BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      AB 1245


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          ASSEMBLY THIRD READING


          AB  
          1245 (Cooley)


          As Amended  April 6, 2015


          Majority vote


           -------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                 |Noes                  |
          |                |      |                     |                      |
          |                |      |                     |                      |
          |----------------+------+---------------------+----------------------|
          |Insurance       |11-1  |Daly, Travis Allen,  |Beth Gaines           |
          |                |      |Calderon, Cooley,    |                      |
          |                |      |Cooper, Dababneh,    |                      |
          |                |      |Frazier, Gatto,      |                      |
          |                |      |Grove, Mayes,        |                      |
          |                |      |Rodriguez            |                      |
          |                |      |                     |                      |
          |----------------+------+---------------------+----------------------|
          |Appropriations  |15-1  |Gomez, Bigelow,      |Gallagher             |
          |                |      |Bonta, Calderon,     |                      |
          |                |      |Chang, Daly, Eggman, |                      |
          |                |      |Eduardo Garcia,      |                      |
          |                |      |Holden, Jones,       |                      |
          |                |      |Quirk, Rendon,       |                      |
          |                |      |Wagner, Weber, Wood  |                      |
          |                |      |                     |                      |
          |                |      |                     |                      |
           -------------------------------------------------------------------- 


          SUMMARY:  Requires, subject to exceptions, all employers to file  








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          their unemployment insurance (UI) related data and taxes  
          electronically.  Specifically, this bill:  


          1)Requires employers with 10 or more employees to file UI taxes  
            and related data requirements electronically, commencing January  
            1, 2016.


          2)Requires employers with less than 10 employees to file UI taxes  
            and related data requirements electronically, commencing January  
            1, 2017.


          3)Authorizes an employer to seek, and the Director of the  
            Employment Development Department (EDD) to grant, a waiver of  
            the requirement to file electronically if the employer  
            establishes it has a lack of automation to comply with  
            electronic filing, there is a severe economic hardship, there is  
            a current federal exemption from electronic filing, or if there  
            is some other good cause to waive the requirement.


          4)Applies the existing penalties for failure to make  
            non-electronic filings to a failure to comply with the new  
            electronic filing requirements.


          EXISTING LAW:  


          1)Establishes a UI program designed to provide unemployment  
            insurance benefits to employees who lose their jobs through no  
            fault of their own.  The UI program is a joint federal/state  
            mandatory program.


          2)Requires employers to pay UI taxes based on a statutory formula,  
            and to provide detailed wage information on a schedule specified  








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            in statute.


          3)Allows "hard copy" filing and paper check tax remittance, but  
            authorizes on a permissive basis electronic filing of the taxes  
            and data.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, savings of several million dollars annually once the  
          program is fully implemented.


          COMMENTS:  


          1)Purpose.  According to the author, this bill would phase in over  
            a two-year period the required use of electronic filing for all  
            California employers to submit returns and remit payments to the  
            EDD.  Electronic filing for employers would increase  
            efficiencies for both EDD and the employer community.  Once  
            fully implemented, this legislation would result in many  
            millions in savings to the state in paper, postage and staff  
            time.


          2)Background.  The UI program is a long-standing state/federal  
            insurance program that predates any form of e-commerce.  The  
            realities of paper filings have created outdated laws which have  
            been subject to modernization efforts over the years.  For  
            example, benefits have been paid based on a "base period" of  
            earnings, which discounts the previous quarter of earning in  
            favor of the 4 quarters prior to the most recently completed  
            quarter.  Because data has historically been filed in hard copy  
            format, it was impossible to use the most recent, relevant,  
            data.  In this respect, federally mandated "UI Modernization"  
            requirements have been established that incentivized states (to  
            the tune of nearly $850 million of federal money for California)  
            to find ways to look at the most recent quarter of earnings -  








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            the so-called "alternative base period" calculation.  Many  
            employers now use electronic filing for both data and tax  
            remittances, because it is cheaper and more efficient.  Moving  
            forward to reflect the realities of modern electronic commerce  
            makes sense from both a governmental and private sector  
            efficiency perspective.


          3)EDD Web site.  The requirement that employers must file  
            electronically would not result in employers being forced to  
            purchase specialized software.  All that will be necessary is  
            that the employers have internet access, because the EDD's Web  
            site will enable employers to file anything necessary merely by  
            logging on to  www.edd.ca.gov  .




          Analysis Prepared by:                     Mark Rakich / INS. /  
          (916) 319-2086                                          FN:  
          0000169