WASHINGTON—The Coca-Cola Co. has received tentative authorization from the Labor Department for its groundbreaking approach to funding retiree health care benefits through a special trust and its captive insurance company.

The tentative authorization, which will be published in the Dec. 22, 2009, Federal Register, came after months of discussions between Labor Department officials and Coca-Cola, its consultants and legal advisers.

“We are extremely pleased this step has been completed,” Coca-Cola said in an e-mailed statement.

“We are thrilled. We were always confident that this would happen,” said Kathleen Waslov, a senior consultant with Towers Perrin in Boston, Coca-Cola's consultant on the project.

In order to help win Labor Department approval, Coca-Cola addressed several issues, including how the arrangement would benefit plan participants. Benefit enhancements include guaranteeing coverage within certain ranges.

The lengthy review process—the Atlanta-based beverage giant filed its application in January—was not surprising, given the complexity of the transaction and the fact that it is the first of its kind, Ms. Waslov said.

Under its plan, the company would use assets in a voluntary employees' beneficiary association to purchase medical stop-loss policies from Prudential Insurance Co. of America to pay claims over the expected lifetimes of roughly 4,000 retirees and dependents. Coca-Cola established the VEBA in 2006 and contributed $216 million to the trust.

The medical stop-loss coverage would pay claims that fall between an attachment point and an upper limit.

In its application, Coca-Cola said the attachment point for all retirees would be $100. For those younger than 65, the upper limit would be $5,800; for retirees 65 and older, the upper limit would be $3,500. Those figures may change slightly when the proposal is finalized.

Prudential, in turn, would use the premium its receives from Coca-Cola to reinsure the risk with Red Re Inc., a South Carolina captive insurer and one of three captives owned by Coca-Cola.

Benefit experts say there are significant financial advantages to Coca-Cola's funding approach and that other employers will follow after the transaction receives final approval.

Coca-Cola still is waiting for a private letter ruling from the Internal Revenue Service involving tax issues related to the transaction.