Question: What are the new changes to California State Disability Insurance (SDI) and Paid Family Leave (PFL) for 2025?

Short Answer: SDI and PFL benefits in 2025 increase to 70% or 90% of wages (up from 60% or 70%), and the payroll contribution rate increases to 1.2% of earnings (up from 1.1%) with no cap (the wage ceiling was permanently removed in 2024). The 2025 maximum weekly benefit increases to $1,681 per week (up from $1,620).

SDI/PFL Benefits Increase to 70% or 90% in 2025
Governor Newson signed into law SB 1090 September 2024 resulting in the following changes to SDI/PFL taking effect in 2025:

1. Employees can file a claim for SDI or PFL benefits up to 30 days in advance of the anticipated first compensable day.

2. The Employment Development Department must issue a claim payment to the employee by the later of 14 days of receipt of the claim or the date the SDI or PFL claim begins.

3. Employees filing SDI or PFL claims beginning on or after January 1, 2025 will receive a weekly benefit amount between 70%-90% of wages, capped at 63% of the state average weekly wage (AWW).

The maximum weekly benefit amount for 2025 increases to $1,681 (up from $1,620 in 2023-2024).

History of the Increased SDI/PFL Benefit
California State Disability Insurance (SDI) provides short-term wage replacement benefits (up to 52 weeks) to eligible California workers who have a loss of wages when they are unable to work due to pregnancy or a non-work-related illness or injury.

California Paid Family Leave provides up to eight weeks wage replacement benefits to workers who need to take time off work to:

• Care for a seriously ill family member,

• Bond with a newborn, newly adopted child or new foster care placement,

• Participate in a qualifying event resulting from an eligible family member’s military deployment to a foreign country.

In 2018, California temporarily increased the SDI/PFL partial wage replacement benefit from up to 55% of Average Weekly Wage (AWW) to up to 60% for individuals who earned one-third or more of the AWW, and up to 70% for individuals who earned less than one-third of the AWW. These enhancements were scheduled to sunset at the end of 2021.

AB 138, enacted in July 2021, extended these changes through 2022. Absent any further legislation, the SDI/PFL benefit would have reverted back to 55% of AWW in 2023. SB 951 saved the day by extending the increased benefit of 60%-70% of AWW through the end of 2024.

SB 1090 now increases SDI/PFL benefits to 70%-90% for claims beginning on or after 1/1/2025, allows workers to file claims earlier, and imposes a deadline on EDD’s processing timeline to begin payment of benefits.

Additional Increases to SDI/PFL Benefits Starting 2025—Particularly for Lower Wage Earners
For SDI and PFL claims beginning on or after January 1, 2025, individuals who earn 70% or less of the state average quarterly wage will receive a benefit of up to 90% of AWW. Individuals who earn more than 70% of the state average quarterly wage will receive a benefit of up to 63% of AWW. Unlike previous benefit increases, these benefit increases do not include a sunset provision.

Reminder: Elimination of Taxable Wage Limit
SB 951 removed the SDI contribution wage ceiling as of 2024. This means that all wages paid will be subject to the SDI tax (1.2% in 2025; 1.1% in 2024). The removal of the SDI payroll tax cap continues to have the greatest impact on high wage earners.

For example:

• An employee earning $500,000 in 2025 will pay 1.2% of salary for a maximum withholding of $6,000.

• That same employee earning $500,000 in 2023 had a SDI/PFL payroll tax set at 0.9% and capped on earnings up to $153,164, resulting in a $1,378 maximum contribution.

For more details: California SDI Payroll Tax Cap Eliminated in 2024

Other State Paid Family Leave Updates
States continue to expand and enhance paid disability and family leave offerings across the country. The following are a few other notable state law changes taking effect at the start of 2025:

• Delaware Paid Leave
  Starting January 1, 2025, employers will be required to deduct payroll taxes for Delaware Paid Leave. The tax is split equally between the employer and employee. Employers with 10-24 employees must start taxing employees for parental leave (.16%) only. Employers with 25 or more employees must begin taxing employees for family caregiving (.04%), medical leave (.2%) and parental leave (.16%). Employers are required to pay the additional 50% of the tax but can choose to pay more than 50% of the premium. Leaves will commence January 1, 2026.

• Maine Paid Family Medical Leave
  Effective January 1, 2025, employers will begin deducting payroll taxes for Maine Paid Family Medical Leave. Employers with fewer than 15 employees will be required to deduct .5% of wages up to the Social Security wage base ($176,100) from employees. Employers with 15 or more employees will be required to deduct .5% from employees and also contribute an additional .5% up to the Social Security wage base.

• Maryland Paid Family Medical Leave
  Maryland Family and Medical Leave taxation, which was previously scheduled to begin 10/1/2023, was delayed to 7/1/2025.

Summary
California employees will see increased SDI and PFL benefits in 2025. With the elimination of the payroll tax cap, higher wage earners can expect to continue to see a much larger total deduction out of their paycheck in 2025 to fund the benefit increases.

Lower wage earners in California will benefit the most from the changes in SB 951 and SB 1090. Earning a wage below the current cap, they will not see an increase in their SDI contribution, and will receive a greatly increased benefit, providing expanded support for working class families.

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).