Section 831(b) of the U.S. Tax Code provides a tax incentive to the owner of a reinsurance company.
By utilizing the tax incentive created by the 831(b) tax code, business owners who have established Self-Funded Health Care Plans can effectively create a tax-deferred “Claims Reserve Fund” to house reserves for health care claims expenses.
The tax code allows reserves that are not utilized for claims to be distributed to the owner of the MARC in the form of dividends taxed at Long Term Capital Gains rates saving the business owner 15-20% in taxes.
Summary of Advantages of a MARC
- New Incentives for a plan sponsor to properly fund their plan (Max Fund)
- Reduced risk of max claims expenses
- Stabilize premium rates and gain control of company’s health care plan
- Create additional long-term planning strategies
- VEBA trust alternative with similar tax benefits but much more flexibility
- Tax-advantaged treatment of remaining reserves. (dividends vs ordinary income)
- Nominal impact on day to day operations and no change in TPA, plan designs or stop loss Insurance.
We help corporations create their own Medical Allied Re-Insurance Company. We work with a seasoned insurance manager who administers the MARC’s created.