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California State Disability Insurance (SDI)

Overview

California's State Disability Insurance (SDI) program provides short-term benefit payments to eligible workers who are unable to work due to non-work-related illness, injury, or pregnancy. ProPay automatically calculates and withholds SDI contributions from employee wages.

SDI Rates and Limits

Note: SDI rates are updated annually by the California Employment Development Department (EDD). Always verify current rates at https://edd.ca.gov at the start of each calendar year.

  • Employee SDI rate: 1.3% for 2026 (rates change annually - verify at EDD)
  • Employer SDI rate: 0.0% (employers do not contribute to SDI)
  • Wage ceiling: No limit (effective January 1, 2026, per Senate Bill 951)

Important Change for 2026

Effective January 1, 2026, Senate Bill 951 removes the taxable wage limit for SDI contributions. This means:

  • All wages are subject to SDI withholding
  • There is no maximum withholding cap per employee
  • ProPay will calculate SDI on the employee's entire gross wages

How SDI is Funded

California SDI is funded entirely by employee contributions. Employers:

  • Withhold SDI contributions from employee paychecks
  • Do not contribute to the SDI program
  • Remit withheld amounts to the EDD quarterly

Setting Up SDI in ProPay

ProPay automatically handles California SDI calculations for employers subject to California unemployment insurance.

  1. Go to Employer > Employer Setup > Screen 3 (Tax Exemptions and Benefit Accruals).
  2. In the SDI section, verify the SDI rate is set to the current year's rate (check EDD website).
  3. Confirm the wage ceiling setting reflects "no limit" for 2026 and beyond.
  4. Click Save.

ProPay will automatically:

  • Calculate SDI withholding on all wages
  • Apply the correct rate
  • Track withholdings for reporting

Reporting and Remittance

Quarterly Reporting

California employers must report and remit SDI withholdings quarterly using Form DE 9, Quarterly Contribution Return and Report of Wages.

Quarterly Due Dates:

Quarter Period Due Date
1st Quarter January - March April 30
2nd Quarter April - June July 31
3rd Quarter July - September October 31
4th Quarter October - December January 31

Remittance

Submit SDI withholdings along with:

  • Unemployment Insurance (UI) contributions
  • Employment Training Tax (ETT)

Use the California EDD's e-Services for Business portal for electronic filing and payment.

Troubleshooting

SDI Not Calculating on All Wages

  1. Verify your ProPay version includes the 2026 wage ceiling update.
  2. Go to Employer > Employer Setup > Screen 3 and check the SDI section to ensure the wage ceiling is set to unlimited.
  3. Update ProPay if necessary to receive the latest tax table updates.

Incorrect SDI Withholding Rate

  1. Go to Employer > Employer Setup > Screen 3 and confirm the current year's SDI rate.
  2. Verify the rate matches the EDD's published rate for the current year.
  3. If the rate is incorrect, update it and recalculate affected paychecks.

SDI Showing as Employer Tax

California SDI is an employee-paid tax only. If ProPay shows employer SDI contributions:

  1. Go to Employer > Employer Setup > Screen 3 (Tax Exemptions and Benefit Accruals).
  2. In the SDI section, verify the employer SDI rate is set to 0.0%.
  3. Check that you haven't inadvertently entered an employer rate.

Frequently Asked Questions

Q: Does California have employer-paid disability insurance? A: No. California SDI is funded entirely by employee contributions. Employers only withhold and remit the tax.

Q: Are there any employee exemptions from SDI? A: Most employees are covered. Limited exemptions include certain government employees, railroad workers covered by the Railroad Unemployment Insurance Act, and some family employees.

Q: What is the difference between SDI and Paid Family Leave (PFL)? A: PFL is part of the SDI program. The SDI rate covers both disability benefits and Paid Family Leave benefits. There is no separate withholding for PFL.

Q: How do I handle SDI for employees who work in multiple states? A: California SDI applies only to wages paid for work performed in California. Consult with a payroll tax professional for multi-state employee situations.

Additional Resources

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