title
ADOPT RESOLUTION TO APPLY FOR ELECTIVE COVERAGE OF STATE DISABILITY INSURANCE FOR MEMBERS OF THE OPERATIONS & MAINTENANCE UNIT (O&M), TRADES & MAINTENANCE UNIT (T&M), AND WATER SUPERVISORY UNIT
recommended action
RECOMMENDATION
It is recommended that the City Council: 1) Adopt a Resolution, in accordance with the Operations & Maintenance Unit (O&M); Trades & Maintenance Unit (T&M); and Water Supervisory Unit Memoranda of Understanding (MOUs), authorizing the City to apply for State Disability Insurance (SDI) elective coverage for members of O&M, T&M, and the Water Supervisory Unit, and 2) Authorize the City Manager to execute the application for SDI and take any necessary steps to implement SDI for O&M, T&M, and the Water Supervisory Unit.
body
Summary
In accordance with the California Unemployment Insurance Code (CUIC), Section 710.5, employers may elect SDI coverage for their employees who are covered by a collective bargaining agreement containing SDI provisions and who have elected such coverage. The City currently does not provide SDI, or any other short-term disability or wage replacement benefit, to O&M, T&M, or the Water Supervisory Unit. As such, employees in these bargaining units must use available leave accruals when taking time off for disability purposes, or go unpaid, until Long Term Disability (LTD) benefits become effective.
Earlier this year, O&M, T&M, and the Water Supervisory Unit bargained for the ability to provide SDI to their members, which was approved by the City Council on June 7, 2016. In July 2016, the City was notified that these bargaining units elected to participate in SDI (Attachments A, B, and C) and requested the City file an application for SDI elective coverage for these bargaining units in accordance with procedures established by the state (Attachments D, E, and F). There is no fiscal impact to the City’s budget with the implementation of SDI elective coverage because employees pay the full cost of the coverage.
DISCUSSION
Background
The Employment Development Department (EDD) manages the State of California’s wage replacement insurance programs, SDI and Paid Family Leave (PFL), which are completely funded through employee paid payroll tax deductions. Both programs are provided under the employee funded SDI payroll tax and cannot be elected separately. Although there are no employer contributions for SDI coverage, the employer is required to file quarterly wage earning reports and to remit the employee-paid 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, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner, or to bond with a new child entering the family through childbirth, adoption, or foster care placement. PFL is a component of the SDI program and workers covered by SDI are also covered for this benefit.
SDI is paid by employees through a payroll deduction; whereby, employers withhold a percentage of the taxable wages, up to a set wage limit in a calendar year. Each year, the California State Legislature sets the tax rate (currently 0.9%) and the wage limit (currently $106,742) for SDI. For illustration, an employee who earns $50,000 a year in 2016 can expect to contribute approximately $450 annually for SDI coverage. The maximum annual contribution amount for SDI, based on the current wage limit of $106,742, is $960.68.
Public entities are not required by law to provide SDI coverage to their employees. However, under provisions of the CUIC, employers may elect SDI coverage for their employees, which is referred to as “Specialized Coverage.” In accordance with Section 710.5 of the CIUC, public entity employers may elect SDI coverage for the following employees:
• 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, O&M, T&M, and the Water Supervisory Unit are recognized bargaining units that have bargained for this option in current MOUs (Section 14.3 for O&M and T&M) and (Section 14.6 for the Water Supervisory Unit). These MOU provisions were approved and adopted by Council on June 7, 2016 by Resolution # 2016-06-07-1209.
In accordance with 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. Based on these requirements, member contributions will begin on October 1, 2016, and the first date of benefit eligibility will be April 1, 2017.
Present Situation
The City does not currently provide SDI, or any other short-term disability benefit, for employees in O&M, T&M, and the Water Supervisory Unit. These employees must use their available leave accruals for disability purposes until LTD benefits become effective. 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 2016 labor negotiations, representatives of O&M, T&M, and the Water Supervisory Unit bargained for a new provision in their MOUs; whereby, the City will implement SDI coverage upon request from these bargaining units. The O&M and T&M MOUs, Section 14.5, and the Water Supervisory Unit MOU, Section 14.6, state the following:
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.
In July 2016, each unit provided notification to the City (Attachments A, B, and C) that their memberships 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 following information outlines SDI Specialized Coverage requirements:
• Requests for Specialized Coverage must be filed in writing on form DE 1378N (Attachments D, E, and F) and include a copy of the resolution in which the 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 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.
Once the application is approved by EDD, staff will implement the appropriate deductions for O&M, T&M, and Water Supervisory Unit members effective October 1, 2016 (the beginning of the next quarter) and will file the necessary wage reports and deductions to EDD on a quarterly basis.
FINANCIAL SUMMARY
There is no fiscal impact to the City’s budget with the implementation of SDI elective coverage because employees pay the full cost of the coverage.
Attachment A - Operations & Maintenance Unit Letter
Attachment B - Trades & Maintenance Unit Letter
Attachment C - Water Supervisory Unit Letter
Attachment D - O&M Application for Elective Coverage of Disability Insurance
Attachment E - T&M Application for Elective Coverage of Disability Insurance
Attachment F - Water Supervisory Unit Application for Elective Coverage of Disability Insurance