Proposed Exemptions From Certain Prohibited Transaction Restrictions
| Published date | 20 September 2021 |
| Record Number | 2021-20237 |
| Section | Notices |
| Court | Employee Benefits Security Administration,Labor Department |
Federal Register, Volume 86 Issue 179 (Monday, September 20, 2021)
[Federal Register Volume 86, Number 179 (Monday, September 20, 2021)]
[Notices]
[Pages 52209-52222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20237]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
Proposed Exemptions From Certain Prohibited Transaction
Restrictions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemptions.
-----------------------------------------------------------------------
SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the
Internal Revenue Code of 1986 (the Code). If granted, these proposed
exemptions allow designated parties to engage in transactions that
would otherwise be prohibited provided the conditions stated there in
are met. This notice includes the following proposed exemptions: L-
12008, Phillips 66 Company; L-12021, Comcast Corporation.
DATES: All interested persons are invited to submit written comments or
requests for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, by November 4, 2021.
ADDRESSES: All written comments and requests for a hearing should be
sent to the Employee Benefits Security Administration (EBSA), Office of
Exemption Determinations, Attention: Application No. D-12003 via email
to [email protected] or online through the Federal eRulemaking Portal:
http://www.regulations.gov by the end of the scheduled comment period.
The applications for exemption and the comments received will be
available for public inspection in the Public Documents Room of the
Employee Benefits Security Administration, U.S. Department of Labor,
Room N-1515, 200 Constitution Avenue, NW, Washington, DC 20210. See
SUPPLEMENTARY INFORMATION below for additional information regarding
comments.
SUPPLEMENTARY INFORMATION:
Comments
In light of the current circumstances surrounding the COVID-19
pandemic caused by the novel coronavirus which may result in disruption
to the receipt of comments by U.S. Mail or hand delivery/courier,
persons are encouraged to submit all comments electronically and not to
follow with paper copies. Comments should state the nature of the
person's interest in the proposed exemption and the manner in which the
person would be adversely affected by the exemption, if granted. A
request for a hearing can be requested by any interested person who may
be adversely affected by an exemption. A request for a hearing must
state: (1) The name, address, telephone number, and email address of
the person making the request; (2) the nature of the person's interest
in the exemption and the manner in which the person would be adversely
affected by the exemption; and (3) a statement of the issues to be
addressed and a general description of the evidence to be presented at
the hearing. The Department will grant a request for a hearing made in
accordance with the requirements above where a hearing is necessary to
fully explore material factual issues identified by the person
requesting the hearing. A notice of such hearing shall be published by
the Department in the Federal Register. The Department may decline to
hold a hearing where: (1) The request for the hearing does not meet the
requirements above; (2) the only issues identified for exploration at
the hearing are matters of law; or (3) the factual issues identified
can be fully explored through the submission of evidence in written
(including electronic) form.
Warning: All comments received will be included in the public
record without change and may be made available online at http://www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be confidential or
other information whose disclosure is restricted by statute. If you
submit a comment, EBSA recommends that you include your name and other
contact
[[Page 52210]]
information in the body of your comment, but DO NOT submit information
that you consider to be confidential, or otherwise protected (such as
Social Security number or an unlisted phone number) or confidential
business information that you do not want publicly disclosed. However,
if EBSA cannot read your comment due to technical difficulties and
cannot contact you for clarification, EBSA might not be able to
consider your comment. Additionally, the http://www.regulations.gov
website is an ``anonymous access'' system, which means EBSA will not
know your identity or contact information unless you provide it in the
body of your comment. If you send an email directly to EBSA without
going through http://www.regulations.gov, your email address will be
automatically captured and included as part of the comment that is
placed in the public record and made available on the internet.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department, unless otherwise stated in the Notice of Proposed
Exemption, within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
The proposed exemptions were requested in applications filed
pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the
Code, and in accordance with procedures set forth in 29 CFR part 2570,
subpart B (76 FR 66637, 66644, October 27, 2011).\1\ Effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C.
App. 1 (1996), transferred the authority of the Secretary of the
Treasury to issue exemptions of the type requested to the Secretary of
Labor. Therefore, these notices of proposed exemption are issued solely
by the Department.
---------------------------------------------------------------------------
\1\ The Department has considered exemption applications
received prior to December 27, 2011 under the exemption procedures
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August
10, 1990).
---------------------------------------------------------------------------
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.
Phillips 66 Company
Located in Houston, TX
[Application No. L-12008]
Proposed Exemption
The Department is considering granting an exemption under the
authority of Section 408(a) of the Employee Retirement Security Act of
1974, as amended (ERISA or the Act) to the Phillips 66 Group Life
Insurance Plan (the Plan). As described in more detail below, under the
proposed exemption, the Plan would enter into an insurance contract
with an unrelated A-rated insurance company (the Fronting Insurer) that
would, in turn, enter into a reinsurance contract with Spirit Insurance
Company (Spirit), an affiliate of Phillips 66 (the Reinsurance
Arrangement). Under the Reinsurance Arrangement, Spirit would reinsure
the Plan's risks. Importantly, the Fronting Insurer would remain fully
responsible for the Plan's risks in the event that Spirit does not
fulfill its contractual obligations to the Fronting Insurer.
Phillips 66, through its ownership of Spirit, is expected to
receive a net income increase from the Reinsurance Arrangement.\2\ To
ensure that the majority of Spirit's additional net income is passed
through to the Plan and its participants and beneficiaries, this
proposed exemption requires Phillips 66 to fund certain new Plan
benefit enhancements (the Benefit Enhancements). Specifically, for
every dollar increase in net income that Spirit (and indirectly,
Phillips 66) receives from the Reinsurance Arrangement, Phillips 66
must pay at least $0.51 to fund Benefit Enhancements.
---------------------------------------------------------------------------
\2\ This proposed exemption requires a qualified independent
fiduciary to review the Reinsurance Arrangement to determine if
Phillips 66 is deriving any benefits other than an increase in
Spirit's net income, such as a benefit from a further
diversification of Spirit's risks. Any such benefit(s) must be
quantified to the extent possible, and the majority of all benefits
to Phillips 66 from the Reinsurance Arrangement must ultimately be
paid to fund Benefit Enhancements in the manner described below.
---------------------------------------------------------------------------
This proposed exemption also would require Phillips 66 to delegate
fiduciary oversight of the Plan to a qualified fiduciary that is
independent of Phillips 66 and its affiliates (the Independent
Fiduciary). The exemption conditions require the Independent Fiduciary
to approve the Reinsurance Arrangement in advance, ensure that the
Reinsurance Arrangement is in the interest and protective of the Plan
and its participants and beneficiaries, and submit annual and five-year
``look-back'' reports to the Department.\3\
---------------------------------------------------------------------------
\3\ The Department notes that the Independent Fiduciary's annual
written report is essential to the Department's tentative finding
that this proposed exemption is, and will continue to be, in the
interest and protective of the Plan and its participants and
beneficiaries. The Independent Fiduciary must clearly, prudently and
loyally determine whether Phillips 66 and its affiliates have
complied with each term and condition of the exemption and include
its finding in the report. The relief provided in this proposed
exemption is conditioned upon the independent fiduciary's compliance
with this requirement.
---------------------------------------------------------------------------
Summary of Facts and Representations 4
---------------------------------------------------------------------------
\4\ The Department notes that availability of this exemption is
subject to the express condition that the material facts and
representations contained in application L-12008 are true and
complete, and accurately describe all material terms of the
transactions covered by the exemption. If there is any material
change in a transaction covered by the exemption, or in a material
fact or representation described in the application, the exemption
will cease to apply as of the date of such change.
---------------------------------------------------------------------------
The Parties
1. Phillips 66. Phillips 66 is a multinational energy company
headquartered in Houston, Texas that processes, transports, stores and
markets fuel products.
2. The Plan. The Plan is sponsored by Phillips 66 and provides life
insurance, travel assistance, occupational accidental death, and
accidental death and dismemberment benefits. As of December 31, 2019,
the Plan covered more than 12,500 participants.
3. Zurich Life Insurance Company. The Plan's benefits are insured
by Zurich American Life Insurance Company (hereinafter, either Zurich
or the Fronting Insurer), which has received an ``A'' financial
strength rating from A.M. Best Company (A.M. Best). Zurich is unrelated
to Phillips 66 and, per the conditions of the exemption, must remain so
throughout the duration of the Reinsurance Arrangement.
4. Spirit Insurance Company. Spirit is an insurance company that is
100 percent owned by Phillips 66. Spirit currently writes Property
Damage, Business Interruption, Excess Casualty, and Terrorism insurance
policies for Phillips 66 and several of Phillips 66's joint ventures.
Spirit has received an ``A'' financial strength rating from A.M. Best
since its formation in 2012.\5\ For the fiscal year ending December 31,
[[Page 52211]]
2018, Spirit reported earned premiums of $33.0 million and total assets
of $285.2 million.
---------------------------------------------------------------------------
\5\ On March 7, 2012, Vermont issued Spirit a license to
transact business as a single-parent captive insurance company.
Vermont captive insurance law allows captive insurance companies to
conduct reinsurance operations. In 2017, Spirit converted from a
pure captive insurance company to a sponsored captive insurance
company and formed 3P Capital Insurance Company IC, an incorporated
protected cell of Spirit.
---------------------------------------------------------------------------
The Prohibited Transaction Arrangement
4. Phillips 66 intends to use Spirit to reinsure the Plan's benefit
claims under the Reinsurance Arrangement. The Reinsurance Arrangement
would be structured as follows: (a) The Plan would enter into an
insurance arrangement with Zurich to insure the Plan's risks; and (b)
Zurich would enter into a reinsurance agreement with Spirit, whereby
Spirit would reinsure up to 100 percent of the Plan's risks.
In general terms, the Plan would make premium payments to Zurich,
and Zurich would make corresponding payments to Spirit in an amount
less than the premiums it is paid by the Plan. The difference between
the premiums the Plan pays Zurich and the amounts Zurich pays Spirit
comprises Zurich's fee to Spirit. In return, Spirit would be
responsible for administering the Plan participants' benefit claims
filed with Zurich. The Reinsurance Agreement between Zurich and Spirit
would be ``indemnity only,'' which means that Zurich, as the Fronting
Insurer, would maintain the responsibility to pay benefit claims to
participants and beneficiaries in the event Spirit does not satisfy any
of its contractual obligations to Zurich for any reason.
Benefit to Phillips 66
5. As noted in the Independent Fiduciary discussion below, Spirit
(and Phillips 66 indirectly) expects to receive a $1,484,000 increase
to its net income in the first year of the Reinsurance Arrangement.
Department's Note: The Department developed this proposed exemption
based on the Applicant's representation that Phillips 66 is not
expected to receive any benefit from the Reinsurance Arrangement other
than the net income increase described herein, which must be verified
annually by the Independent Fiduciary. If Phillips 66 or a related
party directly or indirectly receives any other benefit from the
captive reinsurance arrangement, the benefit must be quantified by the
Independent Fiduciary and included in the Primary Benefit Test
described below.\6\ Consistent with this condition, the proposed
exemption expressly prohibits Phillips 66 (or a related entity) from,
among other things: (1) Using any participant-related data or
information that is generated by (or derived from) the Reinsurance
Arrangement in any manner that benefits Phillips 66 or a related
entity; or (2) transferring any portion of Spirit's reserves that are
attributable to Plan participants' contributions to Phillips 66 or a
related entity.
---------------------------------------------------------------------------
\6\ This includes any benefit to Phillips 66 or a related party
arising from a further diversification of Spirit's risks in
connection with the addition of the Plan's employee benefit
insurable risks to One Belmont's other insurable risks.
---------------------------------------------------------------------------
Benefit to the Plan
6. As discussed in further detail below, Phillips 66 must pay all
costs associated with providing the Benefit Enhancements in an amount
that exceeds one-half of the sum of all direct or indirect benefits
that Phillips 66 and any related party derives from the Reinsurance
Arrangement. In other words, for every dollar that Phillips 66 or a
related party directly or indirectly benefits from the Reinsurance
Arrangement, Phillips 66 must pay at least $0.51 toward Benefit
Enhancements (the Primary Benefit Test).
Department's Note: Both the benefit to Phillips 66 and the cost to
Phillips 66 from the Reinsurance Arrangement are based on projections.
Therefore, this proposed exemption requires an Independent Fiduciary to
look back over successive five-year periods to determine whether the
Primary Benefit Test has been met based on actual results. If the
Independent Fiduciary finds that the Primary Benefit Test has not been
met during a prior five-year period, Phillips 66 must immediately
implement a prospective reduction to the participants' portion of the
Plan premiums in an amount that is sufficient to make up for the
shortfall. The amount of the prospective reduction must include an
additional payment of interest on the shortfall, at the Code's federal
underpayment rate set forth in Code section 6621(b). Further, Phillips
66 may not offset or reduce any benefits provided to Plan participants
and beneficiaries in connection with its implementation of the captive
reinsurance arrangement.
Exemptive Relief and Analysis
7. ERISA Analysis. Phillips 66 is a party in interest with respect
to the Plan pursuant to ERISA section 3(14) (C), because it is an
employer whose employees are covered by the Plan. In addition, the
captive reinsurer, Spirit, is a party in interest with respect to the
Plan pursuant to ERISA section 3(14)(G) because it is wholly owned by
Phillips 66.
8. ERISA section 406(a) prohibits a wide variety of transactions
between plans and parties in interest. For example, ERISA section
406(a)(l)(D) prohibits a plan fiduciary from causing a plan to engage
in a transaction that results in the transfer of plan assets to a party
in interest. The Reinsurance Arrangement would violate ERISA section
406(a)(1)(D), because it would result in Plan premium payments (which
are plan assets) being indirectly transferred to Spirit who is a party
in interest with respect to the Plan.
9. ERISA section 406(b)(1) prohibits a fiduciary from dealing with
plan assets for its own interest or own account, and ERISA section
406(b)(3) prohibits a fiduciary from receiving any consideration for
the fiduciary's personal account from any party dealing with the plan
in connection with a transaction involving the plan's assets. The
Reinsurance Arrangement would violate ERISA sections 406(b)(1) and
406(b)(3), because the plan fiduciary would cause Plan premiums to be
paid to Zurich with knowledge that the premiums ultimately would be
paid to Spirit.
Description of Plan Benefit Enhancements
10. In order to satisfy the Primary Benefit Test, Phillips 66 must
fund the following Plan Benefit Enhancements:
a. The New Care Advocacy Service Benefit. Participants and
beneficiaries of the Plan must receive a New Care Advocacy Service
Benefit at no additional cost. The Applicant represents that under the
New Care Advocacy Service, master's degree-level licensed social
workers would seek out participants and beneficiaries in need of
medical assistance, including those who have been diagnosed with a
terminal or chronic illness and those managing a chronic condition that
has confined them to their home or a rehabilitation center. Care
Advocacy support services include providing participants with education
and assistance regarding available community resources, scheduling and
navigating doctor's appointments, completing forms, and coordinating
care between doctors and specialists.
b. The Enhanced Funeral Concierge Service Benefit. The Plan
currently provides a Funeral Concierge Service Benefit to participants.
Under the conditions of the exemption, Phillips 66 would extend the
Funeral Concierge Service Benefit to cover participants' and
beneficiaries' family members at no additional cost. The Applicant
represents that participants and beneficiaries could use the Funeral
Concierge Service Benefit to compare prices among funeral homes through
the use of a nationwide database of funeral
[[Page 52212]]
home prices. Additionally, participants or their family members can
receive assistance from licensed funeral home directors when
negotiating funeral service pricing.
c. The Enhanced Accelerated Death Benefit. The Plan currently
provides an Accelerated Death Benefit that allows a terminally-ill
participant with a life expectancy of 24 months or less to receive an
accelerated life insurance benefit payment before death in an amount up
to 50 percent of his or her total life insurance benefit amount. If
this exemption is granted, the amount of the Plan's Accelerated Death
Benefit would increase from 50 percent to 80 percent of a participant's
life insurance benefit amount.
d. The Enhanced Accidental Death & Dismemberment Benefit. Under the
Plan currently, if a participant suffers an injury resulting in
Hemiplegia, the Plan will pay a benefit equal to 66 percent of the
participant's incurred losses from such injury. If the exemption is
granted, the Plan would increase this payment from 66 percent to 75
percent of the participant's incurred losses from such injury.
e. The New Accidental Death & Dismemberment Benefit. Currently, the
Plan does not provide an additional benefit to a participant's
beneficiary if the participant dies in an automobile accident while
seated in an air bag-protected position after the air bag system
deploys during an accident. If the exemption is granted, the Plan would
pay an additional ten percent of the death benefit upon the occurrence
of this event up to a maximum amount of $25,000.
Further, the Plan currently does not cover costs associated with
transporting a participant's body from his or her place of death to a
mortuary near the participant's primary residence if the participant
dies 100 miles or more from such residence. If this exemption is
granted, the Plan would pay five percent of the AD&D policy coverage
amount to cover the costs associated with transporting a deceased
participant's body to a mortuary near his or her primary residence up
to a maximum benefit amount of $5,000.
Finally, the Plan currently does not cover medical costs incurred
by a participant who suffers third degree burns. If this exemption is
granted, the Plan would pay a percentage of the principal sum based on
the body area(s) and the percentage of the body surface affected.
The Independent Fiduciary
11. Kathleen Ely, FSA, MAAA, a Consulting Actuary with Milliman of
Windsor, Connecticut will serve as the Plan's Independent Fiduciary
with respect to the Reinsurance Arrangement. Ms. Ely represents that
she and Milliman are independent of all parties associated with the
Reinsurance Arrangement, including Phillips 66, Spirit, and the Plan.
In this regard, Ms. Ely represents that she and Milliman do not have:
(a) An interest in any party involved in the Reinsurance Arrangement;
(b) an ownership interest in Phillips 66, Spirit, or the Plan, nor are
they directly or indirectly, controlled by, or under common control
with them; and (c) any economic stake or financial interest that is
contingent upon the implementation of the Reinsurance Arrangement. This
exemption requires that no party related to this exemption request has,
or will, indemnify Ms. Ely or Milliman, in whole or in part, for
negligence and/or for any violation of state or federal law that may be
attributable to the Independent Fiduciary in performing its duties
under the captive reinsurance arrangement. In addition, no contract or
instrument may purport to waive any liability under state or federal
law for any such violation.
Ms. Ely represents that Milliman's gross income received from
Phillips 66, Spirit, and the Plan is less than 0.1 percent of
Milliman's gross annual income from all sources. Further, as a
condition of the exemption, neither Ms. Ely nor Milliman would enter
into any agreement or instrument that violates ERISA section 410 or
section 2509.75-4 of the Department's regulations.\7\
---------------------------------------------------------------------------
\7\ ERISA section 410 provides, in part, that ``except as
provided in ERISA sections 405(b)(1) and 405(d), any provision in an
agreement or instrument which purports to relieve a fiduciary from
responsibility or liability for any responsibility, obligation, or
duty under this part [meaning Part 4 of Title I of ERISA] shall be
void as against public policy.''
---------------------------------------------------------------------------
12. Independent Fiduciary Analysis. In the course of conducting a
preliminary assessment of the merits of the Reinsurance Arrangement,
Ms. Ely reviewed the following documents: (a) A draft application to
the Department requesting exemptive relief; \8\ (b) a memo dated July
11, 2019, from the Applicant's representative, Spring Consulting Group,
LLC (Spring Consulting), describing the Benefit Enhancements, including
the funding of the Benefit Enhancements and the expected costs Phillips
66 would incur to provide the Benefit Enhancements; (c) a draft
Employee Benefits Study prepared by Spring Consulting that details
projected 2020 financial statement results for Spirit; (d) a
Certificate of Authority from the Vermont Department of Banking,
Insurance, Securities and Health Care Administration authorizing Spirit
to transact business as a captive insurance company in Vermont; (e) a
copy of Phillips 66's Life and AD&D insurance certificates; (f) a draft
of the Reinsurance Arrangement contract between Spirit and Zurich; (g)
documentation of the pricing of the subject coverages, expense charges,
and related underwriting information; (h) 2018 audited financial
statements for Spirit; (i) a 2018 Actuarial Opinion for Spirit; and (j)
a declaration by Phillips 66 that the Plan would pay no commissions
with respect to the Reinsurance Arrangement.
---------------------------------------------------------------------------
\8\ Given that, among other things, some of the documents
reviewed by the Independent Fiduciary were draft documents and/or
documents that are no longer current, this proposed exemption
requires the Independent Fiduciary to: Review the terms of the
exemption; obtain and review all current objective, reliable, third-
party documentation necessary to make the determinations required of
the Independent Fiduciary under the exemption; and confirm in
writing that all of the exemption terms and conditions have been met
(or, due to timing requirements, can reasonably be expected to be
met consistent with the terms of this proposed exemption). The
Independent Fiduciary must send this written confirmation to the
Department's Office of Exemption Determinations at least 30 days
before Phillips 66 engages in the Reinsurance Arrangement. The
confirmation must include: Copies of each document relied on by the
Independent Fiduciary; and the steps the Independent Fiduciary took
to make its confirmation.
---------------------------------------------------------------------------
Based on the foregoing, Ms. Ely completed two Independent Fiduciary
Reports, dated November 15, 2019 and October 22, 2020. In the first
report, Ms. Ely provided a preliminary assessment that, among other
things, the Plan Benefit Enhancements would represent an immediate and
objectively determined benefit to the Plan's participants and
beneficiaries. In the second Independent Fiduciary Report, Ms. Ely
provided preliminary estimates with regard to the costs that Phillips
66 would incur to fund the Benefit Enhancements, which are discussed
below.
(a) Care Advocacy Service. Ms. Ely estimated high-end and low-end
potential ranges of costs for Phillips 66 to provide the Care Advocacy
Service. Ms. Ely relied upon information obtained from Zurich's total
book of business and experience for the high-end estimate. Based upon
its book of business, Zurich estimated that the cost to provide the
Care Advocacy Service ranged from $200-$500 per hour and that, on
average, a care advocate would spend 25 hours on a case. Zurich further
estimated that two percent of Plan participants would use the
service.\9\
[[Page 52213]]
Based on the foregoing, Ms. Ely estimates that, assuming a cost of $200
per hour for 25 hours, the annual estimated cost for Phillips 66 to
provide the Care Advocacy Service would be $1.3 million ($200 * 25 * 2%
* 13,000 employees).
---------------------------------------------------------------------------
\9\ Zurich's book of business indicates the take up is assessed
through a pro-active review of claims reports to identify those
individuals who may require assistance. Zurich then connects with
those individuals to assess what types of service may be required.
In addition, the employer's HR department may bring employees in
need of such assistance to Zurich's attention. The service also is
advertised at Phillips 66 benefits fairs and employee meetings
whenever possible.
---------------------------------------------------------------------------
Ms. Ely also researched non-Zurich data.\10\ Based on this data,
Ms. Ely concluded that it would be reasonable to reduce the average
number of hours spent on a case to 10 hours at a cost of $200 per hour.
Under this formula, Ms. Ely estimates that the annual cost incurred by
Phillips 66 to provide the Care Advocacy Service would be $520,000
($2,000 * 2% * 13,000). Based on the foregoing, Ms. Ely concluded that
$520,000 represents a reasonable low-end estimate for the cost to
provide the Care Advocacy Service.
---------------------------------------------------------------------------
\10\ This research included data taken from: https://www.hopkinsmedicine.org/health/wellness-and-prevention/the-power-of-a-health-care-advocate; and https://www.verywellhealth.com/how-much-does-a-private-patient-advocate-cost-2614909.
---------------------------------------------------------------------------
(b) Funeral Concierge Services. Ms. Ely relied on information from
Zurich's book of business to estimate the cost for Phillips 66 to fund
the additional Funeral Concierge Services to the Plan. Ms. Ely notes
that Zurich estimated the cost to provide the Funeral Concierge
Services would be $995 per use and that two percent of employees would
use the service. Ms. Ely notes that, while Phillips 66 already provides
the Funeral Concierge Benefit to Plan participants, it does not provide
the benefit to participants' family members. Therefore, Ms. Ely's
estimate only includes the additional costs that Phillips 66 would
incur based on participants' family members' use of the benefit. Ms.
Ely represents that a reasonable additional utilization estimate for
participants' family members would be two percent, which is in line
with Zurich's estimate. Assuming this two percent utilization rate, Ms.
Ely estimated that the annual cost for Phillips 66 to provide the
Funeral Concierge Benefit would be $258,700 ($995 * 2% * 13,000).
(c) AD&D. Ms. Ely relied on data provided by Zurich to estimate the
annual cost for Phillips 66 to provide the increased accelerated AD&D
benefits and the new AD&D benefit. Ms. Ely notes that Zurich estimated
that the aggregate cost of the increased accelerated death benefits
would be $4.50 per employee per year, and the cost of the new AD&D
benefit enhancement would be $6.11 per employee per year. Ms. Ely
states that, assuming 13,000 eligible employees, the total estimated
cost for Phillips 66 to fund these benefit enhancements would be
$137,930 per year ($4.5 + $6.11 * 13,000).
13. The Primary Benefit Test: Ms. Ely states that a reasonable low-
end estimate of the expected annual costs for Phillips 66 to fund the
Benefit Enhancements would be $916,630. This includes $137,930 for
accidental death benefit enhancements, $520,000 for Care Advocacy
Service, and $258,700 for additional Funeral Concierge Services. Given
that Spirit expects to realize a net income increase of $1,484,000 from
the Reinsurance Arrangement, the estimated cost to fund the Benefit
Enhancements represents 62 percent of the projected benefit that would
inure to Phillips 66 ($916,630/$1,484,000). Thus, Ms. Ely preliminarily
estimated that the Primary Benefit Test would be met in the initial
year of the Reinsurance Arrangement.
Department's Note. Even though Ms. Ely's prior findings suggest the
conditions of this exemption will be met, those findings would not be
current as of the effective date of this proposed exemption. Therefore,
Ms. Ely must again engage in a prudent/loyal analysis in accordance
with ERISA Section 404(a)(1)(A) and (B), to verify that she has
reviewed the terms of the exemption and all of the necessary documents
and evidence, and has concluded that: The majority of the net benefits
from the proposed captive reinsurance arrangement can reasonably be
expected to inure to the Plan; and all of the exemption's other terms
and conditions have been met (or, due to timing requirements, can
reasonably be expected to be met consistent with the terms and
conditions of the proposed exemption). This confirmation must be
submitted to the Department's Office of Exemption Determinations at
least 30 days before the Plan engages in the captive reinsurance
arrangement. The confirmation must include copies of each document
relied on by Milliman and the steps it took to make its confirmation.
Further, the exemption requires the Independent Fiduciary to ``look
back'' over successive five-year periods to determine whether the
Primary Benefit Test has been met based on actual financial results and
actual cost incurred by Phillips 66 to provide the Plan Benefit
Enhancements rather than projections. The Independent Fiduciary must
provide the Department with a written report of the actual costs and
benefits, along with the underlying sources for such data. The
Department notes that this information would be included in the public
record. The Department is proposing this exemption based on its
understanding that the Independent Fiduciary would be able to quantify
the necessary information based on reliable and verifiable information,
including audited financials and information obtained from the
unrelated Fronting Insurer. The Department retains the right to propose
a revocation or amendment to this exemption if it is unable to confirm
the reliability of the underlying financial data supporting the
Independent Fiduciary's ``look-back'' findings. Any failure by the
Department to propose a revocation or amendment to the exemption is not
an endorsement or conclusion by the Department that the conditions of
the exemption were, in fact, met.
14. Benefit Enhancements Adjustment. Before the end of a five-year
period, Phillips 66 may change Benefit Enhancements at its own expense
to ensure that the Primary Benefit Test would be satisfied. The
exemption requires any new Benefit Enhancement to be: (a) Widely
available to Plan participants on an equal basis; and (b) approved, in
advance, by the Independent Fiduciary, after the Independent Fiduciary
has determined that each Benefit Enhancement is in the interest of the
Plan's participants and beneficiaries and widely available to them on
an equal basis.\11\ A complete description of any new Benefit
Enhancement and the Independent Fiduciary's prior determination
regarding why the new enhancement is in the interest of the Plan's
participants and beneficiaries must be included in the next annual
Independent Fiduciary report submitted to the Department.
---------------------------------------------------------------------------
\11\ If the Primary Benefit Test has not been met and Phillips
66 seeks to terminate the captive reinsurance arrangement, the
relief in the exemption will terminate at the end of the year in
which the Primary Benefit Test was not met, as long as Plan
participants receive a reduction in their portion of the Plan
premium. The premium reduction amount must be at least equal to the
amount by which the prior five-year Primary Benefit Test was not
met, as verified by the Independent Fiduciary and reported to the
Department as part of the Independent Fiduciary's annual report.
---------------------------------------------------------------------------
Department's Note. Notwithstanding a determination by the
Independent Fiduciary that a Benefit Enhancement meets the terms of
this exemption, the Department may propose to revoke or amend the
exemption to the extent that, among other things, the Department
determines that a Benefit Enhancement is not sufficiently protective or
in the
[[Page 52214]]
interest of the Plan and its participants and beneficiaries. Any
failure by the Department to propose to modify or revoke the exemption
is not an endorsement or conclusion by the Department that the
conditions of the exemption were, in fact, met.
The Department's Findings
15. The Department has the authority under ERISA section 408(a)
ERISA to grant exemptions from the prohibition transaction provisions
of ERISA section 406 if the Department finds that the transaction is in
the interest and protective of the rights of the affected plan and its
participants and beneficiaries, and is administratively feasible.\12\
The Department's findings required under ERISA section 408(a) are
discussed below.
---------------------------------------------------------------------------
\12\ Specifically, ERISA section 408(a) provides that the
Department may not grant an exemption unless it finds that the
exemption is administratively feasible, in the interests of the plan
and it participants and beneficiaries, and protective of the rights
of the plan participants and beneficiaries.
---------------------------------------------------------------------------
16. The Proposed Exemption is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed exemption is
protective of the rights of Plan participants and beneficiaries. In
addition to the requirements described above, no commissions would be
paid by the Plan with respect to the sale of any third party insurance
contract and/or any reinsurance contract, and Phillips 66 would only
contract with insurers with a financial strength rating of ``A'' or
better from A.M. Best Company or an equivalent rating from another
rating company, in the year the contract is entered into. Further, for
each taxable year, the gross premiums received by Spirit for benefit
insurance provided to Phillips 66 and its employees with respect to
which Spirit is a party in interest by reason of the relationship to
Phillips 66 described in ERISA sections 3(14)(G), would not exceed 50
percent of the gross premiums received for all lines of its insurance
business (i.e., benefit insurance and non-benefit insurance) in that
taxable year.
Ms. Ely, the Independent Fiduciary must review the Reinsurance
Arrangement and confirm and determine: (a) The total economic benefit
derived by Phillips 66 and its related parties from the Reinsurance
Arrangement; (b) that the majority of the economic benefits derived by
Phillips 66 and related parties from the Reinsurance Arrangement were
transferred to the Plan in the form of Benefit Enhancements and/or
reduced premiums; (c) the Reinsurance Arrangement created real and
substantial additional benefits for the Plan and its participants; (d)
the Reinsurance Arrangement did not result in an offset or reduction in
participants' other benefits and was otherwise consistent with ERISA.
Ms. Ely has confirmed that: (i) She has the requisite knowledge
regarding the Reinsurance Arrangement to fulfill her duties under ERISA
section 404 as a prudent and independent plan fiduciary; (ii) she will
monitor the Reinsurance Arrangement throughout the duration of the
exemption; and (iii) the Reinsurance Arrangement is consistent with
ERISA, including the prudence and loyalty provisions of ERISA section
404.
The exemption would require Ms. Ely to file annual certified
reports to the Department, under penalty of perjury, confirming whether
all terms and conditions of the exemption have been met. She must
complete each report within six months from the end of the 12-month
period to which it relates (the first 12-month period begins on the
effective date of the exemption).
20. The Proposed Exemption is ``In the Interest of the Plan.'' The
Department has tentatively determined that the proposed exemption would
be in the Plan's interest. Among other things, the Plan must receive
the majority of the total benefit generated from the Reinsurance
Arrangement, as verified by the Independent Fiduciary and reported to
the Department.
21. The Proposed Exemption is ``Administratively Feasible.'' The
Department has tentatively determined that the proposed exemption would
be administratively feasible, because the proposed reinsurance
arrangement is subject to robust annual reviews by Ms. Ely that must be
filed with the Department's Office of Exemption Determinations.
22. Based on the conditions that are included in this proposed
exemption, the Department has tentatively determined that the relief
sought by the Applicant would satisfy the statutory requirements for an
individual exemption under ERISA section 408(a).
Proposed Exemption
Section I. Definitions
(a) An ``affiliate'' of Phillips 66 or Spirit includes: (1) Any
person or entity who controls Phillips 66 or Spirit or is controlled by
or under common control with Phillips 66 or Spirit; (2) Any officer,
director, employee, relative, or partner with respect to Phillips 66 or
Spirit; and (3) Any corporation or partnership of which the person in
(2) of this paragraph is an officer, director, partner, or employee;
(b) The term Benefit Enhancements means the following benefits,
unless adjusted consistent with the terms of this proposed exemption:
(i) The New Care Advocacy Service Benefit. Under this new benefit,
master's degree-level licensed social workers would proactively find
participants needing specialized assistance, including those diagnosed
with a terminal or chronic illness or who are managing a chronic
condition that has confined them to their home or a rehabilitation
center. Care Advocacy support service includes participant education
and assistance with respect to available community resources, and
assistance with scheduling and navigating doctor's appointments,
completing forms, and coordinating care with doctors and specialists.
(ii) The Enhanced Funeral Concierge Service Benefit. Under this
enhancement, the Plan would extend its existing Funeral Concierge
Service Benefit to provide coverage for Plan participants' family
members.
(iii) The Enhanced Accelerated Death Benefit. The Plan currently
provides an Accelerated Death Benefit for a terminally-ill participants
with life expectancy of 24 months or less to receive an accelerated
life insurance benefit payment in advance of her death of up to 50
percent of the participant's total life insurance benefit amount. Under
this enhancement, the amount of the Accelerated Death Benefit would
increase to 80 percent of a participant's life insurance benefit.
(iv) The Enhanced Accidental Death & Dismemberment Benefit. The
Plan currently provides that if a participant suffers an injury
resulting in Hemiplegia, the Plan would pay such participant a benefit
equal to 66 percent of the participant's incurred losses from such
injury. Under this enhancement, the payment would increase to 75
percent of the participant's incurred losses from such injury.
(v) The New Accidental Death & Dismemberment Benefit. Under the
current terms of the Plan, if a participant dies in an automobile
accident while seated in an air bag-protected position and such air bag
system deployed during the accident, the Plan would not pay any
additional benefit to the participant. Under this enhancement, the Plan
would provide a new benefit that pays ten percent of the principal sum,
up to $25,000, upon the occurrence of this event.
Further, under the current terms of the Plan, if a participant dies
100 miles away from his or her primary place of
[[Page 52215]]
residence, the Plan would not cover costs incurred to transport the
participant's body from the place of death to a mortuary near the
participant's primary residence. Under this enhancement, the Plan would
provide a new benefit to participants covering up to five percent of
the AD&D policy amount, up to a maximum of $5,000, of the cost
associated with transporting the deceased participant's body to a
mortuary near her primary residence. Finally, the Plan currently does
not cover medical costs incurred by a participant who suffers third
degree burns. If this exemption is granted, the Plan would enhance the
AD&D benefit by paying a percentage of the principal sum based on the
body area(s) and the percentage of the body surface affected.
(c) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual; and
(d) The term ``Independent Fiduciary'' means a person who:
(1) Is not Phillips 66 or an affiliate of Phillips 66 or Spirit and
does not hold an ownership interest in Phillips 66, Spirit or their
affiliates;
(2) Was not a fiduciary with respect to the Plan before its
appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that:
(i) It is a fiduciary and has agreed not to participate in any
decision with respect to any transaction in which it has an interest
that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform
the services contemplated by the exemption;
(4) For purposes of this definition, no organization or individual
may serve as Independent Fiduciary for any fiscal year if the gross
income received by such organization or individual from Phillips 66,
Spirit, or their affiliates for that fiscal year exceeds two percent of
such organization's or individual's gross income from all sources for
the prior fiscal year. This provision also applies to a partnership or
corporation of which such organization or individual is an officer,
director, or 10 percent or more partner or shareholder and includes as
gross income amounts received as compensation for services provided as
an independent fiduciary under any prohibited transaction exemption
granted by the Department;
(5) No organization or individual that is an Independent Fiduciary
and no partnership or corporation of which such organization or
individual is an officer, director or ten percent or more partner or
shareholder may acquire any property from, sell any property to, or
borrow any funds from Phillips 66, Spirit, or their affiliates while
the individual serves as an Independent Fiduciary. This prohibition
would continue for a period of six months after either (1) the party
ceases to be an Independent Fiduciary or (2) the Independent Fiduciary
negotiates on behalf of the Plan during the period that such
organization or the individual serves as an Independent Fiduciary; and
(6) In the event a successor Independent Fiduciary is appointed to
represent the interests of the Plan with respect to the subject
transaction, no time should elapse between the resignation or
termination of the former Independent Fiduciary and the appointment of
the successor Independent Fiduciary.
Section II. Proposed Transactions
The exemption would provide relief from the prohibited transactions
provisions of ERISA sections 406(a)(1)(A), (D), and 406(b)(1) and
(b)(3), and the excise tax imposed by Code section 4975(a) and (b) (due
to the operation of parallel prohibited transaction provisions
contained in Code section 4975(c)(1)(A), (D), (E), and (F)) with
respect to: (1) The reinsurance of risks; and (2) the receipt of
premiums by Spirit in connection with insurance contracts sold by
Zurich (or any successor Fronting Insurer) to provide Group Term Life
and Accidental Death and Dismemberment benefits to Plan participants.
In order to receive such relief, the conditions in Section III must be
met in conformance with the definitions set forth in Section I.
Section III. Conditions
(a) Phillips 66 must improve the Plan with Benefit Enhancements
that are funded solely by Phillips 66 in compliance with (b) through
(e) below;
(b) For every dollar that Phillips 66 and its related parties
directly and indirectly benefit from the Captive Reinsurance
arrangement, Phillips 66 must pay at least $0.51 towards the Benefit
Enhancements, as may be adjusted under condition (e) below (the Primary
Benefit Test);
(c) The Independent Fiduciary must determine whether the Primary
Benefit Test has been met with respect to each successive five-year
period covered by the exemption. The Independent Fiduciary must report
its determinations as part of the Independent Fiduciary's next annual
report. For purposes of the initial five-year period, the Independent
Fiduciary may test only the costs and benefits that inure to Phillips
66 during years two through five of the initial five-year period.
(d)(1) If the Primary Benefit Test has not been met with respect to
a five-year period, Phillips 66 must reduce the participants' portion
of the Plan's premium in the next consecutive year by an amount that is
at least equal to the amount by which the prior five-year Primary
Benefit Test was not met, plus an additional payment of interest on the
shortfall, at the Code's federal underpayment rate set forth in Code
section 6621(b). The premium reduction must benefit all plan
participants equally, be fully implemented during the course of the
year following the last year of the five-year period to which it
relates, and be verified by the Independent Fiduciary; (2) If the
captive reinsurance arrangement is terminated before the end of a five-
year period (a Shorter Term), and if the Primary Benefit Test has not
been met during the Shorter Term, Phillips 66 must reduce the
participants' portion of the Plan's premium in the following year by an
amount at least equal to the amount by which the Shorter Term Primary
Benefit Test was not met. The premium reduction must benefit all plan
participants equally, be fully implemented during the course of the
year following the last year of the Shorter Term, and be verified by
the Independent Fiduciary. Relief in this proposed exemption does not
extend to prohibited transactions described in this proposed exemption
that occur during the Shorter Term unless the requirements in this
subsection (d)(2) have been met. The Independent Fiduciary must ensure
the premium reduction was properly implemented, notwithstanding that
the captive reinsurance arrangement has already been terminated;
(e) Phillips 66 may adjust the Benefit Enhancements to the Plan at
any time, if such adjustment is approved in advance by the Independent
Fiduciary after the Independent Fiduciary first determines that each
adjusted Benefit Enhancement is in the interest of the Plan's
participants and beneficiaries and available to them on an equal basis.
The cost incurred by Phillips 66 to fund the Benefit Enhancement may be
used to determine whether the Primary Benefit Test has been met. A
complete description of any new Benefit Enhancements and the
Independent Fiduciary's rationale and determinations regarding such
enhancements must be included in the next Independent Fiduciary report
submitted to the Department.
(f) Spirit must:
(1) Be a party in interest with respect to the Plan based on its
affiliation with
[[Page 52216]]
Phillips 66 that is described in ERISA Section 3(14)(G); \13\
---------------------------------------------------------------------------
\13\ Under ERISA section 3(14)(G), a corporation is a ``party in
interest'' with respect to an employee benefit plan if 50 percent or
more of the combined voting power of all classes of the
corporation's stock entitled to vote, or the total value of shares
of all classes of stock of the corporation, is owned by an employer
any of whose employees are covered by the employee benefit plan.
---------------------------------------------------------------------------
(2) Be licensed to sell insurance or conduct reinsurance operations
in the Vermont;
(3) Have obtained a Certificate of Authority from the insurance
commissioner of Vermont to transact business as a captive insurance
company. Such certificate must not have been revoked or suspended;
(4) Have undergone a financial examination (within the meaning of
the law of its domiciliary State, Vermont) by the Insurance
Commissioner of Vermont within five years before the end of the year
preceding the year in which the reinsurance transaction occurred;
(4) Have undergone, and continue to undergo, an examination by an
independent certified public accountant for its last completed taxable
year immediately before the taxable year of the Reinsurance Arrangement
covered by this exemption; and
(5) Be licensed to conduct reinsurance transactions by a state
whose law requires that an actuarial review of reserves be conducted
annually by an independent firm of actuaries and reported to the
appropriate regulatory authority;
(g) In each year of coverage provided by a Fronting Insurer, the
formulae used by the Fronting Insurer to calculate premiums will be
similar to formulae used by other insurers providing comparable life
insurance coverage under similar programs. Furthermore, the premium
charges calculated in accordance with the formulae will be reasonable
and comparable to the premiums charged by the Fronting Insurer and its
competitors with the same or a better financial strength rating
providing the same coverage under comparable programs;
(h) The Plan must pay no commissions with respect to the sale of
such contracts or the Reinsurance Arrangement;
(i) The Fronting Insurer must have a financial strength rating of
``A'' or better from A.M. Best Company (A.M. Best) or an equivalent
rating from another rating agency;
(j) The Reinsurance Arrangement between Spirit and Zurich or any
successor Fronting Insurer must be indemnity insurance only. The
arrangement must not relieve a Fronting Insurer from any responsibility
or liability to the Plan, including liability that would result if
Spirit fails to meet any of its contractual obligations to Zurich or
any successor Fronting Insurer under the Reinsurance Arrangement;
(k) Phillips 66 will not offset or reduce any benefits provided to
Plan participants and beneficiaries in relation to its implementation
of the Proposed Benefit Enhancements;
(l) The Independent Fiduciary must:
(1) In compliance with the fiduciary obligations of prudence and
loyalty under ERISA Sections 404(a)(1)(A) and (B) (i) review the
Reinsurance Arrangement and the terms of the exemption; (ii) obtain and
review all current objective, reliable, third-party documentation
necessary to make the determinations required of the Independent
Fiduciary by the exemption; and (iii) confirm in writing that all of
the exemption's terms and conditions have been met (or, due to timing
requirements, can reasonably be expected to be met consistent with the
terms of this proposed exemption) and send this confirmation to the
Department's Office of Exemption Determinations at least 30 days before
Phillips 66 engages in the Reinsurance Arrangement. The confirmation
must include: Copies of each document relied on by the Independent
Fiduciary and the steps the Independent Fiduciary took to make its
confirmation;
(2) Monitor, enforce and ensure compliance with all conditions of
this exemption, in accordance with its obligations of prudence and
loyalty under ERISA Sections 404(a)(1)(A) and (B), including all
conditions and obligations imposed on any party dealing with the Plan,
throughout the period during which Spirit's assets are directly or
indirectly used in connection with a transaction covered by this
exemption.
(3) Report any instance of non-compliance immediately to the
Department's Office of Exemption Determinations;
(4) Take all appropriate actions to safeguard the interests of the
Plan;
(5) Review all contracts pertaining to the Reinsurance Arrangement,
and any renewals of such contracts, to determine whether the
requirements of this proposed exemption and the terms of Benefit
Enhancements continue to be satisfied;
(6) Submit an annual Independent Fiduciary Report to the Department
certifying under penalty of perjury whether each term and condition of
the proposed exemption is met over the applicable period. Each report
must be: (i) Completed within six months after the end of the twelve-
month period to which it relates (the first twelve-month period would
begin on the effective date of the exemption grant); and (ii) submitted
to the Department within 60 days thereafter. The relevant report must
include all of the objective data necessary to demonstrate that the
Primary Benefit Test has been met;
(o) Neither Phillips 66 nor any related entity may use participant-
related data or information generated by or derived from the
Reinsurance Arrangement in a manner that benefits Phillips 66 or a
related entity;
(p) No amount of Spirit's reserves that are attributable to the
Plan participants' contributions may be transferred to Phillips 66 or a
related party;
(q) All the facts and representations set forth in the Summary of
Facts and Representation must be true and accurate; and
(r) No party related to this exemption request has or will,
indemnify the Independent Fiduciary, in whole or in part, for
negligence and/or for any violation of state or federal law that may be
attributable to the Independent Fiduciary in performing its duties
under the captive reinsurance arrangement. In addition, no contract or
instrument may purport to waive any liability under state or federal
law for any such violations.
Effective Date: This proposed exemption would become effective on
the date the Department publishes a grant notice in the Federal
Register.
Notice to Interested Persons
Persons who may be interested in the publication of this notice in
the Federal Register include Plan participants and beneficiaries. The
Applicant will provide notification to such interested persons by
electronic and first-class mail within fifteen (15) calendar days after
the publication date of the Notice in the Federal Register. Such
mailing will contain a copy of the Notice as it appears in the Federal
Register on the date of publication and a copy of the Supplemental
Statement required, by 29 CFR 2570.43(b)(2), which will advise
interested persons of their right to comment on the proposed exemption
and request a hearing.
The Department must receive all written comments and requests for a
hearing no later than forty-five (45) days after the date the Notice is
published in the Federal Register.
All comments will be made available to the public.
Warning: Please do not include any personally identifiable
information (such as your name, address, or other
[[Page 52217]]
contact information) or confidential business information that you do
not want publicly disclosed. All comments may be posted on the internet
and are retrievable by most internet search engines.
Further Information Contact: Mr. Joseph Brennan of the Department,
telephone (202) 693-8456. (This is not a toll-free number.)
Comcast Corporation (Comcast)
Located in Philadelphia, PA
[Application No. L-12021]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA), and in accordance with the procedures
set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October
27, 2011). As more fully explained below, this proposed exemption would
allow an affiliate of Comcast, One Belmont Insurance Company, to
reinsure the life insurance risks of the Comcast Corporation
Comprehensive Health and Welfare Benefit Plan. Comcast expects to
benefit by approximately $375,000 per year from the proposed
arrangement, and participants in the Plan's Dental Component will
receive at least a $375,000 yearly reduction in their portion of the
premium payments. If Comcast benefits by more than $375,000 in a
particular year (e.g., $500,000), participants in the Plan's Dental
Component will receive that same reduction ($500,000) in their premium
payments in the subsequent plan year. This exemption requires, among
other things, annual reports by a qualified, independent fiduciary,
submitted to the Department of Labor confirming whether the
requirements of the exemption have been met.\14\
---------------------------------------------------------------------------
\14\ The Department notes that the independent fiduciary's
annual written report is essential to the Department's tentative
finding that this proposed exemption is, and will continue to be, in
the interest and protective of the Plan and its participants and
beneficiaries. Each report must clearly, prudently, and loyally
determine whether Comcast and its affiliates have complied with each
term and condition of the exemption. The exemption's relief is
conditioned on the independent fiduciary's compliance with this
requirement.
---------------------------------------------------------------------------
Summary of Facts and Representations 15
---------------------------------------------------------------------------
\15\ The Department notes that availability of this exemption,
is subject to the express condition that the material facts and
representations contained in application L-12021 are true and
complete, and accurately describe all material terms of the
transactions covered by the exemption. If there is any material
change in a transaction covered by the exemption, or in a material
fact or representation described in the application, the exemption
will cease to apply to the covered transactions as of the date of
such change.
---------------------------------------------------------------------------
The Applicants
1. Comcast is an American telecommunications conglomerate
headquartered in Philadelphia, Pennsylvania. Comcast wholly owns One
Belmont Insurance Company (One Belmont), a captive insurance and
reinsurance corporation regulated by the State of Vermont. One Belmont
currently provides the following insurance coverage to Comcast and its
subsidiaries: Workers compensation, general liability, automobile
liability deductible reimbursement, production insurance, and
international employee health & welfare benefits. As of December 31,
2019, One Belmont had total assets of $271,114,394 and gross written
premiums of $50.0 million.
2. Comcast sponsors the Comcast Corporation Comprehensive Health
and Welfare Benefit Plan (the Plan), which provides eligible employees
with medical, life insurance, dental, disability, death benefits and
other welfare benefits. As of December 31, 2020, the Plan provided
benefits to approximately 110,657 active participants. Comcast provides
life insurance and death benefits to eligible employees through the
Life Insurance and Death Benefit Plan, which is a component of the Plan
(the Life Insurance Component). Benefits of the Life Insurance
Component include basic life insurance, for which Comcast pays one
hundred percent (100%) of the premium cost, and optional (supplemental)
group term life insurance benefits, for which employees pay one hundred
percent (100%) of the premium cost. The Plan also has a dental
component (the Dental Component), for which Comcast pays 60% of the
premium cost.
3. The basic and optional (supplemental) life insurance benefits
provided under the Life Insurance Component are insured by the
Prudential Insurance Company (Prudential), which is unrelated to
Comcast and its affiliates. Prudential recently received an ``A+''
financial strength rating from A.M. Best Company.
4. The Applicants are requesting an exemption that would permit One
Belmont to reinsure the basic and optional (supplemental) life
insurance provided under the Plan's Life Insurance Component. As
described below, the proposed exemption is subject to a number of
conditions, each of which must be verified by a qualified, independent
fiduciary (the Independent Fiduciary). Among other things, the
Independent Fiduciary must submit an annual report in which, in
accordance with ERISA Sections 404(a)(1)(A) and (B), it prudently and
loyally determines that the Applicants have met the terms of the
exemption, including the requirement that the Plan's Dental Component
has received all the financial benefits and cost savings associated
with the reinsurance arrangement that would otherwise have gone to the
Applicants.
5. The arrangement is expected to generate an annual financial
benefit to Comcast. In particular, Comcast currently anticipates that
the arrangement will result in $375,000 annual cost savings, as
compared to the current benefit structure.\16\ Therefore, the proposed
exemption requires Comcast to provide participants in the Plan's Dental
Component with at least an annual aggregate $375,000 reduction in their
portion of the premium for the Plan's Dental Component, without any
offsetting change or reduction in employee benefits.\17\
---------------------------------------------------------------------------
\16\ According to the Applicants, Prudential has agreed to
reduce the Plan's basic life insurance premiums by $375,000 in
return for transferring the Plan's basic life insurance risks to One
Belmont. The result is a cost savings to Comcast, since Comcast pays
100% of these premiums.
\17\ Based on the number of participants currently enrolled in
the Plan's Dental Component, that amount currently translates to
$3.84 per participant per year in employee premium savings.
---------------------------------------------------------------------------
6. Comcast states that reducing the premiums of the Plan's Dental
Component would benefit a higher percentage of Plan participants than
would benefit from reducing the premiums paid by Plan participants for
supplemental life insurance. Comcast states that 85% of Plan
participants participate in the Plan's Dental Component, while only 35%
of Plan participants who contribute towards the supplemental life
insurance offered by the Plan.
7. In no event may the reduction in the participants' portion of
the Dental Component's premium be less than the amount that Comcast or
any of its affiliates ultimately benefits from the captive reinsurance
arrangement. Further, Comcast must continue to contribute no less than
60% of the Dental Component's premiums after the captive reinsurance
arrangement takes effect.
8. If this proposed exemption is granted, Prudential will continue
to be the ``fronting'' insurer for the basic and optional
(supplemental) group term life insurance. Prudential will contract with
One Belmont for One Belmont to
[[Page 52218]]
provide reinsurance coverage for 90% of the risks insured with
Prudential (up to $1,500,000 in coverage for each individual employee
under the Plan). This captive reinsurance agreement between Prudential
and One Belmont will be ``indemnity only,'' which means that Prudential
will not be relieved of any of its liabilities with respect to benefits
provided under the Plan's Life Insurance Component, even if One Belmont
is unable or unwilling in any way to satisfy its contractual
obligations to Prudential.
9. Comcast and its affiliates, including One Belmont, may not
retain any profit, tax or other benefit from the captive reinsurance
arrangement. If Comcast or any of its affiliates ultimately receive a
tax, profit or other benefit in connection with the captive reinsurance
arrangement, including any benefit arising from a further
diversification of One Belmont's risks in connection with adding the
Insurance Component's risks to One Belmont's other risks Comcast must
ensure, and the Independent Fiduciary must verify, that participants in
the Plan's Dental Component receive a corresponding dollar-for-dollar
additional reduction to their portion of the premiums. For example, if
Comcast's savings from the captive reinsurance arrangement for a year
is $375,000, and One Belmont realizes a $25,000 net income increase
from the captive reinsurance arrangement in that same year, the Plan's
participants must receive a $400,000 reduction in their portion of the
Plan's Dental Component premium in the following year. Comcast may not
offset or reduce any employee benefits in connection with this premium
reduction.
ERISA Analysis
11. Comcast is a party in interest with respect to the Plan
pursuant to ERISA section 3(14)(C), because it is an employer whose
employees are covered by the Plan. In addition, the captive reinsurer,
One Belmont, is a party in interest with respect to the Plan pursuant
to ERISA section 3(14)(G) because it is 100% owned by the Comcast.\18\
---------------------------------------------------------------------------
\18\ Under ERISA section 3(14)(G), a corporation is a ``party in
interest'' with respect to an employee benefit plan if 50% or more
of the combined voting power of all classes of the corporation's
stock entitled to vote, or the total value of shares of all classes
of stock of the corporation, is owned by an employer any of whose
employees are covered by the employee benefit plan.
---------------------------------------------------------------------------
12. ERISA section 406(a) prohibits a wide variety of transactions
between plans and parties in interest. For example, ERISA section
406(a)(l)(D) prohibits a plan fiduciary from causing a plan to engage
in a transaction that results in the transfer of plan assets to a party
in interest. The proposed captive reinsurance arrangement would violate
ERISA section 406(a)(1)(D), because it would result in the Plan's
premium payments (which are plan assets) being indirectly transferred
to One Belmont, which is a party in interest with respect to the Plan.
13. ERISA section 406(b)(1) prohibits a fiduciary from dealing with
plan assets for its own interest or own account. The proposed captive
reinsurance arrangement would violate ERISA section 406(b)(1), because
the plan fiduciary would cause the Life Insurance Component's premiums
to be paid to Prudential with knowledge that corresponding payments
ultimately would be paid to One Belmont, and Comcast may benefit from a
diversification of One Belmont's risks.
14. Comcast must fund the reserves that will be established by One
Belmont for the reinsurance arrangement. This amount is estimated to be
$180,000 for the first year. Comcast will be fully and solely
responsible for funding any future reserves required in connection with
the captive reinsurance arrangement. In this respect, Comcast may not
pass along the cost of funding the reserves to the Plan or its
participants.
15. In connection with this exemption request, the Applicants
engaged Milliman Actuarial Services (Milliman) to act as the
independent fiduciary (the Independent Fiduciary) on behalf of the Plan
to evaluate, and if appropriate, approve or reject the subject
transactions. Milliman is responsible for the prudent and loyal review
and analysis of the proposed transactions on the Plan's behalf and for
providing a written opinion as to whether the arrangement complies with
the Department's requirements for an administrative exemption. Milliman
must have access to the captive insurance company's financial
statements, which will show premiums, claims, reserves and other
relevant financial items, and Milliman must use this information to
determine ongoing savings and any other benefits to the Applicants that
result from the reinsurance transaction. In addition, Milliman must:
(1) Review all contracts (and any renewal of such contracts) of the
reinsurance of risks and the receipt of premiums therefrom by One
Belmont and determine that the requirements of the exemption continue
to be satisfied; and (2) quantify (in dollars) all savings and other
benefits that Comcast receives from the proposed captive reinsurance
arrangement, and ensure that the Plan's participants receive a
corresponding benefit, at Comcast's expense, in the manner described
above.
16. Milliman represents that it has extensive experience overseeing
captive reinsurance arrangements. Milliman represents that it does not
have, and has not previously had, any relationship with any party in
interest (including any affiliates thereof) engaging in the proposed
transactions. Milliman does not have any financial interest with
respect to their work as an independent fiduciary regarding this
proposed transaction, or the captive reinsurance arrangement, apart
from the express fees paid for their work as an independent fiduciary
for the Plan. Gross income received by Milliman from Comcast, One
Belmont, or Prudential for this fiscal year is less than 0.1% of
Milliman's gross annual income from all sources. Under this exemption,
the gross income Milliman receives from Comcast, One Belmont and
Prudential in a fiscal year must not exceed two percent of Milliman's
gross annual income from all sources for that year. As a condition of
the exemption, neither Milliman nor any of its representatives will
enter into any agreement or instrument that violates the prohibitions
on exculpatory provisions in ERISA section 410 or the Department's
regulation relating to indemnification of fiduciaries at 29 CFR
2509.75-4.\19\ Finally, Comcast and its related parties have not, and
will not, indemnify Milliman, in whole or in part, for negligence and/
or for any violations of state or federal law that may be attributable
to Milliman performing its duties under the captive reinsurance
arrangement. In addition, no contract or instrument may purport to
waive any liability under state or federal law for any such violations.
---------------------------------------------------------------------------
\19\ ERISA section 410 provides, in relevant part, that ``except
as provided in [ERISA] sections 405(b)(1) and 405(d), any provision
in an agreement or instrument which purports to relieve a fiduciary
from responsibility or liability for any responsibility, obligation,
or duty under this part [meaning Part 4 of Title I of ERISA] shall
be void as against public policy.''
---------------------------------------------------------------------------
17. In connection with the transactions that are the subject of
this proposed exemption, Milliman represents that it has, among other
things, in full accordance with its prudence and loyalty obligations
under ERISA sections 404(a)(1)(A) and (B): (a) Reviewed a draft of
Comcast's application for an administrative exemption that was
submitted to the Department; (b) conferred with Comcast's
representative to discuss the transactions involved in the reinsurance
arrangement; (c) conducted such other
[[Page 52219]]
due diligence reviews as were prudent to determine that the conditions
of the proposed exemption would be met, including the premiums to be
paid by the Life Insurance Component for the proposed coverage.
Department's Note. If the Department grants an exemption,
Milliman's findings would not be current as of the exemption's
effective date. Therefore, as a condition of the exemption, Milliman
must engage in another analysis of the proposed transactions in full
accordance with ERISA Section 404(a)(1)(A) and (B). As part of this
analysis, Milliman must review the terms of the exemption and verify
that it has concluded based on its review of all of the relevant
documents and evidence that all of the exemption's terms and conditions
have been met (or, due to timing requirements, can reasonably expected
to be met consistent with the time requirements set forth in this
proposed exemption)). Milliman must document the basis for its
conclusions in a written report submitted to the Department's Office of
Exemption Determinations at least 30 days before the Plan engages in
the reinsurance arrangement. The report must include copies of all
documents and evidence Milliman relied on when conducting its review.
18. For the duration of the captive reinsurance arrangement,
Milliman must: (a) Monitor, enforce and ensure compliance with all
conditions of the exemption, including all conditions and obligations
imposed on any party dealing with the Plan, throughout the period
during which One Belmont's assets are directly or indirectly used in
connection with a transaction covered by this exemption; (b) report any
instance of non-compliance immediately to the Department's Office of
Exemption Determinations; (c) monitor the transactions covered by the
exemption on a continuing basis, to ensure the transactions remain in
the interest of the Plan; and (d) take all appropriate actions to
safeguard the interests of the Plan and its participants and
beneficiaries. Milliman must also review all contracts and agreements
(and any renewal of such contracts) relevant to the captive reinsurance
arrangement and exemption.
19. Additionally, Milliman must file annual certified reports to
the Department, under penalty of perjury, confirming that all of the
terms and conditions of the exemption have been met and explaining the
bases for that conclusion.
20. In the initial year of this proposed transaction, there will be
an immediate and objectively determined benefit in the form of reduced
employee contributions for the Dental Component of the Plan in the
amount of $375,000. Milliman must ensure that all participants in the
Plan's Dental Component will receive: The premium savings they are
entitled to under the exemption; and the full amount of any other
benefit Comcast receives from the proposed arrangement. The Department
retains the right to propose a revocation or amendment to this
exemption if it is unable to confirm the reliability of the underlying
financial data supporting the Independent Fiduciary's ``look-back''
findings. The Department notes that its failure to revoke an exemption
is not an endorsement or conclusion that the conditions of the
exemption are, in fact, met.
21. In addition to the protections and conditions discussed above,
this proposed exemption requires, and Milliman must verify that: (a)
Neither the Plan nor any plan participant pays any commissions with
respect to the direct insurance agreement between Comcast and
Prudential and the reinsurance agreement between Prudential and One
Belmont; (b) the formula used by Prudential, or any successor insurer,
to calculate premiums will be similar to the formula used by other
insurers providing comparable coverage under similar programs that are
not captive reinsured; (c) the premium charged to the Life Insurance
Component will be reasonable and comparable to the premiums charged by
the insurer and its competitors with the same or a better financial
strength rating providing the same coverage under comparable insurance
programs that are not captive reinsured; (d) the Life Insurance
Component will only contract with insurers with a financial strength
rating of ``A'' or better from A. M. Best; (e) the Plan pays no more
than adequate consideration with respect to insurance that is part of
the captive reinsurance arrangement covered by the proposed exemption
and (f) the captive reinsurance arrangement between the insurer and One
Belmont will be indemnity reinsurance only (i.e., the Fronting Insurer
will not be relieved of any liability to the Plan should the reinsurer
be unable or unwilling for any reason to cover any liability arising
from the reinsurance arrangement).
22. This proposed exemption expressly prohibits Comcast (or a
related entity) from using any participant-related data or information
that is generated by (or derived from) the proposed captive reinsurance
arrangement in any manner that benefits Comcast or a related entity.
Comcast may not reduce or offset any benefits provided to Plan
participants and beneficiaries in connection with its implementation of
the proposed captive reinsurance arrangement. Further, all expenses
associated with the exemption and the exemption application, including
any payment to the Independent Fiduciary, must be paid by Comcast and
not the Plan.
The Department's Findings
23. The Department has the authority under ERISA section 408(a) to
grant an exemption from the prohibition transaction provisions of ERISA
section 406 if the Department finds that the transaction is in the
interest and protective of the rights of the affected plan and its
participants and beneficiaries, and is administratively feasible.\20\
The Department's findings required under ERISA section 408(a) with
respect the proposed captive reinsurance arrangement are discussed
below.
---------------------------------------------------------------------------
\20\ Specifically, ERISA section 408(a) provides that the
Secretary of Labor may not grant an exemption unless the Secretary
finds that the exemption is administratively feasible, in the
interests of the plan and it participants and beneficiaries, and
protective of the rights of the plan participants and beneficiaries
of such plan.
---------------------------------------------------------------------------
24. The Proposed Exemption is ``Administratively Feasible.'' The
Department has tentatively determined that the proposed exemption would
be administratively feasible, because the proposed captive reinsurance
arrangement is subject to robust annual reviews by Milliman that must
be filed with the Department's Office of Exemption Determinations.
25. The Proposed Exemption is ``In the Interests of the Plan.'' The
Department has tentatively determined that the proposed exemption would
be in the interest of the Plan because, among other things, 100% of the
benefit to Comcast from the proposed captive reinsurance arrangement
must be transferred to participants in the Plan's Dental Component by
reducing their premiums in an amount equal to any and all cost savings
and benefits Comcast derives from the proposed captive reinsurance
arrangement. At no point during the proposed captive reinsurance
arrangement will the aggregate benefit to the Plan's participants in
the Dental Component be less than $375,000 per year, and Comcast may
not contribute less than 60% towards the premium for the Plan's Dental
Component after entering into the proposed reinsurance arrangement.
26. The Proposed Exemption is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed exemption is
[[Page 52220]]
protective of the rights of the Plan participants and beneficiaries
because, among other things: (a) The premium charged to the Life
Insurance Component will be reasonable and comparable to the premiums
charged by the insurer and its competitors with the same or a better
financial strength rating providing the same coverage under comparable
insurance programs that are not captive reinsured; (b) the Life
Insurance Component will only contract with insurers with a financial
strength rating of ``A'' or better from A. M. Best; (c) the Plan pays
no more than adequate consideration with respect to insurance that is
part of the captive reinsurance arrangement covered by the proposed
exemption; and (d) the reinsurance arrangement between the insurer and
One Belmont will be indemnity reinsurance only (i.e., the Fronting
Insurer will not be relieved of any liability to the Plan should the
reinsurer become unable or unwilling for any reason to cover any
liability arising from the reinsurance arrangement).
Summary
27. Based on Comcast satisfying the conditions described above, the
Department has tentatively determined that the relief sought by Comcast
satisfies the statutory requirements for an exemption under ERISA
section 408(a).
Proposed Exemption
The relief described in Section II of this proposed exemption is
conditioned upon adherence to the material facts and representations
described herein and as presented to the Department by Comcast, as well
as satisfaction of the Definitions in Section I and the Conditions in
Section III.
Section I. Definitions
(a) An ``affiliate'' of Comcast or One Belmont includes: (1) Any
person who controls the person or is controlled by or under common
control with Comcast or One Belmont; (2) Any officer, director,
employee, relative, or partner in Comcast or One Belmont; and (3) Any
corporation or partnership of which the person in (2) of this paragraph
is an officer, director, partner, or employee;
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual;
(c) The term ``Independent Fiduciary'' means a person who:
(1) Is not an affiliate of Comcast or One Belmont and does not hold
an ownership interest in Comcast or One Belmont or their affiliates;
(2) Is not a fiduciary with respect to the Plan before its
appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) Is a fiduciary with respect to the plan and has agreed not to
participate in any decision regarding any transaction in which it has
an interest that might affect its best judgment as a fiduciary; and
(ii) has appropriate technical training or experience to perform
the services contemplated by the exemption;
(4) has not entered into any agreement or instrument that violates
the prohibitions on exculpatory provisions in ERISA section 410 or the
Department's regulation relating to indemnification of fiduciaries at
29 CFR 2509.75-4.
(5) For purposes of this definition, no organization or individual
may serve as Independent Fiduciary for any fiscal year if the gross
income received by such organization or individual from Comcast, One
Belmont or their affiliates for that fiscal year exceeds two percent
(2%) of such organization's or individual's gross income from all
sources for the prior fiscal year. This provision also applies to a
partnership or corporation of which such organization or individual is
an officer, director, or 10 percent (10%) or more partner or
shareholder, and includes as gross income amounts received as
compensation for services provided as an independent fiduciary under
any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary
and no partnership or corporation of which such organization or
individual is an officer, director or ten percent (10%) or more partner
or shareholder may acquire any property from, sell any property to, or
borrow any funds from Comcast or One Belmont or their affiliates while
serving as an Independent Fiduciary. This prohibition will continue for
a period of six months after: The party ceases to be an Independent
Fiduciary; and/or the Independent Fiduciary negotiates any transaction
on behalf of the Plan during the period that the organization or
individual serves as an Independent Fiduciary.
Section II: Covered Transactions
If this proposed exemption is granted, the restrictions of ERISA
sections 406(a)(1)(D) and 406(b)(1) will not apply to the reinsurance
of risks and the receipt of premiums therefrom by One Belmont Insurance
Company, an affiliate of Comcast Corporation (Comcast), in connection
with insurance contracts sold by Prudential Insurance Company
(Prudential), or any successor fronting insurer meeting the
requirements of this proposed exemption (a Fronting Insurer), to
provide group term life insurance benefits to participants in the life
insurance component (the Life Insurance Component) of the Comcast
Corporation Comprehensive Health and Welfare Benefit Plan (the Plan).
Section III. Conditions
(a) In the initial year and each subsequent year of the captive
reinsurance arrangement, the participants' portion of the premium for
the dental component of the Plan (the Dental Component) must be reduced
by at least $375,000. If Comcast's savings from the captive reinsurance
arrangement are greater than $375,000 in any year, Comcast must reduce
the participants' portion of the Dental Component's premium by that
greater amount in the next subsequent year. If Comcast or any of its
affiliates ultimately receive some other benefit in connection with the
captive insurance arrangement, such as a tax reduction or a profit or
any benefit arising from a further diversification of One Belmont's
risks in connection with adding the Insurance Component's risks to One
Belmont's other risks, participants in the Dental Component must
receive an additional corresponding dollar-for-dollar reduction to
their portion of the Dental Component's premiums in the subsequent
year.
(b) No commissions are paid by the Plan with respect to the direct
sale of such contracts or the reinsurance thereof;
(c) In the initial year and in subsequent years of coverage
provided by a Fronting Insurer, the formulae used by the Fronting
Insurer to calculate premiums will be similar to formulae used by other
insurers providing comparable life insurance coverage under similar
programs that are not captive reinsured. Furthermore, the premium
charges calculated in accordance with the formulae will be reasonable
and will be comparable to the premiums charged by the Fronting Insurer
and its competitors with the same or a better financial strength rating
providing the same coverage under comparable programs that are not
captive reinsured;
(d) Comcast is solely and fully responsible for funding One
Belmont's reserves with respect to the reinsurance arrangement covered
by this proposed exemption;
(e) One Belmont:
[[Page 52221]]
(1) Is a party in interest with respect to the Plan by reason of a
stock or partnership affiliation with Comcast that is described in
ERISA section 3(14)(E) or (G);
(2) Is licensed to sell insurance or conduct reinsurance operations
in at least one State as such term is defined in ERISA section 3(10);
(3) Has obtained a Certificate of Authority from the state of
Vermont, its domiciliary state, that has neither been revoked nor
suspended;
(4) (A) Has undergone and shall continue to undergo an examination
by an independent certified public accountant for its last completed
taxable year immediately before the taxable year of the reinsurance
transaction covered by this exemption; or
(B) Has undergone a financial examination (within the meaning of
the law of Vermont) by the Commissioner of Banking, Insurance,
Securities and Health Care Administration of the State of Vermont
within five (5) years before the end of the year preceding the year in
which the reinsurance transaction occurred; and
(5) Is licensed to conduct reinsurance transactions under Vermont
law, which requires an actuarial review of reserves to be conducted
annually by an independent firm of actuaries and reported to the
appropriate regulatory authority;
(f) The Plan retained and will continue to retain an independent,
qualified fiduciary or successor to such fiduciary, as defined in
Section I(c), (the Independent Fiduciary) to analyze the transactions
covered by this proposed exemption, and render an opinion that the
requirements of this exemption have been satisfied;
(g) The Independent Fiduciary must, in full accordance with its
obligations of prudence and loyalty under ERISA sections 404(a)(1)(A)
and (B), review the terms of the exemption, engage in a prudent and
loyal analysis of the covered transactions, and verify that based on
its review of all relevant documents and evidence, it has concluded
that all of the exemption's terms and conditions have been met (or can
be reasonably be expected to be met consistent with the time
requirements set forth in this proposed exemption). This conclusion
must be documented in a written report submitted to the Department's
Office of Exemption Determinations at least 30 days before the Plan
engages in a transaction covered by the exemption. The report must
include copies of each document relied on by the Independent Fiduciary
and discuss the bases for its conclusion;
(3) Monitor, enforce and ensure compliance with all conditions of
this exemption, including all conditions and obligations imposed on any
party dealing with the Plan, throughout the period during which One
Belmont's assets are directly or indirectly used in connection with a
transaction covered by this exemption;
(4) Report any instance of non-compliance immediately to the
Department's Office of Exemption Determinations;
(5) Monitor the transactions described in the exemption on a
continuing basis, to ensure the transactions remain in the interest of
the Plan;
(6) Take all appropriate actions to safeguard the interests of the
Plan;
(7) Review all contracts pertaining to the Reinsurance Arrangement,
and any renewals of such contracts, to determine whether the
requirements of this proposed exemption continue to be satisfied;
(8) Determine that the Reinsurance Arrangement is in no way
detrimental to the Plan and its participants and beneficiaries;
(9) Confirm that the Plan's Dental Component has received all the
financial benefits and cost savings associated with the proposed
captive reinsurance arrangement that otherwise would have been retained
by Comcast or a party related to Comcast;
(10) Provide an annual report to the Department, under penalty of
perjury, certifying that each term and condition of this exemption is
satisfied and setting forth the bases for the certification. Each
report must be: (i) Completed within six months after the end of the
twelve month period to which it relates (the first twelve month period
begins on the first day of the implementation of the captive
reinsurance arrangement covered by this proposed exemption); and (ii)
submitted to the Department within six months thereafter;
(h) Comcast and its related parties have not, and will not,
indemnify the Independent Fiduciary, in whole or in part, for
negligence and/or for any violations of state or federal law that may
be attributable to the Independent Fiduciary in performing its duties
under the captive reinsurance arrangement. In addition, no contract or
instrument will purport to waive any liability under state or federal
law for any such violations.
(i) Neither Comcast nor a related entity may use participant-
related data or information generated by, or derived from, the
Reinsurance Arrangement, in a manner that benefits Comcast or a related
entity;
(j) All the facts and representations set forth in the Summary of
Facts and Representation are true and accurate;
(k) Comcast will not offset or reduce any benefits provided to Plan
participants and beneficiaries in connection with its implementation of
the captive reinsurance arrangement;
(l) The Plan will only contract with a Fronting Insurer with a
financial strength rating of ``A'' or better from A.M. Best;
(m) The Plan pays no more than adequate consideration with respect
to insurance that is part of the captive reinsurance arrangement
covered by the proposed exemption;
(n) In the event a successor Independent Fiduciary is appointed to
represent the interests of the Plan with respect to the subject
transaction, no time shall elapse between the resignation or
termination of the former Independent Fiduciary and the appointment of
the successor Independent Fiduciary; and
(o) All expenses associated with the exemption and the exemption
application, including any payment to the Independent Fiduciary, must
be paid by Comcast and not the Plan.
Effective Date: The proposed exemption is effective as of the date
a final exemption is published in the Federal Register.
Notice to Interested Persons
Persons who may be interested in the publication of this notice in
the Federal Register include Plan participants and beneficiaries. The
Applicants will provide notification to such interested persons by
electronic and first-class mail within fifteen (15) calendar days after
the date the Notice is published in the Federal Register. Such mailing
will contain a copy of the Notice as it appears in the Federal Register
on the publication date and a copy of the Supplemental Statement
required by 29 CFR 2570.43(b)(2) that advises interested persons of
their right to comment on the proposed exemption and request a hearing.
The Department must receive all written comments and requests for a
hearing no later than forty-five (45) days after publication date of
the date of the Notice in the Federal Register.
All comments will be made available to the public.
Warning: Please do not include any personally identifiable
information (such as your name, address, or other contact information)
or confidential business information that you do not want publicly
disclosed. All comments may be posted on the internet and are
[[Page 52222]]
retrievable by most internet search engines.
Further Information Contact: Blessed Chuksorji-Keefe of the
Department, telephone (202) 693-8567 (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which, among other things, require a fiduciary
to discharge his duties respecting the plan solely in the interest of
the participants and beneficiaries of the plan and in a prudent fashion
in accordance with section 404(a)(1)(b) of the Act; nor does it affect
the requirement of section 401(a) of the Code that the plan must
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries, and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Signed at Washington, DC.
G. Christopher Cosby,
Acting Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2021-20237 Filed 9-17-21; 8:45 am]
BILLING CODE 4510-29-P
