BILL NUMBER: AB 2778 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 11, 2010
AMENDED IN ASSEMBLY APRIL 29, 2010
INTRODUCED BY Committee on Insurance (Solorio (Chair), Blakeslee
(Vice Chair), Anderson, Carter, Hagman, Nava, and Niello)
MARCH 1, 2010
An act to add and repeal Section 3254.1 of the Unemployment
Insurance Code, relating to unemployment insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2778, as amended, Committee on Insurance. Unemployment
insurance: voluntary plans.
Existing law provides for the payment of disability compensation
for the wage loss sustained by an individual unemployed because of
sickness or injury, and finances that compensation by means of
employee contributions at specified rates to the Disability Fund.
Existing law requires the Director of Employment Development to
approve any voluntary plan, subject to specified exceptions, for
disability if the director finds that there is at least one employee
and that specified requirements are met, including, among other
things, that the plan will be in effect for a period of not less than
one year, and, thereafter, continuously unless the director finds
that the employer or a majority of its employees employed in the
state covered by the plan have given notice of withdrawal from the
plan.
This bill would, through December 31, 2015, allow the director to
approve a voluntary plan that is administered by a
small-business-3rd-party administrator, as defined, that administers
voluntary disability plans on behalf of its clients, subject to
specified requirements.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Employees of small businesses have not had the same access
under existing law to the superior benefits of voluntary plan
disability insurance, hereafter VPDI, under the Unemployment
Insurance Code as employees of larger employers. Part of the reason
for this lack of access is the administrative difficulty and expense
associated with the application and ongoing operating compliance with
the current law and the Employment Development Department's
procedures.
(b) The underground economy is both a threat to employment benefit
funds such as unemployment insurance, workers' compensation, and
disability insurance, and to the competitive marketplace for
employers who comply with California employment and tax laws.
(c) Lowering the administrative costs of compliance with
California's laws will reduce the competitive disincentive to
following the law, and assist in the fight against the underground
economy.
SEC. 2. Section 3254.1 is added to the Unemployment Insurance
Code, to read:
3254.1. (a) For the purposes of this section,
"small-business-third-party administrator" (hereafter SBTPA), means
an applicant that the director finds meets all of the following
criteria at the time of application:
(1) The SBTPA administers voluntary disability plans on behalf of
its clients pursuant to a written agreement in a form and manner
approved by the director.
(2) The SBTPA has at least 1,000 California domiciled clients, 80
percent of whom have fewer than 20 employees.
(3) The SBTPA processes payroll for its California domiciled
clients.
(4) The SBTPA offers workers' compensation insurance to its
California domiciled clients through an affiliated California
domiciled insurance company.
(b) Except as modified by this section, "voluntary plan" shall be
defined as, and shall be subject to the same provisions as, a
"voluntary plan," as set forth in Chapter 6 (commencing with Section
3251) of Part 2 of Division 1.
(c) The director may approve a single voluntary plan for all of an
SBTPA's clients and their employees where all of the following
criteria are met:
(1) The plan is administered by the SBTPA.
(2) The plan establishes a master trust account in a federally
insured national bank that is administered by the SBTPA, but requires
each individual employer that is a client of the SBTPA to have a
subtrust account that reflects that client's employees' specific plan
contributions and is not commingled with any other funds.
(3) (A) If a Voluntary plan does not provide for the assumption by
an admitted disability insurer of the liability of the employer to
pay the benefits afforded by the plan, the director shall not approve
it unless the employer meets the financial security requirements of
Section 3258.
(B) In addition to the security required by subparagraph (A), the
director may require additional security from the SBTPA, consisting
of the same types of financial instruments, and deposited in the same
manner as in Section 3258 in an amount determined by the director to
be adequate to pay disability claims of the SBTPA's clients'
employees should the client's subaccount or the financial security
provided in subparagraph (A) be inadequate.
(4) The plan meets the requirements of subdivision (g) of Section
3254. The provisions for withdrawal from the plan apply to the
employer and to the SBTPA.
(5) The rights afforded to the covered employees are greater than
those provided for in Chapter 2 (commencing with Section 2625),
including those provided for in Chapter 7 (commencing with Section
3300).
(6) 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 paragraph includes those
individuals in partial or other forms of short-time employment and
employees not in employment as the director shall prescribe by
authorized regulations.
(7) A majority of the employees of the client employed in this
state or a majority of the employees employed at any one distinct,
separate establishment maintained by the client in this state have
consented to the plan.
(8) If the plan provides for insurance, the form of the insurance
policies to be issued has been approved by the Insurance Commissioner
and is to be issued by an admitted disability insurer.
(9) The client has consented to the plan and has authorized the
SBTPA to make the payroll deductions required, if any, and deposit
the proceeds in each client's subtrust account.
(10) The plan provides for the inclusion of future employees.
(11) The amount of deductions from the wages of an employee of any
client in effect for the 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.
(12) The approval of the plan or plans will not result in a
substantial selection of risks adverse to the Disability Fund.
(d) The department may adopt application forms and procedures as
deemed necessary to ensure compliance with this section, and shall
adopt any application forms and procedures within 60 days of the
enactment of this section.
(e) Any existing voluntary plan which has received a conditional
letter of approval from the department after January 1, 2009, and is
administered by an applicant which can be deemed an SBTPA under this
subdivision shall be automatically deemed to constitute a plan under
this section.
(f)
(e) It is the intent of the Legislature in enacting
paragraph (3) of subdivision (c) that, in the event of the insolvency
of an employer-client of the SBTPA, or of the SBTPA, the disability
claims against the subaccount of any employer-client arising prior to
the date of the insolvency shall be satisfied by first accessing the
security of the SBTPA, as described in subparagraph (B) of paragraph
(3) of subdivision (c), rather than satisfying the claims from the
Disability Fund.
(g)
(f) This section shall remain in effect through
December 31, 2015, and as of that date is repealed.