Van on 831(b) Plans and Business Risk
On the Family Office Podcast, host Andre Sospina interviews Van about business risk and 831(b) plans.
Van describes 831(b) plans as one way to fund retained business risks. He also explains how he divides plan administration and reserve management with clients and their advisers.
In this video: Andre Sospina (host), Van (founder and CEO of SR831B Admin)
What they said
- Van on equipment purchases. Van says some owners he worked with kept buying and financing equipment while betting each year would be better than the last. He describes that pattern as a poor substitute for planning how to fund business risks.
- Van on retained business risks. Van says traditional policies can have higher rates and more exclusions, leaving businesses with larger deductibles and other costs to fund. He describes an 831(b) plan as a way to set aside premiums for risks the business retains.
- Van on supply chain and cyber exposures. Van cites supply chain problems, cyber breaches, brand damage and disputes as risks that may leave a business paying expenses itself. He says small and middle market businesses can face substantial out-of-pocket costs when their coverage limits are small.
- Van on pooled claims. Van says a participating business may have to pay claims that aren't affiliated with its own operations. He describes that shared exposure as part of spreading risk across the pool.
- Van on adviser roles. Van says his administrator handles plan administration, while clients and their financial advisers manage the reserves. He says he prefers reserves to build before considering less liquid investments.
In their words
"the premium you put into it every year also stays tax deferred"
Why it matters if you are building or preserving great wealth
Van recalled business owners wishing they had cash to buy raw materials for 10 cents on the dollar when others were short of cash. That example connects reserves with the ability to act when raw materials or real estate are available at a steep discount.
From Richard's exclusive Billionaires.com interviews
Lessons from Richard C. Wilson's one-on-one interviews, as published on each interview page.
- Binod K. Chaudhary: Never chase a deal out of desperation. Stay cool and look at every part of the deal. Have your advisers and your finance team review it critically. Your counsel should review it too.
- Igor Olenicoff: Work hard and save. The family arrived with very little. They knew it would take hard work and saving money to succeed.
- Anu Aga: Focus on one main cause. Her family found its giving more satisfying and impactful once it chose primary education for the underprivileged in India.
See the data
Frequently asked questions
How did Van describe plan ownership?
Van said the plan is a C corporation and that its owners must mirror the operating company's owners.
How did Van describe taxes on investment gains?
He said the premiums remain tax deferred while the plan is active, but realized investment gains are taxed each year at the corporate rate.
Sources
Quotes are copied from the video captions and checked against the transcript. Timestamps link to the moment in the video. General information only, not legal, tax or investment advice.