California to Increase PFL and Disability Pay Beginning in 2025

California has extended its current rates of state disability insurance (SDI) and paid family leave (PFL) compensation through Dec. 31, 2024, and instituted an increase to take effect after that date. The programs are funded by employee contributions on earnings up to a wage limit; however, the wage limit will be removed in 2024.

The changes were signed into law Sept. 30, 2022.

Existing Rate Will Remain in Effect Until 2025

The current 60%-70% wage replacement rates for SDI and PFL were set to expire at the end of 2022. The new law extends those rates through Dec. 31, 2024.

Rate Increase to Take Effect in 2025

The law revises the formulas used to determine SDI and PFML benefits, starting Jan. 1, 2025. The new formulas will increase wage replacement rates to 70%-90%, based on the individual’s wages earned, with lower-wage workers receiving a higher percentage in compensation. Workers making no more than 70% of the state average weekly wage will be eligible for up to 90% of their wages.

Payroll Tax Ceiling Removed

Currently, employees fund the SDI and PFL programs through a payroll tax on their earnings up to a specified amount. The new law removes the taxable wage limit (currently $145,600) as of Jan. 1, 2024, meaning employee wages above that limit will be subject to contributions.

While employers do not pay for the benefits, they must withhold mandatory employee payroll deductions and send those contributions to the state Employment and Development Department for SDI and PFL coverage.

Important Dates

• Sept. 30, 2022 – Law enacted changing SDI and PFL benefit rates.
• Jan. 1, 2024 – Taxable wage limit for SDI and PFL ends.
• Jan. 1, 2025 – New benefit rates take effect. Starting in 2025, lower-income workers will be eligible for up to 90% of their wages while taking leave.

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