Spring Managing Partner to Present in Luxembourg

Karin Landry Spring Consulting GroupWe are excited to announce that Spring Managing Partner, Karin Landry, will be presenting at next week’s European Captive Forum conference.

Karin will be presenting a session titled: “Employee Benefits – Reflecting on successful employee benefit programmes, lessons learned and next steps” along with Valerie Alexander, Deputy to the Global Head of Corporate Insurance for Deutsche Bank and UK Head.

The session will focus on the advantages of benefit captive funding and how Deutsche Bank successfully wrote their life and disability risk into their captive. The session will also spotlight some of the results of the Spring 2016 Survey of Employee Benefit Captive Owners.

The European Captive Forum Conference runs from November 8th-9th in Luxembourg.

More details about the event, including registration information, can be found here.

What Employers Need to Know About the US Department of Labor’s New Overtime Pay Rules

new overtime pay rulesWith media coverage squarely focused on politics these days, significant regulatory changes that are about to be enacted and will impact countless American businesses, have completely flown under the radar. These changes center on determining who is eligible for overtime pay and they are definitely worth taking note. Here is what you need to know.

The overtime changes from the US Department of Labor (DOL), are being termed the “Final Rule” and what they essentially do is bring a modern interpretation to determining which white-collar salaried employees are exempt from the Fair Labor Standards Act’s overtime pay protection.

According to the Department of Labor, the percentage of full-time, salaried employees covered by overtime protection has dropped to just 7%, compared to 62% in 1975. These Final Rule changes about to be enacted will extend overtime pay eligibility to an estimated 4.2 million workers.

There are a few changes that will be ushered in with the implementation of the Final Rules, most notably is a significant rising of the salary threshold for overtime exemption.

Let’s step back for a moment and explain how a worker is exempt from overtime pay. In order to qualify for overtime exemption, a white-collar employee must meet all three of the following criteria:

  • The employee must be salaried, earning a fixed salary that is not impacted by the amount of hours they work. This is referred to as the “Salary Basis Test.”
  • The employee must earn more than $455 per week. This is referred to as the “Salary Level Test.”
  • The employee’s primary job must be to perform executive, administrative or professional duties. This is referred to as the “Duties Test.”

Any employee that does not qualify for the exemption by meeting each of the three standards is likely to be entitled to 1.5x their weekly pay divided by 40 for every hour they work over 40 each week.

So what has changed?

The DOL is raising the salary threshold in the Salary Basis Test significantly from $455 per week to $913 ($47,476 per year). They are also enacting a requirement that this threshold is to be automatically updated every three years, going forward, to meet each new standard salary level, which are equal to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Range. The first automatic increase will be triggered on 1/1/2020.

That latter provision is important because, prior to these changes, the DOL had not updated their overtime regulations since 2004. This ensures the threshold stays current going forward.

Also in the Final Rule, the DOL is setting the annual compensation level for highly compensated employees (HCEs) equal to the 90th percentile of earnings for full time salaried workers nationally, which is $134,000 (up from $100,000).

Finally, employers will be permitted to use nondiscretionary bonuses and monetary incentives to cover up to 10% of the employee’s salary level as long as they payments are made at least quarterly.

It should be noted that the Duties Test to determine if the employee is an executive, administrative or professional has not changed in the Final Rule.

These changes stem from a March 2014 Presidential Memorandum in which President Obama instructed the DOL to bring overtime regulations up to modern standards. The new rule becomes effective December 1st, 2016.

So, as an employer, what should you do to ensure you are in compliance without shelling out a bunch of overtime? Here are a few tips:

  • Identify which of your staff members are not exempt based on the criteria above and ensure you have complete control over their schedules;
  • Consider bumping salaried employees that are already close to $47,476 up to clear the threshold and save the overtime;
  • Re-evaluate your team structure and determine if it makes sense to add lower paid staff to support salaried workers under the threshold to lighten their workload;
  • Change salaried employees to hourly to gain greater control of overtime and potentially make up for the added cost of overtime by hourly employees working less than 40 hours occasionally if their work tends to ebb and flow;
  • Amend your budget to account for additional labor cost in new overtime if you think these other suggestions won’t work for your business.

These are just a few general ways in which an employer can counterbalance the new overtime pay rules. We hope you find this helpful and we highly recommend, if you have any questions about how these changes would impact you specifically, please contact our Employee Benefit Team Lead Teri Weber. Teri and her team of benefits and HR professionals are ready to help you stay compliant with the plethora of regulations facing your business.

Spring Short Listed for Prestigious European Employee Benefits Award

european captive services awards 2016We were very excited to find out this week that Spring has made the “short list” for a 2016 European Captive Services Awards.

The awards, presented by the highly regarded industry publication Captive Review, recognize firms “who have outperformed their competitors and peers, demonstrating the highest levels of excellence over the 12 month judging period.”

This year, Spring is nominated for Employee Benefits Consultant of the Year.  The award winners will be announced on November 7th in Luxembourg.

Spring Partner to Present at National Disability Management Conference

Karen English, Spring Consulting Group

Spring Partner, Karen English, will be presenting at the upcoming 2016 National Workers’ Compensation and Disability Conference.

Karen will be presenting a session titled “The “How To” of Integrating Comp, Disability and Leave Programs” along with co-presenter Terri Rhodes, CEO of the Disability Management Employer Coalition.

Employers have embarked on different journeys toward integrating administration of their workers’ comp, disability and leave-management programs to reduce costs, improve Return to Work, meet compliance mandates and enhance employee experience. Karen and Terri will share how-to strategies for a range of integration models, from the least integrated to the most — with workers’ comp in the mix! You’ll hear real examples of paths employers are taking to merge program offerings for greater efficiency and meeting not only Family and Medical Leave Act requirements, but increasingly Americans with Disabilities Act mandates as well.

Attendees can expect the following session takeaways:

  • Relate the value of merging occupational and non-occupational programs
  • Recommend how corporate departments interact to integrate
  • Differentiate models for integrating workers’ comp, disability and leave
  • Design an integration model fitting your operations

The National Workers’ Compensation and Disability Conference runs from November 30th- December 2nd in New Orleans, Louisiana.

More details about the event, including registration information, can be found here.

Spring Consultants to Present Voluntary Benefits to Industry Organization

Karen English, Spring Consulting Group

Karen English, Spring Consulting Group

It was recently announced that Spring Partners and Consultants Karen English and Teri Weber, will be presenting Voluntary Benefits at an upcoming meeting of the New England Employee Benefits Council (NEEBC).

The presentation, titled “Voluntary Offerings:  From Auto to Zebra Coverage,” will kick off by summarizing the current landscape and providing some primary research about the pulse of the market which includes key trends, marketplace changes and benchmarks.

From there, experts will discuss the evaluation process including determining if your organization is well positioned for voluntary benefits, how to implement a best in class strategy including identifying partners, defining the employee experience and rolling out a successful program.

teri weber spring consulting group

Teri Weber, Spring Consulting Group

The session will wrap up with employer panelists providing unique and detailed insights from their experiences and addressing your questions.

English and Weber will be joined in the presentation by Joanne Abate, Assistant Vice President, Global Health and Insurance Programs at UNUM and Lydia Jilek, Senior Consultant, Voluntary Benefits at Willis Towers Watson.

The event will take place on Thursday, October 6th from 8:30am-12:00pm with Registration and Breakfast from 8:00am-8:30am at Waltham Woods Conference Center, 860 Winter Street, Waltham, MA.

More information on the event can be found here or by calling 781-684-8700.

Regulatory Changes That Have Led to Increased Employee Benefit Captive Funding

Fifteen years ago, captives were not commonly used for financing employee benefits, as regulatory obstacles and reinsurance restrictions limited eligibility to only the largest of captives.

The DOL must approve the placement of ERISA benefits into pure-parent captives. Many well-known organizations have obtained funding approval, including ADM, Alcon Labs, Alcoa, AGL Resources, Astra Zeneca, Banner Health, International Paper, Memorial Sloan-Kettering Cancer Center, Sun Microsystems, and United Technologies.

Many more companies have used captives to fund other non-ERISA employee benefits that do not require DOL approval. Moreover, employer groups and associations are establishing captives to fund employee benefits, thus offering an alternative to the commercial insurance markets and providing an incentive for membership growth.

For companies with property & casualty captives, certain employee benefits may be “unrelated business,” i.e., insurance business unrelated to the captive’s parent. Adding unrelated business to a single-parent captive can improve the captive’s overall financial efficiency; satisfy the need for third party business allowing the parent to deduct its captive premiums from its U.S. federal income taxes; and create additional cost savings.

Regulatory changes have led to increased employee benefit captive funding. Some of these changes include the following:

  • Internal Revenue Service clarifies risk shifting/distribution and unrelated business requirements

In 1993, the IRS ruled[1] that certain employee benefits insurance written in a pure captive is unrelated business (to the captive’s parent) since it benefits the employee and not the employer.  In 2002, the IRS issued three revenue rulings clarifying the qualification of captives as insurance companies for federal income tax purposes, including discussions of third party business, brother-sister arrangements and group captives.[2]

  • The DOL review process provides a roadmap to funding

If the proposed transaction is subject to ERISA, the DOL has a streamlined process for approval.

  • GASB 45 and FASB 158 requirements raise awareness of post-retirement liabilities

Accounting rules such as GASB 45 and ASC 715 (formerly FAS 87/106 and amended by FAS 158) require that organizations account for retiree medical and pension obligations.  These requirements encourage employers to not only account for the liabilities, but also to seek efficient funding methodologies. In addition, GASB statements 74 and 75 are increasing the required disclosures for public retiree medical obligations.

  • Court rulings clarify the parameters for funding retiree medical programs

In Wells Fargo & Co. v. Commissioner 224 F.3d 874 (8th Cir. 2000), the tax court clarified the amount that can be set aside to fund retiree medical benefits, expanding the potential funding allowed to employers.

  • Revenue Ruling 2014-15 clarifies funding opportunities for retiree medical programs

In 2014, the IRS ruled in Revenue Ruling 2014-15 that Non-cancellable Accident and Health Insurance policies will receive life insurance tax treatment as long as the following facts and circumstances are met:

-The Company maintains a VEBA Trust that satisfies the requirements of 501(c)(9)

-The Company purchases a Non-cancellable Accident and Health policy from an insurance company and reinsures the policy through the captive

-Both the Company and the VEBA retain the right to cancel the retiree health coverage at any time

As a result, insuring non-collectively bargained retiree medical benefits through a captive allows for tax-free growth of reserves without the need for a Private Letter Ruling.

Want to Learn More?

Download our Risk Manager’s Guide to Employee Benefit Captives to find out all you need to know about this increasingly popular funding option.


[1] IRS Revenue Ruling 92-93 [2] IRS Revenue Rulings 2002-89, 2002-90 and 2002-91

Cell Captives: The Right Fit for Many Small and Mid-Sized Businesses

Cell Captive StructureWhat is a Cell Captive?

A protected cell company (PCC) is a legal entity, set up by a sponsor, which is divided up into individually protected cells that are rented out by the sponsor to companies or groups who want to use a captive cell to fund various risks. The sponsor establishes the core of a PCC and the overall PCC structure. Once established, the sponsor also manages the PCC’s day-to-day activities, allowing cell owners to avoid a lot of the corporate and administrative resources typically required for a captive insurance or reinsurance company.

With a PCC, you essentially benefit from pooled administration, but not risk. Each cell in a PCC is independent of and insulated from the others and the core in terms of assets and liabilities. Often, PCCs will allow companies to own more than one cell, and typically each cell is still treated individually.

See also: The Benefits of Captives for Small and Mid-Sized Businesses (White Paper)

What are the Benefits to a Cell Captive

There are a number of benefits to insuring your risk using a protected cell company:

  • Easy entry into funding risk – While you still have to clear the typical regulatory hurdles of setting up a captive which vary greatly depending on the risk in question, a great deal of the administrative time and money that you would typically spend is eliminated since we have already set up the shell entity for you.
  • Economies of scale – With a protected cell company, you enjoy continued administrative savings due to economies of scale from potentially pooled administrative costs.
  • Professional captive management – As an owner of a cell, you generally can expect day-to-day management services from professional captive managers.

Is a Protected Cell Captive right for you?

Participation in a protected cell captive is attractive, but not for everyone. Generally speaking, mid-sized companies that are dipping their toes in captive funding are the likeliest participants given the lower barriers to entry and management assistance a PCC offers. That said, there are a number of other reasons why companies of all sizes would strategically use a cell captive to address their risk portfolio. A feasibility study will go a long way in identifying if a company is a good fit for participation in a PCC.

Want to Learn More? Contact us today to discuss a captive feasibility study, which will determine your funding requirements and whether a captive is right for you.

Spring Named Actuarial Firm of the Year Again!

top actuarial firmIt was announced last night that Spring has once again been awarded the “Actuarial Firm of the Year” U.S. Captive Service Award.

The U.S. Captive Service Awards are awarded annually, by the industry publication Captive Review, to recognize “excellence in the delivery and management of captive insurance and celebrate innovation, commitment and expertise in the captive insurance field.” The awards were presented in a gala last night that kicked off the Vermont Captive Insurance Association (VCIA) annual conference in Burlington, Vermont.

This is Spring’s second time receiving this high honor. We also won it in 2013.

Our actuarial team assists organizations ranging from insurance carriers to Fortune 100 companies and their captives to local small businesses with critical services such as statistical and financial analysis, product development and pricing, growth strategy, reserving, financial projecting and compliance.

More info about our actuarial work can be found here.

“We are very grateful to the Captive Review judges and our industry peers for bestowing this prestigious honor on our team,” commented Steven Keshner, Spring Partner and Chief Actuary. “It is very heartening to see this growing group of talented actuaries recognized for their continual hard work and extreme client dedication.”

More information about the 2016 U.S. Captive Service Awards can be found here.