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 the employees employment. Existing law governs temporary and permanent disability indemnity payments. Existing law, until January 1, 2024, allows an employer to commence a program under which disability indemnity payments are deposited in a prepaid card account for employees.

This bill would extend the authorization to deposit indemnity payments in a prepaid card account until January 1, 2025.

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 the employees employment. Existing law governs temporary and permanent disability indemnity payments. Existing law, until January 1, 2024, allows an employer to commence a program under which disability indemnity payments are deposited in a prepaid card account for employees.

This bill would extend the authorization to deposit indemnity payments in a prepaid card account until January 1, 2025.

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 the employees employment. Existing law governs temporary and permanent disability indemnity payments. Existing law, until January 1, 2024, allows an employer to commence a program under which disability indemnity payments are deposited in a prepaid card account for employees.

This bill would extend the authorization to deposit indemnity payments in a prepaid card account until January 1, 2025.

 CONSENT 

Bill No: AB 489

Author: Calderon (D)

Introduced: 2/7/23

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 6/14/23

AYES: Cortese, Wilk, Durazo, Laird, Smallwood-Cuevas

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 79-0, 4/27/23 (Consent) - See last page for vote

SUBJECT: Workers’ compensation: disability payments

SOURCE: Author

DIGEST:

This bill extends an existing pilot program by one year to allow workers’ compensation temporary and permanent disability indemnity payments to continue to be made using prepaid cards.

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, regardless of fault. This system requires all employers to provide 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 authorized by the state.
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability indemnity must be made no 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. Authorizes employers to begin a program where disability indemnity benefits may be deposited on a prepaid card account if the injured worker has provided written consent to receive his or her benefits on a prepaid card and prohibits account fees being charged to an injured worker, 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. This provision sunsets on January 1, 2024.
4. 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.

This bill extends by one year, to January 1, 2025, the sunset date for a pilot program that allows employers to transmit workers’ compensation disability indemnity benefits by a prepaid card, rather than a paper check.

Background

SB 880 (Pan, Chapter 730, Statutes of 2018), modelled after the Employment Development Department’s program that utilizes prepaid cards to issue unemployment insurance and disability insurance payments, authorized employers to conduct a pilot program to transmit workers’ compensation disability indemnity benefits via prepaid card, rather than a paper check. The bill also required CHSWC to report the following data to the Legislature by December 1, 2022:

• Number of employees who elected to receive their benefits via prepaid card;
• Cash value of benefits sent via prepaid card, and;
• Number of employees who opted to change their method of payment from prepaid card to either a written instrument or electronic deposit.

The pilot program authorized by SB 880 was due to sunset on January 1, 2023. Last year, AB 2148 (Calderon, Chapter 120, Statutes of 2022) extended the sunset date to January 1, 2024. The CHSWC report required by SB 880 has not yet been submitted to the Legislature.

Unbanked individuals do not have a checking or savings account with a Federal Deposit Insurance Corporation (FDIC) insured financial institution. Underbanked means the household had an account with an FDIC insured financial institution, but regularly used alternative financial services. Communities of color have the highest unbanked and underbanked rates in the nation, largely attributed to racist policies in US institutions and subsequent lingering mistrust. Additionally, those with less education and those who earn lower incomes struggle with obtaining services offered by financial institutions. According to the Federal Reserve, 17 percent of households earning less than $25,000 per year were unbanked between 2021 and 2022, and 34 percent with a high school degree or less were unbanked during that same time span. Of those numbers, 13 percent were categorized as Black and 11 percent as Hispanic.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 6/27/23)

American Property Casualty Insurance Association

California Association of Joint Powers Authorities

California Coalition on Workers Compensation

Housing Contractors of California

Public Risk Innovation, Solutions, and Management

OPPOSITION: (Verified 6/27/23)

None received

ARGUMENTS IN SUPPORT: According to the author, “AB 489 simply extends the sunset of an existing pilot program by one year, while the legislature awaits a report relating to the program. In 2018, the legislature passed a bill to establish a pilot program that allowed employers to transmit certain workers’ compensation payments by a prepaid card, rather than a paper check or direct deposit. This program is particularly helpful for unbanked workers that do not have access to a checking account. This bill would extend the sunset by one year, to give stakeholders sufficient time to review the report, before any interruptions to the existing program take place.”

ASSEMBLY FLOOR: 79-0, 4/27/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Jim Patterson

Prepared by: Dawn Clover / L., P.E. & R. / (916) 651-1556

6/28/23 11:08:34

**** END ****

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Dave Cortese, Chair

2023 - 2024 Regular

Bill No: AB 489 Hearing Date: June 14, 2023

SUBJECT: Workers’ compensation: disability payments

KEY ISSUE

Should the Legislature extend an existing pilot program by one year to allow workers’ compensation temporary and permanent disability indemnity payments to continue to be made using prepaid cards?

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, regardless of fault. This system requires all employers to provide 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 authorized by the state. (Labor Code §§3200)
   
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability indemnity must be made no 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. Authorizes employers to begin a program where disability indemnity benefits may be deposited on a prepaid card account if the injured worker has provided written consent to receive his or her benefits on a prepaid card and prohibits account fees being charged to an injured worker, 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. This provision sunsets on January 1, 2024. (Labor Code §4651)
   
4. 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. (Labor Code §4651)

This bill: Extends by one year, to January 1, 2025, the sunset date for a pilot program that allows employers to transmit workers’ compensation disability indemnity benefits by a prepaid card, rather than a paper check.

COMMENTS

1. Background
   

Senate Bill 880 (Pan, Chapter 730, Statutes of 2018), modelled after the Employment Development Department’s program that utilizes prepaid cards to issue unemployment insurance and disability insurance payments, authorized employers to conduct a pilot program to transmit workers’ compensation disability indemnity benefits via prepaid card, rather than a paper check. The bill also required CHSWC to report the following data to the Legislature by December 1, 2022:

• Number of employees who elected to receive their benefits via prepaid card;
• Cash value of benefits sent via prepaid card, and;
• Number of employees who opted to change their method of payment from prepaid card to either a written instrument or electronic deposit.

The pilot program authorized by SB 880 was due to sunset on January 1, 2023. Last year, AB 2148 (Calderon - Chapter 120, Statutes of 2022) extended the sunset date to January 1, 2024. The report required by SB 880 has not yet been submitted to the Legislature. The committee has requested an update from CHSWC regarding an estimated release date for the report, but has not received a response.

Unbanked individuals do not have a checking or savings account with a Federal Deposit Insurance Corporation (FDIC) insured financial institution. Underbanked means the household had an account with an FDIC insured financial institution, but regularly used alternative financial services. Communities of color have the highest unbanked and underbanked rates in the nation, largely attributable to racist policies in US institutions and subsequent lingering mistrust. Additionally, those with less education and those who earn lower incomes struggle with obtaining services offered by financial institutions. According to the Federal Reserve^[1], 17 percent of households earning less than $25,000 per year were unbanked between 2021 and 2022, and 34 percent with a high school degree or less were unbanked during that same time span. Of those numbers, 13 percent were categorized as Black and 11 percent as Hispanic.

1. Need for this bill?

According to the author, “AB 489 simply extends the sunset of an existing pilot program by one year, while the legislature awaits a report relating to the program. In 2018, the legislature passed a bill to establish a pilot program that allowed employers to transmit certain workers’ compensation payments by a prepaid card, rather than a paper check or direct deposit. This program is particularly helpful for unbanked workers that do not have access to a checking account. This bill would extend the sunset by one year, to give stakeholders sufficient time to review the report, before any interruptions to the existing program take place.”

2. Proponent Arguments

According to the American Property Casualty Insurance Association, California Association of Joint Powers Authorities, California Coalition on Workers’ Compensation, and Public Risk Innovation, Solutions, and Management, “SB 880, adopted as Labor Code 4651, went into effect in 2019. The law, until January 1, 2023, authorized 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 allowing the employee reasonable access to in-network automatic teller machines. The sunset was extended one year by AB 2148 (Calderon, 2022).

The bill was addressing a challenge for many injured workers because temporary disability could only be transmitted to injured workers by either a paper check or direct deposit, which presented 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. The bill was 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.”

3. Opponent Arguments:

None received.

4. Prior Legislation:

AB 2148 (Calderon - Chapter 120, Statutes of 2022), extended the sunset date for the pilot program that allows employers to transmit workers’ compensation disability indemnity benefits by a prepaid card, rather than a paper check from January 1, 2023, to January 1, 2024.

SB 880 (Pan - Chapter 730, Statutes of 2018) created the pilot program to allow employers to transmit workers’ compensation disability indemnity benefits by a prepaid card, rather than a paper check.

SUPPORT

American Property Casualty Insurance Association

California Association of Joint Powers Authorities

California Coalition on Workers’ Compensation

Housing Contractors of California

Public Risk Innovation, Solutions, and Management

OPPOSITION

None received

-- END --

1. https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-banking-and-credit.htm Retrieved May 15, 2023. ↑

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 489

Author:(Calderon) – As Introduced Ver:February 7, 2023

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

SUMMARY:

This bill extends, by one year, to January 1, 2025, the sunset date on an existing pilot program authorizing the deposit of disability indemnity (workers’ compensation) payments in prepaid card accounts.

FISCAL EFFECT:

Negligible state costs, if any.

COMMENTS:

1. Purpose. According to the author:

In 2018, the legislature passed a bill to establish a pilot program that allowed employers to transmit certain workers compensation payments by a prepaid card, rather than a paper check or direct deposit. This program is particularly helpful for unbanked workers that do not have access to a checking account. This bill would extend the sunset by one year, to give stakeholders sufficient time to review the report, before any interruptions to the existing program take place.

This bill is supported by the California Coalition on Workers Compensation and other groups representing employers.

1. Prepaid Card Pilot Program. Modeled after the Employment Development Department’s program utilizing prepaid card accounts to issue unemployment insurance and disability insurance payments, SB 880 (Pan), Chapter 730, Statutes of 2018, created a pilot program, through January 1, 2023, to allow employers to transmit workers’ compensation benefits via a prepaid card, instead of a paper check or direct deposit. Employees must provide written consent to the employer to use a prepaid card account that includes specified consumer protections. At the time, the author of SB 880 argued paper checks present challenges for “unbanked” households lacking access to financial services, such as check-cashing fees and delays receiving payments, and utilizing prepaid cards would make it cheaper and easier for all people to receive benefits.

SB 880 also required the Commission on Health and Safety and Workers Compensation (CHSWC) to report the following data to the Legislature by December 1, 2022: (a) the number of employees who elected to receive their benefits via prepaid card; (b) the cash value of benefits sent via prepaid card; and (c) the number of employees who opted to change their method of payment from prepaid card to either a written instrument or electronic deposit. AB 2148 (Calderon), Chapter 120, Statutes of 2022, extended the pilot program’s sunset date by one year to January 1, 2024, so stakeholders could have more time to review the CHSWC report prior to the program’s expiration. Since the report still has not been transmitted to the Legislature, this bill again extends the pilot program’s sunset date by one more year to January 1, 2025.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: March 22, 2023

ASSEMBLY COMMITTEE ON INSURANCE

Lisa Calderon, Chair

ABPCA Bill Id:AB 489 (

Author:Calderon) – As Introduced Ver:February 7, 2023

SUBJECT: Workers’ compensation: disability payments

SUMMARY: Extends the sunset, from January 1, 2024 to January 1, 2025, for an existing pilot program that allows employers to transmit disability indemnity benefits (workers’ compensation) by a prepaid card, rather than a paper check.

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 authorized by the state.
2. Requires that, if an injury causes temporary disability, the first payment of temporary disability indemnity must 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(b)(1))
3. Defines “prepaid card” or “prepaid card account” as a card, code, or other means to allow a recipient access to funds, which is usable at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines (ATMs). (Unemployment Insurance (UI) Code § 1339.1)
4. Permits employers to begin a program where disability indemnity benefits may be deposited on a prepaid card account, as defined under existing UI Code, if the injured worker has provided written consent to receive his or her benefits on a prepaid card. (Labor Code § 4651(a)(3)(A))
5. Requires that a prepaid card account must meet the following requirements: (Labor Code § 4651)
   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 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.
6. Prohibits any prepaid card account fees being charged to an injured worker, 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. (Labor Code § 4651(a)(3)(B))
7. 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. (Labor Code § 4651(a)(3)(C))
8. Sunsets the prepaid card account program described above on January 1, 2024. (Labor Code § 4651(c))
9. 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. (Labor Code § 4651(a)(3)(D))

FISCAL EFFECT: Unknown.

COMMENTS:

1. Purpose. According to the author:

AB 489 simply extends the sunset of an existing pilot program by one year, while the legislature awaits a report relating to the program. In 2018, the legislature passed a bill to establish a pilot program that allowed employers to transmit certain workers compensation payments by a prepaid card, rather than a paper check or direct deposit. This program is particularly helpful for unbanked workers that do not have access to a checking account. This bill would extend the sunset by one year, to give stakeholders sufficient time to review the report, before any interruptions to the existing program take place.

1. Pilot Program and CHSWC Report. SB 880 (Pan, Chapter 730, Statutes of 2018) allowed employers to conduct a pilot program on transmitting workers’ compensation (disability indemnity benefits) by a prepaid card, rather than a paper check. This pilot program was originally due to sunset January 1, 2023. Last year, AB 2148 (Calderon, Chapter 120, Statutes of 2022) extended the sunset date to January 1, 2024.

SB 880 also required CHSWC to issue a report to the Legislature on payments made to prepaid card accounts on or before December 1, 2022. However, that report has not yet been transmitted to the Legislature. The report shall include, at minimum 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.

This bill would again extend the sunset by one year, to give stakeholders adequate time to review the report, before any interruptions to the existing program take place.

1. Disability Indemnity Benefits and Access to Banking in California. Transmitting indemnity benefits to injured workers by either a paper check or direct deposit both pose unique challenges for 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.

According to the 2021 Federal Deposit Insurance Corporation (FDIC) National Survey of Unbanked and Underbanked Households, 5% of all California households are unbanked.^[1] However, according to the same survey, the rate of unbanked disabled households in California is 19.1% and an additional 13.9% of households are underbanked.

The FDIC survey shows that for African American households in California, the unbanked rate is 6.4% and the underbanked rate is 24.5%. For Latino households in California, the unbanked rate is 7.6% and the underbanked rate is 22.6%. This suggests that for households with injured workers, particularly injured workers of color, the unbanked and underbanked rate may be higher than average.

The pilot program created in 2018 aimed to address these issues. 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 on an existing electronic benefit transfer (EBT) program for individuals to receive CalFresh, CalWORKs, and other food and cash aid benefits.

1. Prior Legislation.

AB 2148 (Calderon), Chapter 120, Statutes of 2022, extended the sunset date on an existing pilot program that allows employers to transmit disability indemnity benefits (workers’ compensation) by a prepaid card, rather than a paper check from January 1, 2023 to January 1, 2024.

SB 880 (Pan), Chapter 730, Statutes of 2018, created the pilot program to allow employers to transmit disability indemnity benefits (workers’ compensation) by a prepaid card, rather than a paper check.

REGISTERED SUPPORT / OPPOSITION:

Support

American Property Casualty Insurance Association
California Association of Joint Powers Authorities (CAJPA)

California Coalition on Workers Compensation
Housing Contractors of California
Public Risk Innovation, Solutions, and Management (PRISM)

Opposition

None on file.

Analysis Prepared by: Claire Wendt / INS. / (916) 319-2086

1. 2021 FDIC National Survey of Unbanked and Underbanked Households. Retrieved March 6, 2023, from https://www.fdic.gov/analysis/household-survey/

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