California State Disability Insurance Cap Being Lifted

As of September 30, 2022, the California legislature passed Senate Bill 951 repealing the wage ceiling for purposes of contributions into the California State Disability Insurance (SDI) Program.  The repeal is effective as of January 1, 2024. For 2023 the maximum wage base subject to SDI withholding is $153,164 at a 0.9% rate so the maximum withholding amount for 2023 is $1,378.48.

Beginning in 2024, all California wages will be subject to the SDI tax. Currently, there is no clarification from California as to whether there will be a change to the SDI tax rate for 2024.  Additionally, starting in 2023 California employers will have to pay an added 0.3% on the first $7,000 of wages paid amounting to an increase of $21 per employee in 2023. This additional charge is due to the State of California’s decision not to comply with the Federal Unemployment Tax (FUTA) rules which resulted in a loss of Federal funding.

Another aspect of the newly passed bill increases the limits on California State Disability Insurance and Paid Family Leave benefits paid to claimants. SB 951 also extends the existing wage replacement rate of 60-70% which sidesteps the previously scheduled decrease to 55% in 2023.

The changes brought on by this bill will affect California employers so if you have any questions about how this may impact your company’s payroll, please reach out to your DKC representative.