The State Compensation Insurance Fund (SCIF) board of directors held its first meeting since industry veteran Larry Mulryan took over chairmanship. It was also the first since SCIF management announced a major restructuring program that puts into question future employment of well over 1,400 SCIF employees. This does not sit well with the rank and file or the Service Employees International Union (SEIU), which says the geographic relocation plan is a thinly veiled and illegal layoff.

Both were on hand to voice their displeasure and make the board fully aware of the impact the changes would have on working families and SCIF’s operations. But management was quick to defend the plan and maintain that it is well received outside the confines of SCIF.

“Generally speaking, the feedback has been positive and constructive. There’s an underlying assumption on the part of agents, brokers and direct policyholders that these actions, properly implemented, will help with a significant reduction in the operating costs at State Fund, which we are further obligated to pass on to policyholders in the form of reduced premiums,” SCIF president Tom Rowe told the board during the meeting. “So in anticipation of the outcome of these strategy announcements, the general reaction of those outside stakeholders is positive.”

“We know full well that not every employee is in a position to move.” —Tom Rowe, SCIF President

Rowe said that outside stakeholders also support the way the plan is being implemented transitionally.

“They believe we’re treating employees with respect both in terms of advance notice, which is uncharacteristic of the private market, and the fact that we’re providing an opportunity for any employee that wishes to remain with State Fund to do so,” Rowe noted. “We know full well that not every employee is in a position to move. Some literally cannot move. But that notwithstanding, the option to deliver this geographic strategy, which is essential to reining in expenses at State Fund, was delivered in an honest, sincere and appropriate fashion.”

 Employees’ Views Differ

This latter statement brought a reaction from union representatives and SCIF employees present. They maintain that management, with the board’s apparent approval, continues to use deceptive tactics to hide the true nature of the plan — that this is more a staff reduction than a realignment.

“The stated goal of the three-year geographic reorganization plan is to reduce SCIF’s office space and consolidate various programs. From the few details we know about the plan, we know it will mean the relocation of thousands of State Fund employees over hundreds of miles across California,” SEIU researcher Kenny Sims noted to the board (see map). The move will reduce SCIF’s footprint by 11%, for an estimated savings of $28 million over the next three years or “less than what is the total in uncollected premiums for 2009 and very likely 2010.”

To reap the remaining $172 million in savings that SCIF projects, Sims maintains that the only solution management can be considering is layoffs. “From our perspective, we see no other way to achieve $200 million in savings. Yet any conversation over layoffs or forced attrition has never taken the center stage of this plan — it continues to officially be a footprint reduction strategy, even though office reductions will only achieve a very small share of the savings,” says Sims.

Kathleen Collins, a SCIF employee and union rep, also urged the board to consider the human side of the story and not just focus on cost savings.

“We have employees who are married and working in the same office that are being split because they work in different function for State Fund,” she told the board. “One is being transferred to Eureka and the other is being told they are going to be assigned to Bakersfield.” For the geographically challenged, the locations are more than 500 miles apart, with an estimated drive time of more than nine hours.

“We have employees who are married and working in the same office that are being split because they work in different function for State Fund.”
—Kathleen Collins, SEIU

She also noted that these relocations come on top of sacrifices that employees already have made. “They recently voted on their MOU, which implemented savings of 4.62% in their pay in exchange for the personal leave program, and this equates to 12 months of savings in salary wages and benefits and taxes of $17 million for SCIF,” Collins noted, referencing SEIU’s new labor agreement with the state. “That means the staff has already contributed savings equal to one-quarter of the estimated annual savings that State Fund hopes to achieve through its geographical layoff plan.”

While acknowledging that the plan will have a life-changing impact for some, board chairman Mulryan defended the plan as a necessary undertaking for the organization.

“We take this matter seriously, knowing that in some cases it may make it difficult on some employees, and while that is regrettable, it is something we have to do in the best interests of this organization and its goals and objectives,” he maintained during the meeting. He noted that SCIF’s mission and objective is to be “self-sustaining while being an open market, being competitive, keeping our expenses under reasonable control and providing our services throughout the state in a sustainable long-term fashion for our insureds, employees and our organization.” The relocation plan is intended to help bring this about.

(Filed by Brad Cain in San Francisco)

Full Executive Team

SCIF’s board of directors ratified the hiring of two new executives to fill vacancies created when former Chief Risk Officer Doug Stewart and former Chief Financial Officer Jay Stewart left SCIF for other opportunities.

Hired to be SCIF’s new CRO is Ken Van Laar, who most recently served as senior vice president and chief underwriting officer for CompWest Insurance Company. Van Laar also has industry experience with Transamerica Insurance Group, Industrial Indemnity and Liberty Mutual.

As CRO, Van Laar will oversee SCIF’s underwriting, actuarial and risk management operations, as well as its risk committee.

The board also approved the hire of Daniel J. Sevilla, Jr. to serve as SCIF’s CFO full time. Sevilla has been in the capacity on an interim basis since October when Jay Stewart resigned. Most recently, Sevilla was vice president of financial and operational planning and analysis at AAA of Northern California, Nevada and Utah.

Both will receive an annual salary of $288,000 plus a monthly recruitment and retention payment of $1,200. They also will be eligible for an annual bonus equivalent to 15% of their annual salary if they meet certain performance standards. But what those standards are remains confidential. Both also receive state civil service benefits, including health insurance, and retirement benefits.