Changes to California’s paid leave programs coming in 2023 

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October 08, 2021

California’s state disability insurance (SDI) and paid family leave (PFL) current benefit calculation rates will remain unchanged until 2023, under recent legislation (2021 Ch. 78, AB 138). Benefits for 2022 will continue at 60%–70% of an employee’s highest quarterly earnings in a base period divided by 13, capped at the annually adjusted weekly maximum benefit ($1,357 for 2021). However, without further legislative action, those rates may revert to pre-2018 levels in 2023. Updates to this GRIST reflect the extension of current rates and the veto of another measure that would have further increased benefit levels.

Temporary rate hike extended

Initially due to sunset at the end of this year under 2016 amendments (2016 Ch. 5, AB 908), the current rates will remain in place through 2022 under the new law. Additional legislation (AB 123) would have incrementally raised the weekly benefits for PFL and the first 12 weeks of SDI benefits to 70%–90% of an employee’s weekly wage for claims beginning on or after Jan. 1, 2023. However, Gov. Gavin Newsom vetoed the increase, citing budgetary concerns.

Current benefit calculation

Under the current system, individuals who earn less than one-third of the state’s average weekly wage ($5,998.57 for 2021) in their highest-earning quarter during the base year will qualify for 70% of those earnings divided by 13, up to the annually adjusted maximum. The minimum weekly benefit of $50 is set by statute. Individuals who earn more than one-third of the state’s average weekly wage qualify for a 60% benefit.

Base period and contributions

The program’s base period is the first four of the last five completed calendar quarters of covered employment. For example, in June of any given year, the base period is the four quarters ending Dec. 31 of the prior year for any employee who worked in covered employment and paid into the state fund during that time. The 2021 employee contribution is 1.2% of annual wages up to $128,298. Employers do not have to contribute to the program.

Looking to 2023

For SDI and PFL benefits beginning on or after Jan. 1, 2023, employees earning more than $1,749.20 in their highest-earning quarter in the base period will receive 55% of those earnings divided by 13, up to the weekly maximum. Lower-income workers may qualify for minimum benefit amounts.

Employer impact

Employers that coordinate their own leave programs with the state plan will want to work with their leave and disability vendors to address any changes to the program for 2023. In addition, employers may want to track any changes coming in 2022 that may impact the cost or administration of their own leave plans in later years. Businesses that pay primary to the state plan or whose employees rely solely on the state plan won’t have to make any changes, but may want to communicate any decrease or increase in state benefits to covered employees.

Related resources

Non-Mercer resources

  • Veto message on AB 123 (Governor’s office, Sept. 28, 2021)
  • 2021 Ch. 78 (California Legislature, July 16, 2021)
  • AB 123 (California Legislature, July 5, 2021)
  • 2021 Ch. 5, AB 908 (California Legislature, April 11, 2016)
  • AB 123 (California Legislature, Sept. 28, 2021)
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