What happened?

As a reminder for California employers, beginning January 1, 2026 the State Disability Insurance (SDI) employee withholding rate increases and DI/PFL benefit maximums update. California’s payroll tax schedules are also refreshed for 2026.

Overview

Why this matters: Accurate SDI withholding (1.3% with no wage cap) and updated DI/PFL maximums are required to ensure compliant deductions and benefit calculations. Using outdated rates can lead to under‑ or over‑withholding, claim reprocessing, and employee complaints. Loading the 2026 PIT schedules avoids state income tax mis‑withholding on paychecks issued in 2026.

Action Steps for Compliance

• Update payroll settings for pay dates on/after Jan 1, 2026: set SDI to 1.3% with no cap; load 2026 PIT Method A/B tables; confirm UI Schedule F+ and ETT 0.1% with $7,000 bases.
  
  
• Refresh employee leave communications and calculators to reflect DI/PFL max $1,765 and SAWW $1,789; update intranet pages and claim letters.
  
  
• Audit open claims crossing into 2026 to ensure SDI deductions and DI/PFL payments reflect the new rates/maximums; correct any variances promptly.
  
  
• Voluntary Plan sponsors: set the 2026 VP assessment to 0.182% and confirm plan benefits remain at least equal to EDD; update plan documents and notices.
  
  

Additional Information

What Is Changing?

• SDI employee withholding rate: 1.3% in 2026 (increased from 1.2%); all wages remain subject to SDI, with no wage cap since January 1, 2024.

• DI/PFL maximum weekly benefit: $1,765 per week (increased from $1,681 in 2025).

• State Average Weekly Wage (SAWW): $1,789 for 2026 (increased from $1,704 in 2025; approximately 4.99% higher).

• California PIT withholding schedules: 2026 Method A (Wage Bracket) and Method B (Exact Calculation) have been updated; load them for checks dated on or after January 1, 2026.

• UI/ETT: UI Schedule F+ ranges from 1.5% to 6.2% with a $7,000 taxable wage limit; ETT is 0.1% with a $7,000 limit.

• Voluntary Plan (VP) assessment rate (for employers with approved private SDI/PFL plans): 0.182% of taxable wages in 2026 (this is 14% of the SDI rate multiplied by taxable wages).

Key Risks for Employers:

• Leaving SDI wage‑cap logic in payroll systems (SDI applies to all wages since 1/1/2024).
  
  
• Not updating DI/PFL communications to the $1,765 max and SAWW $1,789, causing incorrect employee expectations or claim amounts.
  
  
• Using 2025 PIT tables in 2026, leading to improper California PIT withholding.
  
  
• Misapplying UI Schedule F+ or ETT thresholds and wage limits in employer tax calculations.
  
  
• Incorrect VP assessment (0.182%) for employers with voluntary plans.

For additional details: EED Press Release – Contribution Rates, Withholding Schedules, and Meals and Lodging Values

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