BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 908


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          Date of Hearing:  April 8, 2015


                           ASSEMBLY COMMITTEE ON INSURANCE


                                   Tom Daly, Chair


          AB 908  
          (Gomez) - As Amended March 18, 2015


          SUBJECT:  Paid Family Leave Program


          SUMMARY:  Increases the level and duration of benefits provided  
          in the Paid Family Leave (PFL) insurance program.  Specifically,  
          this bill:  


          1)Increases the maximum duration of PFL insurance benefits from  
            6 to 10 weeks.


          2)Establishes a minimum weekly benefit amount of $250.


          3)Increases the wage replacement rate for PFL benefits from 55%  
            to:


               a.     80% for those who make up to 25% of the full-time  
                 minimum wage.


               b.     75% for those who make between 25% and 75% of the  
                 full-time minimum wage.









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               c.     65% for those who make more than 75% of the  
                 full-time minimum wage.


          4)Defines the annual "full-time minimum wage" as product of the  
            California minimum wage and 2,000 hours.


          EXISTING LAW:  





          1)Establishes the PFL program that provides up to six weeks of  
            wage replacement benefits to workers who take time off work to  
            care for a seriously ill family member or to bond with a minor  
            child within one year of birth or placement of the child in  
            connection with foster care or adoption. 

          2)Establishes the State Disability Insurance (SDI) Program for  
            individuals who are unable to work due to sickness or injury,  
            the sickness or injury of a family member, or the birth,  
            adoption, or foster care placement of a new child.  

          3)Requires a claimant for SDI or PFL benefits to establish his  
            or her medical eligibility for each period of disability by  
            obtaining a certificate from a treating physician or  
            practitioner that establishes the sickness, injury, or  
            pregnancy of the employee, or the condition of the family  
            member that warrants the care of the employee.  As part of the  
            certificate of eligibility to care for a family member, the  
            physician or practitioner must provide an estimate of the time  
            needed by the employee to care for the child, parent, spouse,  
            or domestic partner.   
           
          4)Requires each employee to contribute to the Disability Fund to  
            pay the costs of DI benefits.   The rate of these employee  








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            contributions ranges from 0.1% to 1.5% of wages, and are  
            calculated and announced annually by the Director of the EDD  
            based on the financial condition of the disability fund.
          





          FISCAL EFFECT:  Undetermined


          


          COMMENTS: 


           


           1)Purpose  .  According to the author, families supported by  
            adequate PFL benefits have greater economic security when  
            parents need to take time off work to bond with newborn  
            children or care for sick family members.  PFL has also been  
            shown to result in significantly better mental health status  
            and child development outcomes.  However, the current PFL  
            benefit level in California is simply insufficient to offer  
            meaningful wage replacement for too many workers.  In one  
            survey, nearly a third of respondents who were aware of PFL  
            did not apply for it when they needed it because they couldn't  
            survive the 45% pay cut they would get by using their PFL  
            benefit.  Many workers live paycheck-to-paycheck, counting on  
            each dollar to meet their basic needs.  These workers can't  
            absorb the pay cut imposed by the current PFL benefit limits,  
            particularly when it is coupled with the increased financial  
            burdens that accompany supporting a newborn child or caring  
            for a relative.  These workers should be able to use the PFL  
            insurance for which they pay.  This bill will make PFL a real  








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            option for most working families by increasing the wage  
            replacement level and extending the maximum benefit period to  
            10 weeks.  

           2)Paid Family Leave Program  .  PFL was enacted in 2002 to extend  
            disability compensation to individuals who take time off work  
            to care for a seriously ill child, spouse, parent, domestic  
            partner, or to bond with a new minor child. California was the  
            first state in the nation to implement a paid family leave  
            benefit with benefit payments beginning on July 1, 2004.  In  
            calendar year 2013, 203,732 PFL claims were filed, and  
            approximately 90% of which were filed to take time off to bond  
            with a newborn child.  Many confuse the PFL program (which  
            provides only wage replacement during leave) with the job  
            protection guarantees in the federal Family & Medical Leave  
            Act (FMLA) and the California Family Rights Act (CFRA),  
            however the changes to PFL benefits in this bill do not affect  
            these job protection laws.

            The PFL program provides a cash benefit set at 55% of "base  
            period" wages for up to 6 weeks.  The maximum weekly benefit  
            is currently set at $1,104 and is adjusted every year based on  
            the statewide average weekly wage.  The average claim in 2013  
            paid $527 per week for 5.4 weeks.  National data show that  
            two-thirds of women were working during their last pregnancy  
            and that 70% of women took maternity leave with an average  
            duration of 10 weeks.  

            Studies have shown paid family leave policies have positive  
            impacts on infant and maternal health, have been associated  
            with greater labor-force attachment (women retaining jobs into  
            their pregnancy and returning to work after giving birth), and  
            have resulted in increased wages for some women. 

           3)Funding PFL  .  The PFL insurance program is part of the State  
            Disability Insurance (SDI) program that is paid for by the  
            proceeds of an employee payroll deduction which are deposited  
            in the Disability Insurance (DI) Fund.  PFL claims are  
            approximately 12% of total payments from the DI Fund.  The SDI  








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            contribution is set at 0.9% of the first $108,160 of wages in  
            2015.  Both the rate and the wage ceiling are adjusted by EDD  
            according to a formula every year.  At the end of 2014, the DI  
            fund was projected to have reserves ($3.3 billion) that are  
            over 60% of annual program costs.  EDD guidelines suggest that  
            a reserve of 25% is adequate to ensure the ongoing solvency of  
            the DI Fund.  

            The benefit increases in this bill are substantial and no  
            detailed estimate of the total cost is available at this time.  
             However, assuming that the increases to both the wage  
            replacement rate and the maximum duration of benefits  
            represent an approximate doubling of the benefit, the bill  
            would increase benefit payments by approximately $600 million  
            per year.  That added annual cost would likely reduce the DI  
            Fund reserve to 25% in 3-4 years.  Thereafter, the annual cost  
            could be paid by increasing the contribution rate.  Increasing  
            the contribution rate by 0.1% provides an additional $600  
            million per year.  The benefit increase in the bill will  
            reduce the excess DI Fund reserves and provide working  
            families with a stronger PFL benefit going forward at a  
            negligible cost to working families.  

           4)Previous Legislation  .  

               a.     SB 1661 (Kuehl, Chapter 901 , Statutes of 2002)  
                 created the PFL program which began on January 1, 2004.  
               b.     SB 727 (Kuehl, Chapter 797,  Statutes of 2003) made  
                 changes that clarified the role of EDD in maintaining the  
                 program as well as ensuring the accumulation of enough  
                 funds to pay for the benefits.  
               c.     SB 727 (Kuehl) of 2007, which proposed to extend the  
                 PFL Program to caring for grandparents, grandchildren,  
                 siblings, and parents-in-law, was vetoed by the Governor.  

               d.     AB 804 (Yamada) of 2011, which proposed to extend  
                 the PFL program Program to caring for grandparents,  
                 grandchildren, siblings, and parents-in-law and was held  
                 in the Assembly Appropriations Committee.








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               e.     SB 770 (Jackson, Chapter 350, Statutes of 2013)  
                 expanded the definition of family to include in-laws,  
                 siblings and grandparents.
          


          REGISTERED SUPPORT / OPPOSITION:


          


          Support


          


          California Black Health Network
          California Employment Lawyers Association
          California WIC Association
          California WIC Association
          California Women's Law Center
          Center for Law and Social Policy
          Center for Law and Social Policy
          Child Care Law Center
          Children Now
          Communications Workers of America, AFL-CIO District 9
          Communications Workers of America, AFL-CIO Local 9003
          County of Los Angeles
          County of Santa Cruz Supervisor John Leopold
          Equal Rights Advocates
          Glendale City Employees Association (GCEA)
          Glendale City Employees Association (GCEA)
          Jewish Labor Committee Western Region
          Legal Aid Society - Employment Law Center
          National Association of Social Workers, California Chapter  
          (NASW-CA)
          National Association of Social Workers, California Chapter  








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          (NASW-CA)
          Organization of SMUD Employees (OSE)
          Organization of SMUD Employees (OSE)
          Restaurant Opportunities Center of Los Angeles (ROC-LA)
          San Bernardino Public Employees Association (SBPEA)
          San Bernardino Public Employees Association (SBPEA)
          San Diego County Court Employees Association (SDCCEA)
          San Diego County Court Employees Association (SDCCEA)
          San Luis Obispo County Employees Association (SLOCEA) 
          San Luis Obispo County Employees Association (SLOCEA)
          Small Business Majority 
          Small Business Majority


          St. Anthony Foundation
          Teamsters Local 986
          Western Center on Law and Poverty
          Western Regional Advocacy Project
          


          Opposition


          


          None received


          


          Analysis Prepared by:Paul Riches / INS. / (916) 319-2086













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