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Tuesday, January 4, 2011

SCIF "Safety Group" and "Trade Association Group" Programs Upended

This posting pertains primarily to California organizations, and particularly those with workers compensation insurance programs.

State Compensation Insurance Fund (SCIF) recently notified its trade group participants (Safety Groups and Trade Association Groups in letters dated December 20 - 31, 2010) that it is discontinuing its Safety Group programs, and tightening its Trade Association Group program requirements.   The changes will generally take effect in January 2012 or thereabouts, at which time SCIF will apparently not renew agreements with groups that cannot “… demonstrate to State Fund’s satisfaction …” that they meet the new SCIF program requirements.

The new program requirements include requirements that (1) 25% of the group’s annual membership dues are received from non-SCIF insureds and (2) no more than 75% of annual group revenues be sourced from SCIF program funds.  The requirements also include minimum “safety activities” referred to in an “Exhibit A,” which was not provided, and “communication and outreach activities” referred to in an “Exhibit B,” also not provided.

According to the notice, groups may continue under the program if they demonstrate that they meet the new program requirements at least 180 days prior to expiration of their current agreement.  Doing so will be difficult for many groups, as demonstration of compliance with new program requirements is based on prior fiscal year.  The problem will be demonstrating compliance for that initial year, because the new program requirements would not have been in place, or even known, during that period of time.

SCIF is apparently taking this action to curb payments to groups that some observers -- perhaps even regulators -- view as unduly lucrative to some groups (some of which allegedly do little or nothing for the money).  It also appears that SCIF has financial and competitive challenges at this time.  Regardless, many Safety and Trade Association Groups are concerned about their ability to conform new program requirements for the initial year, as the prior year’s program data would not have been subject to the new requirements.

If you are interested in being involved in discussion of this matter, please send me an email ( with your contact information.

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