BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 908 Hearing Date: September
9, 2015
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|Author: |Gomez |
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|Version: |September 4, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Deanna Ping |
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Subject: Disability compensation: disability insurance
KEY ISSUE
Should the Legislature increase the wage replacement rate for
State Disability Insurance and Paid Family Leave benefits from
55% to either 60% or 80% depending on an individual's wage
level?
Should the Legislature increase the State Disability Insurance
taxable wage ceiling to $150,000?
Should the Legislature extend the Paid Family Leave program
benefits from 6 weeks to 8 weeks?
Should the Legislature remove the seven-day waiting period for
the Paid Family Leave program?
ANALYSIS
The existing California State Disability Insurance (SDI) program
provides short-term Disability Insurance (DI) benefits to
eligible workers temporarily unable to work due to non-work
related illness or injury, pregnancy, or childbirth. The SDI
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program, administered by the Employment Development Department
(EDD), is a state-mandated partial wage-replacement insurance
plan funded through employee payroll deductions. Eligible
individuals can receive disability benefits equal to one-seventh
(1/7th) of his or her weekly benefit amount for each full day
during which he or she is unemployed due to a disability if the
director of EDD makes specified findings, including that:
a) He or she has made a claim for disability benefits as
required by authorized regulations.
b) He or she has been unemployed and disabled for a waiting
period of 7-consecutive days during each disability benefit
period. During this 7-day waiting period, no disability
benefits are payable. (Labor Code §2627)
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
§3301)
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
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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)
Existing law states an individual shall be deemed eligible for
family temporary disability insurance benefits equal to
one-seventh of his or her weekly benefit amount on any day in
which he or she is unable to perform his or her regular or
customary work because he or she is bonding with a minor child
during the first year after the birth or placement of the child
in connection with foster care or adoption or caring for a
seriously ill child, parent, grandparent, grandchild, sibling,
spouse, or domestic partner, only
if the director finds all of the following:
a) The individual has made a claim for temporary
disability benefits as required by authorized regulations.
b) The individual has been unable to perform his or her
regular or customary work for a seven-day waiting period
during each disability benefit period, with respect to
which waiting period no family temporary disability
insurance benefits are payable.
(Unemployment Insurance Code §3303)
This Bill makes various changes to the Paid Family Leave and
State Disability Insurance programs including:
1) Increasing the wage replacement benefits for both State
Disability Insurance (SDI) and Paid Family Leave (PFL) as
outlined below:
a. Wage replacement increase to 80% for
individuals whose wages (as calculated under current
law) are under 1/3 of the statewide average weekly
wage for both PFL and SDI
i. The statewide average weekly wage
in 2015 was $1095, meaning this replacement rate
applies to those making $18,992 annually and
below.
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b. Wage replacement increase to 60% for
individuals whose wages (as calculated under current
law) are over 1/3 of the statewide average weekly wage
for both PFL and SDI
i. The statewide average weekly wage
in 2015 was $1095, meaning this replacement rate
applies to those making above $18,992 annually.
c. Includes adjustment language for wages when
transitioning between 80% to 60% wage replacement rate
to ensure increase in benefits
2) Eliminating the waiting period for Paid Family Leave and
includes reporting language for the Employment Development
Department on the projected costs and potential benefits of
eliminating, reducing, or modifying the DI waiting period
due on October 1, 2016 to the legislature.
3) Increasing the benefit duration under PFL from 6 weeks
to 8 weeks.
4) Increasing the SDI taxable wage ceiling to $150,000 and
thereafter indexed for growth equal to the percentage for
the state average weekly wage compared to the prior year.
5) Allowing for implementation on January 1, 2017 for all
provisions except the report from EDD on DI waiting
periods.
COMMENTS
1. Background on the California State Disability Program:
Disability Insurance .
The California Disability Insurance Program was added to the
California Unemployment Insurance Code in 1946 and is
administered by the Employment Development Department.
California is one of five states that provides disability
insurance for their workforce and was the first state to
provide SDI coverage for agricultural workers as well as
coverage for normal pregnancies.
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Approximately 13.1 million California workers are covered by
the SDI program. The law requires coverage for employees
working for employers in excess of $100 in a calendar quarter.
Exceptions include some domestic workers and some governmental
employees. Disability benefits are payable when a covered
employee suffers a wage loss and cannot work due to pregnancy
or illness/injury not related to their job. Benefits are
payable for a maximum for 52 weeks. According the Employment
Development Department's SDI Statistical Information there
were 633,586 total claims paid with a total of $4,515,361,557
in benefits paid. The average benefit amount was $479 with
approximately 15.66 average weeks per claim.
2. Background on the California State Disability Program: Paid
Family Leave
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. 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. Like SDI,
approximately 13.1 million California workers are covered by
PFL. In 2013 calendar year 213,779 total claims were paid with
a total of $599,892,578 in benefits. The average weekly
benefit amount for PFL that year was $532 with an average
duration of 5.32 weeks.
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 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.
3. Funding DI and PFL .
SDI and PFL are funded by an employee-paid payroll tax with
benefit levels indexed to inflation. However, unlike SDI
benefits, income from PFL has been deemed taxable by the
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Internal Revenue Service. Under both the DI and PFL programs,
workers can claim a cash benefit set at about 55% of "base
period" wages. For PFL these benefits can be collected for up
to 6 weeks and DI benefits can be payable for up to 52 weeks.
The maximum weekly benefit for both programs is currently set
at $1,104 and is adjusted every year based on the statewide
average weekly wage.
The State Disability Insurance program is paid for by the
proceeds of an employee payroll deduction which are deposited
in the Disability Insurance (DI) Fund. The DI Fund pays out
the DI and PFL benefits. 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.
4. Need for this bill?
California's DI and PFL programs are funded through worker
contributions and provide partial wage replacement (55% of
prior wage levels) for up to 52 weeks of disability leave or
up to 6 weeks for bonding with a new child or caring for a
seriously ill relative. A report from the Senate Office of
Research entitled California's Paid Family Leave Program found
that in 2013 fewer than 4 percent of workers making under
$12,000 filed for PFL and about 16 percent of workers earning
$12,000 to $24,000 filed a PFL claim. Workers making over
$75,000 accounted for over a quarter of PFL claims. The report
also noted that since the implementation of PFL there has been
a gradual increase in the number of claims filed. However, the
number of claims filed by individuals in the lowest income
bracket is consistently much smaller than those in the highest
income bracket. The report identifies various factors for this
including the current 55 percent replacement wage rate (which
may provide insufficient income), lack of job protection, and
a need for more outreach to employees who could benefit from
PFL if they were aware of the program.
According to the author AB 908 makes several improvements to
bolster the safety net created by the Disability Insurance and
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Paid Family Leave programs while maintaining the solvency of
the SDI fund. The author argues that the bill addresses the
inadequacy and inequity of the current program's 55 percent
wage replacement rate by increasing it to 60 percent for most
workers and 80 percent for the lowest wage workers (those
making under $18,992 annually). The author notes this helps
workers that cannot currently afford to take a large pay cut,
especially when coupled with the financial burden of caring
for a newborn or nursing one's own serious illness.
AB 908 would increase the maximum benefit to 8 weeks,
eliminate the waiting period for PFL, require a study by EDD
on the waiting period for DI, and increase the taxable wage
ceiling to $150,000. The author argues that the elimination of
the waiting period provides benefits more quickly to claimants
who have extended caregiving need. The author also notes that
the increase in the taxable wage ceiling raises revenues to
help offset the additional costs and ensures the solvency of
the DI fund. According to the author these changes to the DI
and PFL programs will make it a real option for most working
families by reducing the financial burden when having a baby,
caring for an ill relative, or taking care of their own
illness.
5. Proponent Arguments :
Proponents note that California's DI and PFL programs are
wholly funded through worker contributions and cover 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
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
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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.
Proponents also note the two programs work together in a
variety of ways, providing the example that a pregnant mother
may claim SDI benefits prior to giving birth, SDI and PFL
benefits after birth, and then the father may also claim PFL
to bond with his new child. They contend that because the
programs are so closely connected, the programs were designed
to offer the same level of benefits to both SDI and PFL
recipients. Proponents argue that by raising benefits for both
SDI and PFL recipients with a new benefit structure, raising
the maximum number of weeks allowed under PFL from six weeks
to eight and eliminating the one-week waiting period for PFL
recipients provides significant changes that strengthen a
worker's right to take advantage of these programs and help
align California's family leave laws with the true needs of
California families.
6. Opponent Arguments :
None on file.
7. 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
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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.
SB 770 (Jackson), Chapter 350, Statutes of 2013 expanded the
definition of family to include in-laws, siblings and
grandparents.
SB 406 (Jackson) of 2015, if passed and signed by the Governor
would make changes to the California Family Rights Act.
SUPPORT
American Academy of Pediatrics
California Black Health Network
California Labor Federation, AFL-CIO
Children Now
Communications Workers of America, Local 9003, AFL-CIO, CLC
Courage Campaign
Friends Committee on Legislation of California
Jewish Labor Committee Western Region
Legal Aid Society - Employment Law Center
National Association of Social Workers - California Chapter
National Council of Jewish Women, Los Angeles Section
Parent Voices
Western Center on Law & Poverty
OPPOSITION
None received.
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