Unveiling the Power of Micro-Captive Insurance - The 831(b) Advantage

Apr 29, 2024

Van Carlson, the Founder & CEO of SRA, brings over 25 years of risk management experience to the discussion. He dives into the world of Micro-Captive Insurance, specifically the 831(b) Plans, revealing how small to mid-market businesses can retain significant risk and premiums while enjoying tax benefits. Van explains the parallels between 401(k) and 831(b) accounts, emphasizing proactive risk management. His insights are a game-changer for farmers and business owners looking to gain control over their financial futures.

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INSIGHT

831(b) Origins

The 831(b) tax code incentivizes self-insurance for risks traditional insurance doesn't cover.
It was introduced in 1986 to address issues like crop insurance gaps and rising costs, similar to current market conditions.

ADVICE

Pre-tax Risk Financing

Consider using pre-tax money through an 831(b) plan for self-insuring risks.
SRA acts as an administrator, ensuring adherence to the tax code, similar to a 401(k) administrator.

ANECDOTE

COVID-19 and 831(b)

COVID-19 highlighted the limitations of government reliance for business interruptions.
An 831(b) can act as a personal "PPP plan," offering more control over financial security.

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In this insightful episode of the Farm4Profit Podcast, we explore the fascinating world of Micro-Captive Insurance with none other than Van Carlson, the esteemed Founder & CEO of SRA. With over twenty-five years of experience in the risk management industry, Van brings a wealth of knowledge and expertise to the table, sharing valuable insights on how small to mid-market businesses can leverage 831(b) Plans to effectively manage their property and casualty risks while enjoying significant tax benefits.

Van's journey in the industry began with Farmers Insurance Group, where he started as an agent and swiftly rose to prominence, growing his book of business to become one of the largest in his home state of Idaho. Today, his primary goal is to continue the upward trajectory of SRA, constantly innovating and developing new products to meet the evolving needs of the market.

The heart of this episode lies in understanding the intricacies of 831(b) Plans and how they offer a unique opportunity for business owners to retain up to 50% of their risk and premiums. By placing funds in a tax-deferred 831(b) Plan, businesses can build a funded reserve for potential losses, thus gaining greater control over claims and even participating in underwriting profits within their plan. It's an ideal strategy for savvy business owners willing to take calculated risks for greater rewards.

Van also draws parallels between 401(k) and 831(b) accounts, shedding light on their similarities in terms of tax benefits, contribution limits, and compliance requirements. However, the real magic of 831(b) Plans lies in their ability to mitigate various business risks that may not be covered by traditional insurance, such as supply chain interruptions, cybersecurity attacks, and even brand damage.

Delving deeper into the history of 831(b) Microcaptives, Van discusses the legislative milestones and regulatory framework that have shaped their evolution over the years. From the Tax Reform Act of 1986 to the more recent PATH Act of 2015, which increased premium amounts and introduced inflation riders, these legislative developments have made 831(b) Plans an increasingly attractive option for businesses seeking comprehensive risk management solutions.

Join us as we unravel the complexities of Micro-Captive Insurance and discover how it can be a game-changer for your business's risk management strategy. Whether you're a seasoned entrepreneur or just starting out, this episode offers invaluable insights into safeguarding your assets and maximizing rewards in today's dynamic business landscape. Tune in now to learn from the best in the industry and take your risk management strategy to the next level.

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