California Senate Bill 951 modifies Statutory Disability and Paid Family Leave Benefits

By: HUB's Absence Management Team

California Senate Bill No. 951, signed by Governor Newsom on September 30, 2022, increasing wage replacement rates for lower wage earners under California’s State Disability Insurance (SDI) and Paid Family Leave (PFL) program. Starting January 1, 2025, certain workers will be able to receive up to 90% of their income when taking leave under the program.

Overview: California State Bill 951 Impact to California’s State Disability Insurance (SDI) and Paid Family Leave (PFL) Program

On September 30, 2022, Governor Gavin Newsom signed Senate Bill (SB) 951 which adjusts contribution requirements and benefit amounts under California’s State Disability Insurance (SDI) and Paid Family Leave (PFL) program. These changes, slated to go into effect January 1, 2025, will allow for lower-income workers to receive up to 90% of their normal wage, while other workers will receive up to 70%.

The current program, which will remain unchanged for 2023 and 2024, provides wage replacement of up to 70% for lower-income earners (annual earnings of up to $27,000) and 60% wage replacement for all other workers, up to the weekly maximum benefit ($1,620 for 2023).

The increased benefits provided under SB 951 will be financially accounted for by removing the current payroll tax limit starting January 1, 2024. This will impact all employees who have annual earnings in excess of the 2023 payroll tax limit of $153,164.

Next Steps

Employers should start communicating with their payroll providers now about the removal of the cap in 2024. Employers are also recommended to start communicating this change to all California employees ahead of January 1, 2024 and why the state is implementing these changes. The state has not produced any sample documentation regarding employee communications at this time.

As a reminder, while the payroll tax limit is removed as of January 1, 2024, the increase in benefits provided under these programs does not take effect until January 1, 2025.

HUB’s Workforce Absence Management Team will continue to monitor this and provide updates as needed.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s specific circumstances. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your organization’s particular needs.