In 2018, California’s State Disability Insurance (SDI) and Paid Family Leave (PFL) benefits were temporarily enhanced to increase wage replacement from up to 55% of average weekly wages (AWW) to up to 60% for individuals who earned one-third or more of the AWW, and up to 70% for individuals who earned less than one-third of the AWW. These enhancements were anticipated to sunset at the end of 2021, but in July of 2021, Assembly Bill No. 138 extended these changes through 2022.

On September 30, 2022, California’s Senate Bill No. 951 was signed into law, extending the SDI/PFL benefits enhancements through to the end of 2024 and then, for 2025, increasing them again up to 63%-90% of AWW.

Taxable Wage Limit Eliminated in 2024

To fund these enhancements, the bill repealed the taxable wage limit. As such, beginning on January 1, 2024, all California wages will be subject to SDI tax. California has yet to clarify whether there will be a change to the SDI tax rate in 2024.

For 2023, the maximum wage base subject to withholding is $153,164 at a 0.9% SDI/PFL contribution rate providing a maximum withholding amount of $1,378.48. The maximum weekly benefit amount is $1,620. Also, starting in 2023, California employers have had to pay an additional 0.3% on the first $7,000 of wages paid, or $21 per employee. These changes have been in effect since January 1, 2023, as initially reported in this Sequoia Foreword blog post.

Employer Action

  • California employers will want to ensure applicable employee payroll deductions and employer contributions are updated.
  • Employers should contact their payroll providers with any questions on how this recent legislation may impact their company payroll.

Sequoia One PEO Clients Only: Sequoia One will update SDI tax deductions for CA worksite employees based on the above updates.

Additional Resources

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog. © 2023 Sequoia. All Rights Reserved.

Tina Barile — Tina is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Tina enjoys being with family, cooking, reading, and playing sports.