State Disability Insurance Programs

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Which States Mandate Disability Insurance

Five states and one territory currently require employers to provide short-term disability insurance coverage to employees: California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico. Each program has different funding mechanisms, benefit levels, and employer obligations.

For employers operating in multiple states, understanding these mandates is critical for compliance. Unlike ERISA-governed voluntary disability plans, state-mandated programs carry specific penalties for non-compliance, including fines, back-benefit liability, and in some cases, personal liability for corporate officers. For context, see our comparison of SSDI vs. private disability coverage to understand how state programs fit into the broader disability insurance landscape.

California State Disability Insurance (SDI)

California SDI is funded entirely through employee payroll deductions. The 2025 contribution rate is 1.1% of wages with no taxable wage ceiling (the ceiling was eliminated in 2024). Benefits replace approximately 60-70% of the highest quarter's earnings, up to a weekly maximum of $1,681 in 2025.

SDI provides benefits for up to 52 weeks for non-work-related illness or injury. The waiting period is 7 days. California SDI also includes Paid Family Leave (PFL), which provides benefits for bonding with a new child, caring for a seriously ill family member, or military assist claims.

Employers can opt out of the state program by offering a Voluntary Plan (VP) that provides benefits equal to or greater than SDI. Voluntary Plans must be approved by the Employment Development Department (EDD) and require a majority vote of covered employees. The advantage of a VP is greater control over plan design, claims administration, and integration with other employer benefits.

New York Disability Benefits Law (DBL)

New York DBL requires employers to provide short-term disability benefits funded through a combination of employee contributions and employer-paid insurance. Employees may be required to contribute up to $0.60 per week toward DBL coverage.

Benefits replace 50% of the employee's average weekly wage, up to a maximum of $170 per week (the statutory maximum has not been significantly updated in decades, making it one of the lowest in the nation). The benefit duration is up to 26 weeks, with a 7-day waiting period.

New York also has a separate Paid Family Leave (PFL) program with significantly higher benefits than DBL. PFL provides 67% of the employee's average weekly wage up to 67% of the state average weekly wage, for up to 12 weeks. For more details on waiting periods and their impact on costs, explore our guide on the elimination period in disability insurance.

Employers must obtain DBL coverage through a licensed insurance carrier, self-insure with approval from the Workers' Compensation Board, or participate in the state fund. Failure to provide coverage is a misdemeanor, with penalties of up to $500 per 10-day period of non-compliance.

New Jersey Temporary Disability Insurance (TDI)

New Jersey TDI is funded through both employee and employer contributions. Employee contributions are 0.00% of the first $161,400 in wages for 2025 (New Jersey periodically adjusts the rate). Employers contribute separately based on their experience rating.

Benefits replace two-thirds of the employee's average weekly wage, up to a maximum of $1,055 per week in 2025. Benefits are available for up to 26 weeks, with a 7-day waiting period. New Jersey also offers Family Leave Insurance (FLI) that provides 85% of average weekly wage for up to 12 weeks.

Hawaii Temporary Disability Insurance (TDI)

Hawaii TDI requires employers to provide disability coverage that replaces 58% of the employee's average weekly wage, up to a weekly maximum of $765 in 2025. Benefits last up to 26 weeks with a 7-day waiting period. The cost is shared between employer and employee, with the employee's contribution capped at 50% of the premium cost or 0.5% of weekly wages, whichever is less.

Hawaii is unique in that it requires employers to provide coverage through an authorized insurer or approved self-insurance plan, and the coverage must include pregnancy-related disability.

Rhode Island Temporary Disability Insurance (TDI)

Rhode Island TDI is funded entirely through employee payroll taxes at a rate of 1.1% of taxable wages up to $87,000 in 2025. Benefits replace approximately 4.62% of the highest quarter's wages, with a minimum weekly benefit of $121 and a maximum of $1,007. Benefits last up to 30 weeks (the longest among state programs), with a 7-day waiting period that is retroactively paid if the disability extends beyond 21 days.

Compliance Considerations for Multi-State Employers

Employers with employees in mandatory-coverage states must ensure compliance with each state's specific requirements. Key considerations include determining which employees are covered based on work location (not employer headquarters), understanding the interaction between state-mandated coverage and voluntary employer-sponsored STD plans, properly structuring payroll deductions where employee contributions are required, maintaining required records and filing obligations with state agencies, and coordinating state benefits with FMLA, ADA, and other federal leave requirements.

Many employers find it advantageous to supplement state-mandated minimums with a private STD plan that brings all employees to a consistent benefit level regardless of work state. Learn more about short-term vs. long-term disability coverage to determine the right supplemental approach. This simplifies communication, reduces administrative complexity, and ensures equitable treatment across the workforce.