Exemption From Certain Prohibited Transaction Restrictions Involving Memorial Sloan Kettering Cancer Center (MSKCC or the Applicant) Located in New York, New York
Published Date: 1/15/2025
Notice
Summary
Memorial Sloan Kettering Cancer Center (MSKCC) got special permission to use its own insurance company to help manage pension plan risks and receive premiums. This change starts January 15, 2025, and aims to protect the pension plan members while making the process smoother and more efficient. It affects MSKCC’s pension plan participants and ensures their benefits stay safe under new rules.
Analyzed Economic Effects
6 provisions identified: 5 benefits, 0 costs, 1 mixed.
Permanent 5.55% Pension Increase
If you are a participant or beneficiary in the Memorial Sloan Kettering Cancer Center Pension Plan, your monthly pension benefit will receive a permanent increase currently expected to be 5.55 percent. The increase is presented as a one-time enhancement with a present value of $66,408,000 for all participants and beneficiaries and will continue for the remainder of recipients' lives.
Fronting Insurer Keeps Unconditional Liability
The unrelated Fronting Insurer will remain fully and unconditionally responsible for paying Plan benefits during both the Buy-In and Buy-Out phases of the annuity arrangement, even if the captive fails to pay. During the Buy-In phase the Fronting Insurer pays the Plan and seeks quarterly reimbursement from the captive; during the Buy-Out phase the Fronting Insurer issues annuity certificates and pays annuitants directly.
Plan Assets Used to Buy Single Premium Annuity
The Plan will use current Plan assets (including possible in-kind transfers) to pay a one-time premium to purchase a single premium group annuity contract (GAC) from the Fronting Insurer. Under the Buy-In phase the GAC will be a Plan asset and quarterly reimbursements flow from the captive to the Fronter for benefits the Fronter pays.
Independent Fiduciary Oversight and $1,968,000 Add‑On
Milliman will act as the Plan's Independent Fiduciary to confirm that participants receive the majority of benefits and to report to the Department; the Department allowed the Independent Fiduciary to step aside after plan termination only if MSKCC adds $1,968,000 (the present value of the fiduciary's expected fees) into the GAC as a permanent additional benefit. That $1,968,000 produces an additional 0.18% permanent monthly pension increase as part of the total 5.55% enhancement.
Captive Collateralization; Vermont Oversight After Termination
The captive (MSK EB) will be collateralized and capitalized by MSKCC in accordance with Vermont law, with parental guarantees separate from Plan assets; the Vermont Department of Financial Regulation (Vermont DFR) will audit the captive annually and conduct a thorough exam at least once every five years, and the Department will receive Exam Reports. After plan termination, Vermont DFR oversight and state insurance regulation of the Fronting Insurer will provide ongoing supervision of annuities.
Limits on Data Use and Prohibition on Captive Distributions
MSKCC and related entities may not use participant or beneficiary data from the reinsurance arrangement for purposes unrelated to the administration, funding, or security of the GAC, Reinsurance Arrangement, or Plan. MSKCC is also prohibited from receiving dividends or distributions from the captive at any point during the Reinsurance Arrangement.
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