If you have contributed a portion of your income as part of a state disability insurance plan, you will note that these contributions will appear on your W-2. Understanding how this information is presented and where it will appear on your W-2 can help you better understand both the benefit of SDI on your current finances as well as the methods used by the state and federal government to accurately record these contributions.
If you have noticed an "SDI" contribution on your W-2, this represents the funds that you have paid into a state disability insurance program. SDI programs provide valuable financial assistance to individuals on a short-term basis who have lost the ability to work due to either a physical or mental disability.
The Basics of SDI
State disability insurance, often referred to as SDI, acts as a short-term benefit program for individuals who are currently unable to work due to disabilities that are not directly related to their profession. Currently in the United States, there are five states that provide some form of disability insurance plan, those being California, Hawaii, New Jersey, New York and Rhode Island.
Although similar programs exist across the country, the SDI program of California is the only support system of its type in the country that has this exact name. Currently, the Employment Development Department in California manages the SDI program, which is also referred to as CASDI.
SDI Funding Structure
Each of these programs maintains a similar structure by which funds are contributed to the program and then distributed to individuals who apply for them. Although the exact names of these programs differ, they operate in fundamentally the same fashion. Employees are required to contribute a small portion of their paychecks to the statewide SDI program, which, in turn, will provide these benefits back to them in the event that they are needed. Employers also have the option to contribute to SDI programs, although it is not legally required. The specific size of the contribution required by employees varies on a state-by-state basis. Similarly, the amount an individual must work during the year in order to qualify can vary.
Who Is Covered by SDI?
According to recent statistics, nearly 18.3 million workers in California regularly contribute to and are covered by the SDI program. As mentioned previously, regular payroll deductions are used fund this program, which in turn provides a maximum of 52-week benefits for individuals suffering from physical or mental disabilities. By definition, a qualifying disability includes any illness or injury that effectively prevents an individual from working at their standard place of employment. It is also important to note that "disability" in the context of SDI includes a variety of other short-term medical scenarios, including pregnancy, birth and some elective surgeries.
SDI Benefit Amounts
When an individual is eligible for SDI and files their claim, their specific benefit amount will be determined by a number of factors, including the date of the filing and the previous wages of the applicant. For individuals choosing to file for SDI benefits on or after Jan. 1, 2018, benefits can be anywhere from $50 to $1,216 weekly.
As a general rule, individuals can receive benefits equaling anywhere from 60 to 70 percent of the wages they typically earned between five to 18 months before the claim was made. It is important to note that the SDI rate for 2017 information, for individuals applying prior to 2018, can also be found on the Employment Development Department website.
Filing an SDI Claim
Once an individual has decided to apply for the SDI program, they must complete either the paper form or the online application. After the application has been turned in, applicants are required to complete a weeklong waiting period before benefits can be received. It is also important to note that an individual may be deemed ineligible for SDI benefits if they had less than $300 in wages that were subjected to the standard SDI contribution procedure.
Required Paperwork for SDI
Assuming all criteria are met, the applicant must also submit the official "Physician/Practitioner Certification," in which a medical professional has confirmed that their specific medical condition qualifies as a disability. Without this completed form, benefits cannot be provided. All paperwork regarding the SDI program must be submitted by the applicant within 49 days of the start of the disability. If an individual files this paperwork late, the possibility exists that they may lose access to their coverage.
State Disability Contributions
If you live in a state that requires SDI contributions, the amount of money deducted from your paycheck and paid into this program will appear on your W-2. In the state of California, an employer is legally required to withhold 1 percent of an employee's salary for SDI contributions, with a maximum taxable wage limit of $114,967 annually. Beyond this amount, no further deductions will be made.
Much like any another tax, the record of these contributions and their subsequent impact on your income will appear on your W-2. Generally speaking, your SDI contribution will be recorded in Box 14 of your W-2, labeled "Other." In the event that your employer has opted to contribute a portion of your SDI duties themselves, this contribution will appear in Box 16 on your W-2.
Deducting SDI Contributions
For those who have contributed to an SDI program, the contributed funds are tax deductible. This money should be added into your paid state income tax calculations and recorded in Schedule A of IRS Form 1040. Keep in mind that the specific details of filing IRS Form 1040 will change beginning with tax year 2018 due to the introduction of a new official form. The IRS has designed a new 1040 form in order to further streamline and simplify the filing process. If you have any additional questions, about these deduction opportunities, you should consult with a tax professional or your employer.
Researching Other SDI Programs
As mentioned previously, a variety of additional SDI-related programs are in effect across the country.
- New York – SDI contributions constitute 1/2 of 1 percent of an employee's income.
- New Jersey – the Department of Labor and Workforce Development manages the Temporary Disability Insurance Program, which offers similar protections for workers. Much like California's SDI program, there are a number of eligibility requirements that must be met in order to receive benefits as part of the program. Workers in New Jersey contribute to the Temporary Disability Insurance Program through regular paycheck deductions.
- Hawaii – Temporary Disability Insurance is also available. Eligibility restrictions apply, and individuals must have worked at least 14 weeks for an employer in the state over the past year in order to apply.
- Rhode Island – maintains a Temporary Disability Program, which was the first of its kind, formally established in 1942. Payroll-deducted payments also form the primary foundation of this particular safety net.