Your Captive is Riding High. Now What?

captive feasabilityYou’ve had your P&C captive for years and it has continued to perform well throughout. So what is next? How do you capitalize on this success and build on your captive or rebuild an underperforming aspect of it?

Enter refeasibility.

Much like your family car, a captive should have a check up on a periodic basis. Are you writing the right lines in your captive? Are you in the right domicile? Would a different structure be more profitable? Would other service providers make a difference? Have your claims changed significantly? Have regulations changed over the years? All this and more can be answered with a good review of your captive by a professional consultant.

Here are a few things to consider as you ponder a refeasability study:

Domicile:

The Dodd Frank Act changed the landscape for a lot of captives.  Rather than incur a self-procurement tax for risk out of state, some captive owners are redomesticating their captive back to their corporate home states or establishing a fronting captive in that domicile to lessen the premium taxes due.  An additional dimension in captive domicile selection is the enormous growth in U.S. domiciles. Countless states have recently set up new domiciles and there are still many quality offshore options. You’re pretty sure you are in the right spot, but a “refeasibilty” might show you otherwise.  For example, some states have created innovative cell legislation that might work for you or your clients. Some assets held in the captive maybe more liberal, so depending on what you are using for collateral, states need to be studied for the best match.

P&C Programs:

Ten years ago there were pretty much only large P&C captives writing pretty much only property, general liability and workers compensation and occasionally a rouge auto or warranty program. Captives stuck to high deductible programs and some small quota share coverages to fill out a line slip.

Today, you can write almost anything that is an insurable risk and makes good business sense.  You still can’t write lines of coverage that just don’t make sense (like tidal wave coverage in Kansas), but you have a great deal more flexibility and room to be creative in how you define and insure your risk.

Contingent business interruption is sometimes an uninsurable or underinsured risk, and a good candidate for the captive.  Some use their captive to front their global or international property program, selling off pieces out the back and taking a nice fronting commission for themselves: the market would have gotten this if they didn’t.   Others write business specific coverage like lost in hole drill coverage for oil companies.

Cyber Risk:

Cyber risk is another good candidate for a captive. Cyber insurance in a captive insulates an organization from the market becoming less competitive in the future. It also gives a captive owner a great opportunity to diversify their existing captive portfolio. The captive can also be used to provide coverage that might not be really available in the market, such as future lost revenue of first-party loss of inventory due to technology failure.

Benefit Programs:

Now we have benefit programs that are really taking off as captive programs.  Prefunding retiree medical, group term life, medical stop-loss coverage, foreign coverage are just a few of the programs that make sense to add to the captive portfolio. And with some of these programs, the premiums qualify as third-party business and may boost your captive returns with a positive tax affect.

Additionally, for U.S. employers, the regulatory hurdles to funding ERISA-covered benefits in a captive have never been lower with the renewal of the expedited process for securing a prohibited transaction exemption. Couple that with the growing costs (and concerns) surrounding the Affordable Care Act in the U.S. and now is clearly the time to at least be considering funding benefits in your captive.

Find out more about funding benefits in a captive here.

Conclusion:

Regardless of how old or new your captive is, there are a number of internal and external factors that have changed since it was created. Now is a great time to have a professional come in and not only take a snapshot of how your captive is currently performing, but also help you project and strategize where your captive should be in the future. Now is a great time for a captive refeasability study.

If you agree that it is time to re-evaluate your captive, Spring is poised to step in and help out. Our team of captive consultants, actuaries, underwriters, strategists, accountants and lawyers have decades of experience helping companies similar to yours not only set up their captives, but also conduct through and thoughtful refeasability studies, which have helped our clients realize continued success with their captive.

Please contact us using the form below if you’d like to chat with a member of our team about your captive’s current and future performance.

Recent Supreme Court Decision Holds ERISA Preempts State Law

erisa state law

Image credit: Matt Wade via flickr

Gobeille v. Liberty Mutual Insurance Co.

In 2005, Vermont enacted a law which required certain public and private entities including health insurers to release data regarding the amount paid for medical claims and various other related information for the Vermont healthcare database. The law was intended to apply to employer plans whether or not they were ERISA governed. The Vermont law required public and private entities including health insurers and providers to furnish information regarding health care costs, prices, utilization ratios etc. to a state governed agency. The law defined a health insurer to encompass a self-insured benefit plan and TPAs, thereby creating additional reporting requirements for ERISA-governed plans.

The Vermont law was challenged by Liberty Mutual Insurance Company (“Liberty”) contending that federal enactment of ERISA preempted such legislation and prohibited this enactment.

ERISA creates federal standards and guidelines for employer-sponsored benefit plans. Although states have the right to regulate insurers, ERISA preempts any state legislation attempting to regulate employer-sponsored plans. The court ruled that while ERISA did not address the issue of jurisdiction comprehensively, it does make its intentions clear regarding being the sole authority responsible for defining rules which would govern the administration and operation of employee benefit plans.

The Supreme Court on March 1, 2016 ruled in favor of Liberty and held that ERISA preempts Vermont’s healthcare database law. Vermont’s proposed law had the potential to complicate plan administration and could have led to additional cost and effort on part of employers – particularly multi-state employers.

More importantly this decision will dissuade other states from attempting to enact regulations which may infringe upon the uniform system of plan administration put into effect by ERISA. It was held that the Federal Law preempted the proposed state legislations as they “intruded upon a central matter of plan administrations”.  It was also noted varying state regulations could result in non-compliance and ultimately penalties and fines relating to those regulations. In the interest of maintaining parity and avoiding dissimilar compliance requirements, the Supreme Court bench ruled in favor of Liberty.

While the decision provides relief to multi-state employers, the imposed restrictions on the states are likely to limit the ability of the states to monitor the markets and lead to lesser transparency from the states’ perspective in the system.

Spring is a leader in employee benefit consultation. Please contact us with any questions you may have about ERISA-governed plans or anything related to employee benefits.

Spring Once Again Named Power Broker

top employee benefits brokerWe are pleased to announce that Risk & Insurance has honored two Spring Partners in their Power Broker award series for 2016.

Spring Managing Partner Karin Landry has been named a 2016 Power Broker and Spring Partner and Integrated Disability Management Team Lead Karen English, has been named a 2016 Finalist by the magazine. Landry’s award is in the Employee Benefit category and English was named in the Workers’ Compensation category.

The Power Broker designation recognizes “creative risk solutions, industry knowledge and superior customer service.”

“We couldn’t be prouder that two members of our team have received such distinction,” remarked John Cassell, Spring Senior Partner. “It is great to see that their hard work and dedication to developing innovative solutions for their clients has been recognized with high honor.”

Walpole Lyons 50th AnniversaryLandry has over 25 years of experience in the insurance, health care, risk financing, retirement and benefits industries. She is an internationally recognized leader in captive insurance strategy, benefits and financing. She is Past-Chairman of the Board of The Captive Insurance Company Association and a member of the ERISA Industry Committee and was recently appointed to the Board of Directors for Fallon Community Health Plan. She is also a Professor of Employee Benefits and member of the finance committee for the International Center of Captive Insurance Education part of the University of Vermont. Karin’s expertise around benefits allowed her to co-author a white paper for Business Insurance Magazine titled “Captives for Benefits: How to Use a Captive to Save Money and Enhance Benefits Coverage”, which is currently a top seller. Both Vermont and the US Virgin Islands asked Karin for input and guidance with their recent legislative changes. Prior to joining Spring, Karin was President of Watson Wyatt Insurance & Financial Services in the United States and Head of the Health & Welfare division for the eastern region.

Walpole Lyons 50th AnniversaryEnglish has over 20 years of experience in the P&C and health & welfare arenas with an emphasis on product development, risk financing, process improvement and project implementation. She provides strategic direction, quantitative & qualitative analysis and implementation expertise for workers’ compensation, disability, absence, health and productivity programs that allows her to routinely work with alternative risk financing vehicles such as captives. She is currently on the Executive Advisory Board for the Disability Management Employer Coalition (DMEC), where she recently was awarded the Partnership Award, the organization’s top annual honor. Prior to joining Spring, Karen was a Senior Consultant with Watson Wyatt’s US Insurance & Financial Services division, a risk manager with US Bancorp and a P&C broker for both Marsh and Aon.

Upcoming Webinar: Results of the 5th Annual DMEC/Spring Leave Management Survey

Leave Management surveyPlease join Spring Partner and Head of our Health & Productivity Team, Karen English for an upcoming webinar that explores and analyzes the results of our 5th annual leave management survey which is co-sponsored by the Disability Management Employer Coalition (DMEC).

The results are in for the 5th annual survey of employer leave management practices and challenges. Hear from over 900 employers on how they manage all types of leaves. Spring has partnered with DMEC to understand employer challenges in managing all types of leaves, including Family and Medical Leave Act (FMLA), state family and medical leaves, military leave (USERRA), state military leave, jury duty, other state mandated leaves, municipal/county leaves, and other company specific leaves (e.g., bereavement, administrative, personal leaves).

You will also receive tips for best practices identified in the survey and as identified by industry experts in absence management.

The webinar will take place on Thursday, February 4th at 12pm ET and can be accessed here.

The webinar costs $29.95 for non-DMEC members to attend, but if you sign up to receive our Spring Newsletter using the form below, we will give you a discount code that will enable you to attend for free!

More info about Spring’s Industry and Employer Surveys can be found here.

Spring Consultant to Present at Captive Insurance Educational Conference

captive insuranceIt was recently announced that Spring Head of New Market Development and Senior Consultant, Peter Bandarenko, would be presenting at this year’s prestigious 4th Annual Captive Insurance Conference presented by the American Conference Institute.

This year’s conference will run from May 2-3, 2016 at the Carlton Hotel on Madison Avenue in New York City. The event regularly attracts the top echelon of the captive insurance industry and serves as a great educational session for all levels of industry experience. This is the second year in a row that Bandarenko will be a presenter.

More information on the presentation can be found in this downloadable pdf.

Employer Alert: IRS Sets Pension Limits for 2016

The US Internal Revenue Service (IRS) recently announced their pension plan limits for 2016. All of the limits below are unchanged from 2015. These limits are reviewed and revised annually, so employers should note these pension limit changes for planning/forecasting purposes.

  • Annual compensation limit: $265,000
  • Maximum Defined Contribution / Profit Sharing contribution: $53,000
  • Maximum Simplified Employee Pension (SEP) contribution: $53,000
  • Maximum 401(k) contribution: $18,000
    • Catch-up contributions limit for age 50+: $6,000
  • Maximum Savings Incentive Match Plan (SIMPLE) contribution: $12,500
  • Maximum annual benefit of Defined Benefit plans: $210,000

Spring is a leader in pension planning and funding solutions with over 25 years of experience and eight patents for funding programs. Please contact us with any questions you may have about pensions.

Identity Theft Coverage Now a Tax Deductible Employee Benefit

identity theft coverage

Image credit: GotCredit via flickr

With the growing threat of data breaches and hacking incidents on the rise, having identity theft protection is quickly becoming as important as home or auto coverage. Forward-thinking employers looking to attract and retain top talent have been adding identity theft protection to the benefit offerings, but to date, there has been no financial incentive to do so for the employer.

The U.S. Internal Revenue Service (IRS) recently announced in Announcement 2016-22, that identity theft protection could be offered to employees on a tax-free basis regardless of a prior data breach. In the past, the IRS has offered the tax-free perk to employers ONLY if a data breach has occurred. This latest move allows employers to move from being reactive to proactive and use identity theft coverage as an attractive perk.

Spring is a market leader in developing the most attractive and appropriate employee benefit packages for employers of all sizes. We offer an excellent Financial Protection Plus identity theft protection product for individuals and families, through a relationship with LifeLock; the leader in Identity theft protection for ID and credit fraud.

LifeLock provides a series of proactive services to protect your employees’ identity and provides a $1 million service guarantee.

For less than $10 per month, employees can purchase protection against identity theft, ID and credit fraud and more.

Services are available for individuals and families via online enrollment through secure, encrypted servers.

For more information on how you can get these critical services to offer to your employees, please contact our team today!

Two Additional ACA Taxes Delayed

aca taxes delayed

Image credit: handikapinfo via Pixabay

With the 2-year delay of the “Cadillac Tax” getting the lion’s share of the publicity surrounding the passage of last month’s omnibus spending bill in Congress, two additional important Affordable Care Act (ACA) taxes were also delayed with little fanfare.

The Health Insurance Tax (HIT) was suspended for one year to 2017. The HIT is a tax on health insurance carriers in the form of a per subscriber, fixed-dollar fee that insurers pay into based on their premiums written. While this tax doesn’t directly impact employers, it has been widely speculated that most insurers would pass most if not all of the cost of the HIT onto their customers in the form of rate hikes, benefit reductions and co-payment increases. The suspension of the HIT provides an estimated 2.5-3% savings on fully insured insurance premiums.

Also delayed for two years, is the implantation of the tax on medical device manufacturers. This is a 2.3% tax on revenue from medical device sales. This tax was poised to deal a significant blow to the medical device manufacturing industry as it dug into money otherwise spent on research and development and would likely result in steeper prices for life-saving medical devices.

It is important that employers know these taxes exist and that they have been delayed. While they may not impact most businesses directly, their cost will almost certainly be passed on to businesses and consumers in some fashion when implemented.