BILL ANALYSIS Ó
AB 1245
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Date of Hearing: April 8, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 1245
(Cooley) - As Introduced February 27, 2015
SUBJECT: Unemployment insurance: electronic reporting and
funds transfers
SUMMARY: Requires, subject to exceptions, all employers to file
their unemployment insurance (UI) related data and taxes
electronically. Specifically, this bill:
1)Requires employers with 10 or more employees to file UI taxes
and related data requirements electronically, commencing
January 1, 2016.
2)Requires employers with less than 10 employees to file UI
taxes and related data requirements electronically, commencing
January 1, 2017.
3)Authorizes an employer to seek, and the Director of the
Employment Development Department (EDD) to grant, a waiver of
the requirement to file electronically if the employer
establishes it has a lack of automation to comply with
electronic filing, there is a severe economic hardship, there
is a current federal exemption from electronic filing, or if
there is some other good cause to waive the requirement.
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4)Applies the existing penalties for failure to make
non-electronic filings to a failure to comply with the new
electronic filing requirements.
EXISTING LAW:
1)Establishes a UI program designed to provide unemployment
insurance benefits to employees who lose their jobs through no
fault of their own. The UI program is a joint federal/state
mandatory program.
2)Requires employers to pay UI taxes based on a statutory
formula, and to provide detailed wage information on a
schedule specified in statute.
3)Allows "hard copy" filing and paper check tax remittance, but
authorizes on a permissive basis electronic filing of the
taxes and data.
FISCAL EFFECT: Undetermined.
COMMENTS:
1)Purpose. According to the author, AB 1245 would phase in over
a two-year period the required use of electronic filing for
all California employers to submit returns and remit payments
to the Employment Development Department (EDD). Electronic
filing for employers would increase efficiencies for both EDD
and the employer community. Once fully implemented, this
legislation would result in many millions in savings to the
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state in paper, postage and staff time.
2)Background. The UI program is a long-standing state/federal
insurance program that predates any form of e-commerce. The
realities of paper filings have created outdated laws which
have been subject to modernization efforts over the years.
For example, benefits have been paid based on a "base period"
of earnings, which discounts the previous quarter of earning
in favor of the 4 quarters prior to the most recently
completed quarter. Because data has historically been filed
in hard copy format, it was impossible to use the most recent,
relevant, data. In this respect, federally mandated "UI
Modernization" requirements have been established that
incentivized states (to the tune of nearly $850,000,000 of
federal money for California) to find ways to look at the most
recent quarter of earnings - the so-called "alternative base
period" calculation. Many employers now use electronic filing
for both data and tax remittances, because it is cheaper and
more efficient. Moving forward to reflect the realities of
modern electronic commerce makes sense from both a
governmental and private sector efficiency perspective.
3)EDD website. The requirement that employers must file
electronically would not result in employers being forced to
purchase specialized software. All that will be necessary is
that the employer have internet access, because the EDD's
website will enable employers to file anything necessary
merely by logging on to www.edd.ca.gov.
4)Author's amendments. The author is proposing amendments that
make minor technical corrections to the bill as introduced, as
well as amendments that delay implementation of the bill's
mandatory requirements. With respect to employers with 10 or
more employees, the bill's provisions would not take effect
until January 1, 2017. With respect to employers with fewer
than 10 employees, the bill's provisions would not take effect
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until January 1, 2018.
REGISTERED SUPPORT / OPPOSITION:
Support
Small Business California
Employment Development Department
Opposition
None received
Analysis Prepared by:Mark Rakich / INS. / (916) 319-2086
AB 1245
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