SIIA Breaking News: Legislative Win for Enterprise Risk Captives

SIIA-Led Advocacy Campaign Secures Positive Outcome for Self-Insurance/ Captive Industry

March 23, 2018 - In a major legislative victory for the captive industry, Congress passed, and the President signed into law, several key tax clarifications for Enterprise Risk Captives (ERCs) proposed by the Self-Insurance Institute of America, Inc. (SIIA). This legislation, the Consolidated Appropriations Act of 2018, is the final result of ongoing spending and appropriations debates within Congress. At SIIA’s request, and after more than two years of consistent advocacy by the association and its members, the omnibus bill includes much needed clarification in the tax code for IRC 831(b) captives pertaining to various reporting requirements included in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).

ERCs, sometimes referred to 831(b) captives, are a self-insurance solution used by increasing number of smaller and mid-sized companies to insure a variety of risks for which coverage in the traditional market is difficult to obtain or too expensive. Many of these companies separately sponsor self-insured group health plans and/or workers’ compensation programs, highlighting the growing trend of companies incorporating multiple self-insurance solutions as part their overall risk management strategy.

Throughout numerous meetings with Congress and regulators, SIIA members have advocated for their industry and, most importantly, their clients who are utilizing captives to help grow and protect their business. This engagement has proven an effective tool in SIIA’s ongoing outreach to policymakers on a broad scope of self-insurance issues.

“This latest legislative accomplishment further demonstrates how SIIA has significantly improved its government relations capabilities over the last several years and how this focus directly benefits our members,” said association president & CEO Mike Ferguson. “These most recent results pair nicely with the solid work we continue to do to represent the interests of the majority of our members who are involved with self-insured group health plans.”

The legislative changes included in the omnibus bill, effective retroactively, include changes to the policyholder “look through provisions” in the first diversification test, clarification of “specified asset” under the second diversification test, and changes to the spousal ownership definition to address community property and attribution issues. The relevant legislative text may be found here.

SIIA played a crucial role in the ultimate outcome of PATH Act provisions passed by Congress back in 2015 related to IRC 831(b), which contained a threshold increase to $2.2 million pegged to inflation, as well as restrictions on the use of captives for estate planning purposes. Since that time, SIIA has worked with congressional policymakers on legislative clarifications to ease the reporting burdens for those captives operating in the right way, while maintaining needed policy parameters for those who may be inappropriately taking advantage of the election.

If you have any questions or would like to talk further about captive issue engagement, please contact Ryan Work, SIIA’s vice president of federal government relations, at rwork@siia.org.

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