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ADOPT RESOLUTION TO APPLY FOR ELECTIVE COVERAGE OF STATE DISABILITY INSURANCE FOR MEMBERS OF THE MID-MANAGEMENT/SUPERVISORY LEVEL UNIT (B&C)
recommended action
RECOMMENDATION
It is recommended that the City Council: 1) Adopt a Resolution, in accordance with Mid-Management/Supervisory Level Unit (B&C) Memorandum of Understanding (MOU) Section 14.5 authorizing the City to apply for elective coverage of State Disability Insurance (SDI) for members of B&C, and 2) Provide the City Manager authority to execute the application for SDI, and take whatever actions are appropriate to carry out the implementation of SDI.
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Summary
Per the California Unemployment Insurance Code (CUIC), public entities are not required to provide SDI coverage to their employees; and the City currently does not provide SDI or any other short-term disability or wage replacement benefit for non-work-related illness or injury. Employees use their sick leave accrual when taking time off for their own medical leave, to care for an ill or injured family member, or to bond with a new baby. However, SDI coverage may be extended to employees of public entities upon request under certain circumstances. Section 710.5 of the CUIC allows employers to elect SDI coverage for their employees who are covered by a collective bargaining agreement containing SDI provisions and who have elected such coverage. In 2014, B&C members, via MOU Section 14.5, bargained for the ability to add SDI in the future. On May 14, 2015, City was notified that B&C members elected to participate in SDI (Attachment A) and to comply with the MOU provision, the City must file an application for elective coverage, pursuant to procedures established by the state (Attachment B). There is no fiscal impact to the City’s budget with the implementation of elective coverage of SDI because the employee bears the full cost of the coverage.
DISCUSSION
Background
California State Disability Insurance provides wage replacement insurance programs; the SDI program and the Paid Family Leave (PFL) program. These wage replacement insurance programs are managed by the Employment Development Department (EDD) and are funded completely by employee paid payroll tax deductions. Both programs are provided under the employee funded SDI payroll tax and are not elected separately. There are no employer contributions for SDI coverage; however, the employer is required to file quarterly wage earning reports and to remit the employee contributions directly to EDD.
The SDI program provides affordable, short-term (up to 52 weeks) wage replacement benefits which are approximately 55% of the employee’s weekly earnings up to the maximum weekly benefit amount, to eligible workers who suffer a loss of wages when they are unable to work due to non-work-related illness or injury, or due to pregnancy or childbirth.
The PFL program was created in 2002, when legislation (Senate Bill 1661) extended disability compensation to individuals needing to take time off work to care for a seriously ill child, spouse, parent, domestic partner, or to bond with a new child, or a child in connection with adoption or foster care replacement. PFL is a component of the SDI program and workers covered by SDI are also covered for this benefit.
SDI is a deduction from employees’ wages whereby employers withhold a percentage (current percentage is 0.9%) of the taxable wages, up to a set wage limit (the current wage limit for 2015 is $104,378) in a calendar year. The wage limit and the tax rate are set by the California State Legislature on an annual basis. For example, in 2015 an employee who earns $50,000 a year can expect to contribute approximately $450 a year for SDI coverage and the maximum contribution for an employee earning $104,378 or more a year would be $939.40.
Public entities are not required to provide SDI coverage to their employees. However, under provisions of the CUIC, employers may elect SDI coverage for their employees. The EDD refers to these elections as “Specialized Coverage.” Per Section 710.5 of the CIUC, public entity employers may elect SDI coverage for the following:
• Employees who are part of a recognized bargaining unit. The election must be the result of a negotiated agreement;
• Management and Confidential employees; or
• Unrepresented employees (who are not part of an appropriate bargaining unit).
In this instance, B&C is a recognized bargaining unit and B&C has bargained for this option per MOU Section 14.5. The MOU was agreed to and adopted by Council on January 27, 2015, by Motion # 2015-01-27-1204.
Per EDD requirements, SDI tax deductions start at the beginning of a quarter (January 1, April 1, July 1, or October 1). In order to build a reserve of funds, members are required to contribute for two full quarters (six months) before they will be able to submit an application for benefits. Thus, member contributions will begin on October 1, 2015, and the first date of eligibility will be April 1, 2016.
Present Situation
The City does not currently provide SDI or any other short-term disability benefit for their employees. Employees use their sick leave accruals for their own illness or injury for the first 90-days of their disability leave, and must exhaust all of their sick leave accruals before the City’s Long Term Disability (LTD) benefit is paid. In addition, employees use their leave accruals (sick leave, annual leave or other compensable leave) when taking time off to care for a seriously ill family member or to bond with their new baby. Employees who exhaust their leave accruals currently have no supplemental short-term income and are in an unpaid status until they become eligible for LTD benefits (90-days), if applicable.
During the 2014 labor negotiations, representatives of B&C bargained for a new provision in their MOU (Section 14.5), whereby, at the union’s request, the City would implement SDI for B&C members. B&C MOU Section 14.5 is as follows:
14.5 State Disability Insurance
At the Union's option, pursuant to procedures established by the state, members may elect to receive State Disability Insurance (SDI) coverage at their own expense SDl will be coordinated with other benefits.
On May 14, 2015, B&C provided notification to the City (Attachment A) that their membership had elected, by majority vote, to participate in SDI and requested the City move forward with the application process to participate in the Specialized Coverage of SDI.
The next steps to participate in the Specialized Coverage of SDI are:
• EDD requires that requests for Specialized Coverage be filed in writing, on form DE 1378N (Attachment B) and include a copy of the resolution in which governing body approved the filing of an application for elective coverage under Section 710.5;
• The election must remain in effect for at least two (2) complete calendar years; and
• Termination requests must be in writing, filed with EDD during January, and will be effective January 1 of the year filed.
Upon acceptance of the City’s application, staff will coordinate with Administrative Services, Payroll Division staff to implement the appropriate deductions for B&C members, effective the beginning of the next quarter, and to file the necessary wage reports and deductions on a quarterly basis.
FINANCIAL SUMMARY
There is no fiscal impact to the City’s budget with the implementation of elective coverage of SDI because the employee bears the full cost of the coverage.
Attachment A - Mid Management Supervisory Level Unit Letter
Attachment B - Application for Elective Coverage of Disability Insurance (Form DE 1378N)