Setting up California VDI for Employees

Employees in California have the option of replacing their state disability insurance (SDI) with a voluntary disability insurance (VDI). If you have employees in California who opt for VDI, subject to state agency approval, you can account for this in your SuitePeople U.S. Payroll setup.

If they opt for VDI, contributions are deducted from their pay, calculated as a percentage of their taxable wage, up to an annual maximum.

The default rate for the VDI deduction must be the same for all of your employees. For more information about this program, go to the Employer Voluntary Plans page on the State of California’s website.

Creating a Payroll Item for VDI

Before applying the VDI deduction to your employees' profiles, you must first create a payroll item for it.

To create the VDI payroll item:

Go to Lists > Employees > Payroll Items > New.
On the Payroll Item page, select Deduction on the Item Type drop-down list.
Enter a unique, explanatory name in the Item Name field, such as "California VDI".
Select the appropriate payroll liabilities account from the Liability Account drop-down list.
Select California VDI Contribution from the Pay Code drop-down list.
In the Default Rate field, enter the rate that your employees should be charged based upon the VDI policy your company has made. NOTE: For this payroll item only, this rate is in decimal format. For example, if the rate for your company is 1 percent, enter 0.01 in this field.
Click Save.

Adding an Employee to VDI

Next, if an employee has opted in to the VDI, then indicate that in the employee record.

To add an employee to VDI:

Go to Lists > Employees > Employees.
Click Edit next to the employee's name.
On the employee record, click the Payroll subtab.
Check the Participates in Voluntary Plan for Disability Insurance box.
Click the Deductions subtab.
In the Deductions field, choose the VDI deduction that you created earlier. Do not change any other fields for the deduction.
Click Add.
Click Save.

Confirming That an Employee Has VDI

After making the changes to the employees' records, you should confirm that the changes were made properly. That is, the employees have a deduction for the VDI, but do not have a tax for the SDI.

To confirm that the employee has VDI:

Create a payroll batch including the affected employees.
On the Payroll Batch page for the batch you have created, click the Complete tab.
Click the Paychecks subtab.
Click View beside the employee for whom you have set up VDI.
Click the Deductions subtab.
Note the field for the VDI payroll item you have created. It should show the deduction that has been calculated for this employee.
Click the Taxes subtab.
Note the California Disability field. This field shows the SDI deduction and should therefore be 0, because you have set up this employee for VDI.