The current State Disability Insurance (SDI) and Paid Family Leave (PFL) programs pay a 55% wage replacement weekly benefit ranging from a minimum of $50 to a maximum of $1,173 per week in 2017. There is a seven day waiting period to receive benefits under both the SDI and PFL programs, although the PFL waiting period is waived for new mothers transitioning from SDI to PFL.
AB 908, which takes effect January 1, 2018, makes two major changes to the SDI and PFL programs:
- Increases the wage replacement rates for SDI and PFL from 55% to:
- 70% for individuals who earned less than one-third of the state’s average quarterly wage; or
- 60% for individuals who earned one-third or more of the state’s average quarterly.
- Eliminates the one-week waiting period for PFL claims (but not for SDI claims).
Goal of AB 908
SDI and PFL claims are paid from the state’s Disability Insurance Fund, which is funded by employee contributions. The goal of the bill is to increase utilization, particularly among lower wage earners who often don’t utilize the benefit because they cannot afford to receive 55% of their pay during the leave period.
2022 Sunset Provision
The SDI and PFL benefit increases in AB 908 that take effect in 2018 are scheduled to expire after a four-year trial run concluding at the end of 2021. The EDD will report to the California Legislature by March 1, 2021 on the effects of AB 908, at which point the Legislature will determine whether to extend or modify the changes into future years.
Potential Employer Action
Because these programs are funded by payroll deductions, there is no direct action employers need to take outside of possibly updating their employee handbook and benefits communication materials. Employers with short and long-term disability insurance, however, may want review their benefit plans to ensure they are still providing value.