Requirements to Become a Voluntary Plan (VP) Employer
An employer must submit a completed Application for Approval of Self-Insured Voluntary Plan of Disability Benefits (DE 2520BV) to the Employment Development Department (EDD).
As referenced by the California Unemployment Insurance Code (CUIC), Section 3254:
In order for a VP to be approved by the EDD all of 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 State Disability Insurance (SDI) coverage.
- The rights and benefits provided by a VP must have at least one greater right or benefit than provided by the State plan.
- 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.
- Once conditional approval has been granted, 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.
Once a VP is approved, the employer is no longer required to send SDI withholdings to the EDD for the employees covered by the VP. Instead, the employer holds the contributions in a separate trust fund to pay Disability Insurance or Paid Family Leave claims and approved expenses. The VP employer pays an assessment to the EDD based on the taxable wages of employees participating in the plan and other factors.
For more information on the VP program, such as types of security deposits, reporting requirements, and disputed coverage claims, reference the Disability Insurance Employer’s Guide to Voluntary Plan Procedures (DE 2040).