The U.S. Labor Department has given final authorization for Intel Corp. to use its Hawaii captive insurer to fund benefit risks, an action that will again open the door for other employers to receive fast regulatory review of requests to fund employee benefit risks through their captives.
The Santa Clara, Calif.-based computer chip manufacturer will use its Technology Assurance Ltd. captive to reinsure life insurance and accidental death and dismemberment policies written by Minnesota Life Insurance Co. Currently, Intel uses the captive to write terrorism risk coverage.
The significance of the Labor Department's approval, though, goes beyond Intel. For more than a decade, employers had used a procedure — known as ExPro — to obtain fast regulatory review of captive benefit funding applications.
Under ExPro, the Labor Department must act within 45 days on a request for an exemption for arrangements that normally would be considered a prohibited transaction under the Employee Retirement Income Security Act. Including a comment period for plan participants, the entire regulatory process under ExPro takes about 2˝ months, less than half the time often needed for exemptions that do not qualify for ExPro.
ExPro generally was available to captive benefit funding applicants that could cite two substantially similar individual exemptions granted in the past five years, or one substantially similar individual exemption approved in the last 10 years and one approved through ExPro within the past five years.
Back in 2012, though, the Labor Department suspended the use of ExPro for captive benefit funding arrangements while regulators reviewed the criteria employers had to satisfy.
As a practical matter, the availability of ExPro was ending as the 10-year mark neared on individual exemptions, such as the 2003 exemption granted to Decatur, Ill.-based agribusiness Archer Daniels Midland Co. Employers seeking ExPro approval frequently cited the ADM approach, in which the company used its Vermont captive, Agrinational Insurance Co., to reinsure life insurance benefits written by Minnesota Life. Under the arrangement, ADM, among other things, agreed to boost plan participants' benefits and to use an independent fiduciary to ensure that all conditions of exemption were met.
Even though the speedier ExPro process was put on hold for more than a year, employers still could seek individual exemptions to fund employee benefit risks through their captives.
In March 2013, Atlanta-based The Coca-Cola Co. won final approval of an individual exemption to use its South Carolina captive, Red Re Inc., to reinsure group term life insurance and accidental death and dismemberment policies written by Metropolitan Life Insurance Co.
Now with the approval of the two recent individual exemptions — Coca-Cola and Intel's, which is expected to published in Thursday's Federal Register — the ExPro procedure again will become available for future captive benefit funding applicants.
“This is a landmark decision by the Department of Labor that will significantly enhance Intel's benefit funding options and pave the way for future employers looking to achieve cost savings, higher efficiency and greater flexibility while still providing their employees with the best benefits possible,” said Karin Landry, a managing partner at Spring Consulting Group L.L.C. in Boston, which filed Intel's application.
Indeed, last year, a Labor Department spokesman, signaling the return of ExPro, said employers seeking ExPro for captive benefits funding arrangements “should review the criteria” in the Coca-Cola and Intel exemptions.