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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