As of 2024, five US states require employers to provide short-term disability insurance to workers: California, Hawaii, New Jersey, New York, and Rhode Island. Eligibility requirements, employer contributions rates, and authorized providers vary by state—but in general, businesses with at least one non-owner employee who performs work in one of these states need to obtain coverage to maintain compliance with state law.
What is state disability insurance (SDI)?
State disability insurance (SDI) refers to a collection of state programs that require employers to offer short-term disability insurance to workers. Some states refer to this coverage type as temporary disability insurance (TDI).
SDI can provide partial wage replacement to employees who are unable to work due to one of the following scenarios:
- Pregnancy or childbirth
- Non-work-related illness or injury
- Mental health conditions
- Recovery from non-elective surgeries
Typically, employees become eligible after a brief unpaid waiting period and can receive benefits for a maximum of 26 to 52 weeks depending on the state.
SDI vs. PFML vs. FMLA
In some states, SDI is part of a larger paid family and medical leave (PFML) program. PFML can offer eligible employees paid medical, caregiving, parental, deployment, and safe leave. As of 2024, 12 states and the District of Columbia offer PFML. PFML is available in every state that offers SDI except for Hawaii.
Employees can also be eligible for unpaid leave under the federal Family and Medical Leave Act (FMLA). FMLA requires covered employers to offer eligible employees up to 12 weeks of job-protected parental, medical, caregiving, or deployment-related leave and up to 26 weeks of leave to care for an injured or ill servicemember.
Can you buy SDI coverage from a private insurance company?
California, Hawaii, New Jersey, and New York allow employers to fulfill SDI requirements by purchasing private insurance coverage. Only Rhode Island mandates participation in the state plan.
Some employers in states without required SDI choose to offer disability insurance, which they obtain through a private insurance company. Doing so can provide an employment incentive as part of an employee’s total benefits and compensation package. It can also help employers retain workers who need to take parental, caregiving, or medical leave. If an employer doesn’t offer this benefit, some workers may also choose to pursue coverage on their own.
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Does SDI include job protection?
Although employees typically remain employed while collecting SDI benefits, only Rhode Island includes job-protection provisions in its SDI program. Employees in other states may be entitled to job protection under FMLA or other state laws, such as the California Family Rights Act (CFRA). Employees who are terminated while receiving SDI will continue to receive benefits according to the terms of the policy. Terminated workers may also be eligible for unemployment insurance (UI) benefits.
SDI vs. long-term disability insurance
Some employers also offer long-term disability plans, which pay benefits to workers who are unable to work for an extended period of time due to an injury or illness. Generally speaking, long-term and short-term disability insurance cover the same types of conditions—the main differences are that long-term disability insurance applies a longer mandatory waiting period, offers a longer benefit period, and only kicks in when other available coverage options have been exhausted.
As an example, an employee who is injured in a car accident might qualify for short-term disability insurance after a waiting period of seven days. If the employee is not yet able to return to work after 30 weeks and short-term disability benefits are exhausted, the employee could then qualify for long-term disability insurance.
Wage replacement rates and eligibility periods vary by policy—but common coverage lengths are two, five, or 10 years or until a worker reaches retirement age. In some cases, long-term disability benefits continue for life.
SDI vs. workers’ comp
SDI only covers injuries or illnesses that occur outside of the scope of an employee’s work. Wage replacement for on-the-job injuries or illnesses falls under the scope of workers’ compensation insurance. Unlike SDI, workers’ compensation insurance can also cover an employee’s medical bills and legal costs.
SDI and workers comp are also funded differently: Employers fund workers’ compensation premiums, while SDI premiums are at least partially funded by employee payroll deductions in each state except for New Jersey.
As of 2024, every state except for Texas requires covered employers to offer workers’ compensation insurance.
Short-term disability insurance requirements by state
As of 2024, five US states require employers to provide temporary disability benefits. States with disability insurance laws include California, Hawaii, New Jersey, New York, and Rhode Island.
Most states calculate plan costs as a percentage of eligible employee wages, which are wages earned up to the state’s taxable wage base limit. Earnings that exceed the taxable wage base amount are not subject to additional withholding or employer contribution requirements.
Here’s an overview of program types and contribution schedules by state.
| State | Program Types | Includes job protection? | Wage replacement rate | Maximum weekly benefit amount | Maximum benefit period | Employee’s Contribution | Employer’s Contribution | Taxable wage base |
|---|---|---|---|---|---|---|---|---|
| California | State or private | No | 60–70% | $1,620 | 52 weeks | 0.9% of eligible wages | None | $153,164 annually |
| Hawaii | Private or self-funded | No | 58% | $765 | 26 weeks | Up to half of premium cost, but not more than 0.5% of an employee’s weekly wages | Remainder of premium after employee contributions | $1,318.48 weekly |
| New Jersey | Private, state, or self-insured | No | Up to 85% of wages | $1,025 | 26 weeks | None | Varies | $156,800 annually |
| New York | Private, state, or self-insured | No | 50% | $170 | 26 weeks | Up to 0.5% of employee’s wages but not more than $0.60 per week | Remainder of premium after employee contributions | None |
| Rhode Island | State | Yes | 4.62% total of wages earned in the highest quarter of the base period | $1,007 | 30 weeks | 1.1% of eligible wages | None | $84,000 annually |
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California
- Wage replacement rate: 60–70%
- Maximum weekly benefit amount: $1,620
- Maximum benefit period: 52 weeks
- Employee eligibility requirements: Earned $300 during the base period
California’s disability benefits law requires businesses that pay $100 or more in wages in a calendar quarter to provide short-term disability insurance to employees. Employers aren’t required to fund premium costs but must withhold and remit employee contributions.
California employers can participate in the California State Disability Insurance (SDI) program or offer coverage through a private insurer after receiving approval from the EDD. California refers to private disability coverage as a “Voluntary Plan.”
The EDD requires Voluntary Plans to meet the following conditions:
- Offer the same benefits to employees as SDI
- Provide at least one benefit that is better than SDI
- Not cost employees more than SDI
- Be updated to match any increase in benefits that SDI implements from legislation or approved regulation
Hawaii
- Wage replacement rate: 58%
- Maximum weekly benefit amount: $765
- Maximum benefit period: 26 weeks
- Employee eligibility requirements: At least 14 weeks of employment at 20 hours a week or more and at least $400 of earnings in the previous 52 weeks
Businesses with at least one employee in Hawaii (with a few exclusions) are required to offer temporary disability insurance. Hawaii doesn’t maintain a state TDI fund—employers must self-fund or obtain coverage through a state-authorized commercial insurance carrier. Hawaii allows employers to deduct up to 50% of premium costs from employee payroll as long as deductions don’t exceed 0.5% of weekly wages.
New Jersey
- Wage replacement rate: 85%
- Maximum weekly benefit amount: $1,025
- Maximum benefit period: 26 weeks
- Employee eligibility requirements: At least 20 weeks of employment earning at least $260 weekly or a combined total of $13,000 in the base year
If you have employees in New Jersey, you are required to provide temporary disability insurance to employees. New Jersey employers can self-insure, participate in the state plan, or select a private plan that meets the state’s minimum TDI requirements:
- Private-insured plans must be at least as liberal in benefit amounts, eligibility requirements, and duration of payments as the state plan
- All private plans must be approved by the state’s Division of Temporary Disability Insurance
As of 2024, New Jersey employers contribute 100% of TDI costs.
New York
- Wage replacement rate: 50%
- Maximum weekly benefit amount: $170
- Maximum benefit period: 26 weeks
- Employee eligibility requirements: All employees
New York requires employers to provide State Disability (SDI) coverage to employees for an off-the-job injury or illness. Employers can purchase private insurance through a New York State Department of Financial Services authorized carrier, purchase coverage through the New York State Insurance Funds (NYSIF), or self-insure if qualified. Like Hawaii, New York allows employers to deduct up to half of premium costs from employee payroll providing that deductions don’t exceed 0.5% of employee payroll (and, in New York, $0.60 per week).
Exceptions only apply to individuals not considered employees by the state. Exclusions include the following nonprofit employees:
- Clergy and members of religious orders that are performing religious duties
- People engaged in a professional or teaching capacity for a nonprofit religious, charitable, or educational organization
Rhode Island
- Wage replacement rate: A weekly payment of 4.62% of total wages earned in the highest quarter of the base period
- Maximum weekly benefit amount: $1,007
- Maximum benefit period: 30 weeks
- Employee eligibility requirements: Earned 1) At least $15,600 in base period wages, or 2) At least $2,600 in one of the base period quarters, total base period wages of at least 1.5 times the highest quarter earnings, and total base period earnings of at least $5,200
If you have employees in Rhode Island, you are required to withhold and remit employee contributions into the state’s temporary disability insurance and temporary caregiver insurance (TCI) fund. TCI can provide wage replacement benefits to an employee who requires time away from work to care for a seriously ill family member or to bond with a new child.
Rhode Island’s TCI and TDI benefits are funded solely through employee payroll deductions. Employers aren’t required to pay into the fund and also can’t self-insure or substitute private coverage for participation in the state plan.
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