eliminated, meaning that all wages will be subject to the 2024 contribution rate with no annual maximum. The 2024 contribution rate has not been announced and may be less than, equal to or greater than 0.9%. Voluntary Disability Plans Employers may offer a stateapproved voluntary plan (VDI) to employees instead of State Disability Insurance. Voluntary programs must meet a specific set of requirements and be approved by the California Employment Development Department (EDD). VDI program requirements include: • Written approval from the majority of employees eligible for coverage • Cannot cost employees more than SDI • Provide all the same benefits as SDI plus at least one that is better • Allow employees to reject the VDI plan and choose SDI coverage • Covered employees must be given a written document that outlines their benefits. • Must be offered to all eligible California employees of the employer. A separate program must be maintained for each FEIN with employees in California. • Must be updated to match any increase in benefits that SDI implements because of legislation or approved regulation The EDD will first grant conditional approval, pending submission of a security deposit based on the amount of the employer’s previous year’s taxable wages and the annual payroll deduction percentage (0.9% in 2023). Once an employer’s VDI is approved, they are no longer required to send State disability payroll deductions to the state, but rather the funds should be placed in a separate trust fund to pay their employees’ disability and paid family leave claims. An assessment paid to the state based on employees’ taxable wage amount is still required annually. Next Steps for Employers Work with your EPIC team to determine if a VDI plan is a good fit for your organization/employees: • Do you have a highly paid workforce that will be adversely affected by the removal of the wage cap on SDI contributions? • Is your disability and PFL incidence rate low that would allow for a lower contribution rate or wage cap than SDI? • Is your company prepared to assist in funding the VDI plan in the event employee contributions are not sufficient to pay claims and administrative costs, especially in the early years? • Are you working with an STD claims administrator that can also manage a VDI plan or will you need to find a new or separate vendor? • Is your benefits/financial team equipped to take on the additional administrative and financial reporting responsibilities required by the EDD? • Does your company operate under a single FEIN within California? Employers with multiple FEINs must maintain separate plans for each FEIN including separate bonds and bank accounts. If you would like more information on this change, EPIC will provide details to CNCDA members. A Alison McCallum has been in the employee benefits industry for over 20 years and personally works with more than 60 Southern California Dealerships. She is a Principal with EPIC Insurance Brokers and Consultants, CNCDA’s only licensed Health and Workers Comp. Insurance broker. With this partnership, EPIC offers unique dealership expertise and services available to CNCDA dealer members at no cost. If you have questions or would like further information, please feel free to contact her at (949) 417-9136 or alison.mccallum@epicbrokers.com. 26 California New Car Dealer Quarterly
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