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Training and planning have helped insurance brokers meet new tax reporting regulations for 2015, and compliance is moving into the “another part of doing business” phase.
Initial reporting under the Foreign Account Tax Compliance Act, meant to help combat international money laundering, began Jan. 1.
“The go-live in January was essentially without incident,” said Craig Coit, deputy chief financial officer for Aon Risk Solutions in Chicago.
Companies had spent considerable time and effort ramping up.
“What we had done with carrier outreach and training of our client-facing staff, that turned out to have paid off big in terms of their preparedness,” Mr. Coit said.
“Training of our client-facing colleagues” was a critical element in the company's preparations, said Patricia Hagemann, chief risk and compliance officer at Marsh L.L.C. in New York.
Marsh got out in front of the regulations early.
Three years ago, it formed an interdisciplinary steering committee, said Andrew Beagley, chief risk and compliance officer at Mercer L.L.C., who was named project manager for Marsh & McLennan Cos. Inc.'s FATCA compliance efforts.
“We were working diligently to make sure we were fully prepared and FATCA-compliant,” Mr. Beagley said. “It was a significant effort, but the goal was to make sure we were ready.”
“Organizations identified key stakeholders and assembled a task force to develop plans for implementation on an enterprisewide basis,” noted Dominick Dell'Imperio, a partner with PricewaterhouseCoopers L.L.P. in New York.
The myriad complex forms were the greatest hurdle.
“The forms themselves are complicated, and I still get several inquiries a week from organizations that have either received forms and are asking if they've been completed properly or from organizations that are trying to complete the documentation that's been requested from them and are struggling to do so,” said Denise Hintzke, tax director and global FATCA leader for Deloitte Tax L.L.P. in New York.
“I believe as time goes on and organizations get good processes in place and procedures become business as usual, it may become easier,” Ms. Hintzke said.
Forms were finalized at different points during the first half of 2014, Ms. Hagemann said, and much of the past year was spent collecting and validating them.
“It's an ongoing process of making sure we have the correct forms,” Mr. Coit said. “We've done 3,500 forms so far, so there's been a lot of validation done to date.”
“Requesting and validating withholding certificates like forms W-8 and W-9 will continue to be a key ongoing concern for insurance companies, as the forms have become more complex and should be analyzed carefully,” Mr. Dell'Imperio said.
But as the process progresses, it has become less of a battle.
“Once we had the fundamental elements of what had to be done, I think it's been fairly straightforward from there,” Ms. Hagemann said.
“Our focus of course was to get the first half of the year done with the renewals we knew we had. We've gotten that behind us, and now we have the balance of the year with an additional few hundred carriers that we're still reaching out to,” Mr. Coit said. “The pace of validation is continuing but at a much slower rate, because we've clearly hit the biggest markets that we deal with.”
That's why FATCA compliance is becoming just another part of doing business.
“For Marsh, there are a lot of things we must comply with when placing business on behalf of our clients, whether locally or globally. That could be licensing, taxes, country regulations,” Ms. Hagemann said. “The FATCA compliance was a requirement in addition to many, many other things that we already do as we approach markets for clients' risk transfer.”
“I think we're comfortable now with what one could describe as a "steady state,'” Mr. Beagley said.
“We've been transitioning from what I would call a "project mode' to a "steady-state mode,'” said Mr. Coit, who added that Aon Risk Solutions' Market Security Organization unit has taken on much of the day-to-day responsibilities with the help of two additional staffers.
“For the most part, the insurance industry has completed the implementation of their FATCA compliance programs and is now focused on the ongoing compliance requirements such as filing the required information returns with the Internal Revenue Service and other jurisdictions,” Mr. Dell'Imperio said.
The U.S. Treasury Department deemed 2014 and 2015 “transition years” to allow parties to ramp up compliance.
“They've continued to say it will be a transition period for organizations that are showing a good-faith effort,” Ms. Hintzke said. “What this usually means is if the IRS does a review and finds little pockets of gaps, as long as the organization has good processes and is moving toward compliance, the IRS are is not going to come down on the organizations with huge penalties and interest.”
A 2-year-old U.S. Securities and Exchange Commission policy that requires companies in some cases to admit wrongdoing to settle agency charges has come under fire for its limited use, but has nevertheless opened the door to litigation and insurance issues.