Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, to compensate an employee for injuries sustained in the course of his or her employment. Existing law governs temporary and permanent disability indemnity payments. Existing law prohibits a disability indemnity payment from being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount, at some established place of business in the state.

Existing law establishes in the Department of Industrial Relations the Commission on Health and Safety and Workers Compensation to conduct a continuing examination of the workers compensation system and of the states activities to prevent industrial injuries and occupational diseases. Existing law authorizes the commission to conduct or contract for studies it deems necessary to carry out its responsibilities and to issue an annual report on the system.

This bill would, until January 1, 2023, authorize an employer, with the written consent of the employee, to deposit disability indemnity payments for the employee in a prepaid card account that meets specified requirements, including, among other things, allowing the employee reasonable access to in-network automatic teller machines. The bill would require employers to provide all necessary aggregated data on their prepaid account programs to the Commission on Health and Safety and Workers Compensation upon request, and would require the commission to issue a report on or before December 1, 2022, to the Legislature regarding payments made to those prepaid card accounts, as specified.

Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, to compensate an employee for injuries sustained in the course of his or her employment. Existing law governs temporary and permanent disability indemnity payments. Existing law prohibits a disability indemnity payment from being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount, at some established place of business in the state.

Existing law establishes in the Department of Industrial Relations the Commission on Health and Safety and Workers Compensation to conduct a continuing examination of the workers compensation system and of the states activities to prevent industrial injuries and occupational diseases. Existing law authorizes the commission to conduct or contract for studies it deems necessary to carry out its responsibilities and to issue an annual report on the system.

This bill would, until January 1, 2023, authorize an employer, with the written consent of the employee, to deposit disability indemnity payments for the employee in a prepaid card account that meets specified requirements, including, among other things, allowing the employee reasonable access to in-network automatic teller machines. The bill would require employers to provide all necessary aggregated data on their prepaid account programs to the Commission on Health and Safety and Workers Compensation upon request, and would require the commission to issue a report on or before December 1, 2022, to the Legislature regarding payments made to those prepaid card accounts, as specified.

Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, to compensate an employee for injuries sustained in the course of his or her employment. Existing law governs temporary and permanent disability indemnity payments. Existing law prohibits a disability indemnity payment from being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount, at some established place of business in the state.

Existing law establishes in the Department of Industrial Relations the Commission on Health and Safety and Workers Compensation to conduct a continuing examination of the workers compensation system and of the states activities to prevent industrial injuries and occupational diseases. Existing law authorizes the commission to conduct or contract for studies it deems necessary to carry out its responsibilities and to issue an annual report on the system.

This bill would, until January 1, 2023, authorize an employer, with the written consent of the employee, to deposit temporary disability indemnity payments for the employee in a prepaid card account that meets specified requirements, including, among other things, allowing the employee reasonable access to in-network automatic teller machines. The bill would require employers to provide all necessary aggregated data on their prepaid account programs to the Commission on Health and Safety and Workers Compensation upon request, and would require the commission to issue a report on or before December 1, 2022, to the Legislature regarding payments made to those prepaid card accounts, as specified.

Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, to compensate an employee for injuries sustained in the course of his or her employment. Existing law governs temporary and permanent disability indemnity payments. Existing law prohibits a disability indemnity payment from being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount, at some established place of business in the state.

This bill would, until January 1, 2023, authorize the State Compensation Insurance Fund (SCIF), an employer, with the written consent of the employee, to deposit temporary disability indemnity payments for the employee in a prepaid card account that meets specified requirements, including, among other things, allowing the employee reasonable access to in-network automatic teller machines. The bill would require SCIF employers to provide all necessary aggregated data on their prepaid account programs to the Commission on Health and Safety and Workers Compensation upon request, and would require the commission to issue a report on or before December 1, 2022, to the Legislature regarding payments made to those prepaid card accounts, as specified.

Existing law prohibits a person or entity, other than physicians or attorneys, from advertising, printing, displaying, publishing, distributing, or broadcasting in any manner a statement concerning services or benefits to be provided to an injured worker, which is paid for by that person or entity that is false, misleading, or deceptive. Violation of these provisions is a misdemeanor punishable by incarceration in the county jail for not more than one year, or by a fine not exceeding $10,000, or by both that imprisonment and fine.

This bill would make technical, nonsubstantive changes to the above provision and would delete an obsolete provision.

 UNFINISHED BUSINESS  

Bill No: SB 880

Author:

:

Vote:

SENATE LABOR & IND. REL. COMMITTEE: 5-0, 4/25/18

AYES: Pan, Stone, Jackson, Mitchell, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/25/18

AYES: Lara, Bates, Beall, Bradford, Hill, Nielsen, Wiener

SENATE FLOOR: 39-0, 5/31/18

AYES: Allen, Anderson, Atkins, Bates, Beall, Berryhill, Bradford, Cannella, De León, Dodd, Fuller, Gaines, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Newman, Nguyen, Nielsen, Pan, Portantino, Roth, Skinner, Stern, Stone, Vidak, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 76-0, 8/16/18 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill permits the employers to conduct a pilot program on transmitting disability indemnity benefits by a prepaid card, rather than a paper check.

Assembly Amendments

expand the number of participants in the pilot program from State Compensation Insurance Fund (SCIF) to all employers (see below for note), and also expand the benefits which may be delivered by a prepaid card from just temporary disability indemnity benefits to all disability indemnity benefits.

ANALYSIS:

Existing law:

1. Establishes a workers’ compensation system that provides benefits to an employee who suffers from an injury or illness that arises out of and in the course of employment, irrespective of fault. This system requires all employers to secure payment of benefits by either securing the consent of the Department of Industrial Relations to self-insure or by securing insurance against liability from an insurance company duly authorized by the state.
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability indemnity shall be made not later than 14 days after knowledge of the injury and disability. Each additional payment of temporary disability indemnity benefits must be made as due every two weeks on the day designated with the first payment. (Labor Code §4650)
3. Prohibits any disability indemnity payment being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount at some established place of business in the state. (Labor Code §4651)
4. Permits an employer to electronically deposit indemnity benefits into an account selected by the employee, provided that the employee has previously authorized to receive electronic deposits of payroll, unless otherwise requested by the employee, as specified. (Labor Code §4651)
5. Defines “prepaid card” or “prepaid card account” as a card, code, or other means of access to funds of a recipient that is usable at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines.
   (Unemployment Insurance Code §1339.1)
6. Defines writing as “handwriting, typewriting, printing, photostating, photographing, photocopying, transmitting by electronic mail or facsimile, and every other means of recording upon any tangible thing, any form of communication or representation, including letters, words, pictures, sounds, or symbols, or combinations thereof, and any record thereby created, regardless of the manner in which the record has been stored.” (Evidence Code §250)

This bill:

1. Permits the employers to begin a program where disability indemnity benefits may be deposited on a prepaid card account, as defined under existing Unemployment Insurance Code, if the injured worker has provided written consent to receive his or her benefits on a prepaid card.
2. Requires that a prepaid card account must meet the following requirements:
   1. Allow the employee to withdraw the entire balance on the card in one transaction without incurring fees.
   2. Allow the employee reasonable access to in-network automatic teller machines (ATMs).
   3. Allow the employee to make point-of-sale purchases without incurring fees from the financial institution.
   4. Prohibit a link to any form of credit, including a loan against future payments or a cash advance on future payments.
3. Prohibits any fees being charged to an injured worker in the use of the prepaid card account except for an expedited replacement prepaid card, out-of-network ATM fees on the third and subsequent withdrawal per deposit, and fees associated with foreign transactions.
4. Permits either the employer or the injured worker to opt to change the method of payment to another method consistent with this section by providing 30 days’ written notice to the other party.
5. Sunsets the prepaid card account program described above on January 1, 2023.
6. Requires the Commission on Health and Safety and Workers Compensation (CHSWC), on or before December 1, 2022, to issue a report to the Legislature on payments made to prepaid card accounts including, but not limited to, the following:
   1. The number of employees who elected to receive their temporary disability indemnity payments in a prepaid card account.
   2. The cash value of the temporary disability benefits sent to prepaid card accounts.
   3. The number of employees who opted to change the method of payment from a prepaid card account to either a written instrument or electronic deposit.

Comments

1. Disability Indemnity Benefits and Access to Banking in California

Under existing law, indemnity benefits can only be transmitted to injured workers by either a paper check or direct deposit. Both methods pose unique challenges for unbanked households, or households where no one in the household has a bank account. For unbanked workers, direct deposit would generally not be available. Without a relationship with a financial institutions, cashing a check without significant fees would also prove challenging. For example, Walmart charges $3.00 to cash a check of up to $1,000 (or at least 3%). Similar rates are charged by other grocery stores, with check cashing businesses advertising slightly lower rates. For a worker who is only receiving two-thirds of his or her normal paycheck, paying a 3%+ fee every two weeks may be financially challenging.

According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, 6.2% of all California households are unbanked and 19.1% are underbanked. In the Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (MSA), the unbanked rate is 8.6%. However, according to the same survey, the national rate of unbanked disabled households is 17.6%. For African American and Latino households, the unbanked rate is 18.2 and 16.2%, respectively. For households where Spanish is the only spoken language, the unbanked rate rises to 31%. This may suggest that for households with injured workers, particularly injured workers of color, the unbanked rate may be significantly higher than average.

1. SB 880 and Addressing Unbanked Injured Workers

SB 880 attempts to address the issue of unbanked workers receiving their indemnity benefits without significant fees by permitting SCIF to conduct a pilot program to see if injured workers will elect to receive their benefits on a prepaid card. This pilot is modeled off of the existing UI prepaid benefit card program, where unemployed workers receive their UI benefits on a prepaid card. That program, in turn, was modeled from an existing electronic benefit transfer (EBT) program for individuals to receive CalFresh, CalWORKs, and other food and cash aid benefits.

Similar to the Employment Development Department UI benefit card, SB 880 requires that the indemnity benefit prepaid card be fee-free on domestic purchases, in-network ATM withdrawals, up to three out-of-network ATM withdrawals, customer service, and transfer the funds off of the card altogether. The only permitted fees would be for out-of-network ATM fees beyond three withdrawals, expedited card replacement, and foreign transaction fees. Finally, prior to the sunset of the SCIF pilot program, SB 880 requires CHSWC to report to the Legislature on the utilization of the prepaid card program by injured workers.

1. Additional Notes on SB 880 and the Assembly Amendments:

• Who are the ‘employers’ which may participate in SB 880?

Unlike many other provisions of the California Labor Code, the statutes which govern workers’ compensation law broadly interpret who is an employer for the purposes of paying benefits. For example, if a small business secures workers’ compensation coverage through a workers’ compensation insurer, the insurer is considered the ‘employer’ for the purposes of workers’ compensation law. If the insurer were to utilize a vendor, then the actions of the vendor would be lieu in employer: for example, if a small business secured workers’ compensation coverage with an insurer, and then that insurer used a vendor to send paper checks to an injured worker, then the injured worker would have legally received his or her indemnity benefits (assuming the paper check was timely and otherwise in compliance with the law).

SB 880 continues the use of a broad definition of employer by being nested in the California workers’ compensation law. Therefore, the prepaid cards discussed by SB 880 may be supplied by the employer directly, or by an insurer, third party administrator, or vendor acting on behalf of any of the parties listed above.

• SB 880 and Written Consent

As noted above, SB 880 requires that an injured worker provides written consent prior to receiving his or her benefits on a prepaid card. The bill, however, is silent on what constitutes written consent. This will likely be addressed through future regulations from the Department of Workers’ Compensation. However, Evidence Code Section 250 gives some guidance for what can constitute written consent: in essence, anything that denotes consent by recording consent on a tangible thing, including forms, letters, emails, and other forms of electronic communication. What cannot be permitted would be utilizing oral consent to enroll an injured worker in the prepaid card program, or similarly registering consent without the injured worker affirmatively consenting to receive his or her benefits on a prepaid card in a written form.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee, SB 880 will result in minor and absorbable costs to CHSWC. Additionally, SB 880 will result in costs to the SCIF in the hundreds of thousands of dollars one-time, which would be by offset by administrative cost savings within three years. SCIF is a quasi-state entity, but is not state-funded outside the funds it receives for administering and paying for workers' compensation benefits for state employees.

SUPPORT: (Verified 8/16/18)

American Insurance Association

California Coalition on Workers' Compensation

California State Association of Counties

Property Casualty Insurers

State Compensation Insurance Fund

Zenith Insurance Company

OPPOSITION: (Verified 8/16/18)

None received

ARGUMENTS IN SUPPORT: SCIF supports SB 880, noting that, under existing law, injured workers can only receive their benefits through either a paper check or direct deposit. For unbanked workers, direct deposit isn’t available, but paper checks are also problematic because they can be stolen or lost. Even when received in the mail, SCIF argues that unbanked injured workers can only cash their indemnity checks by paying high fees. SCIF believes that SB 880 helps address the needs of unbanked injured workers by permitting SCIF to offer a prepaid card as a part of a pilot program. SCIF argues that, by prohibiting most fees, offering immediate access to funds, and creating an opt out process, SB 880 protects injured workers, ensures their indemnity benefits can be fully utilized, and improves the cost of delivering workers’ compensation benefits.

ASSEMBLY FLOOR: 76-0, 8/16/18

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Maienschein, Mathis, Mayes, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rivas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Bloom, Cristina Garcia, Low, McCarty

Prepared by:

8/18/18 12:32:59

**** END ****

Date of Hearing: August 8, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 880

Author:(Pan) – As Amended Ver:August 6, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill allows, until January 1, 2023, employers to issue workers' compensation temporary disability indemnity payments by prepaid card accounts with the injured worker's consent, and specifies such card accounts can be used only if certain conditions are met, including withdrawals without payment of fees and accessible automated teller machines.

It also requires the Commission on Health and Safety and Workers' Compensation (CHSWC) to issue a report evaluating the use of prepaid cards accounts.

FISCAL EFFECT:

1. Costs to the CHSWC to issue a report are expected to be minor and absorbable.
2. Costs to the State Compensation Insurance Fund (SCIF) in the hundreds of thousands of dollars one-time, which would be by offset by administrative cost savings within three years. SCIF is a quasi-state entity, but is not state-funded outside the funds it receives for administering and paying for workers' compensation benefits for state employees.

COMMENTS:

1. Purpose. According to the author, because temporary disability benefits can only be transmitted to injured workers by either a paper check or direct deposit, there are unique challenges for “unbanked” households -- households where no one in the household has a bank account. Although some entities have been using prepaid cards, most others have assumed this was not allowed since it is not expressly authorized in statute. This bill will expressly authorize their use, making it cheaper and easier for people to receive their benefits.
2. Background. According to the 2015 Federal Deposit Insurance Corporation (FDIC) National Survey of Unbanked and Underbanked Households, around 6% of all California households are unbanked, and these numbers are even higher among disabled households of which over 19% are underbanked (lacking sufficient access to mainstream financial services). Challenges accessing financial services mean many people may experience check-cashing fees or delays in receiving workers' compensation payments. The state Employment Development Department (EDD) already uses prepaid card accounts to issue unemployment insurance and disability insurance payments.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: June 27, 2018

ASSEMBLY COMMITTEE ON INSURANCE

Tom Daly, Chair

SBPCA Bill Id:SB 880

Author:(Pan) – As Amended Ver:June 20, 2018

SENATE VOTE: 39-0

SUBJECT: Workers’ compensation.

SUMMARY: Authorizes employers to pay temporary disability (TD) benefits by a prepaid electronic funds card, rather than by a paper check. Specifically, this bill:

1. Permits employers (self-insured employers and workers’ compensation insurers) to begin a program where temporary disability benefits may be deposited on a prepaid card account, as defined under existing Unemployment Insurance Code requirements currently in use for unemployment insurance benefits, if the injured worker has provided written consent to receive these benefits on a prepaid card.
2. Requires that a prepaid card account must meet the following requirements:
3. Allow the employee to withdraw the entire balance on the card in one transaction without incurring fees.
4. Allow the employee reasonable access to in-network automatic teller machines (ATMs).
5. Allow the employee to make point-of-sale purchases without incurring fees from the financial institution.
6. Prohibit a link to any form of credit, including a loan against future payments or a cash advance on future payments.
7. Prohibits any fees being charged to an injured worker in the use of the prepaid card account except for an expedited replacement prepaid card, out-of-network ATM fees on the third and subsequent withdrawal per deposit, and fees associated with foreign transactions.
8. Permits either the employer or the injured worker to opt to change the method of payment to another lawful method by providing 30 days’ written notice to the other party.
9. Sunsets the prepaid card account authorization described above on January 1, 2023.
10. Requires the Commission on Health and Safety and Workers’ Compensation (CHSWC), on or before December 1, 2022, to issue a report to the Legislature on payments made to prepaid card accounts including, but not limited to, the following:
11. The number of employees who elected to receive their temporary disability payments in a prepaid card account.
12. The cash value of the temporary disability benefits sent to prepaid card accounts.
13. The number of employees who opted to change the method of payment from a prepaid card account to either a written instrument or electronic deposit.
    
14. Requires an employer that uses a prepaid card program to provide all necessary aggregated data requested by the CHSWC.
    
15. Provides that certain delays in delivering benefits caused by compliance with state or federal banking regulations do not constitute violations of the laws mandating timely delivery of benefits.

EXISTING LAW:

1. Establishes a workers’ compensation system that provides benefits to an employee who suffers from an injury or illness that arises out of and in the course of employment, irrespective of fault. This system requires all employers to secure payment of benefits by either securing the consent of the Department of Industrial Relations to self-insure, or by securing insurance against liability from an insurance company duly authorized by the state.
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability benefits shall be made not later than 14 days after knowledge of the injury and disability. Each additional payment of temporary disability indemnity benefits must be made as due every two weeks on the day designated with the first payment.
3. Prohibits any disability payment being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount at some established place of business in the state.
4. Permits an employer to electronically deposit disability benefits into an account selected by the employee if the employee has either already authorized electronic deposit of payroll, or has specifically authorized the electronic deposit of the disability payments.
   
5. Defines “prepaid card” or “prepaid card account” as a card, code, or other means of access to funds of a recipient that is usable at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines.
   

FISCAL EFFECT: Undetermined

COMMENTS:

1. Purpose. According to the author, because TD benefits can only be transmitted to injured workers by either a paper check or direct deposit, there are unique challenges for “unbanked” households -- households where no one in the household has a bank account. For unbanked workers, direct deposit would generally not be available. Without a relationship with a financial institution, cashing a check without significant fees would also prove challenging. For example, Walmart charges $3.00 to cash a check of up to $1,000 (or at least 3%). Similar rates are charged by other grocery stores, with check cashing businesses advertising slightly lower rates. SB 880 is designed to assist these households by starting the process of regularizing the use of prepaid card accounts for TD payment, similar to one of the authorized methods for delivering unemployment insurance benefits.
2. Unbanked households. Even in 2018, the number of unbanked households is surprising. According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, 6.2% of all California households are unbanked and 19.1% are underbanked. In the Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (MSA), the unbanked rate is 8.6%. However, according to the same survey, the national rate of unbanked disabled households is 17.6%. For African American and Latino households, the unbanked rate is 18.2 and 16.2%, respectively. For households where Spanish is the only spoken language, the unbanked rate rises to 31%. This may suggest that for households with injured workers, particularly injured workers of color, the unbanked rate may be significantly higher than average.
3. Current Practice. Current statutory requirements specify the methods a payor may use to deliver workers’ compensation benefits. While it seems apparent that current statutes do not expressly authorize payment of TD benefits, the Administrative Director of the Division of Workers’ Compensation under the prior Administration sent a letter to a card service provider that essentially authorized use of prepaid cards. This letter was not widely distributed, but a few payors have been using prepaid cards for several years. Most, however, have been operating on the assumption that use of prepaid cards is not authorized by law, and as a result, the recent amendments expanding the bill from a State Compensation Insurance Fund pilot project to a broad authorization have generated substantial support from insurers and self-insured employers alike.
4. Written Consent. Concerns have been expressed that the written consent requirement could be an impediment to delivering improved services to the unbanked population of injured workers. It is not clear, for example, if electronic communications satisfy the written consent requirement. Some payors have pointed out that the use of prepaid cards in the Unemployment Insurance and State Disability Insurance programs is the default method of payment, and thus the issue of written consent does not arise. The author may wish to continue the dialogue with payors to address in more detail how injured workers can opt in to the prepaid card payment mechanism.

REGISTERED SUPPORT / OPPOSITION:

Support

American Insurance Association

California Coalition on Workers' Compensation

California State Association of Counties

Property Casualty Insurers

Zenith Insurance Company

Opposition

None received.

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

 THIRD READING  

Bill No: SB 880

Author:

:

Vote:

SENATE LABOR & IND. REL. COMMITTEE: 5-0, 4/25/18

AYES: Pan, Stone, Jackson, Mitchell, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/25/18

AYES: Lara, Bates, Beall, Bradford, Hill, Nielsen, Wiener

SUBJECT:

SOURCE: Author

DIGEST:

This bill permits the State Compensation Insurance Fund to conduct a pilot program on transmitting temporary disability indemnity benefits by a prepaid card, rather than a paper check.

ANALYSIS:

Existing law:

1. Establishes a workers’ compensation system that provides benefits to an employee who suffers from an injury or illness that arises out of and in the course of employment, irrespective of fault. This system requires all employers to secure payment of benefits by either securing the consent of the Department of Industrial Relations to self-insure or by securing insurance against liability from an insurance company duly authorized by the state.
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability indemnity shall be made not later than 14 days after knowledge of the injury and disability. Each additional payment of temporary disability indemnity benefits must be made as due every two weeks on the day designated with the first payment. (Labor Code §4650)
3. Prohibits any disability indemnity payment being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount at some established place of business in the state. (Labor Code §4651)
4. Permits an employer to electronically deposit indemnity benefits into an account selected by the employee, provided that the employee has previously authorized to receive electronic deposits of payroll, unless otherwise requested by the employee, as specified. (Labor Code §4651)
5. Defines “prepaid card” or “prepaid card account” as a card, code, or other means of access to funds of a recipient that is usable at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines.
   (Unemployment Insurance Code §1339.1)

This bill:

1. Permits the State Compensation Insurance Fund (SCIF) to begin a program where temporary disability indemnity benefits may be deposited on a prepaid card account, as defined under existing Unemployment Insurance Code, if the injured worker has provided written consent to receive his or her benefits on a prepaid card.
2. Requires that a prepaid card account must meet the following requirements:
   1. Allow the employee to withdraw the entire balance on the card in one transaction without incurring fees.
   2. Allow the employee reasonable access to in-network automatic teller machines (ATMs).
   3. Allow the employee to make point-of-sale purchases without incurring fees from the financial institution.
   4. Prohibit a link to any form of credit, including a loan against future payments or a cash advance on future payments.
3. Prohibits any fees being charged to an injured worker in the use of the prepaid card account except for an expedited replacement prepaid card, out-of-network ATM fees on the third and subsequent withdrawal per deposit, and fees associated with foreign transactions.
4. Permits either SCIF or the injured worker to opt to change the method of payment to another method consistent with this section by providing 30 days’ written notice to the other party.
5. Sunsets the SCIF prepaid card account program described above on January 1, 2023.
6. Requires SCIF, on or before December 1, 2022, to issue a report to the Legislature on payments made to prepaid card accounts including, but not limited to, the following:
   1. The number of employees who elected to receive their temporary disability indemnity payments in a prepaid card account.
   2. The cash value of the temporary disability benefits sent to prepaid card accounts.
   3. The number of employees who opted to change the method of payment from a prepaid card account to either a written instrument or electronic deposit.

Comments

1. Temporary Disability Indemnity Benefits and Access to Banking in California

As discussed above, temporary disability (TD) benefits must be paid by an employer to an injured worker who, due to his or her disability, is unable to work. TD benefits are tax-free, cover two-thirds of the injured worker’s wages, and can be collected for up to two years. Similar to unemployment insurance (UI) or disability insurance benefits, the amount due in TD does not generally vary from period to period.

Under existing law, TD benefits can only be transmitted to injured workers by either a paper check or direct deposit. Both methods pose unique challenges for unbanked households, or households where no one in the household has a bank account. For unbanked workers, direct deposit would generally not be available. Without a relationship with a financial institutions, cashing a check without significant fees would also prove challenging. For example, Walmart charges $3.00 to cash a check of up to $1,000 (or at least 3%). Similar rates are charged by other grocery stores, with check cashing businesses advertising slightly lower rates. For a worker who is only receiving two-thirds of his or her normal paycheck, paying a 3%+ fee every two weeks may be financially challenging.

According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, 6.2% of all California households are unbanked and 19.1% are underbanked. In the Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (MSA), the unbanked rate is 8.6%. However, according to the same survey, the national rate of unbanked disabled households is 17.6%. For African American and Latino households, the unbanked rate is 18.2 and 16.2%, respectively. For households where Spanish is the only spoken language, the unbanked rate rises to 31%. This may suggest that for households with injured workers, particularly injured workers of color, the unbanked rate may be significantly higher than average.

1. SB 880 and Addressing Unbanked Injured Workers

SB 880 attempts to address the issue of unbanked workers receiving their TD benefits without significant fees by permitting SCIF to conduct a pilot program to see if injured workers will elect to receive their benefits on a prepaid card. This pilot is modeled off of the existing UI prepaid benefit card program, where unemployed workers receive their UI benefits on a prepaid card. That program, in turn, was modeled from an existing electronic benefit transfer (EBT) program for individuals to receive CalFresh, CalWORKs, and other food and cash aid benefits.

Similar to the Employment Development Department UI benefit card, SB 880 requires that the TD benefit prepaid card be fee-free on domestic purchases, in-network ATM withdrawals, up to three out-of-network ATM withdrawals, customer service, and transfer the funds off of the card altogether. The only permitted fees would be for out-of-network ATM fees beyond three withdrawals, expedited card replacement, and foreign transaction fees. Finally, prior to the sunset of the SCIF pilot program, SB 880 requires SCIF to report to the Legislature on the utilization of the prepaid card program by injured workers.

Related/Prior Legislation

AB 51 (Yamada, 2011) would have explicitly legalized payroll cards for the purposes of wage payment to workers, regulated the fees the payroll card vendor may charge workers, and also required employee consent for an employer to utilize payroll cards for wages. The hearing for AB 51 by the Senate Banking and Finance Committee was cancelled at the request of the author.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, SCIF would experience net savings, as prepaid cards would be significantly cheaper to issue to impacted employees. Specifically, SCIF estimates initial one-time costs of $400,000. Over the full five-year period, however, the project would produce net savings of $300,000 (special fund).

SUPPORT: (Verified 5/25/18)

State Compensation Insurance Fund

OPPOSITION: (Verified 5/25/18)

None received

ARGUMENTS IN SUPPORT: SCIF supports SB 880, noting that, under existing law, injured workers can only receive their benefits through either a paper check or direct deposit. For unbanked workers, direct deposit isn’t available, but paper checks are also problematic because they can be stolen or lost. Even when received in the mail, SCIF argues that unbanked injured workers can only cash their TD checks by paying high fees. SCIF believes that SB 880 helps address the needs of unbanked injured workers by permitting SCIF to offer a prepaid card as a part of a pilot program. SCIF argues that, by prohibiting most fees, offering immediate access to funds, and creating an opt out process, SB 880 protects injured workers, ensures their TD benefits can be fully utilized, and improves the cost of delivering workers’ compensation benefits.

Prepared by:

5/26/18 15:07:18

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 880 (Pan) - Workers’ compensation

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 880 would permit the State Compensation Insurance Fund (SCIF) to conduct a pilot program on transmitting temporary disability indemnity benefits by a prepaid card, rather than a paper check.

Fiscal Impact:

Transitioning from issuing paper checks to prepaid cards would result in one-time start-up costs to SCIF to update information technology systems and build integrations with third-party vendors. Over the five-year period of the pilot program (2019 to 2023), SCIF would experience net savings, as prepaid cards would be significantly cheaper to issue to impacted employees. Specifically, SCIF estimates initial one-time costs of $400,000. Over the full five-year period, however, the project would produce net savings of $300,000 (special fund).

Background:

Under current law, temporary disability (TD) benefits must be paid by an employer to an injured worker who, due to his or her disability, is unable to work. TD benefits are tax-free, cover two-thirds of the injured worker’s wages, and can be collected for up to two years. Similar to unemployment insurance or disability insurance benefits, the amount due in TD does not generally vary from period to period.

TD benefits can only be transmitted to injured workers by either a paper check or direct deposit. Both methods pose unique challenges for unbanked households, or households where no member has a bank account. Thus, direct deposit would generally not be available. Without a relationship with a financial institutions, cashing a check generally requires significant fees. For example, grocery stores and check cashing businesses will cash a check up to $1,000, but require a flat fee to do so. Depending on the size of the check, the implied interest rate can be significant. For employees unable to work and receiving a fraction of their regular paycheck, paying these fees can be a financial hardship.

Available data indicate that about 6 percent of households statewide are unbanked, and 19 percent are underbanked. In the greater Los Angeles area, the unbanked rate is nearly 9 percent. Moreover, the data suggest that for households with injured workers, particularly injured workers of color, the unbanked rate may be significantly higher than average. For instance, the national rate of unbanked disabled households is about 18 percent. For African American and Latino households, the unbanked rate is 18 percent and 16 percent respectively. For households where Spanish is the only spoken language, the unbanked rate is 31 percent.

Proposed Law:

This bill would do the following:

• Permit SCIF to begin a program where temporary disability indemnity benefits may be deposited on a prepaid card account, as defined under existing Unemployment Insurance Code, if the injured worker has provided written consent to receive his or her benefits on a prepaid card.
• Require that a prepaid card account must meet the following requirements: (1) allow the employee to withdraw the entire balance on the card in one transaction without incurring fees, (2) allow the employee reasonable access to in-network automatic teller machines (ATMs), (3) allow the employee to make point-of-sale purchases without incurring fees from the financial institution, and (4) prohibit a link to any form of credit, including a loan against future payments or a cash advance on future payments.
• Prohibit any fees being charged to an injured worker in the use of the prepaid card account except for an expedited replacement prepaid card, out-of-network ATM fees on the third and subsequent withdrawal per deposit, and fees associated with foreign transactions.
• Permit either SCIF or the injured worker to opt to change the method of payment to another method consistent with this section by providing 30 days’ written notice to the other party.
• Sunset the SCIF prepaid card account program on January 1, 2023.
• Require SCIF, by December 1, 2022, to issue a report to the Legislature on specified payments made to prepaid card accounts.

Related Legislation:

AB 51 (Yamada, 2011) would have explicitly legalized payroll cards for the purposes of wage payment to workers, regulated the fees the payroll card vendor may charge workers, and required employee consent for an employer to utilize payroll cards for wages. The bill was not heard by the Senate Banking and Finance Committee.

Staff Comments:

As noted earlier, cashing TD checks can highly problematic for injured workers who must turn to alternative check cashing services that subject them to high fees. Additionally, checks can be lost, damaged or stolen, delaying payment. Prepaid cards could streamline benefit processing, resulting in cost savings, and eliminate payment delays due to mailing time, and lost or stolen checks.

SCIF indicates that it estimates the cost to produce a check to be about $2.25. This figure excludes certain fixed costs it cannot quantify, including those related to human resources and information technology networks. The estimated cost for ACH/debit cards would be about $0.65, excluding the one-time startup costs. SCIF indicates that, using standard cost-benefit analysis, the breakeven point for this pilot program would be about 2.5 years.

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SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS

Senator Richard Pan, Chair

2017 - 2018 Regular

Bill No: SB 880 Hearing Date: April 25, 2018

Subject: Workers’ compensation.

KEY ISSUE

Should the Legislature permit the State Compensation Insurance Fund to conduct a pilot program on transmitting temporary disability indemnity benefits by a prepaid card, rather than a paper check?

ANALYSIS

Existing law:

1. Establishes a workers’ compensation system that provides benefits to an employee who suffers from an injury or illness that arises out of and in the course of employment, irrespective of fault. This system requires all employers to secure payment of benefits by either securing the consent of the Department of Industrial Relations to self-insure or by securing insurance against liability from an insurance company duly authorized by the state.
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability indemnity shall be made not later than 14 days after knowledge of the injury and disability. Each additional payment of temporary disability indemnity benefits must be made as due every two weeks on the day designated with the first payment.
   (Labor Code §4650)
3. Prohibits any disability indemnity payment being made by any written instrument unless it is immediately negotiable and payable in cash, on demand, without discount at some established place of business in the state. (Labor Code §4651)
4. Permits an employer to electronically deposit indemnity benefits into an account selected by the employee, provided that the employee has previously authorized to receive electronic deposits of payroll, unless otherwise requested by the employee, as specified.
   (Labor Code §4651)
5. Defines “prepaid card” or “prepaid card account” as a card, code, or other means of access to funds of a recipient that is usable at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines.
   (Unemployment Insurance Code §1339.1)

This bill:

1. Permits the State Compensation Insurance Fund (SCIF) to begin a program where temporary disability indemnity benefits may be deposited on a prepaid card account, as defined under existing Unemployment Insurance Code, if the injured worker has provided written consent to receive his or her benefits on a prepaid card.
2. Requires that a prepaid card account must meet the following requirements:
3. Allow the employee to withdraw the entire balance on the card in one transaction without incurring fees.
4. Allow the employee reasonable access to in-network automatic teller machines (ATMs).
5. Allow the employee to make point-of-sale purchases without incurring fees from the financial institution.
6. Prohibit a link to any form of credit, including a loan against future payments or a cash advance on future payments.
7. Prohibits any fees being charged to an injured worker in the use of the prepaid card account except for an expedited replacement prepaid card, out-of-network ATM fees on the third and subsequent withdrawal per deposit, and fees associated with foreign transactions.
8. Permits either SCIF or the injured worker to opt to change the method of payment to another method consistent with this section by providing 30 days’ written notice to the other party.
9. Sunsets the SCIF prepaid card account program described above on January 1, 2023.
10. Requires SCIF, on or before December 1, 2022, to issue a report to the Legislature on payments made to prepaid card accounts including, but not limited to, the following:
11. The number of employees who elected to receive their temporary disability indemnity payments in a prepaid card account.
12. The cash value of the temporary disability benefits sent to prepaid card accounts.
13. The number of employees who opted to change the method of payment from a prepaid card account to either a written instrument or electronic deposit.

COMMENTS

1. Temporary Disability Indemnity Benefits and Access to Banking in California:

As discussed above, temporary disability (TD) benefits must be paid by an employer to an injured worker who, due to his or her disability, is unable to work. TD benefits are tax-free, cover 2/3rds of the injured worker’s wages, and can be collected for up to two years. Similar to unemployment insurance or disability insurance benefits, the amount due in TD does not generally vary from period to period.

Under existing law, TD benefits can only be transmitted to injured workers by either a paper check or direct deposit. Both methods pose unique challenges for unbanked households, or households where no one in the household has a bank account. For unbanked workers, direct deposit would generally not be available. Without a relationship with a financial institutions, cashing a check without significant fees would also prove challenging. For example, Walmart charges $3.00 to cash a check of up to $1,000 (or at least 3%). Similar rates are charged by other grocery stores, with check cashing businesses advertising slightly lower rates. For a worker who is only receiving 2/3rds of his or her normal paycheck, paying a 3%+ fee every two weeks may be financially challenging.

According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, 6.2% of all California households are unbanked and 19.1% are underbanked. In the Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (MSA), the unbanked rate is 8.6%. However, according to the same survey, the national rate of unbanked disabled households is 17.6%. For African American and Latino households, the unbanked rate is 18.2 and 16.2%, respectively. For households where Spanish is the only spoken language, the unbanked rate rises to 31%. This may suggest that for households with injured workers, particularly injured workers of color, the unbanked rate may be significantly higher than average.

2. SB 880 and Addressing Unbanked Injured Workers:

SB 880 attempts to address the issue of unbanked workers receiving their TD benefits without significant fees by permitting SCIF to conduct a pilot program to see if injured workers will elect to receive their benefits on a prepaid card. This pilot is modeled off of the existing UI prepaid benefit card program, where unemployed workers receive their UI benefits on a prepaid card. That program, in turn, was modeled from an existing electronic benefit transfer (EBT) program for individuals to receive CalFresh, CalWORKs, and other food and cash aid benefits.

Similar to the EDD UI benefit card, SB 880 requires that the TD benefit prepaid card be fee-free on domestic purchases, in-network ATM withdrawals, up to three out-of-network ATM withdrawals, customer service, and transfer the funds off of the card altogether. The only permitted fees would be for out-of-network ATM fees beyond three withdrawals, expedited card replacement, and foreign transaction fees. Finally, prior to the sunset of the SCIF pilot program, SB 880 requires SCIF to report to the Legislature on the utilization of the prepaid card program by injured workers.

3. Technical Amendment:

Under existing law, employers who deposit TD benefits into an injured worker’s bank account are not held liable for delays due to state or federal banking laws or regulations. As currently drafted, this is not extended to the SCIF prepaid card pilot, despite the fact that a prepaid card could face similar obstacles. Therefore, Committee may wish to consider the following amendment:

On page 3, line 33, insert “the credit of a deposit or availability of temporary disability indemnity to the employee as authorized under Section 4651(a)(2)” after “instrument”.

4. Proponent Arguments:

State Compensation Insurance Fund (SCIF) supports SB 880, noting that, under existing law, injured workers can only receive their benefits through either a paper check or direct deposit. For unbanked workers, direct deposit isn’t available, but paper checks are also problematic because they can be stolen or lost. Even when received in the mail, SCIF argues that unbanked injured workers can only cash their TD checks by paying high fees. SCIF believes that SB 880 helps address the needs of unbanked injured workers by permitting SCIF to offer a prepaid card as a part of a pilot program. SCIF argues that, by prohibiting most fees, offering immediate access to funds, and creating an opt out process, SB 880 protects injured workers, ensures their TD benefits can be fully utilized, and improves the cost of delivering workers’ compensation benefits.

Anthem takes a ‘support if amended’ position, arguing:

“Anthem Workers’ Compensation supports the use of prepaid benefit cards with the written consent of the injured worker and recognizes the necessity to eliminate the costs un-bankable injured workers’ currently pay to convert checks to cash. To that end, Anthem has taken a Support If Amended position on your SB 880. We believe that prepayment cards are a beneficial and secure method of payment for the injured worker and less costly for employers to administer. Consequently, we proposed amending SB 880 to permit all payers, not just one payer, to use prepaid payment cards going forward without a sunset provision.”

5. Opponent Arguments:

None on file.

6. Prior Legislation:

AB 51 (Yamada) of 2011 would have explicitly legalized payroll cards for the purposes of wage payment to workers, regulated the fees the payroll card vendor may charge workers, and also required employee consent for an employer to utilize payroll cards for wages. The hearing for AB 51 by the Senate Banking and Finance Committee was cancelled at the request of the author.

SUPPORT

Anthem, Blue Cross (If amended)

State Compensation Insurance Fund

OPPOSITION

None on file.

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