Captive experts urge regulators to clarify ExPro processReprints
BOCA RATON, Fla. — Captive benefit experts say they plan to discuss with federal regulators how employers can have greater certainty on whether their applications to fund benefit risks through captive insurers will pass regulatory muster.
“We would like to simplify things,” said Ted Scallet, a principal with Groom Law Group Chtd. in Washington.
Speaking Wednesday at a World Captive Forum session in Boca Raton, Florida, Mr. Scallet said there is “a lot of uncertainty” about a regulatory review process — known as ExPro — tapped by employers seeking rapid Labor Department review and approval of captive benefit funding proposals.
Under ExPro, the U.S. Labor Department must act on an application within 45 days of receiving it. The entire review process takes about 2½ months, substantially faster compared to situations in which an employer is seeking a so-called individual exemption to fund benefit risks, like life insurance and long-term disability benefits through their captives.
To qualify for ExPro, employers have to show that their approach is substantially similar to those the Labor Department approved earlier. Regulators have made clear that to win ExPro for a captive benefit funding proposal, employers must enhance affected benefits.
But employers, Mr. Scallet said, lack the certainty on the level of benefit enhancement that regulators say is necessary.
“That has created a lot of uncertainty for employers. You need to make decisions. You want some certainty,” Mr. Scallet said.
And looking at recent Labor Department approvals of ExPro applications doesn't provide that certainty. Indeed, in the three benefit captive benefit funding proposals that won Labor Department approval in 2015 under the ExPro process, the cost that employers absorbed in enhancing participants' benefits varied widely, Mr. Scallet said.
Whether the Labor Department will respond to requests for greater certainty on how employers can qualify for ExPro for captive benefit funding proposals isn't known.
But, Mr. Scallet said, by the time of next year's World Captive Forum, “I hope we will something new to talk about,” referring to possible new ExPro guidance from regulators
Currently, about three dozen employers have won regulatory approval to fund benefit risks through their captives, said Bruce Wright, a partner with Sutherland Asbill & Brennan L.L.P. in New York.