Hold Up! Ditching CA SDI? Here's the Lowdown from a Homegrown Expert (Me!)
Hey there, awesome Californian wage-earner! Ever looked at that little "CASDI" deduction on your paycheck and thought, "Man, I'd rather spend that on avocado toast"? You're not alone, buddy. That's the California State Disability Insurance (SDI) taking its cut, designed to be there for you if a non-work injury, illness, or even bonding with a new tiny human keeps you off the clock.
But maybe you're already covered, or maybe you've just got that hustle mindset and want every penny. So, can you wave goodbye to the Golden State's mandatory disability insurance? The short, serious answer is: not easily. SDI is mandatory for most employees, like taxes, but this ain't a dead end. There are a couple of rare exceptions that can get you that sweet opt-out action. Let's dive deep, buttercup!
Step 1: Ditching the State Plan – The VIP (Voluntary Plan) Route
This is the big kahuna for most folks looking to opt out. You, the individual employee, can't just stroll up to the Employment Development Department (EDD) and say, "Peace out!" It has to come from your employer. They have to be willing to set up an EDD-approved Voluntary Plan (VP) to replace the State SDI. Think of it as a private, exclusive club for disability and paid family leave benefits.
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| Can I Opt Out Of California Sdi |
1.1 The Employer Must Be on Board
Your boss has to be willing to go through the administrative rigmarole. This isn't a weekend project; it's a major commitment. They'll need to submit a formal application to the EDD. This option is mostly seen in larger companies that have the HR muscle to manage it.
1.2 The "Better Than State" Rule
This is where the VP has to really shine. To get the EDD's rubber stamp, the Voluntary Plan must meet two main criteria, or it's a no-go, chump:
Tip: Review key points when done.
It has to offer all the same rights and benefits as the standard State SDI program (Disability Insurance and Paid Family Leave).
But wait, there's more! It also has to include at least one benefit that is definitively better than the State Plan. This could be a higher weekly benefit amount, a shorter waiting period, or maybe even a free company yacht (okay, probably not the yacht, but you get the idea!).
1.3 The Cost Factor
The VP cannot cost employees more than the State SDI contribution rate. It’s gotta be a sweet deal, or at least a cost-neutral deal, for the employee. If the VP suddenly costs you more than your weekly latte habit, the EDD shuts it down faster than a bad stand-up comedian.
1.4 Majority Rules: Employee Consent
Even if your boss has a VP all shiny and ready to go, the EDD requires the VP to be approved by a majority of the employees eligible for coverage. That's right—your colleagues have a vote! If you're a new hire, you generally have a chance to reject the VP and stick with the State SDI, even if the VP is in place. It's about choice, baby!
Step 2: The Holy Grail – The Religious Exemption
This is the second, way less common way to get out of paying into SDI. You'll need to bring your A-game, spiritually speaking. This isn't for people who just "feel religious" on Sundays. This is for a very specific, deeply held belief system.
2.1 The Sacred Seven-Day Rule
Tip: Break it down — section by section.
To qualify for this exemption, you must follow the faith or teachings of a recognized religious sect, denomination, or organization whose creed, tenets, or principles depend solely on prayer for healing. We're talking about a commitment to your beliefs that is next level.
2.2 Filling Out the Paperwork (The Divine Form)
The official form you need to tackle is the Religious Exemption Certificate (DE 5067). You'll need to:
Certify that you depend on prayer for healing in line with the practice of your organization. No fibbing allowed!
Fill in the name and address of your religious organization.
Provide all your personal and employer info.
Sign on the dotted line—this is you saying, "I understand that if I get this exemption, I will not be eligible to receive any SDI benefits," including Disability Insurance and Paid Family Leave (PFL). Seriously, you give up all of it.
2.3 Submission and Approval
Once you've filled it out, you gotta mail the original form and (get this) a copy of your religious group’s tenets to the EDD. They'll review it to make sure your beliefs are on the up and up with their requirements. If approved, your religious exemption kicks in, and your employer will stop taking out the CASDI deduction. Heads up: If you ever switch employers, you have to file a brand new form—it doesn't just follow you around like a loyal puppy.
Step 3: The Corporate Mogul Exception
Alright, this one's for the folks who are already playing the big leagues. If you are a sole shareholder and officer of a corporation, you might be able to make an exclusion election.
Tip: A slow, careful read can save re-reading later.
3.1 Filing the Form DE 459
You'd need to file a Sole Shareholder/Corporate Officer Exclusion Statement (Form DE 459) with the EDD. This is generally a move that makes sense if you already have killer private disability insurance that makes the State SDI look like pocket change, and you're willing to give up the state benefits.
3.2 The Spousal Unit Clause
Fun fact: If your spouse is also a legally appointed officer and shareholder, either or both of you can file for this exclusion. It's a team effort!
The Bottom Line: Is It Worth It?
Look, SDI isn't just about you being sick. It also covers Paid Family Leave (PFL) for bonding with a new kid or caring for a seriously ill family member. Before you go through the hassle of trying to opt out, sit down and do the math. Are you really saving enough to justify losing the safety net of weeks of income replacement if life throws a curveball? For most Californians, that little deduction is a small price to pay for that peace of mind. Don't be a hero—be smart!
FAQ Questions and Answers
Tip: Compare what you read here with other sources.
How do I appeal if my employer’s Voluntary Plan denies my claim?
If your employer's VP or their insurer denies your claim, they must send you a denial letter outlining your right to appeal. You can then appeal the decision for a hearing before an impartial administrative law judge. Follow the specific instructions on the denial notice—don't let them pull a fast one!
What happens to my Paid Family Leave (PFL) benefits if I opt out of SDI?
PFL benefits are part of the SDI program. If you successfully opt out of SDI—either through the Religious Exemption or the Sole Shareholder Exclusion—you forfeit your eligibility for both Disability Insurance and Paid Family Leave benefits through the state program.
Can I opt back into California SDI after getting a Religious Exemption?
Yes, you can. You must complete and mail a Revocation of Religious Exemption Certificate (DE 6341) to the EDD. Once approved, you will be covered again, and your employer will start taking the SDI contributions from your wages.
How often must an employer's Voluntary Plan be updated?
An EDD-approved Voluntary Plan must be a living, breathing document. It has to be updated to match any increase in benefits that the State SDI program implements due to new legislation or approved regulations. It has to stay "better than the State," or at least equal and one better, at all times!
How do I know if I'm covered by the State Plan or a Voluntary Plan?
You need to contact your employer's HR or benefits office. They are required to know and inform you. If your employer has a Voluntary Plan, they must provide you with a written document explaining your rights and benefits under that plan.
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