BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2733|
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CONSENT
Bill No: AB 2733
Author: Assembly Insurance Committee
Amended: 5/12/14 in Senate
Vote: 27 - Urgency
SENATE INSURANCE COMMITTEE : 10-0, 6/11/14
AYES: Monning, Gaines, Corbett, Correa, DeSaulnier, Mitchell,
Nielsen, Roth, Torres, Vidak
NO VOTE RECORDED: Lieu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 4/24/14 (Consent) - See last page for
vote
SUBJECT : Disability compensation: voluntary plans
SOURCE : Author
DIGEST : This bill repeals the sunset clause on the small
business third-party administrator program for voluntary
disability programs, streamlines the administration of multiple
programs, and shifts financial security obligations from the
employer to the administrator.
ANALYSIS :
Existing law:
1. Requires employees to participate in the State Disability
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Insurance (SDI) program, which provides partial and
short-term income replacement if an employee is disabled and
unable to work due to injuries or conditions that are not
work-related, except when otherwise provided.
2. Requires employers to deduct SDI taxes from wages due to
employees.
3. Authorizes an employer or a majority of the employees or both
to establish a voluntary plan for the payment of disability
benefits subject to approval by the Director of the
Employment Development Department (Director of EDD) instead
of participating in SDI.
4. Establishes standards for approval by the Director of EDD for
plans that involve at least one employee and under specified
conditions including:
A. The rights afforded to the covered employees are
greater than those provided as by the SDI program,
including paid family leave.
B. The plan has been made available to all of the
employees of the employer employed in this state or to
all employees at any one distinct, separate
establishment maintained by the employer in this state
and provides for the inclusion of future employees.
C. A majority of the employees involved have consented
to the plan.
D. The employer has consented to the plan and has agreed
to make the payroll deductions required, if any, and
transmit the proceeds to the plan insurer, if any.
E. The plan will be in effect for a period of not less
than one year and, thereafter, continuously unless the
Director of EDD finds that the employer or a majority of
its employees employed in this state covered by the plan
have given notice of withdrawal from the plan.
F. The approval of the plan or plans will not result in
a substantial selection of risks adverse to the
Disability Fund.
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5. Provides that voluntary plans may be administered by
"small-business-third-party administrator" (SBTPA) if the
SBTPA:
A. Administers voluntary disability plans on behalf of
its clients pursuant to a written agreement in a form
and manner approved by the Director of EDD.
B. Has at least 1,000 California domiciled clients, 80%
of whom have fewer than 20 employees.
C. Processes payroll for its California domiciled
clients.
D. Offers workers' compensation insurance to its
California domiciled clients through an affiliated
California domiciled insurance company.
6. Grants the Director of EDD the discretion to approve a single
voluntary plan to be administered by the SBTPA for all of its
clients and their employees that meets specified criteria.
7. Provides that it is the intent of the Legislature 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 rather than satisfying the claims from
the Disability Fund.
8. Repeals the authorizing statute for the SBTPA on December 31,
2014, and as of that date is repealed.
This bill
1. Permits a SBTPA to consolidate the individual subtrust
accounts and requires the SBTPA to maintain a separate
accounting ledger for each client.
2. Requires the SBTPA, rather than the employer, to meet
financial security requirements on behalf of the SBTPA
clients and their employees.
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3. Eliminates the authority of the Director of EDD to impose
additional security requirements on the employer.
4. Grants the Director of EDD the authority to terminate
participation by an individual employer client of the SBTPA
for cause and provides that the voluntary plan assets shall
be recovered from the SBTPA, rather than the employer.
5. Makes technical and clarifying corrections and changes.
6. Eliminates the sunset date in existing statute.
Background
Disability Insurance . California law requires that employees be
provided disability insurance coverage funded through employee
deductions. Employers have three options to comply with that
requirement:
State Plan . Most California employees are covered by the plan
run by the EDD frequently referred to as SDI. SDI replaces a
portion of an insured's wages when the insured suffers a
qualifying disability or qualifies for paid family leave.
Elective Coverage . Self-employed persons and business owners
can get elective coverage through SDI, subject to different
rules.
Voluntary Disability Plans (VDP) . A VDP is a private disability
insurance plan approved by the Director of EDD. VDP's are
required by law to offer coverage that is as generous as SDI
with at least one feature that SDI doesn't have.
SBTPA-administered Voluntary Disability Plans . AB 2778
(Assembly Insurance Committee, Chapter 399, Statutes of 2010),
established the SBTPA program as a means to make it economical
for small employers to provide enhanced benefits by authorizing
the Director of EDD to approve a single VDP for multiple small
employers. AB 2778 contained a sunset clause to force
evaluation of whether or not the program would operate as
intended. According to Applied Underwriters, the program has
greatly simplified the approval process for numerous yet
essentially identical VDPs and has proven to be a sound way to
deliver enhanced benefits to a class of employees previously
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excluded from VDPs.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/23/14)
Applied Underwriters, Inc.
ASSEMBLY FLOOR : 75-0, 4/24/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Grove, Hagman, Hall, Roger Hern�ndez, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Medina, Melendez, Mullin, Muratsuchi, Nestande, Olsen, Pan,
Patterson, Perea, V. Manuel P�rez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.
P�rez
NO VOTE RECORDED: Gray, Harkey, Mansoor, Nazarian, Vacancy
AL:d 6/24/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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