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What Is New York SDI?

Offering a comprehensive employee benefits package can help your business attract high-quality candidates and retain existing employees. For businesses based in New York, offering certain employee benefits also ensures compliance with state laws and regulations. The SDI New York law mandates that all employees receive specific disability insurance benefits.

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What is SDI New York?

SDI New York is the state-mandated disability insurance. The New York Disability Benefits Law outlines the requirements for the program. Since the law went into effect on January 1, 2018, most employers based in New York must provide disability benefits for employees.

What is disability insurance?

Disability insurance protects workers against lost income due to an injury or illness. The coverage supplements workers’ compensation, providing payment for disabilities that are not job-related.

What types of companies must provide disability coverage in New York?

Businesses that must comply with SDI New York requirements are called “covered employers” by the state. The New York SDI tax law mandates that any business with one or more employees for at least 30 days in a calendar year must provide disability insurance. The 30 days don’t need to be consecutive.

For example, if your business has a single employee who works one day per week for 30 weeks during the year, you would meet the definition of a covered employer. The law establishes only a few exceptions.

Who’s considered an employee for New York SDI tax purposes?

Under New York’s SDI law, an employee is anyone who performs paid tasks for a business on or off the organization’s premises, including those who work:

  • Full-time
  • Part-time
  • Temporarily
  • Seasonally
  • Casually or as day labor

Are nonprofit organizations required to provide disability coverage?

Nonprofits are subject to the New York SDI tax law; however, they typically don’t need to provide coverage for:

  • Religious clergy
  • Teachers who work for religious, charitable or educational organizations
  • Individuals who work for the nonprofit in exchange for aid
  • Compensated executive officers of religious, charitable and educational organizations

Do independent contractors qualify as employees under SDI in New York?

Companies aren’t required to provide disability insurance for independent contractors. The law defines an independent contractor as someone who:

  • Operates under their own Federal Employer Identification Number or pays self-employment taxes
  • Works according to their own contract or authority and has full control over their schedule and work arrangement
  • Has their own business establishment
  • Performs different duties than employees
  • Provides their own materials and equipment

Where can I obtain disability insurance for my employees?

All covered businesses can obtain SDI coverage through the NY State Insurance Fund. This not-for-profit agency also handles workers’ compensation in the state. Alternatively, you can obtain insurance through private companies licensed to operate in New York. Large corporations can also apply to self-insure.

Who pays for disability coverage?

The law gives you the option to fully cover the cost of temporary disability insurance for your employees or to pass along a portion of the costs as a payroll deduction. You need to share information about your company’s policy during the employee benefits enrollment process.

How do I calculate SDI withholding?

Under New York law, you can withhold 0.50% of wages paid up to $0.60 per week. As a result, employees can’t pay more than $31.20 for disability insurance per year. Depending on your payroll calendar, the maximum amount you can withhold is:

  • $2.60 per month
  • $1.20 per biweekly pay period
  • $1.30 semimonthly

Many payroll software programs give you the ability to add SDI NY withholding to simplify calculations.

How do I pay for disability insurance?

Your company makes payments directly to the NYSIF or the private company that provides your coverage.

What are the penalties for not complying with New York’s SDI law?

The New York SDI tax law includes the following penalties for noncompliance:

  • A fine equal to 0.05% of total payroll during the noncompliance period plus an additional fee of up to $500 for each period of noncompliance
  • Misdemeanor criminal charges that carry a fine of $100 to $500, up to one year of imprisonment or both
  • Payment equal to the total value of any claims made to the NYSIF or an additional 1% of total payroll during the noncompliance period, whichever is greater
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