WCI #342: Captive Insurance

This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011.

This is White Coat Investor podcast number 342. Captive insurance still not sure what to.

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Our quote of the day today comes from John Templeton said the four most dangerous words in investing are this time it's different. All right, welcome back to the podcast. A lot of you are out there checking out potential contracts for next year. You're getting your first job or you're getting a second job or maybe you're up for partnership. If you need some help reviewing the contract, we have a recommended list for that. Whitecoatinvestor.com contract negotiation and review is where you will find that. You can go to whitecoatinvestor.com, look at the recommended tab. You can just go to whitecoatinvestor.com recommended and click on contract review. We've got a bunch of people there that can help you with that. They can get you the information from mgma, et cetera so you know you're being offered fair compensation. They can help you understand everything in the contract, make suggestions to improve it, or most of them will even negotiate on your behalf if you want. But check out that list. If you're in that situation, you don't want to end up signing a bad contract with some terrible non compete clause where you're getting paid 75% of what you're worth. Get it reviewed, it's worth a few hundred dollars. All right. By the way, thanks for what you do. Right? That's why they put these contracts together is because what you're doing is important, it's valuable and that's why you get paid so much. That's why you listen to this podcast because you went through all that training, so thanks for doing that. I know every time myself or one of my family goes to the doctor or is in the hospital or whatever, my dad's in rehab. As we're recording this, I know I sure am appreciative of all the sacrifices you all have made. By the way, my wife this morning signed me up for my first colonoscopy, so wish me luck with that, but I've got that to look forward to. Somebody emailed me the other day and said, you got to get a colonoscopy. They found a polyp on mine when I was 40. And so. So I don't know what I said on the podcast a few months ago, but I'm getting a colonoscopy now, so I'll let you know how it goes. If nothing else, as near as I can tell from listening to a lot of standup comedy, it'll provide some funny moments. Anyway, today we've got a guest here. This is not somebody I have a financial relationship with. It turns out he's a pretty loquacious dude. So he said when I got to the end, I'm like, you're pretty loquacious. And he's like, what's that mean? I told him, and he said, oh, you mean long winded. And I'm like, yeah, you're a little long winded. So this podcast interview goes a little while, and he goes off into a few tangents from time to time on the answers to my questions. But I think it's a really interesting subject, and I think there's a lot of doctors out there that have heard of captive insurance but don't know what it is or how it works or why it might be beneficial to them. And I think we got into that in this podcast, and I think it's interesting. I think a lot of you will find it interesting. If you don't, well, shoot, I guess you know where the fast forward button is, but I think it was pretty interesting. I think you'll enjoy learning about captive insurance as well. There's some real tax advantages there, but you got to make sure it's a legitimate insurance company at the end. You know, there's a fellow by the name of Hale Stewart who said captives sold as a tax mitigation tool and not as a bona fide risk reduction are not really captives at all. But I keep running into them, and I think it's something you got to watch out for, for sure. And we talk about that in the Podcast as well. Let's get into it. Our guest today on the White Coat Investor Podcast is Van Carlson, the founder and CEO of SRA831B admin. Van welcome to the White Coat Investor Podcast.

Yeah, thanks for letting me get on your show, Jim. I appreciate it.

Well, this is the first time we've had you on the show, so presumably nobody listening to this actually knows who you are. Why don't you tell us just a little bit about yourself? Tell us about your upbringing and what it taught you about money to start with.

You know, grew up as a farm kid, and, you know, one of the things that's unique in my life was I was selling at a very young age. One of the things my parents did on the weekends would go to farmers markets in California. So whatever we didn't sell during the week to the local grocery stores, we would go out to the farmers markets. And I. I can be. I was 6, 7, 8 years old. And, you know, I was working with my parents and selling fruit, watermelons, cantaloupes, everything else. We were growing around the farm at Salinas, Santa Rosa, Walnut Creek and those places. And so I got exposed really quick, you know, just dealing with the public in general. And I had a great time and great childhood, learned to work hard. You know, I remember growing up, I wish I could be my dog, because he always didn't seem to work very much. And I can remember as a kid wanting to be a dog. But, you know, we worked hard and that's part of farming. And it helped with my work ethic and perseverance and all those things you need to have today in order to be successful in anything. And so I was very lucky, very fortunate to grow up that way. And, you know, I was, you know, I was making change at a very young age. That's when everybody still had cash in their pockets, right? They come to the farmer's markets and, you know, and so for me, it was. I don't know, it's been. It's been my upbringing, and I've always been enamored with owning my own business. I own three or four operating companies today. I've always kind of. Even though I'm in an exciting industry called risk management, you know, I consider myself an entrepreneur still. And really, that's where. That's what drives me. I mean, it's. I always love seeing good, successful business models. That's one of the things, I think, that kind of gravitated me towards this industry. I mean, I never set out to be a risk Manager. But you know, I, you know, I did start my own property casualty agency. I was pretty successful leading up to 08. That's when I saw the Great Recession come in. And unfortunately I saw a lot of business owners that were clients and friends of mine go out of business because they just leveraged themselves to the point where every year was going to be better than the previous year. And I thought there had to be a smarter, better way to run a business. And that's when I got really exposed to what I do today. And that's really managing clients risks that they can't transfer through traditional channels. And I try to, it sounds, it's obviously insurance, risk management, all those things. You know, from an entrepreneur standpoint that just sounds a little boring. But to be honest with you, it's an exciting business to be in.

Very cool. You know, it's interesting you mentioned wanting to be a dog. I have a daughter who thought she was a dog until she was five or six. I think the classic moment was when she literally crawled off a plane once barking. But oh, it was a good time raising a dog and very fun. All right, our subject for today is captive insurance, sometimes called an 831 plan. Let's start with you just explaining what captive insurance is.

Yeah. So captive insurance is really self insuring risk, right? And really the people that are doing this right have been doing it the longest are your Fortune 500 companies, your large companies. Any brand recognized company you can think of out there that develops, manufactures or sells a product is really self insuring their own risk. And what I mean by that is your traditional carriers will not, for great example is Microsoft. Nobody's going to sell them product liability, right. So they got to self insure that. And one of the ways they do that is forming a captive. So these are things that they're still, you know, like traditional businesses. You have work comp, general liability, property coverage business, personal property, commercial auto, all those, those are premiums. You transfer that risk to an insurance carrier for a dollar amount known as premium and you transfer that risk to the, to those carriers to take care of any physical loss, damages, lawsuits, any of those types of things. The big companies can't do that, but they still act that way. So a lot of these companies have their own insurance companies and they're known as captives. One of the things that we've done and kind of leading up to my conversation earlier about getting into the Great Recession and really trying to bring this concept down to the small to middle market business owners self insuring Risk, and they do a lot of it. I would say they have more exposure to risk than big, large companies do. And that's where our price points come in. And that's really where the 831B starts to play out. So think of an 831 as very similar to a 401. You're able to expense it at the operating company level. And as long as they qualify in the 831, the money you put into it stays tax deferred. And that's the advantages. And it's very similar to a 401. Right. I'm going to expense it as an operating company level, drop it into this bucket. And it's designed for my retirement, my employee's retirement, and it stays tax deferred up until a certain point in time when I use it for my retirement or I'm at an age where I have to take it out. Right.

So again, that's presuming the money doesn't get used to pay for the risk. Right. I mean, it sits there for a while covering your risk.

Absolutely. Absolutely. And that's really, you know, that's what the whole purpose is, is to as those things stay deferred as they grow, either through premium surplus and investments, you're in a much better position to handle risk more effectively. And that's why the code exists. And it came in existence in 1986. So a lot of clients, so you can own a captive and not be an 831B. One of the things that we specialize in is 831B. So we're an 831B admin company, no different than a 401 admin company. We make sure that you follow the test that you can stay elected, that those dollars can stay deferred. There's a lot of rules and regulations into this program, no different than a 401. And we, as the administrator of your plans, make sure you stay in good graces with the irs. And we can still keep these funds deductible and deductible and deferred.

Explain how you could have captive insurance. That's not an 831.

Yeah. So a good example would be the Microsoft guys. Right. They don't care about. So the most you can put into this thing in any one year is. And it does change to year to year depending on the CPI. But when it first came out in 1986, the most you can put into this plan is 1.2 million a year. Now it's at 2.6, 5. And it's probably going to increase for next year just because inflation's up, because now it's tied to a cpi. Those dollars stay deferred. Well, if you're Microsoft, you need to put 10, 20, $30 million away for your insurance, for your insurance risk that you have on your books. So you can't really take advantage of the 831B because you're going to pierce through that dollar amount now. And there's some strategies there that we work with business owners all around the country doing some things differently there. But that's where you don't care about the tax deferment. You just have this risk. You got to put a lot of money away. You're expensing it from your operating company and now you're dumping into this. And by the way, this box is a C Corp. So this 831B plan is a C corp. So you're going to pay corporate taxes and all that stuff on all those premiums. If you elect under an 831 and you stay under the $2.6 million premium thresholds, you can keep those dollars deferred. So meaning that it still comes in as a tax, it comes as income, but it's not taxable income inside the C Corp. Again, I don't want this to sound like a rocket ship, but it is designed and really what it's really designed for the small to middle market business owners, which is a clients we want to help. I mean you go back to 1986, what's going on in the marketplace today is very similar. It was going back in 1986. You had the hardening of the market. You had a substantial increase in exclusions going on in the marketplace. If you used your insurance, you got canceled. All those types of things were going on. And one of the industries that were really being hit by it was farmers. Crop insurance was in the private sector at the time. It became so unprofitable. You know, private sectors for profit, no different than they want to do flood insurance. No difference when they, you know, earthquake prone areas and all those types of things they get out of that business. And today, you know, obviously it's backed by the federal government. If you looked at crop subsidies today, the largest crop subsidies farmers receive today is really the subsidy they get off of the premiums for crop insurance. That's a huge, huge farm subsidy today for farmers because if they had to truly pay the premium cost to buy crop insurance, it wouldn't be affordable. You couldn't, they wouldn't buy it, it'd just be too darn expensive. And some of them unfortunately still choose not to buy them because it's so expensive. But back then they were totally self insuring all that themselves. They had nowhere to go. And so that's why Congress got together and said hey, we'll create an incentive for these guys. If they're going to have to self insure risk, we got to create an incentive and we want them to be able to take on more risk more effectively and efficiently through tax deferred dollars. That's why the 831B came into existence. Now you fast forward 40 years, almost 40 years. Cyber wasn't even on the realm, right? I mean cyber wasn't even thought about back in 1986. And now what? It's one of the biggest things we have to worry about today. Brand reputation in the community. I mean we're all going digital marketing, we're all going social media, we're all doing those things. It takes years to build up a reputable brand in your industry, your company, your community, but it can take seconds to destroy it. You talk about supply chain risk, I mean we weren't even talking about global economies back then. Now we're absolutely a global economy. And then unfortunately then you add in COVID 19 on top of all that. And one of the things that has helped us, one of the things that gets exciting at cocktail parties is like man, what do you do? Well, I'm a risk manager. I used to tell people I just sold life insurance and they would just stop asking me what I do. And that was. But today, unfortunately it's a real simple conversation for us. We tell business owners all the time. It's like every business should have their own PPP plan, but it needs to be self funded because we don't know if a COVID 19 is going to happen. But I can tell you this, the complexities of our running a business today relative to employee relationships, cyber, the data we're trying to collect in order to market back to our clients, we have a responsibility that we didn't have responsibility. And now we're relying on a bunch of third party people, meaning that I don't have file paper files anymore. I put all my stuff up in the cloud. I don't have control over that cloud, but I hope I have access every day to be able to operate my business. We call that third party business interruption today which is, you know, you're dependent on a lot of different industries now to just do your day to day business. That wasn't there 40 years ago. And so, you know, when you look about, when you look at the risk complexities of business, it's just, it's gotten much more complicated, substantially more complicated than it was 40 years ago. 40 years ago it was just, hey, crop insurance, we can't, we can't buy it. We need to. How are we going to be able to put more money away for our own if we're going to have to self insure? And so that's what drove this code. And then when you look at the Path act, back in 2017, they made some changes. One of the big changes was that they increased it by a million dollars and added a CPI rider. As inflation goes up, the ability to put more money into these things goes up as well. Since 2017, now it's 2.65. And we haven't got our numbers yet for $24,000, but our assumption is that number is going to go up as well. But now that's the ceiling. There's a lot of rules in the middle of all that that you have to comply with. And as your admin, we're the ones that make sure those rules are applied.

Okay, so let's apply this to my audience. My audience is mostly doctors. So let's say there's a, there's a partnership of five obstetricians and they're paying $100,000 a year right now for malpractice insurance and they decide they want to form a captive. So instead of sending that half a million dollars a year to another insurance company, they form a captive insurance company. They put their half a million dollars into an 831 plan and start investing it. They don't have a claim that year, they put another half million dollars in the next year. They now got a million dollars in there, and now they have a claim and end up having to pay out. What happens if they got a $2 million claim and there's only a million dollars in this plan?

No different than what insurance carriers. I mean, once you meet the limit of the contract, they're gone. And so most of these guys are carrying a million dollars they may carry in excess if there's higher limits. And it really depends. I mean, there's a lot of nuances to your scenario, but it really depends on what we're, how we're crafting. And the nice thing about owning a captive is, is we can structure it whatever way we need to, however the policies need to perform. Remember I was telling these are C Corps. Well, one of the Things we can do is, you know, if you need a $2 million policy and if you need paper, and what I mean by that is depending on where you're licensing at, what state you're in, that you either have to be, you either have to carry malpractice insurance or you don't. Sometimes contractually, you may have to because you're doing business with an insurance company and they want you to carry malpractice or something like that. All those things, we get into those things. But if you don't, you don't have to carry paper. I literally had this conversation this morning with a group of doctors and they found out their insurance was going to cover them on something. One of the things that's happening right now in professional insurance is the price points have gotten so much, so high cost wise that the insurance carriers know that your pain point can only be so much. You're only going to be willing to pay so much. Well, one way they. So if they know your price point's at a limit, one way to offset their risk if they can't charge more premium is put in more exclusions. And that's exactly what we're seeing today. We're seeing a lot more exclusions come into play. And that's across the board, from directors and officers to professional liability insurance. If you have a niche type medical practice, you have so many exclusions today in your medical practice, it's crazy. I was a little surprised this morning with conversations I was having because normally you have a clause in there that says right to defend, meaning that the insurance carrier has to at least defend you. This carrier got off the right to defend, which was a little surprising to me because that's one of the things you would least want to backstop on for malpractice is your carrier is at least going to pay for the attorney to defend you. Now, if it turns out you did something you weren't supposed to, or there's something punitive or something like that, they'll have exclusions on those where they are not going to cover you for those things. But normally, at least the attorney bill is covered. And in this scenario it wasn't, which I was kind of surprised to hear that. And I think those things are just going to continue to play out, unfortunately. So in those scenarios, you know, if the limits exceeded, it's. It's back on the Dodgers, unfortunately, it's this. You know, there is no. You know, I always talk about when I was selling traditional insurance, but I still do with one of my divisions of my company. You know, if you're grossing negligent, it doesn't matter how much insurance you have, it's going to blow through the limit. And, you know, today juries are, you know, awarding unbelievable type loss, you know, lawsuits and punitive damages to where no insurance carrier is going to have enough insurance for you. And that's just a. It happens. It doesn't happen as often as we think. Obviously, I do think it gets glamorized. When it does, the media is going to pick up on all those things. But, you know, a lot of lawsuits are settled for far less than what. What we probably know. On average. I think the average lawsuit's around 200,000 in medical. But the reality though is, is, you know, for me, I look at that and say, well, no, there's other exciting winning circumstances. Malpractice. I had a spa med where it was plastic surgery going on, and this gentleman said to me, he said, hey, I love your program. I'm able to defer some profits out of my company. I'm able to put it into this vehicle. I'm never going to use your insurance. Within a year, he called me up, said, hey, I got a problem. And unfortunately, in spa med and plastic surgery, I didn't know this, but people call around to get pricing on liposuction. And he had made the local news because there was a wrongful, wrongful death and he was being sued for it. His malpractice carrier just became a math problem for him. They don't. When you look at your practice and like I was saying earlier about your community and your reputation in the community and all those things, service carriers don't take that into consideration. They're just doing math. Hey, how much is it going to cost to defend? How do we. What's the likelihood to lose if we're going to lose, can we settle now and how much can we settle for versus trying to hand this over to a jury, you know, and, you know, knowing the details of this, this case, I thought the doctor was very much in his, you know, didn't seem like he acted improperly. However, the insurance carrier still settled, you know, and it affected his business drastically. So much so that we had to hire white hats to go out. And because they Google the articles that are written value, you go come up first because everybody reads them and the way the algorithms work, you know, that that's the first thing to pop up on the screen. So now you got to write op ed, you got to write different articles, you got to start pushing that stuff down. So when people search you, that's not the first thing they're going to read about you. That was the problem. And he was just thankful he had done our program. But when you first talked to him, he never thought, he never looked at this being an issue in his. It's never come up. And now how this program, you're talking.

About some sort of reputation management insurance.

Absolutely.

Cyber protection insurance, that sort of thing.

Yeah. So when we. So when our specialty, truthfully is not taking over traditional insurances, we think traditional insurances do a great job. What we need to look at is exclusions and we also need to look at risk that you're retaining. And what I mean by that is you can't transfer the risk. You know, for example, this group of doctors you're talking about, they transferred that risk by the malpractice insurance policy. Typically for a million, they might get a $5 million policy. It really depends on what they're doing. Most hospitals today are all in their own captives with their malpractice. It's the only way they can afford to do it. But you know, if you got a surgical center or you got a family practice or, you know, you got, you know, you name it in the medical community, you may carry your own policy, but typically this can be at about a million dollar limit, you know. And so, you know, if you're paying 40, 50, $100,000 for that, you got to decide, you know, what, for pennies on a dollar, I'm just going to keep paying that premium. What you're not getting though is supply chain risk, brand protection, dispute resolution. Dispute resolution covers you in venom of a lawsuit where your general liability or your malpractice insurance is not going to cover you in a lawsuit. And that's happening more and more where I'm just simply being sued. It had nothing to do with the medical practice. I might have a dispute with my partner, I might have a dispute with the people I rent my building from or, you know, all sorts of other things that go into that. So it's not going to be covered under those scenarios. And then when you talk about cyber with HIPAA regulations and rules today, you know, if you get fined today, insurance carriers aren't going to cover you for that. And if an employee makes a mistake, I can tell you situations where I had an employee for dental practice put on Facebook that she worked on her first, and she was a dental hygienist and she worked on her first HIV patient. She just put that on Facebook and she Thought it was private in her private messaging and they got out. And those were really innocent mistakes. Kind of shockingly that I'm sure she just thought that's not a big deal to say. Well, it is a big deal to say. That's a direct violation of hipaa. And so now you gotta unwind a lot of things. And so there's these things out there that you're retaining all this risk on. And we call those unfunded liabilities. I fund a liability when I buy a traditional insurance policy on my building for fire. I've transferred that risk, I paid a premium, I've received a policy for that. And then there's a ton of risks that you're just going to receive, you're going to retain. Now how do you manage that more effectively? It was no different than the farmers back in 1986 that were retaining their own crop insurance liability. Right. So we look at it much better. I mean, all of us grow crops every year. And that gets back to me being a farm kid. You know, we start zero January 1st, we all start regrowing our crops. You know, that's, you know, if you're any kind of cash basis company, you gotta regrow, you gotta plant the crop and you gotta harvest the crop in a 365 day calendar. And how do you protect that crop more effectively? Efficiently is utilizing a thing like an 831B.

Okay, so most of these captive insurance companies are now insuring risks that people were self insuring anyway. That's what you're saying?

Absolutely.

You're not selling them some other insurance plan. They're putting money into this 831B plan and self insuring something they, they weren't insuring before.

Exactly. They were funding it. They were funding it. They were funding it on their cash flow. It's why PPP came out. It's why ERC and all the other things that we've seen in the last couple years due to Covid, the government knew the insurance carriers weren't going to cover business interruption because why? It was indirect loss. Hey, we're telling you, you're not essential shut down. Well, my building didn't catch on fire, so that's not going to trigger business interruption. If you don't have a direct loss on your property, there is no business interruption coverage. Everybody gets business interruption coverage on their traditional policies. It's called a business operating policy, a BoP. But if you don't have a direct loss on your property, it doesn't trigger. So Covid is a great Example of that where hey, you're just shutting down. Well, they knew they had to come out with a PPP plan. They had to come out with ERC and all the other fun things that they did to make up $6 trillion of make believe money. And one of the things we're driving home and I appreciate being on your kind of your platform is, you know, and talking with Congress and I would encourage anybody that has an ear of any of their congressional leaders is, you know, this has got to be the next plan. Owning an 831 should be as common as owning a 401 for your business. In fact, I tell clients without the 831, the 401 is at risk because we can't expect our government to step in next time, in my opinion, and bail us out if the insurance carriers aren't going to cover this. Which is if you looked at the first year, the first month, March of 2020, when they closed through the month of April, we collect on average in this country about $250 billion in commercial insurances on all lines across the board between auto, work, comp, all of it, right in the first month of April, it would have been $475 billion of business interruption that the insurance industry would have had to come up with in order to pay that. Now we know that they can't. That's not simply, that is not sustainable. And meanwhile though, so traditional insurance carriers will never cover this stuff and we can't expect the government to do it as well. I just don't think it's a good idea. I still think, I don't know if we still fully know the ramifications for what went on when the PPP and the ERC came out. But to me it's just going to become a normal business practice. And that's just dealing stuff with COVID And then we talk about the other stuff I just mentioned already. So between supply chain risk, brand protection, cyber stuff, all the other things that go into running a business today, it needs to become a normal business practice, truthfully.

But all you're saying is that a business owner ought to set money aside to pay for these risks if they occur.

Well, you know, a business owner. Okay, so good, thank you.

I mean, the plan allows you to set it aside in a tax deferred way and invest the money. But what you're saying is people ought to put more money aside for all these risks that they don't have coverage for.

Well, let's be honest. I mean, a business owner's got all the. He's got a ton of incentive to spend money. He has no incentives to save money. I mean, that's just. That's just the way the world works. Currently in our country, this is the only program I know where a client, the business owner has an incentive to save. And you know, hey, this thing's. Shockingly, this thing's been abused, right? I mean, obviously, anything that has advantages to the taxpayer is going to be abused. And, you know, it was never designed to do what it was doing. And really, when you look at. If you were to Google the 831, the IRS has won some court cases recently. I say recently, probably in the last four to five years. And really, it had to do with estate tax planning, had nothing to do with risk management. The people that were selling these plans were attorneys that just happened to be estate tax attorneys. They weren't risk managers. That's all I know. So what? My professional life for almost 30 years, that's all I've done is risk management and develop strategies for business owners, either through utilizing traditional insurances or doing this kind of a plan.

Okay, so the benefits are if you got. If a risk shows up, you've got some money now to pay for that risk. If the risk doesn't show up, you've got another retirement plan. So what happens at the end of your career? You shut down this business, you got this pool of money sitting in an 831. What happens to it at that point?

We either shut it down after three years when you stop funding. When you stop funding new risk in it. So, like, if, you know, like. So our biggest. One of our biggest industries is the medical community for a lot of reasons. But I would say the medical community, doctors especially, are constantly worried about what they don't know. And I, you know, very astute kind of folks that are like, yeah, I know this insurance policy doesn't cover me for everything. I know my employees do stupid things from time to time. So they've done these programs very well, and I would say they adopted very well to this program. The biggest thing is if they sell their practice someday, we call it transactional risk, where you're gonna have to retain some of that risk yourself. You did a rep on warranties, you sold your practice, you've retained some of the costs, meaning that they're gonna have to pay you over a period of time for your practice. All of those things, I have inherent risk in them, and we do specialized stuff for that. But eventually the thing gets shut down. And when it gets shut down one of the advantages, it comes out as capital gains. We also allow our doctors to take dividends throughout the year.

It all comes out at once. It all comes down out in the year.

That doesn't, it doesn't have to really. There's some strategies we work with their trusted advisors, their counsel, their attorneys, their financial advisors to come up with an exit strategy on the back end of this. We don't participate in it, but we certainly advise our clients on how to, how to do that in a way that, you know, giving them ideas and then they can execute on it. But yeah, there's typically it's done over three years is the way, you know, you don't have to do it all at once. Also throughout the year, throughout the years of having the plan, they may have taken dividends. We do do a solvency testing by year three and five and what I mean by that is if you're having certain risk and now we've got the, the surpluses have grown, the pools haven't been hit, you haven't had your own claims and all that, we'll do a solvency test. We may, by year three or five we may tell you, hey, if you want to keep funding at the rate you're funding, you're going to have to take a distribution no different than the RMDs and a 401k where at some point you reach an age, they're going to force you to start taking money out of there. We do the same thing on this plan as well, but we do it through a solvency test. That this basically says, hey, based on the risk you have, this is funded properly. If you want to fund again for next year, you're going to take a distribution out and that comes out as a 1099D and it's a long term dividend rates which is taxed as the same rate as the capital gains.

That's pretty awesome, right? You take money out of a 401, you're paying ordinary income tax. What you're telling me is when you eventually take money out of this plan that you didn't use to pay for risk, you're taking it out at capital gains rates. Yes, that's pretty sweet. So that's the benefit is hopefully you don't use all the money you put in there and some of it can go toward your retirement.

I couldn't agree more. In fact, I tell clients all the time I said, you know, you don't buy a homeowner's insurance policy with intent of using it I can't think of any good scenario when insurance is being used. And so I'm with you. And now I will tell you this. One of the rules of our, one of our tests, one of the things you have to have in this product in order to elect on an 831, there's a four part test. The first one is there's a transfer of risk which is no different than what I talked about earlier. You write in a premium you're sending, you're transferring that risk to an insurance carrier that has to be seen and designed. And again as admin we do that, then you have to have a risk distribution. And what we mean by that is you can't own 100% of your own risk and call yourself an insurance company. And by its very nature, how are you utilizing the law of large numbers? That's one of the things the IRS is going to ask you. Well, you have to have this distribution of risk and what we do is we call them risk co ops. So if your company has brand protection and you're worried about that, you're going to set aside a premium dollars for that portion of those premium dollars will be put into the pool. I mean all the money goes to you and everything else but portion of those dollars are exposed to the pool. Now the nice thing with our pools, we average between 400 to 700 operating companies within our pools. So we have claims almost every week and then it's a variety of different claims. And I should also note your company is only going to participate in these risk pools that you have risk for from your business. And the best example I give on that is a thing called foodborne illness. Foodborne illness is specifically used for anybody that manufacture, sells or distributes food. Restaurants, farmers, grocery stores, any of those guys, that's food. If I don't. Most doctors for example, don't participate in food. So they would never be involved in that kind of a claim. They wouldn't have their dollars set aside for foodborne illness because why their operating company doesn't have that exposure. But for brand protection, dispute audit protection, cyber and all those things, you could be in there with a restaurant because why? Because they have the same. Those type of exposures are just no different than a family practice office. Right. They both concerned about their brand protection, they're both worried about supply chain risk, all those other things. So you will share within those risks. But that's really where if a business owner, Jim, was to ask me what's my real risk of doing this is that you're going to have to pay claims that are unaffiliated to you. Now, our pools have gotten so big where when the pool claim does come through, you may only own 30bps of 1% of that pool. So like I said, we settle claims out every quarter to our pools, and typically we're settling anywhere from 10 claims on a quarterly basis that actually got hit by the pools. There will be a lot of claims that are either going to be denied and, or it won't hit the pools because it's a layered type risk. And again, we got videos on our website and all that stuff to get more educated on that. But I really want to make sure clients, especially when they get involved with this, is, hey, I don't care what you've heard from our competitors, but you are going to participate in risk that's not yours. And if you don't have a claim, that doesn't mean your 831 plan is still not going to pay out in claims. It says, how do we manage that more effectively and efficiently to where it's a calculated risk to do our program? And I think it's a risk we're taking.

Now. They say you should avoid a bogus risk pool.

Yes.

What are you talking about when they say a bogus risk pool? What's that?

It's like attorneys selling risk when they don't know about risk. I mean, those things, they got really cute. They were selling terrorism coverage. However, if you were in a vicinity of a million people or more, it was excluded from coverage. And so why would you. Why if I was, if I had jewelry stores in Phoenix, and I'm worried about terrorism, but my terrorism is specifically excluded for me from having anybody more than a million citizens living within a 5, 10 mile radius, which I think Phoenix is now the 4th or 5th largest populated city in our country, there's no coverage. So why did you put a half a million dollars away for terrorism when you knew it wasn't going to cover it? That's the bogus pools. You know, we don't again, you. These are, they're just trying to make it look cute. They're trying to make it look like it is a distribution of risk when there really isn't. And so, you know, unfortunately, those are things that we would call those bad actors in our industry. And you know, unfortunately, they're still out there. They want to sell the sizzle. They don't want to tell the backside of the story on these that, hey, yeah, there's some risk to these things. They're not a risk free venture. Nothing is. And by the way, if it's risk free, it's like saying it's tax free. And you know, I always tell people if you think it's tax free, then you must plan on living forever because you're weighing one of the golden rules, right? And so death and taxes. And so we don't go down those roads. And we certainly pride ourselves on our ability to say that you're in a pooled risk. However, we manage over 700 of these plans and in those pools we have large amounts of pools. And by its very nature, this is insurance. Why? Because we're creating a distribution of risk. We're creating the law of large numbers. Any one of our, none of our clients are going to have brand damage in one year, right? We may have a handful, but all that's going to be spread out between the other 500. When you look at 100 years ago, farmers, State Farm, anybody with farm in it were co ops. It's just a couple farmers got a great example is Farmers Insurance down in Orange County, Southern California, A couple farmers got together because they couldn't buy farm liability for their vehicles. So they said, hey, we'll share. You share with my risk, I'll share with yours. And literally out of that grew farmer's insurance. You look at Allstate Insurance. Allstate Insurance was Sears and Roebuck's warranty company that sold warranties on their washing machines and they formed. That's how that company grew up. And so today we're looking at all these different risk profiles that are out there that traditional insurance carriers will never cover, have no appetite to cover it. And now we're just forming these co ops with like minded people and we're making sure as the admin that these meet the distribution rules. And again, I hope this doesn't sound like a rocket ship. I think you said it very plainly. It incentivizes business owners to put away dollars on a tax deferred basis. They handle risk that they can't. They, they're taking it on by themselves. And I should mention all they would do is pull. If at any of these things were to happen, all they would do is simply pull money out of cash flow. Well, that's not a great business plan. You know, pulling cash flow out of a business on an unexpected expense can be very dangerous going forward. As a business owner, cash flow is the blood of the body and you got to make sure there's plenty of cash flow to feed the body. And as soon as you start using it for other unplanned expenses, you're putting the business at risk. It's that simple.

All right, so let's go back to an example. A five doctor practice. They decide, you know, maybe we're not going to form a captive for malpractice. We're going to do it for some of our business risk. We've got some cyber risk and stuff like that. How much money in premium is that business putting into the 831B plan?

So we adopted the crop insurance underwriting. Go figure. One of the things we do there is we look at their gross revenues and we cap them at 10% of their gross revenues. So even though you can put 2.6 million in these things, Congress allows you to do that. We go back and say, listen, what's your gross revenues? No more than 10% of that. So let's say this doctor practice is doing, for simple math, $10 million on a gross revenue basis. And by the way, when you renew your general liability and all those other things, that's the first thing they're asking you is what is your gross revenue. And the idea is the more your gross revenue is, the more likely for exposure for lawsuits or claims. So you're going to pay more premium because you're just making more money or grossing more money. I should say they don't really care if you're profitable or not. That's what we're going to do the same. But here's the difference. We're going to cap you at 10% and no more than 2% per risk. So if you want a max fund, we got to find at least five risks that you're self insuring for that is related to you specifically. And that's really where we get this. And by the way, that's the ceiling. So the most for this doctor group could do is million dollars. But out of that we got at least 5 different risk. 5 different risk co ops they're going to participate in because we're going to cap them at 2% on that stuff.

But I mean, if we're talking about cyber risk, right, I mean you can go buy a policy, it's not $200,000 a year for a business that size.

I couldn't agree more.

So how can you possibly justify putting 200 grand in there for that when you could buy it from another insurance company for three.

We want you to buy it from an insurance company, but they're going to do a credit watch for the clients. They're going to do maybe Some legal bills, maybe some forensic auditing. So if you got compromised, they're going to have to a forensic team to come in and find out why you didn't. But there'll be a sublimit for brand protection, which is typically 5% of the limit, which would give you maybe $50,000 if you had a million dollar policy. And then there's going to be a ton of exclusions in there. And that's really is our job to read your policies and find the exclusions and fit in and absolutely, you're going to overfund these things in the beginning. And I would say under cyber, we want you to buy your own insurance policy today. You can maybe buy one through Beasley and it will cover you for your patients. It's not going to cover you for HIPAA violations. It's not going to. So there's going to be a ton of exclusions in there, Jim. And that's just one policy. And I'm with you on it.

It's raising the premium because now you're essentially creating a policy that doesn't have those exclusions. Yeah.

And if the private sector insurance companies aren't gonna cover you for that, what you as an individual, how much, what's the limit need to be? What should be the premium? And that's, and by the way, so then you add in, then you add in dispute, you add in business interruption in general, which would cover you for indirect losses now because you don't, you know, if you do have a direct loss, you're going to have an insurance policy for your office too. Right. For your mountain, for your slip and fall coverages. And if there's fire in the building and I can't, I can't do my procedures anymore, I'm going to have business interruption on that. But if they shut me down because I'm deemed to be non essential anymore and I guess got to shut down because the government doesn't want exposure to a virus. I'm on my own again. Now when I look at that, what the government did there for you, they provided hundreds of thousands of dollars for business owners to own. So again, gets back down to the premium coverage. What's enough premium charges here? You know, if I own a business and my payroll was $200,000, I got four times that on PPP. So the complexities of the premium is definitely, and here's the thing, I'm not here to replace traditional insurance. I say go buy as much as you can, as much as you can afford. But understand that traditional insurance Carriers are going to keep adding more and more exclusions. You know, your insurance policy doesn't get thicker because they're adding more coverages, they're getting thicker because they're adding more exclusions. And then you add on top of that all the things that you're self insuring for. Right? I mean, look at the prescriptions. Look what's going on today. I think November 1st, you cannot prescribe certain peptides anymore starting November 1st. Done. Medical. Now, if you tied a bunch of your plate patients to selling peptides for weight loss, human growth and all the things that's been going on out here, that's actually making people healthier, in my opinion. FDA just said today you can't prescribe that anymore. Now what happened to all your revenue? What happened to that supply chain risk? No insurance company is going to cover you for that. But meanwhile, you've hired up, you've hired more PAs, you've hired more practitioners to do all this for your patients. And now you can't even prescribe the drugs that you were actually helping patients with. And it's a temporary suspension on the peptides. What does that mean? Six months, two months, three months? Am I supposed to hang out with all my employees because I built my practice around using alternative medicine through functional medicine type stuff? You know, those were unexpected and we would call those political risk. You know, medical practices are huge, huge exposure to political risk.

So basically you can now fund an insurance company, your captive insurance company, to insure against that risk.

Absolutely.

Okay, so I mean the obvious incentive here, because you're turning ordinary income into capital gains and providing a period of time when the money can grow in a tax protected way. The incentive is to have the premiums as high as you can get them, assuming you have enough cash flow to run the company and pay your salary.

And now you can see why we, how.

I mean, obviously if you set them ridiculously high, the IRS or some sort of regulatory agency is going to come in and say, no, that's illegal, this is tax fraud, you're going to jail. So how do you make sure the premium.

Well, let's back up on the tax fraud. I mean, no, that tax fraud is tax evasion. This, this thing's a tax avoidance. There is a little bit, I would say there's substantial difference. These things only get done in civil cases that are not. It doesn't rise to the level of criminality. So nobody goes to jail by doing this program, first and foremost, not unless you did something fraudulent, which, you know, me, interpreting a tax Code to my benefit doesn't mean I did something fraudulent. And so overfunding. And it brings back to what I was saying earlier. That's why we run a solvency test. We will force distributions. You don't get to keep putting money in these things because to me, it does start to look like a tax shelter if I'm not having my own claims or I'm not turning my claims in and the pools aren't being hit as much as they are. Absolutely. You're overfunding the risk. In the beginning of these things, you start out zero capital and you're insuring risk for the first time for your business. And I would get back to the conversation, what's the appropriate premium for that? We've gone back and adopted it under the crop insurance program and said, here's what the crop insurance program does. So we're going to cap, you know, if my crop's worth $100,000 of gross revenue, I can insure for that. Well, I got to put up 10% of the value of the crop to do that. The government though matches me on the backside of that. So they're actually putting up 20 grand for $100,000 policy coverage. You know, so that's how we came to our methodology underlying the premiums. But I'm with you. After a certain period of time, you just don't get to keep piling more money into these things. We will force a distribution. And unfortunately, clients do have claims. And when those claims come out, they're going to be a substantial amount of dollar amount coming back to your operating company to keep it solvent.

Okay, so the distributions, those come out at ordinary income tax rates.

Well, assuming the premium's been in there year one day, it would be considered long term dividends, long term capital gains.

All right, so the money's sitting in there. What is the money doing while it's sitting in the 831 plan?

So we don't, our clients sign an investment agreement with this on this, what they can and can't do with it. And there's two different buckets of money I want you to be aware of. One is reserve and one is surplus. The reserve is premium at money. Excuse me, the premium you put into it is at risk for that. And typically there's a 12 month policies are at risk during those 12 months. You know, like when you write an insurance policy for your malpractice or for your business or you know, whatever, it's a 12 month policy. That's how commercial insurance works. You might get Some tailpipe coverages for your professional liability insurance for 35 years, but that's a different animal. But typically they're a 12 month policy. So that's what's going to happen. The premium during that time is that's a reserve and that money's at risk for claims of either yours or are unaffiliated to you. Now the policies expire, meaning they go out of force. That premium now, assuming it hasn't been paid out through claims, has become surplus. It's called underwriting profit. For insurance companies, it's truly what they live and breathe to have. I always get a kick out of, oh, we're losing money this year. Well, that just means you don't have any money to put away. And then they act like they're going broke when they actually have to dip into the surplus because they had a catastrophic event and now they gotta pay for hurricane losses they weren't expecting. That's surplus. But understand these are monies that have been piled up. Billions of dollars have been piled up in our. I would tell you traditional insurance companies are some of the strongest financial institutions we have in our country. It's their ability, it's the way they're taxed and everything else. And in the surplus that goes into them. So our clients get the same advantages those things become. That money becomes surplus. Obviously it's eligible for a dividend because it's one year, one day, they leave it in the vehicle that it's being managed. We work financial advisors all over the country to manage these reserves. We don't put our hands in that and we don't have. We just tell the client, here's the rules of engagement, here's what you can and can't do. The reserves need to stay liquid. And to us, liquid is managing it in the bond, stocks, bonds, mutual funds and all that fun stuff. Once it becomes surplus, there can be some more additional investment strategies put in there. And we're advising our client on that, but we're not participating in that, if that makes sense. We're not managing those reserves or surpluses. We're letting their trusted advisors do that for them. And we, we just tell them the rules of engagement, how it needs to operate.

Okay, so let's say they want to be their own trusted advisor. Is this, is this at a brokerage account at Schwab? Where's the money sitting?

We require all of our clients open up a bank account that's really for us to move money into that easily and also debit the account when there's claims that need to be paid on a quarterly basis. So meaning if they didn't have their own claims, they get an email from us and hey, we, you know, based on the. We had four claims settle. You participate in these co ops, it's 450 bucks. That's how much money we're going to take out. You count November 2nd. So we, so we always require a bank account. Obviously banks are paying pretty well right now. So you know, they can. And we have a lot of clients sitting in cash right now, truthfully in a money market account or wherever. And then we have clients that have financial advisors. They open up a investment account on Pershing, Schwab, whoever and trade the account too as well.

All right, so stocks, bonds, mutual funds, cash, CDs.

What we don't want is non traded securities. I would say non traded REITs is a big one for us. Not with the reserves. That money's gotta stay liquid. And that's really the, I would say that's the big rule for us.

You know, liquid, liquid you can take quite a bit of risk with liquid you can securities. I mean, you're what you're telling me. I mean someone could essentially put it all in the stock market.

Well, you can, but there's rules based on our investment agreement the client signed. There's rules and regulations on that as well.

And I'm certain in cash or bonds or how's it work?

Yeah, it's got to be a balance. Like I don't, I think one of the big rules is you can't have more than 10% of your overall portfolio and any one stock are bond so you know, designed to limit your exposure if you want to. And no bitcoin, we get that asked all the time. There is no bitcoin that you can invest in. So we'll put restrictions in the investment agreement all the time. And bitcoins, I would say in the last handful of years we've had to introduce that because you know, some people tell me it's liquid. I don't know enough about it to even talk anything at any level of education on that. But it's just, we've just made a decision that no, you can't invest in bitcoin.

So but someone could put it all in an s and P500 index fund, something like that, as long as it's.

Not more than 10%. So even in that situation, no more than 10% in the S&P 500, even.

Though there's 500 stocks in it, that would be considered one investment.

I know.

Okay, so they gotta be 10 different investments basically. Yeah, but they could be a 500 index fund from 10 different providers.

See, I get questions like, you see, you're a creative guy.

I'm just curious how it works. Insurance companies hold, right? If you look at the assets of a big insurance company, it's going to be mostly cash and bonds. And I was just curious if there's, with these captives that it's got, you know, it's got to be fairly low risk investments. What I'm hearing from you is that's not necessarily the case.

No, it's not. Absolutely not. I mean, especially if it's surplus. I mean the surplus is the surplus. I would tell you that, you know, most, a lot of insurance companies have loans. A lot of insurance companies do loans. I mean if you look at their overall portfolio right now, I would tell you that it's probably 30, 40% sitting in loans, you know. And you know, there's been some, there's been some stress on that, you know that, you know, they're sitting in these low interest rate. Some of these loans haven't reset yet. And meanwhile interest rates right now they're, you know, they get 8, 9% on a corporate, a rated bond right now. Right. So that's been interesting talking to some folks. I mean we work with other, we work with a lot of major insurance carriers as well. I mean one of the ones we obviously work with is out of Lloyd's, Lloyd's of London. And you know, because there are times when we do replace traditional insurances. I have a whole nother arm in my company that, you know, if you're paying north of $400,000 in traditional insurance between work comp, GL, property, commercial auto, you know, we could start to look at taking over your traditional insurances if you have risk, meaning if you're willing to take on more risk yourself. And all that is, is really is you're taking on a bigger first dollar risk, meaning a very large deductible. And if you, if you have the risk for it, we do those as well. But it's a case by case and it's underwritten in a way. But you know, those, those are called macro captives and we deal with that a lot. I would say a lot of construction companies, hospitals do it. A lot of hospitals are doing that with their buildings and then also their malpractice and everything that they own. They like to own captives in Hawaii. I think Hawaii requires the presidents and directors to have their board meetings in Hawaii. So that's another reason why Bermuda came in. When you look at companies like UPS and other companies that are large like that, they all own all these things offshore. They're trying to do it for a lot of reasons. There's now 35 states encouraging you to own these things within their states. And they're doing it for premium taxes, for domicile fees for taxes and everything else. So, you know, again, we're heading in a place where this is becoming a normal business practice. And really it's an educational thing. I mean, you know, even though this thing's been on the books for 40 years, you know, the biggest people to adopt it were Fortune 500 companies, warranties, auto dealers. Auto dealers. You know, the reason why the F and I guy pushes you so hard for their service contracts is because they're all, they're retaining all that risk themselves for your warranty. They're just using, utilizing an 831B. And I can tell you about that business model. I think it's a beautiful business model. What they do with those reserves, they turn around and increase it on their flooring or they put it in their consumer investment arm for loaning out vehicles because the people have too high, they don't have a great credit. Banks are going to loan money to them. Well, they can use that money to still sell that car to them and get 24, 28% interest on that money. Great business model.

All right, so we've been going for a while here to spend at least a little bit of time though, talking about not getting in trouble. Right. I mean, there are people out there selling these captives as a tax mitigation tool, not a bona fide risk reduction tool. So how can a doctor looking at one of these for their practice know that they're not getting involved in a scam? They're not going to end up having some terrible audit experience for it, that they're actually, you know, running a legitimate cap.

Yeah, I would say that. You know, really, what's the background of the manager? If the background of the manager is preparing taxes or doing tax returns or it's an attorney doing it because they're a tax attorney, then you might want to question, you know, because their motivation is taxes. I mean, I don't know how to make it plainer and simpler than that. And I think also be well versed in a four part part test. You know, is there a transfer of risk? Is there a risk distribution? How many. What should be my expectations in sharing other people's claims? And then, then there's a thing called a fortuitous risk, which means it has to be insurance. Insurable type risk. It cannot be planned and it can't not be expected. That's not insurance. And unfortunately I see a lot of business owners get wrapped up into certain things that I would think is more business related risk than it is a insurable type risk known as fortuitous. And then the fourth one is, are you acting on the principles of insurance? Are there reserves, are there solvency testing? Is there financials being prepared for me, is the policies being issued in a timely manner and are the policies backed? Are they policies that I actually will have coverage for? What is the claims process? Is there a defined claims process? One of the things that puts us in a unique position as an admin. We're not going to cover claims that aren't legitimately covered under the policy. You know, we have to hire an independent third party adjuster to adjudicate these. We have to at times get legal opinions based on the wording and the scenario that came in. Under a claim scenario, is this covered or not? That all has to be defined. Because why we have a distribution of risk. Our clients aren't going to want us to cover claims willy nilly. Why? Because they got to participate in that claim. So those are, those are, I would say probably the biggest thing is what is your claims process, how is it defined and what is the distribution of risk? Because when people have gotten in trouble with these things, it's when they made it look like there was a distribution of risk when there really wasn't. And that's, and that's, I hope with our discussion you can see that we are a differentiator in that space. We absolutely have those. And you will participate in that if you're going to be, if you're going to be a client sra. That's the biggest thing for me. And then two, who's your risk manager? Who's your team that's assessing the risk? Who's, what's their qualifications? You know, and the other thing too is if you're paying for a feasibility study and an actuarial and all this other stuff and they want to charge you 30 or 40 or $50,000 for that. That's ridiculous. These things are not complicated. If you've been in business for long enough, we know your industry, we know what exposures you have, you shouldn't be paying that kind of money for that stuff. And to get all that, it's just, you know, when I first got back in this in 08, I saw fees that were being charged that just were ridiculous. And I can't tell you how many times I met with business owners that said, well, I looked at these things, they're too. They're too expensive. It doesn't make any sense for me. And I say, yeah, I agree. You know, one of the things that we pride ourselves on to start this program is $6,000, and to maintain this program is $6,000. And that's all done through the 831B plan. So if your investment advisor is getting you more than $6,000 on your investments, this is gonna cost you a frictional cost. If one year you decide, hey, I can't fund, I can't pay a premium, guys. The economy took a hit and I'm not making the kind of money I was making, and I can't afford this. What I saw back in 08 09, 2010, that they were still paying 40, $60,000, and they weren't putting any money in these things. I just thought it was egregious. And so I'm trying to help the small to middle market business owner. This was the code who. The code was written for that group. Unfortunately, the big adoption people have been the big companies, and they love this program. Right, and is the IRS gonna go challenge Microsoft? I don't know. You know, on their tax returns? I don't know. You know, I look at Deloitte, Deloitte has, I think, last time I heard, Deloitte has 240,000 employees. I think the IRS has like 82,000. You know, if Deloitte's preferring your tax returns, there's probably a good chance that, you know, maybe Deloitte's telling the IRS what's going on. But anyway, so. So those are things that I kind of bring into place here that, you know, I would tell business owners all the time. And, you know, when a business owner comes to me that has these plans, that's the first thing I ask him. Well, what's your claims? What claims have you paid that aren't your own? Well, I don't know. I've been in this for five years, and I don't. I don't know what you're talking about. Then I'm like, oh, okay, well, what were you doing? What? You know, and then we dive into it, and of course we get their insurance policies and all that kind of stuff. So, you know, you know, it's not a. You know, it's a legitimate code. Congress, both sides of the aisle are a believer in this code, they believe its ability for small business to manage their risk more effectively and efficiently. And we just gotta get, you know, some of the bad actors out. I mean, they're there. There's not as many as there used to be. I think there's better rules and regulations coming out through case precedents that kind of make the business owners a little bit more savvy, their advisors a little bit more savvy on some of the things they need to be looking out for. And one of the big one is how demonstrate to me how the distribution of risk works. That's the first thing I would ask anybody looking at one of these things.

Very helpful. Well, Van, our time is long gone, but it's been a discussion. I haven't, you know, had a long discussion about this subject before. So I hope the podcast listeners find it as interesting as I did. They have additional questions for you. What's the best way to reach you?

You know, really 831b com, we got educational videos on there. They can reach out to my team. We probably have about 150 advisors around the country that represents our products that we'd love to hook you up with if you happen to be in those areas. And it's an educational process. And here's the thing, Jim. It's a tool in a toolbox for the right client. It's a great tool, but it's not a silver bullet and it's not a tax free venture. It's none of that stuff. It's risk management that has some tax strategies to it. That's it.

All right. Very helpful. Well, thank you so much for coming on the podcast.

Thank you. Appreciate it.

All right. I hope you enjoyed that interview as much as I did. Obviously it's longer than most of our episodes, but I hope it was worthwhile to you. Those of you who are in business for yourselves that would consider Captive Insurance. It got me thinking. I'm like, wow, what can I do with white coat investor? Or with my partnership with Captive Insurance? Because that's a pretty serious tax break. Not only do you get to have that money growing in a tax deferred way or tax protected way for a long time, when it comes out, it comes out at qualified dividend rates. Right. That's not quite as good as HSA treatment, but it's better than 401 and Roth IRA treatment. It's pretty awesome. So something to think about there.

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Don't forget about our contract review recommended list. You can find all our recommended lists@whitecoatinvestor.com recommended thanks to those of you leaving us 5 star reviews. We have a recent one left by Lei who said always inspiring. This is such a great podcast and an inspiration to medical professionals to take control of their own finances. Five stars. Thank you for that. Help spread the word getting this information out into the hands of those who most need it. All right, so that's it. This episode's been long enough. We've had a long day. We've been at it for about nine hours today. Recording. We're ready to be done. So I hope you're ready to be done listening. Keep your head up and shoulders back. We'll see you next time on the White Coat Investor Podcast.

The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.