Background
Debbie & Dan’s Décor first opened in 2011 in San Diego, Calif., and have developed three retail stores in the surrounding area. The company is a retail store primarily focused on the interior design of clients’ homes.
- INDUSTRY- Retail
- SPECIFIC- Home Decor
- ANNUAL GROSS REVENUE- $3 Million
- EMPLOYEES- 25
- COVERAGES- $25K Premium, $50K Limit of Liability
Risk Description
Over the past two years, the company’s owners have added 7 employees to different positions across the company. Excited to see their company grow, the owners worry about the different risks that come with their success. The owners recognize the financial impact a disgruntled employee can have on a company.
Business Situation
- Debbie & Dan’s Décor is a successful company that desires risk mitigation tools to protect their success.
- The rapid growth of the company has created additional exposure, especially their unfunded liabilities: Supply Chain Interruption, Brand Protection, Employer Liability, and Cyber Risk.
- The owners are primarily worried about the risks involved with adding employees and the dynamics of eccentric personalities. Because of this, they have purchased an Employment Practices Liability Policy from their traditional insurance broker.
- Several years ago, the company had an employee receive multiple workplace harassment allegations. The employee was ultimately fired and nothing more came of it, however, the owners are worried about future incidents.
- The Employment Practices Liability Policy through traditional insurance lacks certain coverage that concerns the owners. The primary worry is the absence of coverage pertaining to the loss of income to their business if a claim were to be made.
Resolution
•An 831(b) Plan strategy was developed by SRA to help if a loss of income were to occur due to an Employer Liability Interruption.
•SRA evaluated Debbie & Dan’s Décor and assessed additional risks that they were exposed to depending on their industry, size, etc.
•The 831(b) Plan strategy also provided coverage for income losses due to fortuitous interruptions in the supply chain or brand damage.
•Premiums were determined by a percentage of gross revenue.
SOLUTION
SRA successfully implemented a strategy that would ultimately protect Debbie & Dan’s Décor if an Employee Liability Interruption caused a loss of income. SRA also created and administers an 831(b) Plan with the same ownership structure as Debbie & Dan’s Décor, to more efficiently manage risk to the company’s unfunded liabilities. By applying SRA’s program, Debbie & Dan’s Décor was able to utilize the available tax efficiencies that allowed the owners to manage risk more effectively.
Key Takeaways
BENEFITS TO DEBBIE & DAN’S DÉCOR
- Debbie & Dan’s Décor found a solution to mitigate risk that comes with owning a successful business, specifically income loss from employer liability, using tax-deferred funds.
- The 831(b) Plan strategy covered gaps in the business’ traditional insurance that were causing the owners anxiety.
- Along with managing unfunded liabilities, Debbie & Dan’s Décor implemented a strategy to set their business apart from others by creating a tax-deferred surplus account to protect the success they worked so hard to create.
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