831b Institute launched across US
The 831(b) Institute has launched across the US on June 28, National Insurance Awareness Day.
The Institute was formed to bring the business community together and give them a voice around what true risk mitigation and insurance coverage means to small and medium-sized businesses.
Insurance is an essential part of owning a business, but often complicated rules and lack of proper guidance from the Internal Revenue Service (IRS) result in confusion and misconceptions, the Institute said.
In a statement the Institute explained: “Our country is built on entrepreneurial spirit, and microcaptive insurance helps protect the livelihoods of America’s entrepreneurs.
“Microcaptives, also known as 831(b) plans, can serve as an excellent insurance option for small business owners. Essentially, microcaptives allow for self-reliance, independence, and flexibility for businesses. However, these plans are scrutinised unfairly by the IRS. Instead of creating guidelines that allow for microcaptive plans to be fairly regulated, the IRS is attempting to push forward harmful regulation that will make microcaptives less effective.”
“The inability of the IRS to create clear regulatory standards for microcaptives is harmful to good faith business owners looking to have an insurance plan in place that allows them to participate in the risk and premium of their insurance programs in the same manner as large enterprises – on this includes the ability to help to cover unpredictable expenses and potentially catastrophic events,” said Nate Reznicek, an advisor for the Institute, is the President and Principal Consultant at Captive.Insure. “As long as the establishment of a microcaptive follows the 4-pillar test of risk transfer, risk distribution, fortuitous risk, and common notions of insurance (as determined by the appropriate state/domicile regulatory authority), business owners should be able to pursue the plan that is best for them without having to fear the IRS.”
The IRS announced that it was considering treating microcaptives as abusive tax transactions earlier this year and asked for comments from the insurance industry.
On July 19, the IRS will be holding a public hearing on the proposed regulations for microcaptives. Many individuals, businesses, and associations shared the importance of microcaptives during the IRS comment period that ended June 12. The 831(b) Institute will continue to advocate for microcaptives as the hearing approaches.
