BILL ANALYSIS �
AB 1845
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CONCURRENCE IN SENATE AMENDMENTS
AB 1845 (Solorio)
As Amended August 24, 2012
Majority vote
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|ASSEMBLY: |77-0 |(May 29, 2012) |SENATE: |36-0 |(August 29, |
| | | | | |2012) |
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Original Committee Reference: INS.
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).
The Senate amendments :
1)Modify the standard used to determine when EDD is prohibited
from crediting an employer's UI reserve account for a benefit
overpayment.
2)Permit EDD to assess penalties against employer agents who
willfully make a false statement or misrepresentation related
to a UI claim.
3)Add amendments to resolve chaptering out conflicts.
AS PASSED BY THE ASSEMBLY , 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.
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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.
FISCAL EFFECT : Approximately $15 million in overpayment
penalties will be shifted from the Benefit Audit Fund to the UI
Trust Fund and thereby reducing the availability of funds to
support the General Fund. EDD would have other minor and
absorbable costs to implement the provisions of this bill.
COMMENTS : 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. 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.
The Benefit Audit Fund provides financial support for the
department's UI fraud investigation program. In recent years
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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.
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086
FN: 0005803