Coca-Cola Co., Atlanta, received final authorization from the Department of Labor for its approach to funding retiree health-care benefits through a special trust and Coca-Cola's captive insurance company.
The final authorization was published in the April 2 Federal Register.
Under its plan, Coca-Cola will use assets in a VEBA to purchase medical stop-loss policies from Prudential Insurance Co. of America to pay claims over the expected lifetimes of roughly 4,000 retirees and dependents. Coca-Cola established the VEBA in 2006 and contributed $216 million to the trust.
The medical stop-loss coverage will pay claims that fall between an attachment point and an upper limit.
Prudential in turn will use the premium it receives from Coca-Cola to reinsure the risk with Red Re, a South Carolina-domiciled captive insurer and one of three captives owned by Coca-Cola.
Coca-Cola still is waiting for a private letter ruling from the IRS involving tax issues related to the transaction.
Jerry Geisel is editor-at-large at Business Insurance, a sister publication of Pensions & Investments.