AB 1683 amends Labor Code section 4651 to allow employers to deposit disability indemnity payments into prepaid card accounts when an employee gives written consent. The bill ties the definition and baseline requirements to Unemployment Insurance Code section 1339.1, then layers additional worker protections: fee disclosure, limits on the types of fees card issuers may charge, required card features (fee‑free full balance withdrawal, reasonable ATM access, no point‑of‑sale fees), and a prohibition on linking cards to credit products.
The bill also requires employers to provide aggregated data to the Commission on Health and Safety and Workers’ Compensation for a report, creates a narrow safe harbor for delays caused solely by banking laws, permits either party to change the payment method with 30 days’ written notice, and includes a repeal date of January 1, 2027. Employers, insurers, paycard vendors, and compliance teams need to evaluate operational, disclosure, and recordkeeping changes to offer or accept prepaid card payments under these rules.
At a Glance
What It Does
Permits employers to pay disability indemnity into prepaid card accounts when an employee provides written consent, requires cards to meet UI Code 1339.1 plus additional access and fee protections, and limits permissible fees to a short, enumerated list. It also mandates employer data sharing with the state commission and contains a banking‑delay safe harbor.
Who It Affects
California employers and claims administrators that pay workers’ compensation benefits, prepaid card providers and banks that would issue these cards, and employees who receive disability indemnity payments. HR, payroll, and legal teams will need to update authorization, disclosure, and recordkeeping processes.
Why It Matters
The bill creates a regulated pathway for paycard use in workers’ compensation while constraining provider fee models and access design — potentially shifting how indemnity payments are delivered and lowering check processing costs, but imposing new compliance obligations and product design limits on card issuers.
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What This Bill Actually Does
AB 1683 expands the permitted methods for delivering disability indemnity payments under Labor Code section 4651 to include prepaid card accounts, but only when the employee gives written consent. The bill imports the baseline definitions and some standards from Unemployment Insurance Code section 1339.1 so that terms like “prepaid card” and “prepaid card account” are consistent with existing state UI law.
On top of those baseline standards, the bill mandates specific consumer protections: the card must permit withdrawing the entire balance in a single transaction without a fee, provide reasonable access to in‑network ATMs, and not charge point‑of‑sale fees imposed by the financial institution. It also bars any linkage of the card to credit products like loans or cash advances on future payments.
AB 1683 restricts the universe of fees that a card issuer may impose to three narrow categories: expedited replacement card fees, out‑of‑network ATM fees beginning on the third withdrawal after a deposit, and foreign transaction fees. Employers must disclose the fees in writing before enrollment.
Employees who have consented can later switch payment methods (or an employer can change) by giving 30 days’ written notice to the other party. The bill leaves existing options intact — employers may still pay by negotiable written instrument or by deposit into a bank/credit union account the employee chooses, including electronic deposit unless the employee opts out in writing.For oversight, the bill requires employers to provide aggregated data to the Commission on Health and Safety and Workers’ Compensation so the commission can produce a report to the Legislature on prepaid‑card payments; that report must comply with state requirements on confidentiality and reporting.
The statute includes a limited safe harbor that excuses delays in negotiation or deposit where state or federal banking rules alone cause the delay. Finally, the provision is time‑limited: it sunsets on January 1, 2027, at which point the prepaid‑card authorization in this section is repealed unless reenacted or extended.
The Five Things You Need to Know
The bill permits employers to deposit disability indemnity payments into prepaid card accounts only after the employee provides written consent.
Prepaid cards must allow an employee to withdraw the entire card balance in one transaction without a fee, provide reasonable access to in‑network ATMs, and not charge financial‑institution point‑of‑sale fees.
The only fees the bill allows are expedited replacement card fees, out‑of‑network ATM fees starting with the third withdrawal per deposit, and foreign transaction fees; all fees must be disclosed in writing.
Either the employer or the employee may change the payment method (to another permitted method) by giving 30 days’ written notice to the other party.
Employers must supply aggregated data to the Commission on Health and Safety and Workers’ Compensation for a report; the section includes a narrow banking‑delay safe harbor and sunsets on January 1, 2027.
Section-by-Section Breakdown
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Baseline negotiability and voluntary direct deposit rules
These subsections preserve the existing requirement that disability indemnity payments be payable by immediately negotiable written instrument and keep the employee’s option to have benefits deposited into a bank, savings and loan, or credit union account of their choice. Practically, employers retain traditional payment channels and must continue honoring voluntary authorizations for direct deposit unless the employee has explicitly opted out of electronic deposits in writing.
Authorization and baseline product standards for prepaid‑card programs
This paragraph authorizes employers to start a prepaid‑card payment program only with the employee’s written consent and adopts the Unemployment Insurance Code’s definitions and baseline requirements for prepaid cards. It then adds three mandatory consumer protections—fee‑free single‑transaction full‑balance withdrawal, reasonable in‑network ATM access, and no point‑of‑sale fees charged by the financial institution—and forbids linking the card to credit or advances. Compliance teams must coordinate with card vendors to document these product features and ensure contracts and enrollment forms collect the required written consent.
Fee disclosure and an enumerated, narrow fee list
The bill requires employers (or issuers) to disclose all prepaid‑card fees in writing before use and restricts permissible fees to expedited replacement card fees, out‑of‑network ATM fees beginning on the third withdrawal per deposit, and foreign transaction fees. This limits typical prepaid‑card revenue levers (monthly maintenance, POS fees, excessive ATM fees) and forces issuers to redesign price schedules if they want to participate in workers’ comp programs.
Thirty‑day written notice to change payment method
If an employee has consented to receive payments on a prepaid card, either party may switch to another permitted payment method (written instrument or electronic deposit) by giving 30 days’ written notice. That creates an operational requirement for employers and payors to process change requests and to document notices and effective dates, and it gives employees a clear, time‑limited exit option from the card program.
Employer data obligations and reporting to the Commission
The bill directs employers to produce aggregated data about prepaid‑card programs to the Commission on Health and Safety and Workers’ Compensation to support a legislative report. Employers must cooperate with the commission’s requests for aggregated counts, cash values sent to cards, and numbers of employees who switched payment methods. The reporting language requires compliance with state confidentiality rules and will impose recordkeeping and data‑sharing work for claims administrators and their vendors.
Banking‑delay safe harbor and sunset
Subsection (b) provides a narrow exemption from liability for delays in negotiation or deposit of payments where state or federal banking laws or regulations, and those alone, cause the delay—covering issues like clearing holds or compliance holds. Subsection (c) sunsets the entire prepaid‑card authorization on January 1, 2027, meaning the statute’s prepaid‑card regime is temporary unless extended; that affects long‑term vendor investments and employer program planning.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Injured employees who prefer prepaid cards: Employees without reliable access to a bank account may gain faster, card‑based access to funds and the ability to use balances immediately if the card meets the mandated access and fee protections.
- Employers and claims administrators: Organizations that issue many paper checks can reduce check production and mailing costs by offering a prepaid‑card option, streamlining payment logistics where employees consent.
- Prepaid‑card issuers that comply with limits: Issuers that can redesign products to meet the bill’s feature and fee constraints may win new business from employer programs seeking a compliant paycard partner.
- Payroll and HR operations: Teams gain a defined, lawful pathway to offer paycards for workers’ comp, reducing uncertainty about whether such programs are permissible and what consumer protections are required.
Who Bears the Cost
- Prepaid‑card issuers and banks: The bill restricts common fee lines (monthly fees, many POS fees, early ATM fees), forcing issuers to absorb revenue reductions or redesign products to comply with the permitted fee structure.
- Employers and insurers: Employers must obtain and retain written consent, disclose fees in writing, handle 30‑day change notices, and supply aggregated data to the commission — adding administrative and IT burdens.
- Claims administrators and payroll vendors: These intermediaries must ensure product contracts meet the statutory requirements, implement enrollment and opt‑out workflows, and support reporting requests, which may require contractual renegotiation and system changes.
- Employees in sparse ATM networks: Where 'reasonable access' is hard to provide, workers may face practical barriers or out‑of‑network fees if networks are limited, shifting costs back to vulnerable employees despite the bill’s protections.
Key Issues
The Core Tension
The central tension is between operational efficiency and consumer protection: the bill aims to make prepaid cards a workable, lower‑cost vehicle for delivering indemnity payments while strictly constraining card features and fees to protect injured workers — a tradeoff that limits issuer flexibility and creates enforcement and design complexities for employers and vendors.
AB 1683 sets prescriptive product features and a short, enumerated list of permissible fees, but it leaves several operational questions unresolved. The statute does not define what constitutes “reasonable access” to in‑network ATMs, nor does it specify how an issuer must track the “third and subsequent withdrawal per deposit” trigger for out‑of‑network ATM fees.
Those gaps create ambiguity for issuers, employers, and auditors about design and monitoring obligations. The requirement that the card allow a fee‑free single‑transaction full‑balance withdrawal is consumer‑friendly but raises practical issues where ATM or point‑of‑sale networks impose per‑transaction cash limits, velocity controls, or third‑party charges.
The reporting requirement creates a nontrivial compliance task: employers must aggregate data across multiple vendors and claims channels while complying with state confidentiality rules. The bill’s narrow safe harbor for banking delays limits liability exposure but leaves open disputes about when a delay is truly caused “solely” by banking laws.
Finally, the statute’s sunset on January 1, 2027 compresses the timeframe for program rollout and evaluation, undercutting incentives for long‑term vendor investment and raising the prospect of regulatory churn if the program is not extended or codified differently after repeal.
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