Department of Labor ExPro Option for Captive Insurers Remains on Hold

A US Department of Labor (DOL) suspension of a regulatory procedure employers have used for years to get quick DOL review of their applications to fund employee benefit programs through their captive insurance companies remains on hold with no word yet on when the suspension will be lifted.

That procedure—ExPro—requires the Labor Department to act within 45 days of an employer's request for regulatory approval of arrangements, like funding employee benefits through its captive, that are prohibited by a 1974 federal law—the Employee Retirement Income Security Act.

The ExPro process had been available to employers that could cite 2 substantially similar individual exemptions approved by the DOL in the past 5 years, or 1 substantially similar individual exemption approved in the last 10 years and 1 approved through ExPro within the past 5 years.

In all, the turnaround time, under ExPro, for the Labor Department to issue a final ruling is about 3 months.

By contrast, Labor Department action on non-ExPro filings is much slower.

"At a minimum, it is 6 months," said Brian Tiemann, a partner with McDermott, Will, & Emery LLP in Chicago.

When the Labor Department will lift its suspension of tapping ExPro for captive benefit funding requests isn't known.

"There is no firm or predicted date of when" the suspension will be lifted, said Rich Fuerstenberg, a senior partner with Mercer LLC in New York.

Experts say that one of the toughest issues confronting Labor Department regulators is how to revamp the current requirement under which employers—to win ExPro approval—have to improve benefits offered to employees.

"I wouldn't be surprised if the DOL has had trouble pinning down" what that enhancement should be, Mr. Fuerstenberg said.

While the timing is uncertain, there is optimism—as was the case about 5 years ago—that the DOL will eventually end the suspension and again open up the use of ExPro for employers seeking quick regulatory approval of their captive benefit funding applications.

"I am confident that the DOL will resolve issues and restore ExPro," Mr. Tiemann said.

While the captive benefits funding approach is not widespread, some very large and well-known employers are using it. Employers that fund benefits through their captives include Archer-Daniels Midland Co., Dow Corning Corp, Google, Inc., and Hyatt Hotels Corp., all of whom received DOL approval for their ExPro applications.

Employee benefits typically funded through captive insurance companies have been life insurance, accidental death and dismemberment, and short- and long-term disability.

Advantages to funding employee benefits through captives include cost savings compared to buying coverages in the commercial market and diversifying a captive's book of business, experts say.