California law allows employers or a majority of employees to apply to the Employment Development Department (EDD) for approval of a Voluntary Plan (VP) for the payment of Disability Insurance (DI) and Paid Family Leave (PFL) insurance benefits to their employees in lieu of the mandatory State plan coverage. To be approved for a VP, the employer must post a security deposit with the EDD to guarantee that it meets all obligations of the VP. The benefits and rights under a VP must equal to or exceed the State plan in all respects and provide at least one greater right or benefit than provided by the State plan.
For comprehensive information on the VP plan, such as types of security deposits, reporting requirements, and disputed coverage please reference the Disability Insurance Employer’s Guide to Voluntary Plan Procedures (DE 2040). For additional forms and materials on the VP and SDI programs, please see Forms and Publications.
Conditions of Voluntary Plan Approval
A prospective VP employer must submit an Application for Approval of Self-Insured Voluntary Plan of Disability Benefits (DE 2520 BV) to the EDD, assuring that all necessary conditions are met. The DE 2520 BV may be obtained by calling the Voluntary Plan Group Customer Service at 916-653-6839. Upon review the approval of the application, the EDD issues a Notice of Conditional Approval pending receipt of the security deposit.
In order for a VP to be approved by the EDD all the following conditions must be met:
- The application for approval must be submitted prior to the requested implementation date.
- A majority of the employees eligible for coverage must have written approval to implement the VP.
- Covered employees may not be required to pay more for VP coverage than they would pay for SDI coverage.
- The rights and benefits provided by the VP must equal or exceed SDI in all respects.
- The VP must provide at least one right or benefit that is greater than provided by SDI.
- Employees who are eligible for coverage must be given the right to reject the VP and instead be covered by SDI.
- All covered employees must be given a written document that states their rights and benefits under the VP.
- The employer must post a security deposit with the EDD to guarantee that it meets all obligations of the VP.
- The VP coverage must be offered to all California employees of the employer.
Following are allowed exclusions:
- Part-time employees who work less than half of the employer’s standard workweek.
- Short-term employees who are hired for an expected duration of two weeks or less.
- All employees in one or more geographic employment location.
Reference: California Unemployment Insurance Code (CUIC), Section 3254
Once a VP is approved, the employer is no longer required to send SDI withholdings to EDD. Instead, the employer holds the contributions in a separate trust fund to pay Disability or PFL insurance claims and approved expenses. The VP employer pays an assessment to EDD based on the taxable wages of employees participating in the plan and other factors.
For additional information about Voluntary Plans, please call the Voluntary Plan Group at 916-653-6839, or write to:
Employment Development Department
Disability Insurance Branch, MIC 29 VP
P.O. Box 826880
Sacramento, CA 94280-0001