Federal Register Extracts

Agency: "Employee Benefits Security Administration, Labor."

SUMMARY: This document contains a notice of exemption issued by the Department of Labor (the Department) 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). Under the exemption, the Comcast Corporation Comprehensive Health and Welfare Benefit Plan (the Plan) will enter into an insurance contract with an unrelated A-rated insurance company (the Fronting Insurer) that will, in turn, enter into a reinsurance contract with One Belmont Insurance Company (One Belmont), an affiliate of Comcast (the Reinsurance Arrangement). Under the Reinsurance Arrangement, One Belmont will reinsure the Plan's risks.

FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the Department at (202) 693-8567. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On September 20, 2021, the Department published a notice of proposed exemption in the Federal Register at 86 FR 52217, permitting: (1) the reinsurance of risks; and (2) the receipt of premiums by One Belmont in connection with insurance contracts sold by Prudential Insurance Company (Prudential), or any successor Fronting Insurer, to provide group term life insurance benefits to participants in the life insurance component (the Life Insurance Component) of the Plan.

This exemption provides only the relief specified in the text of the exemption. It provides no relief from violations of any law other the prohibited transaction provisions of ERISA expressly stated herein.

The Department makes the requisite findings under ERISA Section 408(a) based on adherence to all of the conditions of the exemption. Accordingly, affected parties should be aware that the conditions incorporated in this exemption are, taken as a whole, necessary for the Department to grant the relief requested by the Applicant. Absent these or similar conditions, the Department would not have granted this exemption.

The Applicant requested an individual exemption pursuant to ERISA section 408(a) in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).

Written Comments

In the proposed exemption, the Department invited all interested persons to submit written comments and/or requests for a public hearing with respect to the notice of proposed exemption. All comments and requests for a hearing were due to the Department by November 4, 2021. The Department received one written comment from the Applicant, /1/ discussed below, and three written comments from members of the public. Two of the public commenters were against the proposed exemption and shared the same general concern that the exemption would allow Comcast to own or control the entities that provide healthcare services to its employees. /2/ The other public commenter expressed a view that was unrelated to the substance of the proposed exemption. The Department did not receive any requests for a public hearing from any of the commenters.

FOOTNOTE 1 At the Department's request, the Applicant submitted an additional written submission clarifying its comment letter. END FOOTNOTE

FOOTNOTE 2 The Department notes that Prudential, the "fronting" insurer, is unrelated to Comcast and its affiliates. The Department has clarified section III(l) of this exemption to expressly provide that, consistent with the Department's intent, each "fronting" insurer may not be owned or controlled, in whole or in part, by Comcast. END FOOTNOTE

Comments From the Applicant

I. Reinsurance Benefit

The Applicant notes that footnote 16 of the Summary of Facts and Representations states: "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."

The Applicant now represents, however, that, upon further review, the Reinsurance Arrangement will not result in Prudential reducing the premium amounts charged to Comcast for the Life Insurance Component. Those premium amounts are expected to remain the same. The current rates are guaranteed through December 31, 2023, as part of a three-year guarantee period. The Plan has negotiated three-year guarantee periods for several years.

Department's Note: Although Comcast will not save $375,000 per year in Plan premium payments, as originally expected, Comcast now expects One Belmont will instead receive approximately $375,000 in additional earned income per year from the captive arrangement. Under the terms of the exemption, the net result is the same: Plan participants must receive all the financial benefits that Comcast derives from the arrangement. This includes, as described in Section III(a) of the exemption, any premium savings to Comcast from the captive reinsurance arrangement, as well as any additional earned income to One Belmont from the arrangement.

Comcast requests that the references throughout the exemption be modified to reflect "expected earned income" or "earned income" rather than "premium reduction" or "savings."

Department's Response:The Department declines to revise the operative language of the exemption as requested. The terms "earned income" or "expected earned income" do not accurately describe the exemption's expressed intent to ensure that all benefits generated from the captive arrangement, not just additional earned income, inure to the benefit of Plan participants. Consistent with this intent, the Department has changed the term "savings" to "benefits" in Section III(a) and deleted the reference to "savings" in Section III(g)(9) (for consistency).

Further, the Department has not changed the term "premium reduction" to "earned income" "or expected earned income." The term "premium reduction," as used in the exemption, describes the requirement that Comcast must reduce the participants' portion of the premium for the dental component of the Plan by at least $375,000 each year the reinsurance arrangement is in effect. In this context, the term "premium reduction" more accurately describes the Department's intent than "earned income" or "expected earned income."

II. Five-Year or Three-Year Look Back Proposal

Section III(a) of the proposal states that: "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 Plan-related insurance 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."

Comcast requests that this section be modified to allow for a five-year look-back in which to calculate and apply any additional earned income over $1,875,000 to reduce the dental premiums (i.e., any amount above the $375,000 per year over a five-year period that Comcast is already expected to receive from the arrangement and required to pass on to participants in the form of reduced premiums). Comcast states that it is "concerned that the current structure of the proposed exemption, which could involve adjustments to participant contribution amounts each year, introduces the potential for significant fluctuations in participant dental premium amounts over time." Comcast states that such a period will help it "smooth fluctuations in participant contribution amounts over time."

Comcast requests that if the Department is not agreeable to a five-year lookback period, the exemption be modified to allow for a three-year rolling lookback period. Comcast states that a three-year rolling lookback would allow Comcast to assess over a three-year period whether any additional earnings above $125,000 (the $375,000 guaranteed minimum amount over a three-year period) must be credited against participant contributions on an annual basis (subject to the timing request discussed below). Comcast argues that this three-year rolling lookback would mitigate any significant lag between the calculation of the extra earning income and crediting the earnings against participant contributions to the Dental Component and this methodology will allow Comcast to achieve more consistent pricing to soften the impact of fluctuations on participant contributions.

Department's Response:The Department declines to make either of the Applicant's requested revisions. The Department developed the conditions of the exemption to ensure that participants will benefit from all earned income and other benefits that are generated by the reinsurance arrangement. A five or three-year period is excessive for participants to receive additional premium reductions. Among other things, a multi-year period would deprive Plan participants who leave Comcast's employment before the end of the period of the benefits of further premium reduction. Consistent with this view, the exemption requires Comcast to calculate One Belmont's earned income from the reinsurance arrangement on an annual basis. However, the Department acknowledges that Comcast may have legitimate concerns regarding the amount of time it needs to properly reduce participants' premium payments by such amount and has agreed to additional timing considerations, as discussed immediately below.

III. Timing of Use of Benefits and Independent Fiduciary Report

--This is a summary of a Federal Register article originally published on the page number listed below--

Notice of exemption.

Citation: "87 FR 54264"

Document Number: "Prohibited Transaction Exemption 2022-03; Exemption Application No. L-12021"

Federal Register Page Number: "54264"

"Notices"