At Capital Guardian, the plan must ensure the transfer of risk from the participant’s operating company. To facilitate this, we utilize a direct writer. Additionally, the plan leverages the law of large numbers to distribute risk among unrelated parties. It is essential that the risks addressed are unexpected and not typical business risks. Finally, the plan must adhere to generally accepted insurance principles.
Traditional insurers cover many of the risks business owners face. However, their policies often include limitations or exclusions, leaving certain losses uncovered. A Captive helps mitigate the risks business owners encounter daily, providing an additional layer of protection they may not even realize they need.
A Captive enables business owners to set aside pre-tax income to address future risks. Without a Captive, business owners are self-insuring risks, like business interruptions, using after-tax cash flow. With a Captive, when unexpected events occur, owners can access these tax-deferred reserves to navigate challenging times.
We understand the complexities of life as a business owner. At Capital Guardian, our Captive plans are designed to streamline operations and minimize disruptions. As your plan administrator, we ensure compliance with the four-part test while helping you achieve your risk mitigation goals. Our proven process guides business owners through seamless plan implementation and provides ongoing support for effective plan management.
Similar to a 401(k) plan, a Captive has annual contribution limits. As the plan administrator, Capital Guardian applies a defined methodology to calculate contributions, factoring in gross revenue and the participant’s industry. Captive plans operating for three to five years undergo annual solvency testing, which may require distributions based on solvency results. Participants can also distribute reserves by declaring dividends, which are limited to surplus reserves. For those seeking higher contribution limits, a non-831(b) election under our 1120PC plan offers an alternative solution.
Captive reserves are held in a C-Corp that can elect to operate under the 831(b) tax code, allowing up to $2.8 million in annual tax-deferred contributions (subject to contribution limits). Investment income and realized gains from plan reserves are taxed at the C-Corp rate, while dividend distributions to shareholders are taxed at the qualified dividend rate. For those seeking higher contribution limits, a non-831(b) election under our 1120PC plan provides an alternative with expanded flexibility.
As outlined above, plan participants can choose to distribute reserves by declaring a dividend. More critically, in the event of a catastrophe, business owners can file a claim against the Captive, similar to a traditional insurance policy. Capital Guardian guides participants through a structured claims process to ensure compliance with insurance principles. Once the claim is processed, participants are compensated for their losses, up to the plan limits. Alternatively, reserves can be invested or utilized to become a lender, creating additional financial opportunities.
To satisfy the risk distribution requirement of the Four-Part Test, all Captive participants are grouped into risk co-ops with other participants, sharing risks on a pro-rata basis. This means participants are responsible for a portion of claims made by unrelated parties within the Captive. Each risk co-op is organized based on the specific risks being covered and leverages the law of large numbers to distribute risk across a broad group of participants effectively.
Capital Guardian charges a flat annual fee for the Captive plans it administers. This fee covers all ongoing plan maintenance, including claims processing, annual tax returns, compliance with tax reporting requirements, plan adjustments, and proper documentation of plan distributions. Additionally, the direct writer charges a retained liability premium, which is tiered based on annual contributions. Financial institutions holding plan reserves may also impose additional fees.
Dee is a seasoned Sales Director with a BA in Accounting from Portland State University, bringing over 30 years of extensive sales experience, including a notable decade-long focus on international business. Throughout his career, Dee has honed his expertise in engaging business owners and C-suite executives, leveraging his financial acumen and adept relationship-building skills to tackle intricate business challenges effectively. Known for his entrepreneurial mindset and proactive approach, Dee excels in devising and implementing innovative processes that significantly enhance revenue streams. Beyond his professional endeavors, Dee finds great joy in golfing, experimenting with at-home cooking recipes, exploring global destinations, and immersing himself in diverse cultures.