BILL ANALYSIS �
AB 1845
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ASSEMBLY THIRD READING
AB 1845 (Solorio)
As Amended April 11, 2012
Majority vote
INSURANCE 13-0 APPROPRIATIONS 17-0
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|Ayes:|Solorio, Hagman, |Ayes:|Fuentes, Harkey, |
| |Bradford, | |Blumenfield, Bradford, |
| |Charles Calderon, Carter, | |Charles Calderon, Campos, |
| |Feuer, | |Davis, Donnelly, Gatto, |
| |Beth Gaines, Hayashi, | |Ammiano, Hill, Lara, |
| |Miller, Olsen, Skinner, | |Mitchell, Nielsen, Norby, |
| |Torres, Wieckowski | |Solorio, Wagner |
| | | | |
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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
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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
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 : The partial shift of penalties from the Benefit
Audit Fund to the UI Trust Fund does not take place until
October 2013. However, assuming the current year revenue of
approximately $30 million in penalty assessments, $15 million in
overpayment penalties will be shifted from the Benefit Audit
Fund to the UI Trust Fund. EDD would have other minor and
absorbable costs to implement the provisions of this bill.
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COMMENTS :
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.
Federal Legislation. The Trade Adjustment Assistance Extension
Act of 2011 (PL 112-40) included three new federal requirements
for UI program integrity efforts:
1) 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.
2) 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.
3) 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.
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
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bill delays implementation of this change until October 21,
2013, which defers any budgetary impact until the 2013-14 fiscal
year.
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086
FN: 0003940