Title
a. Authorize remittance by the Auditor-Controller of up to $1.7 million to the State of California Employment Development Department (“EDD”), for State Disability Insurance (SDI) tax under-withholding, including a late payment penalty and interest, for payroll tax returns filed after October 31, 2022; and
b. Authorize payment of the SDI tax under-withholding without recoupment from County employees.
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
a. Authorize remittance by the Auditor-Controller of up to $1.7 million to the State of California Employment Development Department (“EDD”), for State Disability Insurance (SDI) tax under-withholding, including a late payment penalty and interest, for payroll tax returns filed after October 31, 2022; and
b. Authorize payment of the SDI tax under-withholding without recoupment from County employees.
SUMMARY:
The Auditor-Controller’s Office (ACO) recently identified an error in SDI tax calculations, where the 457(b) deferred compensation and CalPERS retirement contributions were inadvertently excluded from taxable wages in calculating SDI tax. This resulted in an estimated under-withheld tax liability of $1.2 million from approximately 6,500 employees during the period of October 2022 through June 2025. The under-withheld tax is expected to incur approximately $180,000 in penalties and $98,000 in interest.
If the recommended action is approved, the County will treat the SDI taxes paid on behalf of County employees as reportable wages in the year paid, subject to payroll tax withholdings.
DISCUSSION:
The County participates in the State Disability Insurance (SDI) Program which provides temporary wage replacement benefits to eligible employees within unions negotiated to participate in the program. For those participating in the SDI program, a deduction based on the SDI tax rate at the time of wage payment is calculated and deducted from the wages subject to SDI tax. The 457(b) deferr...
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