BILL ANALYSIS Ó AB 1245 Page 1 ASSEMBLY THIRD READING AB 1245 (Cooley) As Amended April 6, 2015 Majority vote -------------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+---------------------+----------------------| |Insurance |11-1 |Daly, Travis Allen, |Beth Gaines | | | |Calderon, Cooley, | | | | |Cooper, Dababneh, | | | | |Frazier, Gatto, | | | | |Grove, Mayes, | | | | |Rodriguez | | | | | | | |----------------+------+---------------------+----------------------| |Appropriations |15-1 |Gomez, Bigelow, |Gallagher | | | |Bonta, Calderon, | | | | |Chang, Daly, Eggman, | | | | |Eduardo Garcia, | | | | |Holden, Jones, | | | | |Quirk, Rendon, | | | | |Wagner, Weber, Wood | | | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Requires, subject to exceptions, all employers to file AB 1245 Page 2 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. 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 AB 1245 Page 3 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: According to the Assembly Appropriations Committee, savings of several million dollars annually once the program is fully implemented. COMMENTS: 1)Purpose. According to the author, this bill 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 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 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 million of federal money for California) to find ways to look at the most recent quarter of earnings - AB 1245 Page 4 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 Web site. 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 employers have internet access, because the EDD's Web site will enable employers to file anything necessary merely by logging on to www.edd.ca.gov . Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086 FN: 0000169