What Is the SDI Deduction on My Paycheck?

State Disability Insurance (SDI) is a program many employees encounter as a deduction on their paychecks, often without a clear understanding of its purpose. This deduction contributes to a state-mandated insurance plan designed to offer partial wage replacement. It serves as a financial safety net for workers who experience a temporary loss of income due to non-work-related illnesses, injuries, or conditions such as pregnancy.

Understanding State Disability Insurance

State Disability Insurance, or SDI, functions as a short-term wage replacement program. Its core purpose is to provide financial assistance to eligible employees who find themselves unable to perform their work duties due to a non-work-related illness or injury, or a medically disabling condition related to pregnancy or childbirth. This insurance is distinct from workers’ compensation, which covers job-related incidents, and federal disability programs, which address long-term disabilities. SDI programs are mandated and administered at the state level, meaning their rules and specifics can vary depending on the state where an individual works. These programs aim to alleviate some of the financial burden when an employee cannot earn their regular wages.

How SDI is Funded and Appears on Your Paycheck

The funding for State Disability Insurance programs comes from mandatory employee contributions. These contributions are deducted directly from an individual’s gross wages and appear as a specific line item on a paycheck. Common labels for this deduction include “SDI,” “CA SDI,” or “CASDI-E,” indicating an employee contribution to the state’s disability insurance.

The calculation of these contributions is based on a percentage of an employee’s wages. While the exact percentage and any applicable annual wage cap can differ by state, a portion of earnings is withheld. For instance, in some states, the deduction might be a fixed percentage of all wages earned, with no upper limit on the amount subject to the deduction. This system ensures that the program is funded by the workers who may eventually rely on its benefits.

Eligibility for SDI Benefits and What They Cover

Eligibility for State Disability Insurance benefits requires an individual to be unable to work due to a non-work-related medical condition, have sufficient prior wages from which SDI contributions were withheld, and be under the care of a licensed medical professional. A common requirement is having earned at least $300 in wages during a specified “base period,” which refers to a 12-month timeframe preceding the disability claim. There is a waiting period, such as seven days, before benefits commence.

SDI programs encompass two main types of benefits: Disability Insurance (DI) and Paid Family Leave (PFL). DI provides partial wage replacement for an individual’s own non-work-related illness, injury, or pregnancy. PFL, where available, extends benefits for those needing to care for a seriously ill family member or to bond with a new child. Benefit amounts are calculated as a percentage, ranging from 60% to 90%, of an individual’s average weekly wages earned during a specific base period, up to a maximum weekly benefit amount. The duration of these benefits is short-term, with DI benefits lasting up to 52 weeks and PFL benefits for a shorter period, such as 8 to 12 weeks.

Where SDI Programs Exist

State Disability Insurance programs are not uniformly available across the United States. Only a limited number of states currently operate mandatory SDI programs. These include California, Hawaii, New Jersey, New York, and Rhode Island.

Several other states and jurisdictions have established broader Paid Family and Medical Leave (PFML) programs, which often incorporate or expand upon temporary disability insurance. States with such comprehensive programs include:
California
Colorado
Connecticut
Delaware
Maine
Maryland
Massachusetts
Minnesota
New Jersey
New York
Oregon
Rhode Island
Washington
District of Columbia