BILL ANALYSIS Ó
AB 908
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
908 (Gomez and Burke)
As Amended September 4, 2015
Majority vote
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|ASSEMBLY: | |June 2, 2015 |SENATE: | |(September 11, |
| |60-17 | | |27-13 |2015 |
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Original Committee Reference: INS.
SUMMARY: Increases the level and duration of benefits provided
in the Paid Family Leave (PFL) and State Disability (SDI)
insurance programs.
The Senate amendments:
1)Increase the maximum duration of PFL insurance benefits from
six to eight weeks.
2)Increase the wage replacement rate for PFL and SDI benefits
from 55% to:
a) Eighty percent for those who make up to 33% of the
California average weekly wage.
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b) Sixty percent for those who make more than 33% of the
California average weekly wage.
3)Eliminate the one-week waiting period for PFL claims.
4)Increase the amount of wages subject to SDI payroll
contributions to $150,000 and annually adjusts the wage
ceiling based on the increase in the California average weekly
wage.
5)Require the Employment Development Department (EDD) to perform
a cost/benefit analysis of the one-week waiting period for SDI
claims and report the results of that study to the Assembly
Committee on Insurance and the Senate Committee on Labor and
Industrial Relations.
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 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
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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.
4)Requires each employee to contribute to the Disability
Insurance Fund (DI Fund) to pay the costs of SDI and PFL
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.
5)Adjusts the amount of wages subject to SDI payroll
contributions annually based on the change in the California
average weekly wage.
FISCAL EFFECT: Based on preliminary estimates from EDD the bill
would:
1)Increase the cost of benefits by approximately $650 million.
2)Generate approximately $350 million per year by increasing
amount of wages subject to SDI payroll contributions.
3)Increase the contribution rate by 0.2% in the first year.
This bill's impact on the contribution rate is expected to
fall 0.1% thereafter.
4)Unknown administrative costs to EDD paid for by the DI Fund.
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COMMENTS:
1)Purpose. According to the author, this bill makes several
improvements to bolster the safety net created by the state
disability and paid family leave insurance programs while
maintaining solvency of the DI Fund. First, it addresses the
inadequacy and inequity of the current program's 55% wage
replacement rate. Many workers can't absorb the pay cut
imposed by the current wage replacement rate, particularly
when it is coupled with the increased financial burdens that
accompany supporting a newborn child or nursing one's own
serious disability. This situation is even more dire for a
low-wage worker, who is more likely to live
paycheck-to-paycheck. The author points out extremely low
utilization for both SDI and PFL among low-wage workers
compared to those with higher wages, as well as survey
research raising wage replacement as a key reason workers
declined to take PFL benefits. The author contends PFL and
SDI should be available for all workers, not just those who
can afford to take a huge pay cut. This bill raises the wage
replacement rate for all workers to 60% for SDI and PFL
benefits, and to 80% for the lowest-wage workers, while
ensuring benefits increase as wages increase. This will make
PFL and SDI a real option for low-income working families,
allowing them to use benefits they are paying for.
Second, this bill extends the maximum duration of PFL benefits
from six to eight weeks. Extending the maximum number of
weeks reduces the burden of unpaid bonding and caregiving
leave, enhancing a number of outcomes for families and
children. Extending weeks also moves California closer to
aligning with the 12 weeks of job protection under the Family
and Medical Leave Act and California Family Rights Act. This
bill also raises revenues to help offset a portion of the
additional costs, in order to ensure the DI Fund remains
solvent for years to come as well as to limit the impact on
worker contribution rates. Finally, this bill eliminates a
seven-day waiting period for PFL benefits, providing benefits
more quickly to claimants who have an extended caregiving
need, as well as requiring a study assessing the costs and
benefits of modifying or eliminating the waiting period for
SDI.
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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 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)SDI Program. The SDI program provides partial wage
replacement benefits to employees who are unable to work
because of pregnancy or illnesses and injuries unrelated to
their job (job related injuries are covered by the workers'
compensation system). To be eligible for SDI, a worker must
have his/her disability certified by a health care
professional. Workers receive 55% of their wages, subject to
a maximum benefit amount (currently $1,104 per week) for up to
52 weeks.
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4)Funding PFL and SDI. The PFL program is part of the SDI
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.
Analysis Prepared by: Paul Riches / INS. / (916)
319-2086 FN: 0002386