BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1245|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 1245
Author: Cooley (D)
Amended: 7/7/15 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 5-0, 6/10/15
AYES: Mendoza, Stone, Jackson, Leno, Mitchell
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-1, 5/18/15 - See last page for vote
SUBJECT: Unemployment insurance: electronic reporting and
funds transfers
SOURCE: Small Business California
DIGEST: This bill, beginning on January 1, 2017, requires an
employer with 10 or more employees to file all reports and
returns, and remit all contributions for unemployment insurance
premiums to the Employment Development Department (EDD)
electronically, as specified. Beginning on January 1, 2018,
this bill extends the application of these electronic filing
requirements to all employers. This bill authorizes the granting
of a waiver from these requirements for severe hardship, as
specified. In addition to any other penalties imposed under
existing law for failure to timely and properly submit their
reports, this bill imposes a $50 penalty on employers who fail
to file without good cause, as specified.
AB 1245
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Senate Floor Amendments of 7/7/15 change from six months to one
year the time frame under which a waiver of these requirements
(that is approved by the Director of EDD) shall be valid to be
consistent with other provisions in the bill which grant a one
year waiver.
ANALYSIS:
Existing law:
1)Establishes the Unemployment Insurance (UI) program, a joint
federal-state program administered by the Employment
Development Department (EDD), designed to provide unemployment
insurance benefits to employees who lose their jobs through no
fault of their own.
2)Requires an employer to file a report of contributions, a
quarterly return, a report of wages paid, and an annual
reconciliation return, as specified, with the Director of the
EDD and to make contributions for unemployment insurance
premiums.
3)Requires each employer to file their contributions and reports
with the director of EDD within the time frame specified in
statute.
4)Allows "hard copy" filing and paper check tax remittance.
However, depending on the taxes and data, existing law
authorizes electronic filing of contributions and data.
5)Imposes a 15% penalty on an employer who fails to timely pay
the contributions and imposes a $20 penalty for each
unreported wage item.
This bill:
1)Requires employers to file their UI contributions and
withholdings, report of contributions, quarterly return, and
report of wages electronically as follows:
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a) Effective January 1, 2017 - employers with 10 or more
employees;
b) Effective January 1, 2018 - all employers (capturing
those with less than 10 employees).
2)Authorizes an employer to seek, and the Director of the 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.
3)Imposes, in addition to any other penalties imposed under
existing law for failure to timely and properly submit their
reports, a $50 penalty on employers who fail to file without
good cause, and until January 1, 2019, exempts certain
employers' timely nonelectronic filings from that penalty.
Background
The UI program is a state/federal insurance program that
provides unemployment
insurance benefits to employees who lose their jobs through no
fault of their own.
For years the EDD operated on an almost 30 year old antiquated
IT system that was inadequate to handle the heavy UI claims
volume that resulted from the Great
Recession. The EDD has replaced its major IT systems and
continues to make upgrades to its various programs. Most
recently, EDD implemented a new UI Online web portal for UI
customers to access their UI claim online 24 hours a day, seven
days a week. The UI Online is a web-based system that has
automated the core business functions that support the continued
claims and reopening of existing claims. This project has
allowed EDD to redirect staff resources to other business
functions within the UI Program. Additionally, the improvements
will also help by reducing paper handling and associated costs
and creating greater efficiencies within the system.
The realities of technology and the movement towards more
electronic operations create opportunities for efficiencies to
be implemented in other areas. For example, in the UI Program,
benefits are calculated using a "standard base period" of
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earnings. The current standard base period is the first four of
the last five completed calendar quarters prior to the beginning
date of the UI claim. In the calculation of the earnings, the
most recent quarter of earnings is discounted in favor of the 4
prior quarters. 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 -
using what is referred to as the "alternative base period"
calculation. The Alternate Base Period (ABP) program was
implemented in 2012 to allow EDD to use the four most recently
completed calendar quarters of earnings when establishing a
claim. The ABP law does not change employers' current statutory
wage reporting requirements. However, employers may receive
requests for wage information before their customary wage
reports are due. EDD will mail a request for wages to the
employer, who must then respond in accordance with the
instructions provided on the form. Employers will have 10 days
to respond to the EDD's request for wages.
Since January 2011, EDD has offered employers online payment and
reporting capabilities through its e-Services for Business web
site. With e-Services for Business, employers and their
representatives can register their businesses, submit tax
returns, make tax payments, and manage their accounts online.
According to EDD, approximately 35% of employers currently use
e-Services for Businesses for some form of interaction with EDD.
For employers, using electronic filing for both data and tax
remittances is cheaper and more efficient. Moving forward to
reflect the realities of modern electronic advances makes sense
from both a governmental and private sector efficiency
perspective.
This bill phases in over a two-year period the required use of
electronic filing for all California employers to submit returns
and remit payments to EDD. Because EDD has an already
established e-services system for employer use, this requirement
would not result in employers being forced to purchase
specialized software. All that would be necessary for the
employer to fulfill this requirement is to have internet access
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to submit their payments and documents through EDD's current
online service. According to the EDD, this bill would bring
efficiencies both to EDD and the employer community - saving
time, paper, and postage while reducing common errors associated
with paper forms. The two-year, phased-in approach will allow
for a robust education and outreach campaign. Additionally, EDD
has a technical assistance team in place to assist employers
with the online system.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified7/8/15)
Small Business California (source)
Employment Development Department
National Association of Women Business Owners
OPPOSITION: (Verified7/8/15)
None received
ARGUMENTS IN SUPPORT: The author states that processing
paper documents and payments costs California nearly eight times
as much as processing the same information electronically.
According to the author and sponsors, EDD's existing e-Services
for Business is secure, easy to use, and would help businesses
to: 1) avoid errors that are common with paper forms; 2) save
time by saving basic account information for future
transactions; 3) protect data through encryption that is safer
and more secure than paper forms; 4) allow employers to easily
update account information; 5) provide an automated receipt so
employers immediately know their payment was received; and 6)
complement and upcoming feature that will allow employers to
also handle their Unemployment Insurance forms online.
Overall, proponents argue that this legislation would result in
many millions in savings to the state in paper, postage and
staff time, while requiring no upfront costs or additional
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infrastructure. The sponsors note that currently three states
require all employers to use electronic filing, while many
others require certain employers (based on size or industry
type) to do so. Lastly, the author and the sponsors note that
EDD has a technical assistance team in place to support
employers in making the transition to its online system.
ASSEMBLY FLOOR: 76-1, 5/18/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Lackey, Levine, Linder, Lopez, Low, Maienschein,
Mayes, McCarty, Medina, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NOES: Beth Gaines
NO VOTE RECORDED: Kim, Mathis, Melendez
Prepared by:Alma Perez / L. & I.R. / (916) 651-1556
7/8/15 15:15:29
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