The CA VDI tax on your paystub is a payroll deduction funding a Voluntary Disability Insurance plan your employer runs in place of California’s State Disability Insurance (SDI). For 2026, it comes out at 1.3 percent of your wages with no earnings cap, the same rate you would pay into SDI.1Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values The money supports a private plan rather than the state’s Disability Fund, and that plan is what pays you if you miss work for a non-work illness, injury, pregnancy, or qualifying family caregiving leave.
How Much Comes Out of Your Paycheck
The 2026 rate is 1.3 percent of all wages, with no taxable wage ceiling.1Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values Senate Bill 951 removed the cap effective January 1, 2024, so every dollar you earn is subject to the deduction.2Employment Development Department. Determine Taxable Wages and Calculate Taxes On $100,000 of wages, that works out to $1,300 for the year. On $250,000, it’s $3,250.
Your VDI deduction legally cannot exceed what you would pay into SDI.3Employment Development Department. Become a Voluntary Plan Employer If the line item on your stub shows a higher rate than 1.3 percent, something is wrong and worth raising with payroll.
How VDI Differs From SDI
California requires nearly all employees to carry disability coverage. The default program is SDI, administered directly by the Employment Development Department (EDD). A VDI plan is the private alternative, run by the employer or by an insurance carrier it has contracted with. The EDD still oversees these plans and must approve them before they can take effect.
The visible difference for you is who handles a claim. Under SDI, you file with the EDD. Under VDI, you file with your employer’s plan administrator or insurer. Employers often choose VDI to deliver faster claims processing or richer benefits than the state baseline.
What Your VDI Plan Has to Provide
The EDD will not approve a voluntary plan unless it delivers every benefit SDI offers and at least one benefit that is better.3Employment Development Department. Become a Voluntary Plan Employer That extra piece might be a shorter waiting period, a higher weekly payment, or broader coverage for certain conditions. The plan must also cover Paid Family Leave for bonding with a new child or caring for a seriously ill family member.4Employment Development Department. Paid Family Leave When the state raises SDI benefits, VDI plans have to match the increase to stay compliant.
Because SDI sets the floor, you can use the state numbers as a benchmark. The weekly benefit is based on wages earned roughly 5 to 18 months before the claim starts. Lower earners receive about 90 percent of their weekly wages and higher earners about 70 percent, up to a 2026 maximum of $1,765 per week.5Employment Development Department. Disability Insurance Benefit Payment Amounts The maximum total payout for a single claim period in 2026 is $91,780.6Employment Development Department. Contribution Rates and Benefit Amounts A single claim can run up to 52 weeks depending on your base period wages.7Employment Development Department. Disability Insurance – Benefits and Payments FAQs Your plan documents will show the exact weekly amount and any enhancements over the state floor.
You Can Opt Out
No employer can force you into a VDI plan. When you start work at a company with VDI, you must receive written notice explaining the plan, your benefits, and your right to reject it and stay on SDI.8Employment Development Department. Employers’ Guide to Voluntary Plan Procedures Your written consent is required before payroll deductions begin.
If you join and later change your mind, you can withdraw at the start of any calendar quarter by giving your employer reasonable written notice ahead of time.3Employment Development Department. Become a Voluntary Plan Employer Once the withdrawal takes effect, your deductions shift to SDI and the EDD takes over any future claims.
Filing a Claim
When you need to use the benefit, the claim runs through your employer’s plan administrator or insurer rather than the EDD. Ask your employer for the claim forms and instructions. The EDD’s SDI Online system also supports voluntary plan claim submissions, and employers use it to file a Report of Voluntary Plan Disability Claim (Form DE 2523) when processing your request.9Employment Development Department. Online Services to Manage Your Voluntary Plan
If there’s a coverage dispute or hardship, the EDD’s Disability Insurance Voluntary Plan unit can step in, especially when it isn’t clear whether the private plan or the state should be handling your claim.9Employment Development Department. Online Services to Manage Your Voluntary Plan Don’t let that kind of confusion sit, because the longer it drags on, the longer you wait to get paid.
Are VDI Benefits Taxable?
Usually no. The EDD treats VDI disability benefits the same as SDI for tax purposes: payments you receive while out for illness or injury generally aren’t subject to federal or California state income tax.10Employment Development Department. Form 1099G FAQs
One exception: if you were collecting unemployment and then transitioned onto disability, those disability payments are treated as a substitute for unemployment and become taxable at the federal level. They remain exempt from California state income tax. If any of your benefits are taxable, you’ll get a Form 1099G and a notice with your first payment.10Employment Development Department. Form 1099G FAQs
If Your Claim Is Denied
You have appeal rights. The first step is a written appeal to the California Unemployment Insurance Appeals Board (CUIAB), filed within 30 calendar days of the mailing date on your EDD Notice of Determination.11California Unemployment Insurance Appeals Board. Filing an Appeal There’s no required form. A letter is enough, as long as it includes your name, address, Social Security number, employer information, the determination date, and why you disagree.
An Administrative Law Judge will hear the case. If the decision goes against you, you can appeal to the full Appeals Board within 30 days, and at that stage you can request the case record, submit new evidence, or present oral argument. If the Board also rules against you, the final step is a Petition for Writ of Mandate in your county’s Superior Court within six months of the Board’s decision.11California Unemployment Insurance Appeals Board. Filing an Appeal The 30-day deadlines at the earlier stages are strict. Miss one without good cause and your appeal can end before it starts.