BILL ANALYSIS �
AB 1845
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Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1845 (Solorio) - As Amended: April 11, 2012
SUBJECT : Unemployment Compensation Insurance
SUMMARY : Implements new federal requirements related to
Unemployment Compensation Insurance (UI) program integrity and
makes technical changes to UI and tax collection programs
administered by the Employment Development Department (EDD).
Specifically, this bill :
1)Prohibits crediting an employer's UI reserve account for
benefit overpayments resulting from the employer's failure to
respond timely to claim notifications or requests for
information from EDD.
2)Corrects inconsistencies between sections allowing employers
to submit additional information regarding a UI claim.
3)Requires reporting an employee who returns to an employer
after more than 60 days as a new hire.
4)Permits a claimant to cancel a UI claim within one year of
submitting the claim.
5)Redirects one-half of the penalties assessed for the
fraudulent overpayment of UI benefits from the Benefit Audit
Fund to the Unemployment Fund.
6)Specifies that the redirection of revenue from the Benefit
Audit Fund takes effect on October 21, 2013.
7)Conforms EDD's tax collection calendar to the federal tax
collection calendar.
EXISTING LAW
1)Provides that an unemployed person is eligible for UI benefits
if he or she becomes unemployed through no fault of their own,
has worked in UI-covered employment, is able and available to
work, and is totally or partially unemployed during the week
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for which a claim is filed.
2)Permits employers to submit additional information regarding a
UI claim in specified circumstances.
3)Requires employers to report new hires to the EDD for the
administration of EDD programs, tax collection, child support
enforcement, administration of workers compensation programs,
and verification of eligibility for some federal programs.
4)Permits UI claimants to cancel a claim prior to collecting
benefits.
5)Requires a claimant who fraudulently receives UI benefit
overpayments to pay a penalty of 30% of the overpayment
amount.
6)Requires the overpayment penalty amounts to be deposited in
the Benefit Audit Fund.
7)Specifies that the Benefit Audit fund shall be used to finance
the discovery and collection of UI benefit overpayments.
8)Establishes EDD as the state agency responsible for collecting
state payroll taxes.
FISCAL EFFECT : Unknown, but potentially significant adverse
impacts on programs supported by the Benefit Audit Fund.
COMMENTS :
1)Purpose. According to the author, this bill is intended to
implement new federal mandates for UI integrity and make a
number of technical changes to the Unemployment Insurance Code
requested by the department.
2)Federal Legislation. The Trade Adjustment Assistance
Extension Act of 2011 (PL 112-40) included three new federal
requirements for UI program integrity efforts:
a) States must impose a minimum 15% penalty on
individuals whose fraudulent acts resulted in
overpayment of UI benefits and that those penalty
funds are to be deposited in the state's UI fund.
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b) States are prohibited from providing relief
from charges to an employer's UI reserve account when
the action/inaction of the employer led to the UI
overpayment.
c) States are required to include employees
rehired after 60 days in the National Directory of New
Hires.
Under the Federal legislation, states must implement these
provisions by October 1, 2013. Failure to implement these
requirements could result in the state losing its
administrative grant funds to operate the UI program ($340
million in the 2012 federal fiscal year) and California
employers could also lose a federal tax credit resulting in
approximately $6 billion of additional taxes.
3)Benefit Audit Fund. The Benefit Audit Fund provides financial
support for the department's UI fraud investigation program.
In recent years the fund has generated between $25 and $30
million per year through the collection of assessments on
fraudulent UI claims. In response to ongoing fiscal
shortfalls, annual budget acts have provided approximately $15
million annually to support the UI fraud investigation program
and used the remaining revenue to support the General Fund.
The new federal requirements have the effect of reducing
Benefit Audit Fund revenue by 50% which will result in reduced
support for either (or both) the department's UI fraud
investigation program or the General Fund. Consistent with
the Federal requirements, the bill delays implementation of
this change until October 21, 2013 which defers any budgetary
impact until the 2013-14 fiscal year.
REGISTERED SUPPORT / OPPOSITION :
Support
Employment Development Department
Opposition
None Received
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086
AB 1845
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