SACRAMENTO, Calif. – The State Compensation Insurance Fund (SCIF) wants the California Legislature to pass special rules that will let them keep their preferential tax status while enabling the entity to operate like a multi-state private carrier, says the Association of California Insurance Companies (ACIC). AB 228 (Fuentes) would give SCIF the authority to provide workers’ compensation policies to its California-based clients that cover the client’s out-of-state employees.
“AB 228 is not the simple “business-friendly” measure that SCIF is portraying it to be,” said Mark Sektnan, ACIC president. “This bill raises a lot of questions. For instance, what is the definition of a California based company – does it mean a company can have one office here but do all of its sales or manufacturing business in other states? If a company has three restaurants in California but five in other states, is it still a business with California as its principal place of business if there are more employees out of state than in state? Each question raises another question.”
SCIF was established as a public enterprise fund by legislation in 1913 and reaffirmed by initiative in 1918 to provide coverage for California employers to meet their workers’ compensation obligations under the state’s mandatory workers’ compensation law. The Insurance Code says SCIF was established to assure that California employers would be able to obtain workers’ compensation insurance and to be fairly competitive with other insurers providing the same coverage. As a consequence of being the guaranteed market for California employers, SCIF qualifies for an exemption from federal income tax. Private insurers pay billions in federal income tax.
“Policymakers need to ask what responsibilities and liabilities SCIF will have for the policies in other states if they cede control to another carrier,” said Sektnan. “Additionally we need answers to questions such as why is it so important to enact a bill on this issue in 2011 and why is this bill being rushed through the process? This is an expansion of SCIF’s responsibilities and the legislature should take the necessary time to review this and the implications it could have on California’s small businesses that rely on SCIF for coverage.”