Amended in Senate May 12, 2014

California Legislature—2013–14 Regular Session

Assembly BillNo. 2733


Introduced by Committee on Insurance (Assembly Members Perea (Chair), Hagman (Vice Chair), Bradford, Ian Calderon, Cooley, Dababneh, Frazier, Gonzalez, Nestande, V. Manuel Pérez, and Wieckowski)

February 25, 2014


An act to amend Section 3254.1 of the Unemployment Insurance Code, relating to disability compensation, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 2733, as amended, Committee on Insurance. Disability compensation: voluntary plans.

Existing law authorizes an employer, a majority of the employees employed in this state of an employer, or both, to apply to the Director of Employment Development for approval of a voluntary plan for the payment of disability benefits to the employees electing to be in a voluntary plan. Existing law, until January 1, 2015, authorizes the Director of Employment Development to approve a single voluntary plan for all of the small-business-third-party administrator’s clients and their employees if specified criteria are met.

begin insert

This bill would extend the operation of these provisions indefinitely. This bill would require the small-business-third party administration use separate accounting ledgers, rather then individual subaccounts, for each client’s contributions and plan assets. The bill would make the small-business-third-party administrator, rather than the employer, responsible for providing the financial security requirements for the plan. The bill would also authorize the Director of Employment Development to terminate a plan for cause and to recover plan assets from the small-business-third-party administrator, as specified.

end insert

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: 23. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 3254.1 of the Unemployment Insurance
2Code
is amended to read:

3

3254.1.  

(a) For the purposes of this section,
4“small-business-third-party administrator” (hereafter SBTPA),
5means an applicant that the director finds meets all of the following
6criteria at the time of application:

7(1) The SBTPA administers voluntary disability plans on behalf
8of its clients pursuant to a written agreement in a form and manner
9approved by the director.

10(2) The SBTPA has at least 1,000 California domiciled clients,
1180 percent of whom have fewer than 20 employees.

12(3) The SBTPA processes payroll for its California domiciled
13clients.

14(4) The SBTPA offers workers’ compensation insurance to its
15California domiciled clients through an affiliated California
16domiciled insurance company.

17(b) Except as modified by this section, “voluntary plan” shall
18be defined as, and shall be subject to the same provisions as, a
19“voluntary plan,” as set forth in this chapter.

20(c) The director may approve a single voluntary plan for all of
21an SBTPA’s clients and their employees where all of the following
22criteria are met:

23(1) The plan is administered by the SBTPA.

24(2) The plan establishes a master trust account that is
25administered by the SBTPA,begin delete but requiresend deletebegin insert and requires the SBTPA
26to maintain a separate accounting ledger forend insert
each individual
27employer that is a client of the SBTPA tobegin delete have a subtrust account
28that reflects that client’s employees’end delete
begin insert reflect each client’send insert specific
29planbegin delete contributions and is not commingled with any other fundsend delete
P3    1begin insert contributionsend insert. The master trust account shall be held in a federally
2insured bank.

3(3) begin delete(A)end deletebegin deleteend deleteIfbegin delete a voluntaryend deletebegin insert theend insert plan does not provide for the
4assumption by an admitted disability insurer of the liability of the
5employer to pay the benefits afforded by the plan, the director shall
6not approve it unless thebegin delete employerend deletebegin insert SBTPAend insert meets the financial
7security requirements of Section 3258begin insert on behalf of the SBTPA
8clients and their employeesend insert
.

begin delete

9(B) In addition to the security required by subparagraph (A),
10the director may require additional security from the SBTPA,
11consisting of the same types of financial instruments, and deposited
12in the same manner as in Section 3258, in an amount determined
13by the director to be adequate to pay disability claims of the
14SBTPA’s clients’ employees should the client’s subaccount or the
15financial security provided in subparagraph (A) be inadequate.

end delete

16(4) (A) The single voluntary plan will be in effect for a period
17of not less than one year and, thereafter, continuously, unless the
18Director of Employment Development finds that the SBTPA has
19given notice of withdrawal of the plan. The notice filed by the
20SBTPA shall be filed in writing with the Director of Employment
21Development and shall be effective on the anniversary of the
22effective date of the plan next following the filing of the notice,
23but in any event shall not be less than 30 days from the time of the
24filing of the notice; except that the plan may be withdrawn on the
25operative date of any law increasing the benefit amounts provided
26by Sections 2653 and 2655 or the operative date of any change in
27the rate of worker contributions as determined by Section 984, if
28notice of the withdrawal from the plan is transmitted to the Director
29of Employment Development not less than 30 days prior to the
30operative date of that law or change. If the plan is not withdrawn
31on the 30 days’ notice because of the enactment of a law increasing
32benefits or because of a change in the rate of worker contributions
33as determined by Section 984, the plan shall be amended to
34conform to that increase or change on the operative date of the
35increase or change.

36(B) Any individual employer who is a client of the SBTPA, or
37a majority of that client’s employees employed in this state covered
38by the plan, may also terminate their participation in the plan by
39giving written notice of withdrawal from the plan to the SBTPA
P4    1and to the Director of Employment Development not less than 30
2 days prior to the date of withdrawal.

begin insert

3(C) The Director of Employment Development may terminate
4the participation of an individual employer client of the SBTPA
5from the plan for cause, and the employer’s voluntary plan assets
6shall be recovered from the SBTPA and not from the employer as
7referenced in Section 3262.

end insert

8(5) The rights afforded to the covered employees are greater
9than those provided for in Chapter 2 (commencing with Section
102625), including those provided for in Chapter 7 (commencing
11with Section 3300).

12(6) The plan has been made available to all of the employees
13of the employer employed in this state or to all employees at any
14one distinct, separate establishment maintained by the employer
15in this state. “Employees” as used in this paragraph includes those
16individuals in partial or other forms of short-time employment and
17employees not in employment as the director shall prescribe by
18authorized regulations.

19(7) A majority of the employees of the client employed in this
20state or a majority of the employees employed at any one distinct,
21separate establishment maintained by the client in this state have
22consented to the plan.

23(8) If the plan provides for insurance, the form of the insurance
24policies to be issued has been approved by the Insurance
25Commissioner and is to be issued by an admitted disability insurer.

26(9) The client has consented to the plan and has authorized the
27SBTPA to make the payroll deductions required, if any, and deposit
28the proceedsbegin delete in each client’s subtrust accountend deletebegin insert into the master
29account administered by the SBTPA as referenced in paragraph
30(2)end insert
.

31(10) The plan provides for the inclusion of future employees.

32(11) The amount of deductions from the wages of an employee
33of any client in effect for the plan shall not be increased on other
34than an anniversary of the effective date of the plan except to the
35extent that any increase in the deductions from the wages of an
36employee allowed by Section 3260 permits that amount to exceed
37the amount of deductions in effect.

38(12) The approval of the plan or plans will not result in a
39substantial selection of risks adverse to the Disability Fund.

P5    1(d) The department may adopt application forms and procedures
2as deemed necessary to ensure compliance with thisbegin delete section, and
3shall adopt any application forms and procedures within 60 days
4of the enactment of thisend delete
section.

5(e) It is the intent of the Legislature in enacting paragraph (3)
6of subdivision (c) that, in the event of the insolvency of an
7employer-client of the SBTPA, or of the SBTPA, the disability
8claims against the subaccount of any employer-client arising prior
9to the date of the insolvency shall be satisfied by first accessing
10the security of the SBTPA, as described inbegin delete subparagraph (B) ofend delete
11 paragraph (3) of subdivision (c), rather than satisfying the claims
12from the Disability Fund.

13

SEC. 2.  

This act is an urgency statute necessary for the
14immediate preservation of the public peace, health, or safety within
15the meaning of Article IV of the Constitution and shall go into
16immediate effect. The facts constituting the necessity are:

17In order to amend Section 3254.1 of the Unemployment
18Insurance Code before it is repealed, it is necessary that this bill
19go into immediate effect.



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