The Coca Cola Company has received tentative authorization from the Labor Department for its groundbreaking approach to funding retiree health care benefits through a special trust and its captive insurance company.
Under its plan, the company will use assets in a voluntary employee’s beneficiary associaion to purchase medical stop-loss policies from Prudential 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.
Prudential will use the premium it receives from Coca Cola to reinsure the risk with Red Re Inc., a South Carolina captive insurer and one of three captives owned by Coca Cola.
Benefit experts say there are significant financial advantages to Coca Cola’s funding approach and that other companies will follow after the transaction receives final approval from the Labor Department.