VDI plans are self-insured and are also required by the state to include the state-mandated PFL coverage. The California SDI program is funded through the employee's state disability Insurance tax withholding. The employee contribution rate for SDI is 1. Note: this contribution also funds the California PFL benefit. California SDI provides an employee with up to one year of benefits.
SDI benefits do not have to be reported for tax purposes, unless an employee receives unemployment Insurance UI benefits, becomes unable to work due to a disability, and then begins receiving SDI benefits. In this situation, the employee will get a notice, along with the first reportable benefit payment, advising them that the benefits are being reported to the Internal Revenue Service IRS.
The employee will get a G form the following January, showing the reportable amounts paid no more than the original UI maximum. A copy of the G will also be sent to the IRS.
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Close I sell or want to start selling Lincoln products or I am support staff or a sales assistant. Close I am a dentist or work in a dental office and need to verify patient eligibility. We help employers develop proactive strategies, strong policies and business-oriented solutions to cultivate high-functioning workforces that are engaged, stable and diverse, and share our clients' goals to emphasize inclusivity and respect for the contribution of every employee.
Remember Me. Search Search form Search. LinkedIn Twitter Facebook. All People. All Offices. About Us. You are here Publications. These questions are arising as a growing number of states enact laws to provide income replacement for employees who take leave from work due to their own illness or life event or that of a family member.
Congress enacted the Family and Medical Leave Act in FMLA to protect the jobs of employees taking extended leaves to care for themselves or family members. The key FMLA provisions protect such workers when leave is taken:. Several states have enacted similar family and medical leave FML laws giving additional — and generally more generous — protections than those under the federal FMLA.
None of these state FML laws require the provision of paid leave, although certain states do require employers to provide paid sick leave for the employee's own illness or to allow employees to use available leave for FML.
More recently, some states have begun enacting their own PFML laws. To date, all state PFML laws are structured as state insurance systems funded by payroll taxes. They vary widely, however, on the following issues: determining which party bears the burden of paying the state payroll tax to fund the state insurance system; whether employers offering a private plan are excepted from the state insurance system; and under which state agency's jurisdiction the PFML-sponsored program resides.
In addition, from a federal income tax perspective, neither the Treasury Department nor the IRS has provided guidance on the federal income tax treatment of contributions to, and benefits received from, these new state-sponsored programs. Until such guidance is released, employers and employees must seek their own tax advice. Broadly, the state PFML laws impose contribution requirements in the form of state tax payments to fund the state insurance system.
The state taxes that have thus far been enacted tend to fall into four structural categories: 1 taxes imposed only on the employer, 2 taxes imposed only on the employee, 3 taxes imposed on both the employer and the employee, and 4 taxes imposed on the employer with an option for the employer to deduct certain amounts from employee wages.
Under FUTA, these taxes are imposed on the employer with no corresponding employee share. FUTA and its state counterparts i. Although employees may ultimately benefit from the unemployment insurance coverage funded by FUTA, for federal income tax purposes, the coverage funded by the tax assessed on the employer is not treated as taxable compensation to the employees.
One would expect, therefore, that employees would not be subject to federal income tax on the amounts paid by employers under the District of Columbia PFML system. Because California's statute was enacted in — well before the recent trend — federal guidance exists on the taxation of these employee contributions. Although the CCA advises on whether the employee may claim the contributions as a deductible state tax under IRC Section , rather than whether the initial contribution may be withheld pre-tax, one may infer that the contribution at issue was post-tax because a pre-tax deduction would have mooted the question.
If an employee has received something of value as compensation for services, that value may be excluded from his or her income or wages only if there is a statutory exclusion. In this case, the only exclusion that might apply is provided under IRC Section , which excludes from income employer-provided coverage under an accident or health plan.
Notably, contributions made by an employer for the payment of disability benefits are excludible from the gross income of covered employees under IRC Section See Revenue Ruling For PFML insurance, however, the coverage is broader than disability coverage, potentially covering individuals and events that are not within the scope of IRC Section It is helpful to look to analogous situations to understand whether the broader scope of the new PFML taxes comports with the accident or health plan benefits described in IRC Section , and thus potentially renders IRC Section entirely inapplicable to the payments made by the employee.
For example, before the Supreme Court decision in United States v. Windsor U. Related Information: Where do I report a G for unemployment or paid family leave? Is maternity or parental leave considered paid family leave? Is FMLA considered paid family leave?
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