The U.S. Department of Labor has proposed a prohibited transaction exemption that would allow Memorial Sloan Kettering Cancer Center (MSKCC) to use a captive insurance company to reinsure pension risks.

According to a notice published in the Federal Register, the proposed exemption would allow MSK Insurance US Inc., a subsidiary of MSKCC, to reinsure risks and receive premiums associated with a single group insurance contract issued by an unrelated front-end insurer.

According to a report by AM Best, Memorial Sloan Kettering had 29,732 employees and generated nearly $6.63 billion in operating revenue, according to the Department of Labor. The cancer center’s pension plan, which closed to new enrollments in December 2012 and had future benefit enrollments frozen in 2020, covered 8,263 participants and had total assets of $1.35 billion.

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The Department of Labor is considering granting this exemption under the Employee Retirement Income Security Act (ERISA). The notice noted that MSKCC is expected to benefit financially from the exemption, estimated at $126.4 million. The exemption requires MSKCC to allocate the majority of this benefit to plan participants and beneficiaries through a uniform percentage increase in monthly retirement benefits.

The Department of Labor has set an August 23 deadline for written comments and requests for a public hearing on the proposed exemption.

In other recent developments, nine life insurance trade groups have filed a joint lawsuit against the Department of Labor, seeking to overturn its fiduciary rule, which they claim will limit consumers’ ability to obtain retirement-related investment advice.

The lawsuit, filed June 4, includes plaintiffs such as the American Council of Life Insurers, the National Association of Insurance and Financial Consultants (including its Texas, Dallas and Fort Worth chapters and NAIFA-POET), FinSec, the Institute for Insured Retirement, and the National Association of Fixed Annuities.

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