Spring Consulting Group is pleased to announce that T.J. Scherer, Vice President, has been appointed to the Board of Directors of the Texas Captive Insurance Association (TxCIA).
Since joining Spring Consulting Group, T.J. has played a key role in the growth and execution of the firm’s alternate risk practice. This appointment highlights his leadership and expertise within the risk management community.
In his role on the TxCIA Board, T.J. will collaborate with industry peers to support the association’s mission through strategic oversight, regulatory guidance, and industry advancement, as Texas continues to strengthen its position as a leading captive domicile.
T.J. brings more than 10 years of experience advising organizations on complex risk management and captive insurance programs. His background in financial reporting and program governance provides a strong analytical perspective aligned with TxCIA’s commitment to fostering a stable and effective captive insurance environment.
Spring Consulting Group congratulates T.J. on this appointment and looks forward to his contributions to the TxCIA and the broader captive insurance community.
Actuarial valuations form the financial bedrock of an organization’s planning, requiring both precision and reliability. An independent actuarial review provides a crucial, objective layer of verification and quality assurance. This process involves a second set of expert eyes examining the complex models, underlying data, and key assumptions used in the valuation. The goal is two-fold: to gain additional assurance that the results are reasonable and accurate, and to ensure the work adheres strictly to all relevant regulatory and funding standards. Specifically, an independent audit verifies Adherence & Alignment with the administrative reality of your plan and mandates compliance with Actuarial Standards of Practice (ASOPs). For organizations in jurisdictions with Mandated Compliance (including states like CA, NY, OR, and WA), this external validation is a legal requirement. Ultimately, independent verification serves as a safeguard, ensuring stakeholders can rely on the outcome for making sound, defensible financial decisions.
Title:
Actuarial Consultant
Joined Spring:
February 2021
Hometown:
Burlington Vermont has been my home for the last 10 years, but I grew up in Allentown, PA and Mountainside, NJ before that
At Work Responsibilities:
Prepare and review actuarial reports for reserving, pricing, and Statements of Actuarial Opinion for insurance or captive insurance company clients. Prepare and present loss estimates and financial forecast for clients’ prospective captive formations. Work with clients to source data inputs as well as present findings and discuss impacts.
Outside of Work Hobbies/Interests:
I like getting active outdoors running or biking on trails nearby or visiting the beaches here in town.
Fun Fact:
I go through phases where I cook a lot. I learned a good pizza dough in Spring 2025 and have made approximately 50 pizzas since.
Describe Spring in 3 Words:
Collaboration, flexibility, and excellence
Do You Have Any Children?
Yes, my son Bruce (13)
Favorite Food:
Coffee, pizza, lo-mein, ribs, wings, donuts, celery, raspberries
Favorite Place Visited:
Montreal during the summer
Q1: What does it mean when a company “transfers” pension risk?
At a high level, it means the company is looking to reduce or offload the financial uncertainty tied to its pension obligations. That typically happens in one of two ways: either by offering terminated employees a one-time lump-sum payment, or by transferring the responsibility for future pension payments to an insurance company through the purchase of an annuity contract.
For the company, it’s about getting pension liabilities off the books and reducing exposure to things like interest rate swings, longevity risk, or investment volatility. It’s essentially a financial risk management strategy, but it has big implications for both the balance sheet and the participants.
Q2: Why are so many companies pursuing this right now?
The environment is favorable at the moment and has been for several years. Many pension plans are well or overfunded, partly due to the high interest rate environment, which means the present value of future liabilities has come down. That creates a window of opportunity because it’s more affordable to transfer pension obligations when the plan has a funding cushion.
At the same time, there’s increasing pressure from boards, investors, and regulators to reduce long-term financial volatility. For many employers, especially in sectors like healthcare and manufacturing, pension plans are legacy liabilities that no longer align with current business strategy. Transferring that risk, either to an insurer or through a captive, has become a compelling strategy.
Q3: What are the main ways companies transfer pension risk?
The most common approaches we see are offering lump sums to terminated vested participants or purchasing annuities from insurance companies. Both of these methods shift the liability off the sponsor’s balance sheet, but they come with different timing, regulatory, and cost considerations.
There’s also a “buy-in,” where the pension plan still holds the liability but uses an annuity contract as a hedge to match those obligations. This is often a strategic interim step as a plan approaches termination.
And now, more recently with our guidance, we’re seeing employers explore the use of their own captive insurance companies. While common in Europe, this is a newer development in the U.S. that is gaining traction, especially among organizations with overfunded plans or illiquid assets that would otherwise be penalized in a traditional market transaction. The idea is to retain some control while still taking meaningful steps toward de-risking.
Q4: We’ve heard about using captives in this space. How does that work?
In simple terms, the pension plan purchases an annuity contract from a captive insurance company that’s owned by the employer. The captive then takes on the obligation to pay the retirement benefits, often backed by reinsurance. Structurally, it’s very similar to how employers already fund other ERISA-covered benefits like disability or life insurance through a captive.
We recently worked with a leading cancer research and healthcare institute that already had a Vermont-domiciled captive. We helped them set up a separate cell within the captive specifically for pension risk. The Department of Labor reviewed the structure and granted a prohibited transaction exemption, making it the first ERISA-approved pension transfer into a captive. That approval opened the door for other organizations to explore this approach.
Q5: What’s the advantage of using a captive insurance company for this instead of a commercial carrier?
It gives the employer more flexibility and control. In the case of the healthcare institute mentioned earlier, the commercial insurance market was uncomfortable with the shape of their pension liability and was charging significantly more to take on the risk. By using their captive, they were able to assume the liability internally, with proper fronting and reinsurance, and realize projected financial benefits of over $120 million on the premium alone.
Additionally, our client will be able to transfer the trust assets directly to the captive – avoiding significant haircuts on their illiquid assets.
And they didn’t just keep the savings to themselves. As part of the DOL-approved structure, they used some of those funds to provide a one-time cost-of-living adjustment for retirees. So the outcome benefited both the organization and its participants. That’s the power of this approach. It’s not just about risk transfer — it’s about doing it in a way that aligns with your values and financial goals.
Q6: Are there risks to going the captive route?
There are definitely risks, and the process isn’t simple. When you use a captive to take on pension liabilities, you’re retaining some of the investment and longevity risk, at least in the near term. And because you’re transferring ERISA-covered obligations to a related party, it requires a prohibited transaction exemption from the Department of Labor — which is a highly detailed and rigorous regulatory process.
That said, we had the opportunity to help a major healthcare and cancer research institute become the first organization in history to receive ERISA approval for transferring pension risk into a captive structure. That was a groundbreaking moment. It’s not just a win for that one sponsor — it opens the door for other organizations to approach pension risk more strategically and cost-effectively.
We worked closely with them through every step, from actuarial modeling and structuring the captive cell to direct engagement with the Department of Labor. A big part of the success was treating the captive like a fully functional insurer, with strong governance, appropriate capitalization, and a clear segregation of the pension risk. So yes, there are hurdles, but with the right team and a strong rationale, it’s absolutely achievable — and the precedent we helped set is already starting to shift the landscape for other plan sponsors.
Q7: How do you help clients decide whether a captive makes sense?
It comes down to modeling and understanding the broader context. We look at the plan’s funded status, the company’s risk tolerance, whether a captive already exists, and what types of assets are in the trust.
For example, in the case of the healthcare institute, they had a well-funded plan but also held a significant amount of illiquid investments. If they had gone the traditional route and purchased an annuity in the market, they would’ve needed to liquidate those assets — likely at a loss. Using the captive allowed them to avoid that inefficiency and structure a transaction that worked better from both a financial and operational perspective.
That’s why it’s so important to tailor the solution to the organization’s fact pattern. There’s no one-size-fits-all approach here.
Q8: What’s your advice for companies thinking about this?
My advice is to start with a feasibility study. Even if you’re not planning to move forward immediately, taking the time to assess your options in a structured way can be incredibly valuable. Every pension plan is different — different funding levels, investment profiles, participant demographics, and organizational goals. A feasibility study helps you understand what’s possible based on your unique circumstances.
That process should include working closely with unbiased actuaries and consultants to model out different risk transfer strategies. Whether it’s a traditional annuity purchase, a lump-sum window, or a captive structure, each approach has its own tradeoffs. The right strategy often depends on things like your plan’s funded status, asset mix, existing captive infrastructure, and long-term financial goals.
We’ve found that the earlier sponsors engage in that kind of planning, the more flexibility they have. Even simple steps like cleaning up data or segmenting your liability profile can create opportunities down the line. And if a captive solution is on the table, the earlier you start understanding the regulatory landscape — especially around ERISA exemptions — the better positioned you’ll be.
Spring Consulting Group is contracted with the State of Maine to conduct actuarial studies of the Maine Paid Family & Medical Leave (PFML) trust fund. You can read the full press release here.
We’re excited to announce that our Senior Consulting Actuary, Nick Frongillo, was featured in Captive International’s FORTY Under 40 Awards this year! The award spotlights the most influential figures in captive insurance under the age of 40. You can find his winner Q&A responses here.
Captive International recently released its Forty Under 40 Awards, which spotlights the top industry leaders under 40 years old impacting captive insurance. We are excited to announce that four of our colleagues were on this list this year! You can find the full list here.
Prabal Lakhanpal (Senior Vice President)
Nick Fongillo (Senior Consulting Actuary)
Aviel Shalev (Consultant)
Spencer Towle (Analyst)
Workforce populations tend to be diverse in terms of demographics as well as other factors such as geography. This is one of the primary reasons healthcare programs are aligned with and sponsored by employers. These programs aim to achieve high enrollment to accommodate the demographic diversity among members. This, in turn, creates a system where the highest utilizers are subsidized by the leanest. There are several typical drivers that affect utilization: age, gender, morbidity, family size, etc. For mature populations participating in employer-sponsored healthcare programs, new hires with more favorable demographic characteristics help offset rising costs for aging employees, providing a consistent balance between those subsidizing and those being subsidized.
One of the largest demographic drivers of cost is age. As age increases, so do costs. When a population has aging members staying on well beyond 65, it becomes difficult to maintain the same influx of younger members to offset these rising costs. There are many industries where employees tend to work beyond age 65, such as education, public administration, and real estate. Additionally, due to rising retirement costs and increases in the cost of living, it has become necessary for many individuals to work beyond the traditional retirement age. The result is an average age that dramatically increases over time and average plan costs that outpace already burdensome medical and pharmacy trend rates.
How can we control these ongoing costs?
In general, there are many levers typically used to control healthcare costs. Many of them still make sense in the present environment, though they may be unattractive in a competitive employment situation. Examples include increased employee cost-sharing, leaner healthcare offerings, more stringent participation requirements, disease management, utilization management, and leaner pharmacy formularies.
How can we specifically address older members?
In the case of consistently increasing average age, these cost-control approaches may be temporary and insufficient. Further steps may include such approaches, but employers may also seek to decrease the number of older members remaining enrolled in the plan. Some specific suggestions include:
- Salary-banded employee contributions – This involves charging scaled contributions to members based on salary ranges. While this will not directly address older members, they tend to have higher salaries.
- Enrollment in Medicare – Increased Medicare enrollment could significantly mitigate post-65 costs. One potential approach, though often considered unattractive, is to move to a leaner pharmacy benefit for the active plan. If the pharmacy benefit is not as generous as contemporary Medicare Part D benefits, Medicare-eligible members will have to enroll in Medicare or pay a scaled penalty when they eventually do register, based on the number of months they were not enrolled.
- Offer an active stipend or payout – Some employers offer an annual or monthly stipend for not enrolling in an employer-sponsored plan, which may encourage members to seek coverage elsewhere. It could also make sense to offer a one-time lump-sum payout to help partially cover some of the estimated $165,000 (per Fidelity1) per individual for post-retirement healthcare costs.
- Offer post-retirement medical – One reason members remain in the workforce into later years is the challenge of acquiring and affording medical benefits after retirement. A post-retirement medical benefit is a large and expensive undertaking, but there can be more controllable mechanisms that limit costs to predictable amounts. A specific example is a defined contribution-type plan, where an explicit subsidy helps offset ongoing costs. This can be based on various factors to yield a predictable set of costs.
In summary, mitigating the increase in medical and pharmacy costs over time is already a significant challenge for employers, and aging populations can exacerbate these increases. It’s important for employers to address these issues head-on or face financial headwinds that could impact their stability. Please reach out to our team to explore these solutions further.
In a recent podcast from the International Risk Management Institute (IRMI), or Chief P&C Actuary, Peter Johnson gives an inside view into the actuarial methodologies that go into calculating loss development patterns and optimizing risk management strategies across long-tail lines. You can find the full podcast episode here.