DOL’s Lefkowitz Advises: Copy Previous Exemptions

March 15, 2010 -- Gary Lefkowitz has for 35 years defined “prohibited transactions” involving captive insurance companies and employee benefit plans as the benefits law specialist of the Department of Labor’s Employee Benefits Security Administration. But his genial manner belied his dictatorial power when he spoke at SIIA’s Legislative-Regulatory Conference last week in Washington, DC.

In fact, he encouraged captive managers to “cheat” in applying for exemptions to rules covering prohibited transactions. “Look them up on the website,” he told the audience. “Just copy the applications (of programs that have achieved exemptions). This is not like school where you can’t copy from Bobby’s paper – go ahead and copy Bobby’s paper,” he told the audience.

The website in question is www.dol.gov/ebsa to look up exemption application processes and rulings. And in case a person has more questions Lefkowitz invites phone calls at 202-693-8546.

Lefkowitz said that exemption applications for captive reinsurance of benefits plans have become more numerous under the “Expro” (for expedited procedure) process that the DOL established in recent years. Captives that can’t meet the “50 percent rule” (no more than 50 percent of annual premium derived from related corporations) may emulate other successful exemption applications based on two safeguards: (1) an independent fiduciary, and (2) enhanced benefits to plan participants.

Examples of benefits enhancements that Lefkowitz cited as helping to gain exemptions include:

  • Improved death benefits.
  • Free will preparation.
  • Free financial counseling for beneficiaries.
  • Addition of free AD&D plans.
  • Spousal and child tuition support.
  • Childcare benefits.
  • Non-revocable, fully covered lifetime retiree benefits.

While traditional exemption requests have taken up to six months for processing, the Expro applications are turning around in less than three months, Lefkowitz noted. “It is important to cite similarities to previously granted exemptions and for applications to meet all conditions of conventional cases going back 10 years or for Expro cases in the past five years,” he said.