State disability insurance (SDI)
State disability insurance (SDI) is a state program replacing part of an employee’s wages lost to off-the-job illness or injury, funded by payroll contributions.
Workers’ compensationWorkers’ compensation. Workers’ compensation is state-mandated insurance that pays medical expenses and partial lost wages when an employee is injured or becomes ill because of their job.Click to open the term covers injuries arising out of the job; state disability insurance covers illness or injury away from work. In a statutory disability jurisdiction you may carry both, because they answer different events and are funded and administered separately. The abbreviation changes by jurisdiction: TDI, DBL, or SINOT. Where a state builds paid leave on its disability program, as California does, deduction lines can look alike. The claims still run under different rules.
Which jurisdictions run a statutory disability program?
Six long-standing programs sit alongside the federal payroll taxesPayroll tax. Payroll tax is the umbrella term for every tax an employer calculates, withholds, or owes because it paid wages.Click to open the term and are tracked separately from them. Every program publishes its own covered wages, contribution rate, and wage limit, which can differ from the state unemployment or FICAFICA. FICA is the federal law, and the payroll tax under it, that funds Social Security and Medicare through matching employee and employer shares.Click to open the term figures. Disability programs also need their own state registrations, separate from the withholding and unemployment accounts. Rates and limits change annually, so confirm current numbers with the administering agency. Benefit taxability depends on the program and on who paid for coverage, a question for the agency or a qualified tax professional.
| JURISDICTION | PROGRAM | FUNDED BY |
|---|---|---|
| California | State disability insurance, which also runs Paid Family Leave | Employees |
| Hawaii | Temporary disability insurance | Employer and employee share the cost |
| New Jersey | Temporary disability | Employer and employee |
| New York | Disability benefits law | Largely employer funded |
| Rhode Island | Temporary disability | Employees |
| Puerto Rico | SINOT | Employer and employee |
- California Employment Development Department, State Disability Insurance
- New Jersey Department of Labor and Workforce Development, Division of Temporary Disability and Family Leave Insurance, Information for Employers
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.