BILL NUMBER: SB 467 CHAPTERED 06/06/02 CHAPTER 52 FILED WITH SECRETARY OF STATE JUNE 6, 2002 APPROVED BY GOVERNOR JUNE 5, 2002 PASSED THE SENATE MAY 23, 2002 PASSED THE ASSEMBLY MAY 16, 2002 AMENDED IN ASSEMBLY MAY 13, 2002 AMENDED IN SENATE JANUARY 24, 2002 AMENDED IN SENATE JANUARY 7, 2002 INTRODUCED BY Senator Scott FEBRUARY 22, 2001 An act to amend Sections 2610, 3254, 3255, 3260, 3261, 3262, and 3263 of, and to add Section 3260.5 to, the Unemployment Insurance Code, relating to disability insurance. LEGISLATIVE COUNSEL'S DIGEST SB 467, Scott. Disability insurance. Existing Law provides unemployment compensation benefits for qualified unemployed individuals. In determining the disability base period for persons whose unemployment benefits for the benefit year have expired, the disability period is calculated with reference to specified 3-month periods in which the disability benefits begin. This bill would change the specified 3-month periods to include those 3 months included in the respective quarters of a calendar year. Existing law provides that a specified percentage of the wages of all California employees are to be deposited in the Disability Fund for purposes of funding unemployment compensation disability benefits. Existing law also authorizes an employer, or a majority of employees employed in this state by the same employer, subject to approval by the Director of Employment Development and conditioned upon specified requirements, to elect to be covered under a voluntary plan for the payment of disability insurance. This bill would make technical amendments to a number of the provisions governing voluntary plans for the payment of disability insurance deductions. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 2610 of the Unemployment Insurance Code is amended to read: 2610. "Disability base period," with respect to an individual who does not have an unexpired benefit year for unemployment compensation benefits, means for disability benefit periods beginning in October, November, or December, the four calendar quarters ended in the next preceding month of June; the disability base period for disability benefit periods beginning in January, February, or March, shall be the four calendar quarters ended in the next preceding month of September; the disability base period for disability benefit periods beginning in April, May, or June, shall be the four calendar quarters ended in the next preceding month of December; the disability base period for disability benefit periods beginning in July August, or September shall be the four calendar quarters ended with the next preceding month of March. SEC. 2. Section 3254 of the Unemployment Insurance Code is amended to read: 3254. The Director of Employment Development shall approve any voluntary plan, except one filed pursuant to Section 3255, as to which he or she finds that there is at least one employee in employment and all of the following exist: (a) The rights afforded to the covered employees are greater than those provided for in Chapter 2 (commencing with Section 2625) of this part. (b) The plan has been made available to all of the employees of the employer employed in this state or to all employees at any one distinct, separate establishment maintained by the employer in this state. "Employees" as used in this subdivision includes individuals in partial or other forms of short-time employment and employees not in employment as the Director of Employment Development shall prescribe by authorized regulations. (c) A majority of the employees of the employer employed in this state or a majority of the employees employed at any one distinct, separate establishment maintained by the employer in this state have consented to the plan. (d) If the plan provides for insurance the form of the insurance policies to be issued have been approved by the Insurance Commissioner and are to be issued by an admitted disability insurer. (e) The employer has consented to the plan and has agreed to make the payroll deductions required, if any, and transmit the proceeds to the plan insurer, if any. (f) The plan provides for the inclusion of future employees. (g) The plan will be in effect for a period of not less than one year and, thereafter, continuously unless the Director of Employment Development finds that the employer or a majority of its employees employed in this state covered by the plan have given notice of the withdrawal from the plan. The notice shall be filed in writing with the Director of Employment Development and shall be effective only on the anniversary of the effective date of the plan next following the filing of the notice, but in any event not less than 30 days from the time of the filing of the notice; except that the plan may be withdrawn on the operative date of any law increasing the benefit amounts provided by Sections 2653 and 2655 or the operative date of any change in the rate of worker contributions as determined by Section 984, if notice of the withdrawal from the plan is transmitted to the Director of Employment Development not less than 30 days prior to the operative date of that law or change. If the plan is not withdrawn on 30 days' notice because of the enactment of a law increasing benefits or because of a change in the rate of worker contributions as determined by Section 984, the plan shall be amended to conform to that increase or change on the operative date of the increase or change. (h) The amount of deductions from the wages of an employee in effect for any plan shall not be increased on other than an anniversary of the effective date of the plan except to the extent that any increase in the deductions from the wages of an employee allowed by Section 3260 permits that amount to exceed the amount of deductions in effect. (i) The approval of the plan or plans will not result in a substantial selection of risks adverse to the Disability Fund. SEC. 3. Section 3255 of the Unemployment Insurance Code is amended to read: 3255. When workers are engaged in an employment that normally involves working for several employers in the same industry interchangeably, and several employers or some of them cooperate to establish a plan for the payment of wages at a central place or places, and have appointed an agent under Section 1096, that agent, or a majority of workers regularly paid through a central place or places, or both, may apply to the Director of Employment Development for approval of a voluntary plan for the payment of disability benefits applicable to all employees whose wages are paid at one or more central place or places. The Director of Employment Development shall approve any voluntary plan under this section as to which he or she finds that all of the following exist: (a) The rights afforded to the covered employees are greater than those provided for in Chapter 2 (commencing with Section 2625) of this part, and are separately stated and designated "unemployment compensation disability benefits" separate and distinct from other benefits, if any. (b) The plan applies to all employees whose wages are paid at a central place or places with respect to all employment for which wages are paid at central place or places. (c) Seventy-five percent of the workers regularly paid at the central place or places have consented to the plan prior to the filing of the initial application for approval. (d) If the plan provides for insurance the form of the insurance policies to be issued have been approved by the Insurance Commissioner and are to be issued by an admitted disability insurer. (e) All employers paying wages through the central place or places have agreed to participate in the plan and the agent appointed under Section 1096 has agreed to make the payroll deductions required, if any, and transmit the proceeds to the plan insurer, if any. (f) The plan provides for the inclusion of all future employees paid at the central place or places. (g) The plan is to be in effect for a period of not less than one year and, thereafter, continuously unless the Director of Employment Development finds that the agent or a majority of the employees regularly paid at the central place or places has given written notice of withdrawal from the plan. The notice shall be filed in writing with the Director of Employment Development at least 30 days before it is to become effective and, upon the filing, will be effective only as to wages paid after the beginning of the calendar quarter next occurring on or after the anniversary of the effective date of the plan; except that the plan may be withdrawn on the operative date of any law increasing the benefit amounts provided by Sections 2653 and 2655 or the operative date of any change in the rate of worker contributions as determined by Section 984, if notice of the withdrawal from the plan is transmitted to the Director of Employment Development not less than 30 days prior to the operative date of that law or change. If the plan is not withdrawn on 30 days' notice because of the enactment of a law increasing benefits or because of a change in the rate of worker contributions as determined by Section 984, the plan shall be amended to conform to that increase or change on the operative date of the increase or change. (h) The amount of deductions from the wages of an employee in effect for any plan shall not be increased on other than an anniversary of the effective date of the plan except to the extent that any increase in the deductions from the wages of an employee allowed by Section 3260 permits that amount to exceed the amount of deductions in effect. (i) The approval of the plan or plans will not result in a substantial selection of risks adverse to the Disability Fund. SEC. 4. Section 3260 of the Unemployment Insurance Code is amended to read: 3260. An employer may, but need not, assume all or part of the cost of the plan, and may deduct from the wages of an employee covered by the plan, for the purpose of providing the disability benefits specified in this part, an amount not in excess of that which would be required by Sections 984 and 985 if the employee were not covered by the plan. SEC. 5. Section 3260.5 is added to the Unemployment Insurance Code, to read: 3260.5. (a) All deductions from the wages of an employee remaining in the possession of the employer upon its voluntary withdrawal of the plan as a result of plan contributions being in excess of plan costs, that are not disposed of in conformity with authorized regulations of the Director of Employment Development, shall be remitted to the department and deposited in the Disability Fund. If an employer fails to remit any deductions to the Disability Fund, the Director of Employment Development shall assess the amount thereof against the employer. (b) The provisions of Article 8 (commencing with Section 1126) of Chapter 4 of Part 1, with respect to the assessment of contributions, and the provisions of Chapter 7 (commencing with Section 1701) of Part 1, with respect to the collection of contributions, shall apply to assessments provided by this section, except that interest may not accrue until 30 days after issuance of the notice of assessment. (c) With respect to individuals covered by a voluntary plan on January 1 of any calendar year for which the limitation on wages under Section 985 is increased or the tax rate under Section 984 is increased, the amount of the deduction on or after that date may be increased to apply to not more than the maximum limitation on taxable wages or to not more than the maximum tax rate, as applicable, without any further consent of the individual or approval of the Director of Employment Development, but only if such increase in the amount of the deductions is made effective as of January 1 of the affected calendar year. SEC. 6. Section 3261 of the Unemployment Insurance Code is amended to read: 3261. All employee contributions and income arising therefrom received or retained by an employer under an approved voluntary plan are trust funds that are not considered to be part of an employer's assets. An employer shall either maintain a separate, specifically identifiable account for voluntary plan trust funds in a financial institution, or an employer may transmit voluntary plan trust funds, including any earned interest or income, directly to the admitted disability insurer. If an employer, with prior approval from the Director of Employment Development, invests voluntary plan trust funds in securities purchased through a commercial bank under Article 4 of Chapter 10 of Division 1 of the Financial Code, the securities account shall be separately identifiable from any other securities accounts maintained by the employer. In the event of commingling of voluntary plan trust funds, or the bankruptcy or insolvency of the employer, or the appointment of a receiver for the business of the employer, those voluntary plan trust funds are entitled to the same preference as are the claims of the state under Sections 1701 and 1702. SEC. 7. Section 3262 of the Unemployment Insurance Code is amended to read: 3262. (a) The Director of Employment Development may terminate any voluntary plan if the director finds that there is danger that the benefits accrued or to accrue will not be paid, that the security for the payment is insufficient, or for other good cause shown. The Director of Employment Development shall give notice of his or her intention to terminate a plan to the employer, employee group, and insurer. The notice shall state the effective date and the reason for the withdrawal. The Director of Employment Development may change or stay the effective date of the termination. (b) Notwithstanding Section 3260.5, on the effective date of the termination of a plan by the Director of Employment Development, all moneys in the plan, including moneys paid by the employer, moneys paid by the employee, moneys owed to the voluntary plan by the employer but not yet paid to the plan, and any interest accrued on all these moneys, shall be remitted to the department and deposited into the Disability Fund. (c) If an employer fails to remit all moneys owed to the Disability Fund after termination of the plan, the Director of Employment Development shall make an assessment against the employer equal to the amount of the moneys owed. The Director of Employment Development shall also make an assessment against the employer for all benefits paid from the Disability Fund after the termination of the plan, less any moneys received from the employer after the termination of the plan. (d) The provisions of Article 8 (commencing with Section 1126) of Chapter 4 of Part 1, with respect to the assessment of moneys, and the provisions of Chapter 7 (commencing with Section 1701) of Part 1, with respect to the collection of moneys owed, shall apply to assessments authorized under this section, except that interest may not accrue until 30 days after issuance of the notice of assessment. (e) The employer, employee group or insurer may, within 10 days from mailing or personal service of the notice, appeal to the Appeals Board. The 10-day period may be extended for good cause. The Appeals Board may prescribe by regulation the time, manner, method and procedure through which it may determine appeals under this section. (f) The payment of benefits from the Disability Fund and the transfer of moneys in the voluntary plan may not be delayed during an employer's appeal of the termination of a voluntary plan. SEC. 8. Section 3263 of the Unemployment Insurance Code is amended to read: 3263. (a) An employee is no longer covered by an approved voluntary plan if a disability arose after the employment relationship with the voluntary plan employer ends, or if the Director of Employment Development terminates a voluntary plan in accordance with Section 3262. (b) An employee who has ceased to be covered by an approved voluntary plan shall, if otherwise eligible, thereupon immediately become entitled to benefits from the Disability Fund to the same extent as though there had been no exemption from contributions as provided in this chapter.