Social security schemes in the United States are robust and although replete with red tape save thousands of lives each year. The State Disability Insurance is one such scheme that has been useful for individuals suffering from short-term non-work-related issues.

In this article, we take you through what SDI stands for, how it is taxed, and how individuals can file a claim for SDI online.

What Does SDI Stand For?

State Disability Insurance (SDI) is a state initiative that provides financial benefits to Californians and New Yorkers who have non-work-related short-term disabilities. 

What Is SDI Tax?

An SDI tax is levied to contribute to a State Disability Insurance. It is a payroll tax that a few states have made mandatory. SDI tax proceeds like NY SDI and CA SDI tax fall under a state disability insurance system (SDI disability). It offers financial support to workers who cannot work due to a physiological or psychological impairment unrelated to their job.

California and New York are some of the states with a tax officially called an SDI tax. However, numerous states offer temporary disability insurance (TDI) that operates identically.

Workers’ compensation insurance is a type of insurance that businesses provide. 

Where Is SDI Applicable?

Six jurisdictions maintain state disability insurance (SDI tax) systems:

  • California
  • Hawaii
  • New Jersey
  • New York
  • Puerto Rico, and
  • Rhode Island

Additionally, nine states have or will shortly have paid family and medical leave (PFML) insurance plans in place. These include California, Connecticut, the District of Columbia, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington.

According to the region, the individual can pay full SDI and/or PFML payments through wage withholding. For example, the CA SDI withholding rate is different from the NY SDI withholding rate. Additionally, management and the staff may split the cost of the insurance. These jurisdictions often let companies utilize private insurance/self-insured plans instead of contributing to the SDI tax’s public insurance fund. The State Controller’s Office evaluates and holds back the payments.

Is SDI Taxable?

SDI is the state of California’s disability insurance. It is a compulsory tax. Whenever individuals use SDI benefits to replace UI compensation, the federal government taxes the SDI, but not from California. When filling out your W2, place your CA SDI number in box 14 instead of 19 (if applicable). In this way, it will accumulate as part of the state or local taxable income.

What Is the SDI Tax Rate?

Because temporary disability insurance schemes differ by region, each state has its taxation rate. The following are the tax rates for each state with a short term disability program as of 2021: 

  • The SDI tax rate in California is 1.20% of SDI taxable wages per individual annually. The total tax per employee per year is USD 1,229.09.
  • The Temporary Disability Insurance levy in Rhode Island is 1.3% of the worker’s income.
  • Companies in Hawaii have the option of covering the cost of temporary disability insurance for their employees. They can also withhold up to 0.5% of a staff’s weekly pay, limited to a total of USD 5.60.
  • The individual participation rate for temporary disability in NJ SDI is 0.26% of the taxable pay baseline. It is USD 134,900. Employees can contribute up to USD 350.74 each year.
  • Businesses in New York have the option of bearing the cost of state disability insurance for all personnel. They can also withhold up to USD 0.60 for the NY SDI from qualified employees’ income per week.

Application Process for a Non-work-related Injury or Illness

Employees can apply for State Disability Insurance payments if they cannot work due to a non-job-related accident or sickness.

  • The EDD offers basic guidelines and a video about how to make an SDI disability claim electronically.
  • For applying a claim by paper, the individual can collect the form from the SDI Office. The other option is getting it from the employer, the medical consultant’s office. Additionally, one can also purchase a physical form online via EDD’s website and publications. The portal will mail the form to you, and EDD outlines how to ship an SDI claim.

Users can enter their application as early as nine days following the disability. That refers to the time after which they were unable to work. However, they must apply before 49 days of becoming disabled or be denied payments. Further, they must attach a letter detailing why they are submitting late if registering after 49 days.

An employee completes part A of the application, and a general practitioner completes the Part B of the form. A general practitioner is a person who provides medical verification of the impairment. Any claim is unacceptable unless an applicant fills both Parts A and B.

State Disability Insurance and the Benefits of a Paid Family Leave 

State Disability Insurance and the Benefits of a Paid Family Leave 

Short-term Disability Insurance (DI) and Paid Family Leave (PFL) compensation substitution incentives are available under the State Disability Insurance plan. In particular, they are available to qualifying individuals who are employed or actively looking for employment.

Individuals who cannot work due to a non-job-related sickness or injury, pregnancy, or childbirth may receive State Disability Insurance benefits. Anyone will be eligible for PFL if they are,

  • Providing facility and care to a critically sick relative
  • Making a connection with a new child 
  • Enrolling in a qualified activity if a family member is serving in the military services of another country

Log into the State Disability Insurance Online account to claim the benefits. Read all EDD communications, complete online forms, or update your profile.

Information Required to File a State Disability Insurance Claim Online

To make an SDI claim, individuals must supply the following details.

  • A valid federal ID 
  • The complete legal name, as it stands in the driver’s license or identification card
  • Birthdate as it appears on the CDL or ID
  • Identification of Social Security
  • Recent employer’s business identity, contact information, and postal address, as seen on the W2 or paystub
  • The details of the last day of work for typical or usual responsibilities 
  • Alternatively, the day the individual started working for less than the complete or modified duty

Which Individuals Does the SDI Scheme Not Cover?

  • Most administrative employees, whether federal, regional, municipal or local 
  • Non-industrial Disability Insurance covers some government employees (NDI)
  • Several domestic help and staff
  • Employees of the Interstate Railroad
  • Some members of non-profit organizations’ staff
  • Self-employed individuals and small company owners that do not spend on Elective Coverage

Why is the State Disability Insurance Important? 

Employees briefly incapable of working due to a non-job-related condition can receive assistance payments under the state’s disability tax scheme. The State Disability Insurance tax also funds Paid Family Leave (PFL) benefits.

Furthermore, other employees who cannot work are also eligible for the PFL program. Their eligibility includes caring for a critically ill family member or bonding with a new infant.

Soon, State Disability Insurance disability schemes and SDI tax will make their way in many other states.