BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 908|
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THIRD READING
Bill No: AB 908
Author: Gomez (D) and Burke (D), et al.
AmendedAmended:9/4/15 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 4-1, 6/24/15
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
SENATE LABOR AND IND. REL. COMMITTEE: 4-1, 9/9/15 (pursuant to
Senate Rule 29.10)
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/10/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 60-17, 6/2/15 - See last page for vote
SUBJECT: Disability compensation: disability insurance
SOURCE: Author
DIGEST: This bill makes various changes to the Paid Family
Leave and State Disability Insurance programs.
Senate Floor Amendments of 9/4/15 increase the wage replacement
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rate for Paid Family Leave (PFL) and State Disability Insurance
(SDI), eliminate the PFL waiting period, increase the SDI
taxable wage ceiling, and provide the Employment Development
Department (EDD) reporting requirements on the SDI waiting
period.
ANALYSIS:
Existing law:
1)Establishes the SDI program which 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 program,
administered by the 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 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 seven-consecutive days during each disability
benefit period. During this seven-day waiting period, no
disability benefits are payable. (Labor Code §2627)
2)Establishes a family temporary DI program, PFL that provides
up to six weeks of wage replacement benefits to workers who
take time off work to care for:
a) 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)
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
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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)
4)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)
5)States that an individual is eligible to receive temporary DI
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)
6)States an individual shall be deemed eligible for family
temporary DI 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 DI benefits are
payable. (Unemployment Insurance Code §3303)
This bill makes various changes to the PFL and SDI programs
including:
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1)Increasing the wage replacement benefits for both SDI and PFL
as outlined below:
a) Wage replacement increase to 80% for individuals whose
wages (as calculated under current law) are under one-third
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.
b) Wage replacement increase to 60% for individuals whose
wages (as calculated under current law) are over one-third
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 PFL and includes reporting
language for the EDD 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 six weeks to
eight 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.
Background
1)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 EDD. California is one of five states that
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provides DI for their workforce and was the first state to
provide SDI coverage for agricultural workers as well as
coverage for normal pregnancies.
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 EDD'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)California State Disability Program: Paid Family Leave. In
2002 SB 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 and
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
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inflation. However, unlike SDI benefits, income from PFL has
been deemed taxable by the 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 six 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 SDI program is paid for by the proceeds of an employee
payroll deduction which are deposited in the 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.
Comments
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 six
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 four 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
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bolster the safety net created by the DI and PFL programs while
maintaining the solvency of the SDI fund. The author argues that
this 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 increases the maximum benefit to eight 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.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
EDD estimates that increasing the specified benefit duration
and wage replacement level would result in increased payments
from the DI Fund of $651 million in 2017, rising to $1 billion
by 2021, assuming no change to the program's current
utilization rate. If utilization were to rise, benefit
payments would be commensurately higher.
EDD estimates that covered workers would pay an additional
$300 million in 2017, rising to $994 million in 2021,
resulting from this bill's increase to the wage ceiling
related to covered workers' contributions.
EDD would likely adjust the worker contribution rate, from 1.0
percent to 1.1 percent beyond 2018 (assuming no change to the
program's current utilization rate), to ensure benefit
payments can be maintained. If utilization were to rise, the
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worker contribution rate would be higher.
EDD would incur one-time IT-related costs, likely in the high
hundreds of thousands of dollars, to implement the provisions
of this bill.
SUPPORT: (Verified9/8/15)
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: (Verified9/8/15)
None received
ARGUMENTS IN SUPPORT: 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 PFL 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 PFL are more
likely to stay in the workforce. Proponents also highlight a
recent study that found that women who take PFL 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.
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Proponents argue that AB 908 will make PFL 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 six weeks of paid leave offered by PFL
is far less than nearly every other developed county.
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.
ASSEMBLY FLOOR: 60-17, 6/2/15
AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brown,
Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper,
Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine,
Linder, Lopez, Low, Maienschein, Mathis, McCarty, Medina,
Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Waldron, Weber, Williams, Wood, Atkins
NOES: Travis Allen, Bigelow, Brough, Chang, Dahle, Gallagher,
Hadley, Harper, Jones, Lackey, Mayes, Melendez, Obernolte,
Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Chávez, Beth Gaines, Kim
Prepared by: Deanna Ping / L. & I.R. / (916) 651-1556
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9/10/15 23:08:52
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