Associated costs represent roughly ONE HALF of the marketplace. Example, the onetime
capitalization ($7,500) is much less than competitors charging between $15,000 and
$250,000. Similarly, the 17% ceding fee is a FLAT FEE for remitted premium; this represents
ONE HALF of the marketplace charging approximately 30% with various fees and taxes.
See image: Cost Comparison

Lower Capitalization & Gross Revenues Requirements – Capitalization requirements of
a reinsurance company are $50,000 and minimum gross revenues are $1.5M, except for the
eR3 Plan™.

Flexible Ownership Requirements – The ownership can be anyone, including family
members, enabling a tax-efficient transfer of wealth to younger generations.

Lower Set-up and Administrative Costs – The one-time set-up cost of a reinsurance
company is $7,500, premium ceding fee is a flat 17%, and annual administrative costs are
1% of the eR3 Plan’s asset value.

No State Insurance Regulations – There is no US state oversight, fees, or taxes; the
reinsurance company is established under sovereign tribal law.

No Premium Taxes – Participant pays zero annual premium taxes with our popular
reinsurance model.

No Sharing of Risk with Others – Our model has zero ‘sharing of risks’ with other
businesses [no risk ‘pooling’].

Lower Premiums – Our unique reinsurance model requires a lower annual premium of
$50,000.

Alliance Reinsurance Company (ARC) platform partners with seasoned third-party
insurance carriers with decades of service serving coast-to-coast clients. These third-party
insurance carriers develop and issue policies (risk and premium) based on the risk
assessment of respective businesses.

Principles at Providence CPA Group and the Alliance Reinsurance Company (ARC) are
seasoned CPAs, Attorneys, etc., and having studied both platforms, it is observed that the
Solo Roth 401(k) has slightly better options/flexibility. Your remitted premium funds either
the Solo Roth 401(k) or a Roth IRA through a professional industry-leading custodian.

The participant can simply cancel their policy and/or cease remitting premium.
Keep in mind, one of the most common goals of ARC clients is to a) remit tax-advantaged
premium; b) mitigate claims; c) protect assets and d) make investments. Clients have been
with our legacy model for 10—15 years on average.

Your enterprise risk will be identified/validated by a licensed, third-party Actuary using
a formal Actuarial Assessment; relative enterprise risks make up the Insurance Policy.
Generally, risks/policies within reinsurance platforms cover uninsured and under-insured
risks and it is advisable to not cancel your commercial P&C policy [reinsurance-related risks
typically augment your P&C policies; never duplicating coverages]. See image:

No. The Alliance Reinsurance Company (ARC) platform does not pool risks. Your risks are
not ‘pooled’ with other business leaders.

Alliance Reinsurance Company (ARC) recognizes there are many alternative risk
management strategies to include, but not limited to, captive arrangements, micro
arrangements and PORCs. ARC’s research has found some models are better than others. It
is our opinion, clients should avoid direct writes and parent-child models; clients should
consider a model which does not use (or sparingly uses) the 831(b) election.
ARC prefers compliant, best-in-class PORC models. The IRS does audit and may tax/
penalize the approximate 3% of abusive captive insurance arrangements formed outside
of the US tax code, statutes and IRS guidelines; it seems this small percentage of ‘abusers’
receive most of the attention in search engine results.

In a PORC (Producer Owned Reinsurance Company), an unrelated third-party Insurance
Company issues a policy directly to the business for the deductible expense, then cedes the
risk and premium to the PORC according to the reinsurance treaty in place. A PORC may
reduce the cost for general liability, medical malpractice, auto liability, property, or other
conventional insurance.

Statutory accounting determines that a reinsurance company is taxed on earned premium
minus expenses such as claims, claims reserves, ceding fees, IBNR, etc. The reinsurance
company is taxed on the investment earnings of the insurance company as a c-corp and files
an 1120PC (earnings minus deductions).

Filed claims are reviewed by the policy-issuing commercial insurance company who
determines if the claim is payable against the policy details. Generally, the claim form
receives a thorough review to approve or deny the claim, whereby the reinsurance company
reimburses the insurance carrier via reinsurance treaty.

One of the benefits of the ARC model is that tax-advantaged premium assets can be
invested in any way the owner of the PORC desires to include offsetting CMA accounts,
stocks, bonds, mutual funds, real estate, private loans (including related party loans at
AFR), etc.

Yes. Policy premiums are treated no differently than other traditional Property & Casualty
insurance companies (e.g., Century, Chubb, Progressive, State Farm, Geico…). Insureds pay
a premium (defined by the policy) to protect their businesses; Premiums are an expense on
the business’ P&L.

ARC’s in-house and partnering CPAs/insurance tax experts prepare the cession
statements, financials, and tax returns for your reinsurance company. We also take care of
the annual reports and all domicile communications.

Insurance: assumes an “insurance risk” which is a fortuitous risk not a speculative
(investment) risk.

Insurance contact: is a contract that has risk transfer (from insured viewpoint) and risk
distribution (from insurer viewpoint), meaning it is not some other kind of contract such as
real estate, sales, finance, etc. Seventh Circuit: “Suppose we ask not “What is insurance?”
but “Is there adequate reason to recharacterize this transaction?’ given the norm that tax
law respects both the form of the transaction and the form of the corporate structure…
For whether a transaction possesses substance independent of tax questions is an issue of
fact….” Sear Roebuck, No. 91-3038

Risk transfer: is from the perspective of the insured, did insured transfer an insurable risk
to another party.

Risk distribution: is from the perspective of the insurance company and has no relevance to
the insured’s deductibility of premiums (See Helvering v. Legierse 1941 U.S. Supreme Court,
see especially definition includes “Historically and commonly”). Distributing risk allows the
insurer to reduce the possibility that a single costly claim will exceed the amount taken in
as premiums and set aside for the payment of such claim. By assuming numerous relatively
small risk, independent risks that occur over time, the insurer smoothes out losses to
match more closely its receipts of premiums (Clougherty Packing v. Commissioner (9th
Cir.1987); Humana (6th Cir. 1989). Beech Aircraft Corp. v. United States (10th Cir. 1986, (risk
distribution” means that the party assuming the risk distributes his potential liability, in
part, among others”). Said more simply, risk distribution is determined to have occurred if
the premiums attributable to a certain risk exposure doesn’t substantially pay for the claim
on that risk exposure.

Insurance company: is a company in which more than 50% of its business is the business
of insurance… “it is the character of the business actually done in the taxable year, which
determines whether a company is taxable as an insurance company under the Code.”

In Helvering v. LeGierse the Court: “We think the fair import of subsection (g) is that
the amounts must be received as the result of a transaction which involved an actual
“insurance risk”; at the time the transaction was executed. Historically and commonly
insurance involves risk-shifting and risk distributing” which is also repeated in Americo v.
Commissioner, 1992 Ninth Circuit.
Additionally in the same case: “That these elements of risk-shifting and risk-distributing
are essential to a (life) insurance contract is agreed by courts and commentators”

The simple synopsis is there are only two attributes to a contract of insurance as denoted
above. That the IRS has asserted a third attribute called “insurance in its commonly
accepted sense” is not a new attribute but part of the same definition as used in this case
is limited to the last line “Historically and commonly insurance involves risk-shifting and
risk-distribution” is the definition of insurance not an additional attribute requirement.
The IRS has been misquoting the case for the last few years in order to assert a regulatory
authority over the “business of insurance” which it is specifically forbade from doing in the
McCarren-Ferguson Act “that the continued regulation and taxation by the several States
of the business of insurance is in the public interest, and that silence on the part of Congress
shall not be construed to impose any barrier to the regulation or taxation of such business
by the several states” It stated that from then on, “no Act of Congress shall be construed to
invalidate, impair, or supersede any law enacted by any state for the purpose of regulating
the business of insurance or which imposes a fee or tax upon such business, unless such
Act specifically relates to the business of insurance.” The IRS is not Congress and has no
authority over the business of insurance, only the taxation of an insurance company (i.e. on
the GAAP side of the M-1 Adjustment on the 1120 PC tax form).