California SDI and PFL Increases for 2018

January 31, 2017 Andrew Larsen

In an effort to provide assistance to low income workers and shrink the growing income gap, California Gov. Jerry Brown signed off on AB 908; a bill that will increase Social Disability Insurance (SDI) and Paid Family Leave (PFL). The bill is set to go in effect on Jan. 1 2018.

The new bill raises the rate of SDI and PLF from 55% to 60% for employees earning more than one-third the average quarterly wage and to 70% for workers who earned less than one-third. It will also remove the one week waiting period for PFL claims.

For business leaders, this means more employees will opt to use the full six weeks of PFL, because prior to the increase, many employees could not survive off of only 55% pay compensation. In order to fund the increase, the state is relying on employee contributions ranging from 0.1% to 1.5%. For 2016, the rate was 0.9% of wages. Currently, extra funding will not be required from employers.

Those opposed to the bill were upset over additional employee contributions, and many viewed the increase as another complication in an already complex tax system.

Those in favor argued that the bill encourages employees to spend more time with family, like bonding with a newborn child or caring for an ill family member. They also argue that this change will be more fair to low income employees who, in the past, were the least likely to use this benefit.

Former President Barack Obama took notice of the bill and was quick to address it by saying the bill provided “basic security” and would bring peace of mind to California workers. He states that, “Congress needs to catch up to California—and to countries all over the world—by acting to guarantee paid family leave to all Americans.”

As it stands, California is only one of three states that mandates pay for family leave. The other two are New Jersey and Rhode Island. New York is implementing its own PFL on Jan. 1 2018.

While the new bill goes into effect on Jan. 1 2018, it is also set to expire at the end of 2021. On March 1, 2012, the Employment Development Department (EDD) will report to the California Legislature the effects of AB 908 they will review whether to extend or modify the law.

 

About the Author

Andrew Larsen

Andrew is a marketing Communications Specialist for Zuman, the one solution for HR, payroll, and benefits administration that supports growing small to midsize businesses.

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