BILL ANALYSIS Ó SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS Senator Tony Mendoza, Chair 2015 - 2016 Regular Bill No: AB 908 Hearing Date: June 24, 2015 ----------------------------------------------------------------- |Author: |Gomez | |-----------+-----------------------------------------------------| |Version: |June 18, 2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Deanna Ping | | | | ----------------------------------------------------------------- Subject: Disability compensation: family temporary disability insurance. KEY ISSUE Should the Legislature extend the paid family leave program benefits from 6 weeks to 10 weeks? Should the Legislature increase the wage replacement rate for PFL benefits from 55% to either 65%, 75%, or 80% depending on an individual's wage level? Should the Legislature establish a $250 minimum weekly benefit amount for the paid family leave program? ANALYSIS Existing law established a family temporary disability insurance program, Paid Family Leave (PFL) that provides up to six weeks of wage replacement benefits to workers who take time off work to care for: a seriously ill child, spouse, parent, or domestic partner, siblings, grandparents, grandchildren, and parents-in-laws or to bond with a minor child in connection with foster care or adoption. (Unemployment Insurance Code AB 908 (Gomez) Page 2 of ? §3301) Existing law 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. Existing law 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. (Unemployment Insurance Code §3301) Existing law requires each employee to contribute to the Disability Fund to pay the costs of 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 EDD based on the financial condition of the disability fund. (Unemployment Insurance Code §3301) Existing law states that an individual is eligible to receive temporary disability insurance benefits equal to one-seventh of his or her weekly benefit amount for each full day during which he or she is unable to work due to caring for a seriously ill or injured family member or bonding with a minor child within one year of the birth or placement of the child in connection with foster care or adoption. (Unemployment Insurance Code §3301) This Bill 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. AB 908 (Gomez) Page 3 of ? 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. 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. COMMENTS 1. Background on the Paid Family Leave Program . In 2002 Senate Bill 1661 was enacted, making California the first state in the nation to provide Family Temporary Disability Insurance, more commonly known as Paid Family Leave. Established within the State Disability Insurance program and administered by the Employment Development Department, PFL provides benefits to individuals who take time off of work to care for a seriously ill child, spouse, parent, or registered domestic partner, or to bond with a new minor child due to birth, adoption, or foster care placement. Approximately 13.1 million Californians are covered by PFL. In 2013 Governor Brown signed SB 770 (Jackson) which extended PFL to workers who take time off of work to care for a seriously ill parent-in-law, grandparent, grandchild, or sibling. 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. It is important to distinguish the difference between the PFL program (which provides only wage replacement during leave) and job protection legislation such as the federal Family & Medical Leave Act (FMLA) and the AB 908 (Gomez) Page 4 of ? California Family Rights Act (CFRA). The PFL program itself does not provide job protection but the program itself nearly covers all employees, aside from some self-employed and public sector persons, regardless of the size of the employer. However, a claimant could have such job protection benefits if they also qualify under the requirements of FMLA or CFRA. PFL is funded by an employee-paid payroll tax with benefit levels indexed to inflation, built upon California's long standing State Disability Insurance system, which has provided income support for employees' medical and pregnancy-related leaves for many years. However, unlike SDI benefits, income from PFL has been deemed taxable by the Internal Revenue Service. Under the PFL program, workers can claim 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. 2. 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 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. 3. Need for this bill? AB 908 (Gomez) Page 5 of ? California's PFL program is funded through worker contributions and provides partial wage replacement (55% of prior wage levels) for up to 6 weeks for bonding with a new child or caring for a seriously ill relative. According to the author, although the PFL benefit enhances security for claimants who take leave to bond with children or care for sick family members, the benefit is simply insufficient to offer meaningful wage replacement for workers, especially those whose only source of paid leave is PFL. The author brings attention to one survey, in which nearly a third of respondents who were aware of PFL did not apply for it when family needs arose because the wage replacement level was too low - making it difficult for workers that live pay check to paycheck to meet their basic needs. The author notes that these workers cannot 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. The author also notes that these workers should be able to use the PFL insurance for which they pay. AB 908 would increase the maximum benefit to 10 weeks, as well as increase the wage replacement rate based on wage level ranging from 65% for a higher wage level to 80% for a lower wage level, as well as increase the minimum weekly benefits to $250. According to the author these changes to the PFL program will make PFL a real option for most working families by reducing the financial burden when having a baby or caring for an ill relative. 4. Proponent Arguments : Proponents note that California's PFL program is wholly funded through worker contributions and covers all private sector workers and some public sector workers. Proponents bring attention to research that shows that paid family leave not only improves the ability of working families to meet the obligations of their family members, but employers benefit from reduced turnover as families that benefit from paid family leave are more likely to stay in the workforce. Proponents also highlight a recent study that found that women who take paid family leave are 39 percent less likely to AB 908 (Gomez) Page 6 of ? receive public assistance and 40 percent less likely to receive food stamps in the year following a child's birth. Proponents argue that AB 908 will make paid family leave work for all workers by addressing two critical aspects of the benefit design. For many workers, the 55 percent wage replacement level is simply insufficient to offer meaningful wage replacement, especially when PFL is the only source of paid leave. They argue that PFL's current wage replacement level of 55 percent coupled with increased financial burdens when having a baby or caring for a relative makes it financially impossible for workers to use their PFL benefits. Proponents argue that in addition to wage replacement levels, the 6 weeks of paid leave offered by PFL is far less than nearly every other developed county. Proponents bring attention to the fact that in comparison to the thirty-eight Organization for Economic Co-operation and Development (OECD) countries, the median amount of fully-paid leave available for mothers is over five months. Proponents also argue that longer paid leave is associated with a range of positive physical and mental health benefits for families and children, as well as improved early child development. 5. Opponent Arguments : None on file. 6. Prior Legislation : SB 1661 (Kuehl) Chapter 901, Statutes of 2002 created the PFL program which began on January 1, 2004. 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. SB 727 (Kuehl) of 2007, proposed to extend the PFL Program to caring for grandparents, grandchildren, siblings, and parents-in-law, was vetoed by the Governor. AB 804 (Yamada) of 2011, 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. AB 908 (Gomez) Page 7 of ? SB 770 (Jackson), Chapter 350, Statutes of 2013 expanded the definition of family to include in-laws, siblings and grandparents. SUPPORT Alliance of Californians for Community Empowerment American Association of Retired Persons American Association of University Women American Federation of State, County and Municipal Employees, AFL-CIO Breastfeed LA California Alliance for Retired Americans California Black Health Network California Breastfeeding Coalition California Child Care Resource and Referral Network California Domestic Workers Alliance California Employment Lawyers Association California Partnership California WIC Association California Women's Law Center California Work and Family Coalition Career Ladders Project Center for Law and Social Policy (CLASP) Child Care Law Center Children Now Communications Workers of America, AFL-CIO District 9 Communications Workers of America, AFL-CIO Local 9003 Community Clinic Association of Los Angeles County Congress of California Seniors Congress of California Seniors County of Los Angeles Board of Supervisors County of Monterey Board of Supervisors County of Santa Cruz Board of Supervisors Courage Campaign Equal Rights Advocates Family Caregiver Alliance, National Center on Caregiving First 5 California Glendale City Employees Association (GCEA) Health Officers Association of California Jewish Labor Committee Western Region Legal Aid Society- Employment Law Center Mujeres Unidas y Activas AB 908 (Gomez) Page 8 of ? National Association of Social Workers-California Chapter National Association of Working Women, California Chapter National Council of Jewish Women National Council of La Raza (NCLR) Next Generation Organization of SMUD Employees Parent Voices Raising California Together Restaurant Opportunities Center of Los Angeles San Bernardino Public Employees Association San Diego County Court Employees Association San Francisco Breastfeeding Promotion Coalition San Luis Obispo County Employees Association School Employees Association of California Small Business Majority Small School Districts' Association St. Anthony Foundation Teamsters Local 986 The Center for Popular Democracy The Health Officers Association of California The Women's Foundation of California Tradeswomen Inc. Tulare County Breastfeeding Coalition Tuolumne County Breastfeeding Colition UFCW Western States Council Ultra Violet Western Center on Law and Poverty Western Regional Advocacy Project Zero to Three, National Center for Infants, Toddlers, and Families 9 to 5 California OPPOSITION None on file. -- END --