BILL ANALYSIS Ó
AB 2733
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Date of Hearing: April 2, 2014
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
AB 2733 (Committee on Insurance) - As Introduced: February 25,
2014
SUBJECT : Disability compensation: voluntary plans
SUMMARY : Repeals the sunset clause on the small business
third-party administrator program for voluntary disability
programs, and declares that the bill is an urgency measure, to
take effect immediately.
EXISTING LAW :
1)Requires employees to participate in the State Disability
Insurance (SDI) program, which provides partial income
replacement for specified periods of time if an employee is
disabled and unable to work due to injuries or conditions that
are not work-related.
2)Requires employers to deduct SDI taxes from wages due to
employees.
3)Authorizes an employer, upon vote of the employer's employees,
to participate in a private voluntary disability program in
lieu of SDI, provided the private program has better benefits
at no higher cost than SDI.
4)Requires an employer that wishes to implement a private plan
to make application to the Employment Development Department
(EDD), which must review the application and determine whether
that particular employer's plan is compliant with the law.
5)Authorizes a third-party administrator to apply to EDD for
approval of a plan that can be made available to any small
employer without the need for the employer to make specific
application, provided that the third-party administrator's
plan complies with the law and obtains EDD approval, and the
employees of the employer vote to participate in the plan in
lieu of SDI.
6)Provides that the small business third party administrator
program sunsets on December 31, 2014.
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FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . According to the proponents, the small business
third-party administrator program has enabled over 2100 small
businesses employing nearly 37,000 employees to participate in
enhanced disability insurance programs that, prior to creation
of the program in 2010, were for all practical purposes
unavailable to small businesses' employees. The program was
created in 2010, with a sunset clause to enable an evaluation
of whether or not the program would operate as intended.
According to Applied Underwriters, the program has proven to
be a sound way to deliver enhanced benefits to a class of
employee previously excluded from benefitting from prior law.
2)Support . Supporters argue that requiring each employer to
submit a specific application that EDD must scrutinize
individually effectively precluded small businesses from
taking advantage of the voluntary private disability insurance
option. By authorizing an administrator to file, and obtain
approval of, a group program, that allows small businesses to
participate through notice to EDD, the employment benefit can
be made available to employees of small businesses. Applied
Underwriters argues that the program has proved to be
successful and administratively viable. As a result, it
argues the sunset clause ought to be repealed.
3)Prior legislation . AB 2778 (Committee on Insurance), Statutes
2010, Chapter 399, established the small business third party
administrator program.
REGISTERED SUPPORT / OPPOSITION :
Support
Applied Underwriters, Inc
Opposition
None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
AB 2733
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