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In 1993, in response to the publication of the Internal Revenue Service's (IRS) Revenue Ruling 92-93, 1992-2 C.B, 15, the state of Vermont enacted legislation that would allow captive insurance companies to write employee benefit plan business. Soon thereafter, Hawaii enacted a similar provision to amend its captive insurance company law. And interest continues to grow. There are three categories of legal issues to consider: federal income tax issues, state insurance regulatory constraints and prohibited transaction considerations under the Employee Retirement Income Security Act of 1974 (ERISA). The U.S. Department of Labor's (DOL's) evolving interpretations of ERISA have spurred more contentious issues and provide for more dramatic changes in the future. These are examined in detail.