BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2778
                                                                  Page  1

          Date of Hearing:   May 19, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

            AB 2778 (Committee on Insurance) - As Amended:  May 11, 2010 

          Policy Committee:                              Insurance  
          Vote:12-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill authorizes the Employment Development Department (EDD)  
          to approve a voluntary disability insurance plan through  
          calendar year 2015 if the plan is administered by a third party  
          on behalf of a number of small businesses and meets specified  
          criteria. Under current law, EDD must approve these plans  
          separately. Specifically, this bill: 

          1)Defines "small-business-third-party administrator" (SBTPA). 

          2)Authorizes EDD to approve a single voluntary plan for clients  
            of a SBTPA if specific plan criteria are met, such as the  
            continuity of coverage, the rights provided to employees, and  
            the form of insurance provided. 

           FISCAL EFFECT  

          Unknown, likely absorbable workload to the EDD to continue  
          oversight of voluntary disability insurance plans. 

           COMMENTS  

           1)Rationale  . This bill is sponsored by Applied Underwriters,  
            Inc, a subsidiary of Berkshire Hathaway to allow  
            administrators of disability insurance policies to be approved  
            under a single policy instead of having to apply separately  
            for numerous policies provided on behalf of small businesses.  
            The sponsor administers 1,600 nearly identical voluntary  
            disability plans on behalf of small businesses. 

           2)State Disability Insurance  (SDI) is a public disability  
            insurance program funded through premiums and payroll taxes  
            and provides most California employees with cash benefits for  






                                                                  AB 2778
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            disabilities lasting more than seven days that result in  
            partial or total disability. SDI generally pays up to 55% of  
            wages earned before the disability and lasts up to a year. SDI  
            differs from federal Social Security disability benefits.  
            Federal benefits are only provided if a disability lasts more  
            than a year and results in not being able to work in any  
            industry.  

          Companies may opt to provide disability coverage via a voluntary  
            plan which is also funded with employee contributions, but  
            usually provides more robust benefits than SDI. This bill  
            addresses these voluntary plans to improve efficiency of  
            administration for both EDD and third party administrators. 

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081