BILL ANALYSIS Ó
AB 908
Page 1
ASSEMBLY THIRD READING
AB
908 (Gomez)
As Amended March 18, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
|----------------+------+-----------------------+---------------------|
|Insurance |10-2 |Daly, Calderon, |Travis Allen, Mayes |
| | |Cooley, Cooper, | |
| | |Dababneh, Frazier, | |
| | |Gatto, Gonzalez, | |
| | |Grove, Rodriguez | |
| | | | |
|----------------+------+-----------------------+---------------------|
|Appropriations |12-5 |Gomez, Bonta, |Bigelow, Chang, |
| | |Calderon, Daly, |Gallagher, Jones, |
| | |Eggman, Eduardo |Wagner |
| | |Garcia, Gordon, | |
| | |Holden, Quirk, Rendon, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Increases the level and duration of benefits provided in
the Paid Family Leave (PFL) insurance program. Specifically, this
bill:
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1)Increases the maximum duration of PFL insurance benefits from
six 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) Eighty percent for those who make up to 25% of the
full-time minimum wage.
b) Seventy-five percent for those who make between 25% and
75% of the full-time minimum wage.
c) Sixty-five percent 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,
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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 Disability Insurance (DI) benefits. The rate
of these employee contributions ranges from 0.1% to 1.5% of
wages, and are calculated and announced annually by the Director
of the Employment Development Department (EDD) based on the
financial condition of the disability fund.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Increasing the benefit duration and wage replacement level will
result in a projected increased in expenditures from the
Unemployment Compensation Disability Fund (UCDF), the special
fund that pays for SDI and PFL benefits, in the range of $750
million annually.
Participating workers pay around 1% of wages, up to the first
$104,000 of wages, to fund SDI/PFL benefits. On an ongoing
basis, it is projected this expansion of benefits would require
an increased contribution of 0.13% of wages subject to the
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contribution. This could hypothetically require, for example,
the EDD to increase the contribution rate from 1.0% of wages to
1.13% of wages. As the UCDF is currently operating with a $2.5
billion fund balance, it is projected the fund could shoulder
increased benefit payments while maintaining a 25% reserve with
no changes to the contribution rate until 2017.
2)If utilization of the program grows due to the enhanced level of
benefits offered, expenditures could be slightly higher than
indicated here. For example, under assumptions of increased
claims of 5% for higher-income and 20% for lower-income wage
earners, increased take-up would result in expenditures of an
additional $110 million annually (UCDF).
3)Administrative costs to the EDD, for information technology
changes estimated at $800,000 (UCDF).
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
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able to use the PFL insurance for which they pay. This bill
will make PFL a real option for most working families by
increasing the wage replacement level and extending the maximum
benefit period to 10 weeks.
2)PFL 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 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 six 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 SDI
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program that is paid for by the proceeds of an employee payroll
deduction which are deposited in the DI Fund. PFL claims are
approximately 12% of total payments from the DI Fund. The SDI
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, this 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 three to four 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 this 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.
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d) AB 804 (Yamada) of the 2011-12 Regular Session, which
proposed to extend the PFL program to caring for
grandparents, grandchildren, siblings, and parents-in-law and
was held in the Assembly Appropriations Committee.
e) SB 770 (Jackson), Chapter 350, Statutes of 2013 expanded
the definition of family to include in-laws, siblings and
grandparents.
Analysis Prepared by: Paul Riches / INS. / (916)
319-2086 FN: 0000729