Newly released state payroll records reveal that deposed State Compensation Insurance Fund (SCIF) president James Tudor left the carrier with hundreds of thousands of dollars stuffed in his pocket from extra pay for accrued paid time off. But he was far from alone in stockpiling a nest egg of unused vacation time to be cashed out at retirement — forced or otherwise — and the problem does not seem to be going away. SCIF is the largest writer of workers’ comp in California.

Those same payroll records show that over three fiscal years from 2006/2007 to 2008/2009, SCIF paid off 163 employees and managers for accrued vacation and other paid-time-off benefits that exceeded the maximum of 80 banked days. For 53 of these employees and managers, the total number of days saved up more than doubled the amount they’re nominally allowed to have banked at any given time. Six even had entire calendar years’ worth of days accumulated when they cashed out their account.

This is not to suggest that SCIF employees and managers should be denied benefits that they have rightfully earned. Far from it. They should exercise those benefits and take the leave time and use it per the policies of the state. And SCIF management should see that state pay policies are followed. Those policies require managers to develop a plan for reducing an employee’s banked time when they exceed the 640-hour maximum, but this is proving ineffective and policyholders are paying the price.

Policyholders ultimately pay more than they should because the hours are cashed out at current wages, not the rate of pay at which they were earned. And while some progress has been made in reducing the number of banked hours in excess of the standard, the overall total is still a significant liability for policyholders—one that keeps growing as wages increase year over year.

Problem Worst Among Managers

According to data provided by SCIF, 856 employees, managers, supervisors and others in exempt positions at the carrier had a total of 277,956 hours banked over the 640 hours that each is allowed to carry. The liability? A cool $11 million in excess of their base vacation pay.

The problem is most acute among managers and others in leadership positions. While 487 rank-and-file workers had 110,018 hours banked over the limit, 369 managers, supervisors and other exempt employees had 167,938 banked over the limit — that’s an extra 455 hours over the limit on average for each supervisor compared to 225 hours for each rank-and-file worker.

SCIF spokeswoman Jennifer Vargen says the carrier made a concerted effort to bring its operations into line with state rules (see chart) but lost ground in the past year.

“Our HR department sends out reports identifying employees whose accruals exceed the limit and requests the department(s) submit plans to reduce the accruals. We implemented this procedure in 2008 and it proved effective in reducing balances,” she maintained, noting that the impact of the furloughs can be seen in the uptick last year as workers took furlough days each month. “We have, however, begun working once again to reduce our accrual balances. Of course, any plans to reduce accrual balances must take State Fund’s operational needs into consideration.”

Cha-Ching

So who’s been cracking open that nest egg?

State payroll records show that Tudor took home the largest lump sum payment by far when he cashed in for $363,224.43 in the 2007/2008 fiscal year. This payment came after he had been shown the door and covered 346 days of accrued paid time off. Tudor also had the dubious distinction of having the second-largest vacation payday in the list, a $187,170.45 payout for 179 days cashed out during the prior fiscal year.

Combined, Tudor had been allowed to accumulate paid time off that amounted to more than two full years’ worth of normal workdays. State rules say 80 days is the limit. All told that was more than $500,000 worth of unused time off. SCIF says the payout was split into two payments to comply with Department of Personnel Administration rules. Tudor was ousted in March 2007, in the 2006/2007 fiscal year.

On the most egregious cases — those cashing in at least double the allowable amount that can be banked — SCIF paid out more than $4.8 million to 54 employees over the three-year period. Included in these totals is former vice president of group business Renee Koren, who cashed in 321 days for more than $150,000 when she was fired along with Tudor. And Robert Daneri, former chief counsel, cashed in 169 days of accumulated paid time off for $89,000.

Broader research by the group California Watch noted that the state paid out $486 million in accrued vacation pay and other paid time off during the period, and SCIF accounted for 2.4% of the spending. But among individual payouts, Tudor came in second on the list of individuals, bested only by a Corcoran State Prison doctor who cashed in more than $800,000 worth of banked time.