Funding Retiree Medical and Other Benefit Liabilities

A group of utility companies wanted to evaluate options for funding employee benefits liabilities, retiree medical, and pensions.


These utilities were required to fund their retiree medical benefits for their employees and retirees. The regulators were requiring them to fund in advance, for benefits that would be paid decades in the future. These assets would be tied up for many years, and the utilities wanted to be certain that they performed as well as possible.

These clients found that the traditional methods of funding did not suit their needs. The available options either had onerous restrictions, high fees, or high taxes.


Spring helped these utilities form a group captive. This captive issued long-term Trust Owned Health Insurance (TOHI) policies. This enabled the utilities to make a tax deductible contribution to the trust. The trust could then purchase TOHI policies that would provide non-taxable reimbursement for a portion of the claims paid. The policies invest in marketable securities, with excess returns paid out in the form of enhanced TOHI benefits to the trust.

Spring’s Solutions

A captive stop-loss arrangement was recommended to meet the risks of the utility companies.


The captive produced over $100 million in savings, as compared with a non-captive approach, over the first 10 years. Spring continues to play a role in this program, including annual policy pricing, claims processing, reserve calculations, quarterly conference calls, and annual meetings with the board of directors, policy application support, and policy issuance support.