BILL NUMBER: AB 2778 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 5, 2010
PASSED THE ASSEMBLY AUGUST 12, 2010
AMENDED IN SENATE JUNE 21, 2010
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, 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, 2014, 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.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
Small businesses have not had the same access under existing law
to the 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.
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 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. The master trust account shall be
held in a federally insured bank.
(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) (A) The single voluntary 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 SBTPA has given
notice of withdrawal of the plan. The notice filed by the SBTPA shall
be filed in writing with the Director of Employment Development and
shall be effective on the anniversary of the effective date of the
plan next following the filing of the notice, but in any event shall
not be 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 2563 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 the 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.
(B) Any individual employer who is a client of the SBTPA, or a
majority of that client's employees employed in this state covered by
the plan, may also terminate their participation in the plan by
giving written notice of withdrawal from the plan to the SBTPA and to
the Director of Employment Development not less than 30 days prior
to the date of withdrawal.
(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) 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.
(f) This section shall remain in effect through December 31, 2014,
and as of that date is repealed.