With many organizations looking for solutions in these financially challenged times, employee benefit captives provide an answer, offering increased security and decreased frictional costs.
These goals are achieved through many avenues, including better plan management, greater loss control, investment income gains and decreased profit margin to other firms.
An existing captive will experience additional gains by adding employee benefits–such as life insurance and disability–allowing the captive to be more diversified and run more efficiently.
Funding employee benefits in a captive used to be viewed as a slow and labor-intensive process, but what was once the path least traveled has now become a paved road for cost-conscious captive owners, with their risk managers and human resource managers riding shotgun.
During turbulent economic conditions, firms often struggle to find the time and fiscal support to explore expansion of their current captives or consider implementing a new employee benefits program.
Though once an involved and sometimes expensive process, the Department of Labor's fast track is now 
a proven option. Road maps have been established by approximately 20 firms, including AGL Resources, Alcoa, Alcon Labs, Archer Daniels Midland, Banner Health, Cephalon, H.J. Heinz, International Paper, United Technologies and YKK, just to name a few.
Because these firms have already sought and gained DOL approval based on the parameters set, it is now much more advantageous for all captives to consider the possibilities for their organization.
WHAT'S INVOLVED
The fast-track approval process through the DOL can be achieved in less than three months. This includes:
o The initial review by the DOL.
o Drafting and distribution of the notice to interested persons, including a mailing.
o A required comment period.
o Final authorization.
To qualify for the fast-track process, captives must be pure- or single-parent facilities seeking to fund ERISA benefits and use the imprint from prior groups. This translates into:
o Being in business for at least one year.
o Using a fronting insurance company with an "A-minus" or better rating.
o Leveraging an independent fiduciary.
o Providing a benefit enhancement in the first year.
Charging fair and appropriate premiums is also a requirement, as is using similar formulas to derive financials over time. Although captives generally pay their advisors for services and support, the fast track does not allow any commissions as part of the captive funded plan.
The DOL fast-track process has gained momentum and enabled many captives to achieve their goals in a timely manner. However, it must be considered as one of a number of solutions available for captive owners looking to cover benefit risks.
Other options for those not eligible or not interested in the fast-track process are essentially limitless, but include noncaptive options such as self-insurance or other alternative risk-transfer solutions, as well as captive options such as a rent-a-captive or applying for an individual exemption.
The best way to know if the fast-track process is right for your captive is to work with an advisor you trust, who specializes in alternative risk-financing and employee benefits. In some cases a feasibility analysis may be required, while in other instances, a quick discussion of your goals may be enough to identify which path to take.
In fact, there are many paths to take on the road toward a captive that writes employee benefit risks. The fast track offers great possibilities for those captive owners willing to follow the maps already established with the DOL. It affords improvements in terms of ease, speed and proven success.
The key is to understand the obstacles on each course and the rewards waiting at the finish line.
Teri Weber is a partner at Spring Consulting Group in Boston, Mass.
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