Many aspects of the Patient Protection and Affordable Care Act (PPACA) become effective Jan. 1, 2014, but preparing for that date is difficult for businesses because not all of the rules and regulations have been written.

“As of last month, there were still 1,200 regulations yet to be written by the end of the year. I don’t think anybody has it figured out yet — that’s the biggest problem,” says William F. Hutter, president and CEO of Sequent.

Nonetheless, there are steps businesses can take now to be ready for 2014. “The first thing to do is to understand the PPACA. Unfortunately, there is no definitive source of information on how it will impact companies because of the yet-to-be written regulations. So you need to read a variety of materials, starting in July — that’s when we should see those rules and regulations start to manifest,” says Hutter.

Smart Business spoke with Hutter about strategies small and midsize businesses can take to deal with the uncertainty surrounding health care reform.

Is there a chance that the effective date of PPACA provisions might be delayed?

Some factors already have. The Small Business Health Options Program (SHOP), an exchange for small businesses to purchase health insurance, has been delayed for a year. Also, nothing has been presented showing how the federal health care exchange, a marketplace for individuals to purchase insurance, is going to work.

Since everything is in flux, what can companies do in preparation?

A number of strategies are going to emerge, and many might have questionable structure. If someone presents an opportunity too good to be true, it probably is. Be careful about vetting companies offering creative strategies to avoid some of the impact of health care reform.

One legitimate strategy on the increase is the use of cell captives. Companies will self-insure, but with minimal exposure. There are good self-insurance options for businesses in the 60- to 70-employee range that will exempt them from certain aspects of the legislation, such as unlimited rehabilitative services. An employee can go to rehab for 30 days, come back and four months later have another drug problem that sends him or her back to rehab — there’s no limitation and it’s covered under the Family and Medical Leave Act. A company can design a plan that doesn’t allow that because it’s not required in a self-funded plan, even though it is part of the minimum essential coverage required under the PPACA in the fully insured environment.

All of these self-funded plans will become high deductible health plans with three layers of risk. The first is the employee deductible, which will pay the first layer of claims. The second layer will be an amount of self-retained insurance risk a company insures. The insurance company will pay the third layer. That setup protects insurance companies from a lot of the smaller claims. In Ohio, about 70 percent of claims are less than $8,000.

What impact will reform have on health care costs?

It will not bring down the cost of insurance because there’s nothing health care reform can fix relative to the aging demographics of the workforce. There’s been a dramatic increase in recent years in the use of medication and cost of defensive medicine. As baby boomers continue to age, those costs will only increase. There are not enough 20-somethings coming into the workforce to compensate for the aging demographic in the state of Ohio.

If anything, the cost of regulation just keeps increasing. A recent study stated that fines and penalties are expected to total $88 billion. All kinds of alternative strategies are being considered, not to avoid the intent of providing good coverage for employees, but because of uncertainty with the legislation. If you can create certainty by having a new health care plan design, that’s good for business. At least you know what you have.

We’re not going to see the conclusion of how health care reform is going to be implemented for a decade. It’s going to be a really long time.

William F. Hutter is president and CEO at Sequent. Reach him at (888) 456-3627 or bhutter@sequent.biz.

Website: Understand your legal obligations when sponsoring a health plan for your employees. Download a checklist.

Insights HR Outsourcing is brought to you by Sequent

Published in Akron/Canton

As we approach next year’s continued implementation of the Patient Protection and Affordable Care Act (PPACA), which affects how and what type of health insurance employers will offer, many employers are beginning to explore the best plan for them.

One popular topic of discussion is wellness programs. The PPACA provision on wellness programs that rewards positive health outcomes is being expanded. Next year, employers will be able to provide even more incentives for employees participating in wellness programs, with the reward percentage changing from 20 to 30 percent of the cost of coverage.

“It’s not surprising that a significant change under the PPACA is one that encourages employers to promote and reward employees for healthy behaviors,” says Marty Hauser, CEO of SummaCare, Inc. “Employer-sponsored wellness programs are popular, and incentivizing employees to make better overall lifestyle and wellness choices can help to lower long-term health care costs. It is reasonable at a time when we are trying to make health care available to more consumers and also drive down overall health care costs.”

Smart Business spoke to Hauser about the new wellness aspect of the PPACA and what employers should consider to help encourage and promote a healthier workforce next year.

What types of wellness programs are eligible for the 30 percent reward?

Wellness programs are currently and will continue to be divided into two categories — participatory wellness programs and health-contingent wellness programs. Participatory wellness programs are not eligible for the 30 percent reward, while qualified health-contingent wellness programs are.

In general, participatory wellness programs account for the majority of wellness programs offered by employers. They are made available to most employees and do not offer a reward or request that the individual satisfy a health standard to receive a reward. Examples include a full- or partial-reimbursement to employees for fitness center membership and/or a program that rewards employees for attending free health education seminars or lectures.

Health-contingent wellness programs require the participant meet certain health measures to receive a reward. These rewards can include incentives such as a discount or rebate on monthly health insurance premiums; partial- to full-waiver of cost-sharing benefits, such as deductibles or copays; and/or other monetary or non-monetary incentives. An example could include a program where participants’ biometrics are measured regularly and rewards are based on meeting a health measure. Participants who don’t meet the health measure must take additional steps to get the reward.

What are the requirements of a health-contingent wellness program?

A qualifying health-contingent wellness program must meet five regulatory requirements. These requirements include:

• Frequency of opportunity to qualify. The program is offered to all similarly situated employees.

• Size of reward. This could be as high as 30 percent of the cost of health coverage and up to as much as 50 percent for programs meant to prevent/reduce tobacco use.

• Uniform availability and reasonable alternative standards. The program is designed to be available for everyone, with a reasonable alternative for those whose medical conditions don’t allow them to participate to the full health standard.

• Reasonable design. The program is designed with an overall goal to promote health and prevent disease.

• Notice of other means of qualifying for the reward. Those who qualify for a different means of obtaining a reward have the opportunity to do so.

These requirements are meant to protect the consumer and safeguard against unfair practices.

What should interested employers do?

Discuss your options with your health insurer, benefits consultant or broker to determine what type of program makes the most sense for your employee population, time, wellness staff and budget.

Marty Hauser is CEO at SummaCare, Inc. Reach him at hauserm@summacare.com

Website: To learn more about health care reform, visit www.summacare.com/healthcarereform or www.healthcare.gov.

Insights Health Care is brought to you by SummaCare, Inc.

Published in Akron/Canton

Technology tool-related capital investments, such as new software, mobile apps and cloud computing services, are as important as a healthy workforce to many small business owners. But you must be strategic about the technological applications you choose, using your goals as a guide.

“It’s a really exciting time for small business. For the first time, you have access to tools and solutions that may have been cost prohibitive in the past, and you can buy them by the seat and without the need to build and support an enterprise infrastructure. This allows you to build a cost effective, end-to-end automation platform that really impacts your business,” says Frank D. “Buddy” Cox, Jr., executive vice president and chief information officer at Cadence Bank.

Smart Business spoke with Cox about how businesses are using technology to operate more efficiently and cost-effectively.

What emerging technology is impacting business productivity and profitability?

Cloud computing, a modern name for traditional outsourcing, has not only grown in adoption, but reach also has been extended from a focus on the enterprise to small business. This shift away from having to build a robust, secure and resilient in-house infrastructure to support software solutions, and instead migrating to a model where all critical infrastructure is built, maintained and shared by the provider, makes most all enterprise-level solutions available to small businesses in a very affordable way.

With Microsoft 365, for example, you can fully leverage Exchange, SharePoint and other enterprise-level solutions for less than $10 per employee per month. Platforms such as salesforce.com, when combined with modern real-time accounting platforms like financialforce.com, allow for a level of work flow and integration once reserved for large scale implementations.

Another technology that’s transforming business is the mobile platform. For most, it has become a primary computing device, allowing people to conduct business anywhere and at any time. When leveraged as a part of an overall business automation platform, the results can be very meaningful.

How are these new technologies transforming banking?

Banks continue to work with businesses that are building end-to-end automation solutions by plugging in at the right points in the process to provide real-time financial information and transaction capabilities. This includes, in many cases, unique one-off solutions to support a customer’s proprietary automated framework.

In the mobile space, we have seen an unprecedented adoption curve. A survey conducted by Constant Contact in March found that 66 percent of small business owners currently use a mobile device, such as a smartphone or tablet, for work. That same survey revealed that mobile apps increasingly are becoming part of how small business owners manage operations. Business owners clearly want to run their businesses and conduct their banking from the palms of their hands. Strategically, we are very focused on building feature-rich, secure and easy-to-use mobile applications that positively impact the day-to-day operation of businesses.

Mobile also is a much more capable and rich development platform than anything that we have built upon in the past. For example, not only can you turn your debit card on or off using a mobile app, but by leveraging location services on your device, we allow you to specify the use of your debit card only if it’s within a certain number of miles of you.

What are some challenges with the adoption of this technology?

Moving your data to the cloud or carrying sensitive data around on your smartphone present risk. Privacy, security, backups and business continuity are all topics to vet. Understanding from your provider how your data is stored, if it is encrypted at rest, how it is backed up, who has access to your data and how that is being properly controlled is extremely important. Third-party audits can be employed to validate that all of this is in place and functioning according to design. You must hold your vendors accountable to the same high standard with which you would grade your own internal control environment.

Frank D. “Buddy” Cox, Jr. is executive vice president and chief information officer at Cadence Bank. Reach him at (713) 871-4000.

Website: Cloud computing services and mobile technology are changing the way businesses operate and serve clients. Learn more at www.cadencebank.com.

Insights Banking & Finance is brought to you by Cadence Bank

Published in Houston

Selling a business is challenging. From vetting potential buyers to preparing financial statements to keeping negotiations on track — all while running your company — there’s a lot that can go wrong. In fact, almost no detail is too big or too small to affect the eventual outcome of merger and acquisition (M&A) deals. However, you can reduce the odds of a mistake by knowing where similar transactions have gone astray.

“It’s important to talk to owners who have successfully completed sale transactions and to work with experienced M&A advisers,” says Brian Reed, partner in Transaction Advisory Services at Weaver.

Smart Business spoke with Reed about common M&A mistakes and key items to resolve before closing a deal.

How might sellers hurt their chances before putting their business on the market?

You risk a letdown when you make overly optimistic future earnings projections or put too much weight on variable measurements, such as the sale prices of similar companies in stronger M&A markets. If you won’t budge from an unrealistic sale price, you could drive away an appealing buyer.

Work with a professional adviser to assess your company’s value as well as estimate an offering price the market can support. The two may not match because the price depends on contemporary economic, M&A market and sector conditions.

Where does timing factor into this?

Other critical seller mistakes revolve around timing, whether internal or external. For example, selling at the wrong time, at the end of a market cycle, could mean fewer buyers and possibly lower offers. If your sector has experienced a recent wave of M&A deals, the buyer base could be depleted, and you may want to hold off.

Sometimes sales are spurred by internal circumstances, such as the retirement of a founding owner, but these situations shouldn’t rush the sale. If your company is not ready for the market, consider appointing an interim head to make preparations and screen potential buyers.

Sellers, particularly those selling for the first time, often greatly underestimate the amount of work and hours it takes to prepare for sale. Have you allocated enough time to implement strategies to maximize your sale’s value? Is your company ready to promptly and accurately respond to hundreds of specific buyer requests? If you haven’t assembled a team with the time and resources to handle these requests, it could bring your potential deal to a standstill and deter otherwise interested buyers.

How might housekeeping impact deals?

Housekeeping issues aren’t trivial. They include essential tasks such as ensuring that contracts and legal obligations are in order. Some items that can trip companies up are:

• Poor accounting. If your financial statements and records are not properly organized and presented, it reflects poorly on your management, and the due diligence process will likely take longer. Sloppy accounting errors could mean tax or legal issues after the deal closes.

• Neglecting key players. Buyers want to know that key employees will stay onboard once the sale is completed. Make sure your top performers are offered financial and other incentives to stay.

• Locking in contracts. Don’t renew an expensive vendor contract as you’re about to transfer ownership. Buyers don’t like long-term contracts they didn’t negotiate, particularly if they’ll be penalized for breaking them. Negotiate short-term contracts or push for favorable terms.

What are some common loose ends to watch for and resolve?

Leaving loose ends hanging won’t endear you to your buyer, as they could hinder integration and future profitability. Some common unresolved internal issues involve:

• Minority interests. Buying out minority investors or shareholders before a sale means the buyer won’t need to deal with their demands later.

• Employee controversies. An integration team doesn’t want to deal with open legal issues, for example, while trying to build a new culture.

• Copyright confusion. Make sure all patents, copyrights, trademarks and other intellectual property holdings are in order. If you’ve failed to verify and document ownership, you may risk the deal’s value.

Brian Reed is a partner in Transaction Advisory Services at Weaver. Reach him at (972) 448-6936 or brian.reed@weaverllp.com.

Blog: To stay current on audit, tax and advisory issues that may impact your business, visit Weaver’s blog.

Insights Accounting is brought to you by Weaver

Published in Dallas

When acquiring a company, it’s important that there are no surprises after an agreement has been signed. That’s why it’s critical to do your due diligence to ensure that there are no unknown problems that might arise after the closing.

“Companies that conduct a volume of transactional work — a lot of acquiring of businesses — understand the importance of getting information on the target company and assembling the proper team to review it,” says Patricia A. Gajda, partner and chair of the Corporate Group at Brouse McDowell.

Smart Business spoke with Gajda and Rachael Mauk, an associate at Brouse McDowell, about what areas to look at and the potential pitfalls in the due diligence phase of an M&A transaction.

What is involved in the due diligence process?

From a business, legal and financial perspective, you look at everything in the company that could have a risk or liability associated with it.

Usually the buyer will provide a list of documents for the seller to gather, including:

• Organizational documents.

• Financial documents, including three or four years of audited and unaudited financial statements, monthly statements, any audit reports, receivables, etc.

• Contracts with vendors, customers, etc.

• Real property information such as title documents, deeds, title insurance, zoning variances and leases.

• Permits and certifications.

• Environmental testing reports, remediation records, audit information.

• Intellectual property (IP) including patents, copyrights, trademarks, trade secrets, confidentially agreements, and licenses and software agreements.

• Employee information.

You also want to investigate the company to examine past and pending lawsuits, insurance claims, product liability questions, warranty information — how often there were product warranty claims — and delve into the history.

Due diligence can play an important role in determining the final transaction price. For example, if you find out the target company you intend to buy has a $5 million lawsuit pending against it, you will want to determine if and how that will negatively affect the company, even if you’re not going to take the liability for the lawsuit.

Are there things you find that might cause you to back out of a deal?

It will depend largely on your motivation for acquiring the target company. You may be buying a company because they have the latest product, which you want to incorporate into your product line, only to discover that the target company doesn’t own the IP or the IP associated with the product was not protected. Alternatively, you might uncover product warranty issues that bring into question whether the product works, or review the financial records and find out it’s not a profitable line of business.

It’s not just attorneys who do the due diligence. A company will put a team together to look at the various segments of the business. Accountants will look at the financial statements and tax returns. If there are environmental issues, you might have an environmental consultant do additional testing.

What pitfalls do companies experience in doing due diligence?

They do not allow for adequate time for due diligence. A strategic buyer is generally familiar with the business, so it may think it already knows everything. Things can fall through the cracks, so leave enough time for adequate review, testing and follow up. The process can take from a few weeks to 30 days or more if it’s a complicated business.

Typically, due diligence is done simultaneously with negotiating the purchase agreement. It might result in a purchase price reduction because something discovered doesn’t add up to the price that was originally discussed. You might find there’s the potential for environmental liability and seek an indemnification for that specific item — due diligence can lead to specific requests in the purchase agreement.

Once you’ve completed the due diligence, you’re close to signing the transaction agreement and the purchase can go as planned.

Patricia A. Gajda is a partner and chair of the Corporate Group at Brouse McDowell. Reach her at (216) 830-6830 or pag@brouse.com. Rachael E. Mauk is an associate at Brouse McDowell. Reach her at (216) 830-6846 or rmauk@brouse.com.

FOLLOW UP: Pat Gajda and Rachael Mauk are based in Brouse McDowell’s Cleveland office.

Insights Legal Affairs is brought to you by Brouse McDowell

Published in Akron/Canton

Under the Patient Protection and Accountable Care Act (PPACA), large employers may know that to avoid penalties, they need to offer coverage that is affordable and qualified to full-time staff. But how do you treat a new hire to fold him or her into full-time staff so the employer shared responsibility rule can be applied?

Smart Business spoke with Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions, about how to handle new hires, in the final of a three-part series on the employer shared responsibility provision.

When must health coverage be offered to new hires?

Per the PPACA, new hires must be offered coverage within 90 days if you reasonably expect the person to be full time. However, if, at the time of hire, you cannot reasonably predict whether the person will be full or part time, you can submit the employee to a similar set of measurement/stability periods as the full-time ongoing staff. (For more information on ongoing staff measurement/stability periods, see the second article in this series.) The term ‘standard measurement’ was created to distinguish ongoing staff from what you can use for new hires, which is called an initial measurement period.

How does the initial measurement period work?

Like the standard measurement, the initial measurement period must be continuous months of between three and 12 months. Also, you have an administration period and an associated stability period where, as long as the person remains employed, you treat him or her according to the results of the hourly average from the measurement period.

What administration period rules need to be satisfied for new hires?

First, the period is no longer than 90 days — same as for ongoing staff. However, there is a caveat that the 90 days actually starts counting upon date of hire, keeps counting until you start your initial measurement period, where it pauses, and begins counting again for the period from the close of the measurement period through to the start of coverage. This is pertinent if you don’t measure from date of hire, such as beginning to measure the first of the month following date of hire, so some days between hire date and measurement beginning are deducted from the total 90-day allotment.

Also, the administration period when added to the initial measurement period cannot exceed the first of the month following 30 days of an employee’s anniversary. The longest an employee can possibly go from date of hire to coverage effective is 13 months and some change.

How does the stability period operate for new hires?

Like the ongoing staff, if a 12-month measurement period is chosen, then a 12-month stability period must be chosen. So, if an employee were hired on May 15, 2014, the employer would use a 12-month initial measurement period beginning the first of the month following date of hire, June 1, 2014, to May 31, 2015. Because the employee’s anniversary is May 15, 2015, the first of the month following 30 days of that is July 1, and the employer’s only option for administration is the month of June. If the new hire was deemed full time, he or she is offered coverage for a 12-month stability period beginning July 1, 2015, through June 30, 2016.

So, in this example, what happens with the employee on June 30, 2016?

The employee’s timeline runs from May 15, 2014, to June 30, 2016, so there is enough time for him or her to have eclipsed whatever time frame the employer uses as the standard measurement period for ongoing staff. If this new hire worked for an employer who measures ongoing employees from Nov. 1 to Oct. 31 every year, what happens to benefits on June 30 would be contingent upon the average hours worked from Nov. 1, 2014, to Oct. 31, 2015.

If the employee were full time during this time frame, the benefits would continue to the end of the year, per a 2016 stability period associated with that standard measurement period. If the employee was not full time in the standard measurement period but was during his or her initial measurement, benefits will continue through to June 30, 2016. And if the employee was not full time in either measurement period, benefits don’t have to be offered through the end of 2016.

It’s important to note that if an employee was not full time during the initial measurement but was full time during the standard measurement, you will need to add him or her to the benefits. So, in the running example, if an employee didn’t qualify based on June 1, 2014, to May 31, 2015, hours worked, but you re-measure according to your ongoing rules and find the person was full time during the Nov. 1, 2014, to Oct. 31, 2015 period, then the 12-month new hire stability period of not having benefits is clipped short. It’s replaced by the guarantee of benefits for the full 2016 plan year with an effective date of coverage of Jan. 1, 2016.

This can be complicated, but you should be fine as long as you work with a good consultant and utilize the tools your payroll vendor provides.

Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

Insights Business Insurance is brought to you by Montage Insurance Solutions

Published in Los Angeles

The Patient Protection and Accountable Care Act (PPACA) has a number of employer provisions generally called the “employer shared responsibility.” So, with this responsibility, who, exactly, do you have to offer coverage to as full-time employees?

“It’s not always as easy as 100 percent of your staff sitting in a chair from 8 a.m. to noon, then again from 1 to 5 p.m.,” says Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions. “The reality is employers will have project-based staff, variable-hour employees and other factors that make figuring out ‘full time’ slightly tricky.”

Smart Business spoke with Kennedy about the PPACA’s look back/stability safe harbor, in this second of a three-part series on the employer shared responsibility provision. The first article discussed how the penalties are triggered under employer shared responsibility.

How does the look back/stability safe harbor work?

This provision allows an employer to look at ongoing staff and make a technical calculation on whether or not a person is supposed to be offered benefits under the PPACA. The legislation applies month-to-month, but because the government realizes that a monthly application would be administratively crippling, an optional safe harbor exists where you can extend the length of time used to measure employee hours, and then that data determines which employees qualify.

For ongoing staff, you get three new time frames to calculate with: a measurement period, an administration period and a stability period.

What is a measurement period?

The measurement period is a time frame you get to select — it has to be continuous months and can last anywhere from three to 12 months. Obviously, the shorter the period, the more likely to have irregular spikes; the longer the period, the more it’s a true measure of an employee’s average.

Essentially, you simply define the period of time, and those are the months that an employer uses to calculate employee hours worked. For example, the employer might select a 12-month measurement period and choose to run it from Nov. 1 to Oct. 31 every year. In this case, the employer would look at the hours worked over this period of time to determine each employee’s average hours worked to see if it is more or less than the PPACA-mandated 30 hours — thus qualifying, or not qualifying, for benefits.

What’s involved during the administration period?

The administration period is where you, the employer, have time to evaluate the results of your measurement period, and take care of logistics. This period cannot be longer than 90 days. For practical purposes, this would be used to see who is benefit eligible, plan your open enrollment meetings, distribute benefit information and then collect/process all of the applications for the upcoming plan year.

Using the previous example’s time frame, an employer might have this period run from the end of the measurement period to the end of the year, e.g., Nov. 1 to Dec. 31.

Once an employer moves on to the stability period, what happens?

In the stability period, as long as an employee remains employed, employers must treat him or her according to whatever average the measurement period deemed them — either full time or part time — regardless of the hours worked. So, if an employee measured as full time during the measurement period, you have to continue to offer him or her benefits through the entire stability period even if hours dip lower, as long as the person is still employed.

The stability period has to be at least six months and also no shorter than the time chosen as the measurement period. So, in the example from before, because the measurement was 12 months, the stability period also needs to be 12 months. If employees were measured from Nov. 1, 2014, through to Oct. 31, 2015, the employer would enroll employees throughout the end of 2015 for their 2016 plan year.

Then, the measurement, administration and stability periods continue to go on, overlapping such that every plan year occurs back to back without a break, and each plan year’s eligibility is associated with the hourly performance of employees during the preceding associated measurement period.

In the final of this three-part series, we’ll discuss how to treat a new hire to eventually fold him or her into your employee hourly average calculations.

Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

Insights Business Insurance is brought to you by Montage Insurance Solutions

Published in Los Angeles

A global company that started out as a provider of telecommunications equipment, TelStrat was founded in 1993 in Plano, Texas to take advantage of the Dallas-Fort Worth Metroplex’s Telecom Corridor.

“Being in the middle of the telecom industry is very important to us because of the engineering and product development talent that is available,” says Jennifer Slack, CFO of TelStrat.

When the company sold off a division a couple years ago to focus solely on software, the Plano site was leased to another business and TelStrat needed to find a new location. TelStrat celebrated its 20th anniversary this past February and is focused on providing call recording and workforce optimization solutions.

Smart Business spoke with Slack about the decision to move the company’s headquarters to nearby Allen, Texas.

What were the key factors favoring Allen?

It was the location and the local talent pool. We knew we wanted to stay in the same general vicinity. Employees love the Allen area because of the good schools and housing that is available. The quality of life that’s in Allen makes it very easy to find employees.

How has the Allen Economic Development Corporation assisted TelStrat?

They helped with incentives that made it more affordable to change locations. Moving can be very disruptive, as well as expensive, and the financial incentives they provided definitely helped.

The city of Allen and the economic development corporation also sponsor many programs for businesses. They provide many opportunities for networking and encourage businesses within Allen to build on the synergies available, or just talk to each other for advice. They certainly promote that spirit of cooperation.

At one of their events, I met a representative from a local company that was able to help with our recruiting efforts. We’ve probably not taken full advantage of what Allen and the economic development corporation offer, but it did help with recruiting.

What is the nature of TelStrat’s operations in Allen?

It’s a complete headquarters facility; we have about 50 employees working in departments from sales order entry to engineers for software development and support and maintenance of our product with customers. There are also some sales staff, accounting and HR personnel.

The landlord was very helpful in remodeling the site. We predominately needed office and lab space and the building had served as a call center or back office. We’re in a five-year lease and it’s a very convenient location right off of the North Central Expressway.

What’s the best thing about your new location?

It’s the convenience — it’s very easy to get around for meetings, or if we have clients or partners visiting us. There are plenty of nearby options for lunches and shopping, which employees enjoy because it saves them a lot of time and helps with developing a good work/life balance. It‘s great when you have children and you need some flexibility if they have something special going on or are sick. You can pick them up for a dental appointment and get back fairly quickly. It helps a lot to have your place of employment near your neighborhood.

We’re a pretty simple company with simple needs. The city of Allen and economic development board have made it easy for us to do business here.

Jennifer Slack is the CFO at TelStrat. Reach her at (972) 633-4512 or jslack@telstrat.com.

Reach the Allen Economic Development Corporation at www.allentx.com or call (972) 727-0250.

Published in Los Angeles

Employee benefit plans are an important part of your company, and participating executives have just as much at stake as anyone else. With continually evolving fiduciary roles, the last thing you want is to fail in your responsibility, lose money and possibly face penalties or a lawsuit. That’s why employee benefit plan audits are conducted to identify potential problem areas. But only by closely managing the plan with fiduciary governance can you be ready for an audit.

“It’s prudent to have the board delegate to someone that is closely managing the plan — an oversight committee,” says Bertha Minnihan, national practice leader, Employee Benefit Plan Services, at Moss Adams LLP. “There’s so much to know, you can’t possibly know it all. It’s great to have this committee working with people who have expertise in this area to make sure they are meeting their fiduciary responsibilities.”

Smart Business spoke with Minnihan about areas of concern in employee benefit plan audits.

How do these plans come to be audited?

There are two types of employee benefit plan audits. If you have more than 100 eligible plan participants at the beginning of the plan year, you generally need an independent financial statement audit attached to your plan’s annual tax Form 5500. Eligible participants not only include employees eligible to participate, whether they do or not, but also those with plan account balances who are no longer employees. However, if you have between 80 and 120 eligible participants, the Department of Labor (DOL) allows you to file the same as the year prior.

The other type is when the DOL decides to audit the plan. Most of the time the DOL says its audits are random. But, for example, if you’ve reported late deposits on your Form 5500, sometimes that causes the DOL to want to look further. Another trigger is an anonymous employee phone call. The DOL also has different levels of inquiry — sometimes it just asks for supporting documentation from the independent plan auditors or the company, and sometimes goes directly to auditing the plan as far back as three to five years.

What are some areas of noncompliance, correction and deficiency you’ve come across when auditing these plans?

The DOL hot buttons remain similar to what they’ve always been. The top ones, on the regulatory and compliance side, are:

  • Timeliness of getting all employee contributions into the trust. The DOL has said small plans, with 100 eligible participants or less, need to get everything in the trust within seven days. However, there’s no hard-and-fast rule for large plans, just as soon as administratively possible. This leaves a lot of room for judgment.
  • Eligible compensation. What are the compensation components that are eligible for deferral and match?
  • Operational defects, like not following eligibility requirements as noted in Plan documents or auto enrollment that isn’t kicking in when it should.

What developments are auditors following?

The accounting and auditing world has gotten more complex, especially on the investment side. Auditors are waiting for additional guidance on disclosure requirements for investments for certain plan types. For example, the Financial Accounting Standards Board hasn’t ruled on whether employee stock ownership plans are exempt from certain quantitative investment disclosures about the valuation of private company stock. Another issue is what exactly makes a plan public or nonpublic, and how that impacts the benefit plan disclosure requirements. Additionally, auditors continue to follow the convergence of U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards.

How should plan sponsors handle their plans?

Generally, sponsors need to stay educated. Things are moving fast, but companies have many service and investment providers at their fingertips. Call on them to educate your board and oversight committees.

When making a change in your plan, document it. Have an oversight committee, no matter how big the company, following and documenting the plan operations and plan investment decisions. The committee would, for instance, know the participant demographic trends or how auto-enrollment is unfolding. In the end, you’ll always be better for whatever is going on if you have that structure and a solid governance foundation.

Bertha Minnihan is national practice leader, Employee Benefit Plan Services, at Moss Adams LLP. Reach her at (408) 916-0585 or bertha.minnihan@mossadams.com.

Insights Accounting & Consulting is brought to you by Moss Adams LLP.

Published in National

Competitive intelligence aims to provide as much insight as possible into the trends of an industry and into the strengths, weaknesses and current activities of direct competitors. Such programs can be as simple as monitoring the intellectual property (IP) filings within the U.S. of a single competitor, or as sophisticated as gathering and analyzing IP information for many competitors in different countries throughout the world. Either way, there is business value in establishing and maintaining a competitive intelligence program to understand how competitors are behaving through their IP habits.

Smart Business spoke with Matthew P. Dugan, a partner at Fay Sharpe LLP, about competitive intelligence programs.

What is competitive intelligence?

The term refers to a program to develop and maintain a body of data and information that can be organized and analyzed to provide a better understanding of one or more aspects of a company's business environment. The analysis can provide a broad, high-level view of an industry by identifying trends in a particular area of technology. It also can give a focused view of the activities of a particular competitor or group of competitors. Often, the strategy includes both.

What types of information are included?

Information described in patents and published patent applications often form the backbone of the program. While records from the U.S. Patent and Trademark Office are easily accessible and can provide valuable data for a competitive intelligence program, in some cases other sources may provide access to information on a shorter time frame. For example, companies with foreign competitors should consider searching for patent applications in the competitor’s home country, since patent filings are often made and published there before a corresponding U.S. application is available for review.

Is just the technical information of the patent documents evaluated?

No. Often, useful information can be ascertained from what patents and patent applications a competitor decides not to aggressively pursue. So, once a potentially relevant patent application is identified, the application’s progress can be monitored to try to determine whether the competitor is moving away from that technology. With such an assessment, it can be helpful to ask:

  • Has the competitor continued to pursue its initial patent applications for a new concept? Or, did the initial applications go abandoned without further activity?

  • Did the competitor file just a single application for this new concept? Or, did it file a whole family of applications that cover a variety of aspects and variations of the concept?

  • Did the competitor pursue patent protection in a very limited number of countries? Or, did it go to the expense of filing the application all over the world?

What other information can be included in a competitive intelligence program?

News and announcements, regulatory filings and even domain name registrations can add to the overall effectiveness of a program.

Useful insight can be gained from the trademark and service mark applications filed by a competitor. They are normally available within days or weeks of being filed, so a company can be alerted to the possibility of activity by a competitor much earlier than by monitoring patents alone.

Also, in cases of new products and product lines, trademark applications are often filed in the U.S. based on an intention to use the trademark or service mark with a particular list of goods or services. Such information can be useful in determining that a competitor is working toward offering an updated product or expanded product line.

Why should a company undertake this?

Insight gathered through a competitive intelligence program can help business leaders make more informed decisions about a company’s strategic direction and where to focus marketing and product development resources. It can help identify trends in the evolution of existing technologies, which can impact existing product lines; find developing technologies near core businesses, which could lead to new products and business opportunities; and identify new or emerging players in the industry, which can help in preparing for new competitive threats and eliminate surprises.

Matthew P. Dugan is a partner at Fay Sharpe LLP. Reach him at (216) 363-9167 or mdugan@faysharpe.com.

Insights Legal Affairs is brought to you by Fay Sharpe LLP.

Published in Cleveland