BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2778|
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CONSENT
Bill No: AB 2778
Author: Assembly Insurance Committee
Amended: 6/21/10 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMM : 10-0, 6/30/10
AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Liu,
Lowenthal, Padilla, Price, Runner
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 63-0, 5/28/10 (Consent) - See last page
for vote
SUBJECT : Unemployment insurance: voluntary plans
SOURCE : Applied Underwriters
DIGEST : This bill authorizes the Director of the
Employment Development Department to approve a single
voluntary plan of disability insurance for multiple small
employers.
ANALYSIS : Existing law:
1.Allows an employer, and a majority of the employees of an
employer, to apply to the Director of the Employment
Development Department (EDD) for approval of a voluntary
plan for the payment of disability insurance benefits to
CONTINUED
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the employees.;
2.Requires the Director of EDD to approve a voluntary plan
when he or she finds, among other things, that the
following conditions exist:
A. The rights afforded to the covered employees are
greater than those provided for employees covered by
State Disability Insurance (SDI) benefits and Paid
Family leave;
B. The plan has been made available to all of the
employees of the employer in this state or the
employees of a separate establishment maintained by
the employer;
C. A majority of the employees and the employer have
consented to the plan;
D. The plan will be in effect for at least one year;
E. The plan will not result in a substantial selection
of risks adverse to the state Disability Fund;
3.Provides that disability benefits payable to employees
are the liability of an approved voluntary plan;
4.Provides that an employee covered by an approved
voluntary plan is not entitled to SDI benefits.
This bill:
1. States findings and declarations as follows:
A. Small businesses have not had the same access to
the benefits of voluntary plan disability insurance
(VPDI) as employees of larger employers;
B. This lack of access is due, in part, to the
administrative difficulty and expense associated with
the application and ongoing operating compliance with
current law and Employment Development Department
procedures;
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2. Authorizes the EDD Director to approve a single
voluntary plan for all of the clients of a
"small-business-third-party administrator" (SBTPA), and
the clients' employees, when all of the following
criteria are met:
A. The plan is administered by the SBTPA;
B. The plan establishes a master trust account, to be
held in a federally insured national bank, that is
administered by the SBTPA, but requires each
individual employer that is a client of the SBTPA to
have a subtrust account that reflects that client's
employees' specific plan contributions and is not
commingled with any other funds;
C. If a plan does not provide for the assumption by an
admitted disability insurer of the liability of the
employer to pay the disability benefits, the EDD
Director shall not approve it unless the employer
files with the Director the bond of an admitted surety
insurer, deposit of securities approved by the
Director, or deposit of an irrevocable letter of
credit in an acceptable amount and in compliance with
specified law. The Director may require additional
security from the SBTPA;
D. The single voluntary plan will be in effect for a
period of not less than one year and, thereafter,
continuously, unless the Director of EDD finds the
SBTPA has given notice of withdrawal of the plan. Such
notice shall be filed in writing with the Director and
effective on the next anniversary of the plan
effective date, that is not less than 30 days from the
date of the filing of the notice; the plan may be
withdrawn on the operative date of any law increasing
the benefit amounts provided by Sections 2563 and 2655
or the operative date of any change in the rate of
worker contributions as determined by Section 984, if
notice of the withdrawal from the plan is transmitted
to the Director of Employment Development not less
than 30 days prior to the operative date of that law
or change. If the plan is not withdrawn on the 30
days' notice because of the enactment of a law
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increasing benefits or because of a change in the rate
of worker contributions as determined by Section 984,
the plan shall be amended to conform to that increase
or change on the operative date of the increase or
change.
E. Any individual employer who is a client of the
SBTPA, or a majority of that client's employees
employed in this state covered by the plan, may also
terminate their participation in the plan by giving
written notice of withdrawal from the plan to the
SBTPA and to the Director not less than 30 days prior
to the date of withdrawal.
F. The rights afforded to the covered employees are
greater than those provided for employees covered by
SDI benefits and Paid Family Leave;
G. The plan has been available to all of the employees
of the employer in this state, and a majority of the
employees have consented to the plan;
H. If the plan provides for insurance, the form of the
insurance policies to be issued has been approved by
the Insurance Commissioner and is to be issued by an
admitted disability insurer;
I. The approval of the plan will not result in a
substantial selection of risks adverse to the
Disability Fund. SDI benefits are paid from the
Disability Fund;
1. Defines "small-business-third-party administrator," or
SBTPA, as an applicant that the EDD Director finds meets
all of the following criteria:
A. The SBTPA administers voluntary disability plans on
behalf of its clients pursuant to a written agreement
in a form and manner approved by the EDD Director;
B. The SBTPA has at least 1,000 California domiciled
clients, 80 percent of whom have fewer than 20
employees;
C. The SBTPA processes payroll for its California
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domiciled clients;
D. The SBTPA offers workers' compensation insurance to
its California domiciled clients through an affiliated
California domiciled insurance company;
1. Requires EDD to adopt any application forms and
procedures within 60 days of the enactment of this bill;
2. Declares the intent of the Legislature in enacting the
financial security requirements that in the event of the
insolvency of an employer-client of the SBTPA, or of the
SBTPA, the disability claims against the subaccount of
any employer-client arising prior to the date of the
insolvency shall be satisfied by first accessing the
security of the SBTPA, which may include additional
financial security required by the EDD Director, rather
than satisfying the claims from the state Disability
Fund;
3. Sunsets on December 31, 2014.
Background
State Disability Insurance (SDI) is a California insurance
program run by the Employment Development Department.
There are three different SDI plans:
1. Most California employees are covered by the State plan;
2. Some employers offer Voluntary Disability Plans (VDP)
which is the type of plan which this bill addresses. A
VDP is a private disability insurance plans that has
been approved by the Director of EDD. VDP's are
required by law to offer coverage that's at least as
good as the State plan and have at least one feature
that the State plan doesn't have. It cannot be more
expensive than the state plan, and it has to be approved
by a majority of employees;
3. Additionally, persons who are self-employed or a
business owner can get Elective Coverage through SDI,
subject to different rules.
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This bill has been introduced to provide a means for a
specially qualified business to become an approved third
party administrator for VDP plans so that their
efficiencies and superior benefits can be made available to
those businesses which want them without the existing
bottleneck of the approval process.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/4/10)
Applied Underwriters (source)
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Block,
Blumenfield, Bradford, Brownley, Buchanan, Caballero,
Charles Calderon, Conway, Cook, Coto, Davis, DeVore, Eng,
Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Gaines,
Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Knight, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nava, Nestande, Niello, Nielsen, Norby, V. Manuel Perez,
Portantino, Ruskin, Saldana, Skinner, Solorio, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, John
A. Perez
NO VOTE RECORDED: Bass, Bill Berryhill, Tom Berryhill,
Blakeslee, Carter, Chesbro, De La Torre, De Leon,
Emmerson, Furutani, Hall, Jeffries, Salas, Silva, Smyth,
Audra Strickland, Vacancy
JA:nl 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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