A multi-national manufacturing company with 8,800 employees had a Bermuda captive writing property, workers’ compensation, general liability, auto liability and employer’s liability. They wanted  to evaluate writing employee benefits, specifically life and disability including multinational pooling of benefits through their captive.

Challenges

As the current captive was domiciled offshore, it would be necessary to bring it on-shore in order to write employee benefits per the Department of Labor (DOL) requirements or seek a 953(d) election. Based on Revenue Ruling 90-92 the company would also have to qualify for a brother/sister arrangement. In addition we were looking at circumstances involving cross subsidization between basic life and supplemental life and finding a carrier to place the supplemental life and dependent life in a captive and leave basic life fully insured.

Process

Due to tax complexity and the age of the captive, Spring explored two structural options: re-domestication, or making a 953(d) election and establish a branch captive in the United States to fund employee benefits. To decide, Spring initiated a captive feasibility study which led to determine that re-domestication was the best choice. Identifying Washington D.C. as the best fit domicile, Spring facilitated and managed the process to gain approval from the on-shore domicile and the DOL due to ERISA requirements. Upon completion of the approval process by regulators, Spring initiated and managed the RFP process to select qualified carriers for supplemental and dependent life insurance.

Spring’s Solutions

Basic insurance remained fully insured and pooled. Supplemental and dependent life was place and funded through a captive solution. The captive was re-domesticated according to the DOL and U.S. domicile regulations and based on the RFP results it was advised to move their programs to a new carrier.

Results

The saving’s for life and disability programs we’re estimated at $4.6 million over five years. Funding the programs in a captive resulted in third party business allowing for a deduction of property & casualty insurance premiums.

Under the DOL process, benefit enhancements were provided for all employees (active and retired) at no cost to the employee. Through the process, Spring was able to negotiate better programs with the carrier.

Spring continues to complete on-going actuarial work for the captive and is now working to fund basic life through the captive.