both employee and employer contributions. The 2021 contribution rates are as follows:
- The employee contribution is increasing to 0.47% (from 0.26% in 2020) on the first $138,200 (from $134,000 in 2020) of wages, up to a maximum of $649.54 annually (from $350.74 in 2020).
- The employer contribution varies from 0.1% to 0.75% of taxable wages earned by each employee. In 2021, the taxable wage increases to $36,200 (from $35,300 in 2020), up to a maximum of $271.50.
Maximum Benefit: The weekly benefit will be 85% of AWW, up to a maximum of $903 per week.
Change for 2020: To qualify for TDB in 2021, employees must have worked at least 20 weeks, earning at least $220 weekly, or a combined total of $11,000 in their “base year.” This is a change from the eligibility requirements in 2020, which required employees to work at least 20 weeks, earning at least $200 weekly, or a combined total of $10,000 in their “base year.”
|Employee (EE) wage deductions||0.47% on the first $138,200, up to $649.54 annually||0.26% on the first $134,900, up to $350.74 annually|
|Employer Contribution||Varies from 0.1% to 0.75% on the first $36,200||Varies from 0.1% to 0.75% on the first $35,300|
|Maximum Weekly Benefit||85% of AWW weekly wage, up to a max $903||85% of AWW weekly wage, up to a max $881 (from July 1, 2020)|
New Jersey Resources
Contributions: Rhode Island Temporary Disability Insurance (TDI) is entirely financed through employee payroll deductions. For 2021, employee wage deductions increase to 1.3% of the first $74,000 in wages (from 1.3% of the first $72,300 in 2020).
|Employee (EE) wage deductions||1.3% of first $74,000 in earnings||1.3% of first $72,300 in earnings|
|Maximum Weekly Benefit||$887||$867|
Maximum Benefit: In 2021, the weekly benefit increases to $887 per week (from $867 per week in 2020).
Rhode Island Resources
There is no 2021 change to the New York Disability Benefits Law, which requires employers to maintain a private disability benefit insurance policy or set up an approved self-insured plan. Employers can choose to cover the entire cost of providing disability benefits or can withhold 0.5% of employee wages, up to $0.60 per week, to help pay for the coverage. The maximum benefit allowance is up to $170 per week.
There is no 2021 change to the Puerto Rico disability law, which is funded by employers and employees equally. The disability tax is 0.6% on the first $9,000 of wages (employers can deduct 0.3% from employees’ wages). The maximum benefit allowance is up to $113 per week.
Employer Action Items
- Employers who have employees in states that have mandated disability programs should ensure they update employee payroll deductions and/or employer contributions with 2021 rates, as applicable.
- Employers should work with their payroll vendor to ensure any employee wage deductions are properly being withheld according to the 2021 rates.
- Sequoia One Clients ONLY: For clients with employees in states that have mandated disability programs, your Sequoia One systems will be updated with the 2021 rates, as necessary.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved