Patrice Bucciarelli

Thursday, 29 June 2006 17:52

Valuing MBAs

The masters of business administration degree (MBA) has long been the sought-after “golden ticket” for ambitious businesspeople on their way up the corporate ladder. In recent years, the degree hasn’t lost its luster. More than 100,000 MBA degrees are conferred annually in the United States, and more are on the way.

According to numbers compiled by the Graduate Management Admission Test Council, 228,000 people took the GMA test in 2005. And even though MBA salaries have grown more than 13 percent over the past two years, companies continue to covet advance-degreed businesspeople as critical assets to their organizations.

The degree’s appeal endures. Employers know that the knowledge and insight of MBAs at the corporate table translates to bottom-line benefits, says Jasper Arnold, director of the executive MBA program at the University of Texas at Dallas.

“A critical component to an organization’s success is the people who work there,” Arnold says. “MBAs contribute a broad perspective of business from customer service to strategy that translates positively to a company’s competitiveness.”

Smart Business talked with Arnold to learn how businesses benefit from adding MBAs to their management staffs.

How do MBA skills vary from non-MBAs?
High-level managers are called upon to create strategies and solve problems on a wide corporate scale. MBA programs carry a core component of courses, including finance, management and strategy. Students may also choose a concentration of study by taking additional courses, such as in finance or accounting. In either case, students learn to think globally about business problem-solving across the organization.

For entry-level jobs, employers want people with deep functional knowledge in specific areas such as human resources or accounting. People with MBAs have that knowledge, but are better prepared to solve problems and devise strategies that extend beyond specific corporate functions.

What other skills do MBAs bring to the corporate table?
MBAs also have highly developed communication skills. During their studies, they write numerous detailed reports connected with their projects and frequently give presentations regarding those projects. They have strong interpersonal skills because they frequently work on projects with groups of people to meet deadlines. As a result, MBAs develop strong leadership qualities and are skilled at organizing and motivating groups of people to reach a certain goal.

MBA-degreed managers also bring a higher level of commitment to business. Just by having successfully earned an MBA degree, they have proven that they can set a goal and pursue it. Also, they have demonstrated a commitment specifically to business management as opposed to other disciplines, such as engineering, government work or health care.

Do MBAs also have experience beyond the classroom?
People pursuing executive MBA degrees come into the programs with extensive work experience. Students average 36 years of age and have an average of 14 years of workplace experience. But younger MBAs also gain practical experience through program-related projects that take them into companies to create strategies and solve problems.

How might companies recruit MBAs?
University placement departments can put employers in touch with newly minted MBAs. Human resources consulting and recruiting professionals can help locate more experienced MBA-degreed job candidates.

However, as in any hiring situation, employers should consider the individual, his experience and fit into the corporate culture in choosing among candidates. The key question to ask a candidate is, ‘Can you do this job?’

How much should employers expect to compensate MBA-degreed managers?
The average compensation for an experienced MBA three years after graduation is $135,000 annually. MBA salaries for new graduates are usually less and may be approximately $100,000. Employers should recognize, however, that the marketplace for MBA-degree managers is competitive.

How is their investment returned over time?
Adding an MBA to a company staff does require an investment. But businesses operate in a competitive environment. They strive to improve their operations, improve customer service and make a reasonable profit.

MBAs come to the company with strong analytical, strategic, marketing and finance skills as well as practical experience. As a result, they are able to help set goals and enhance customer service shortly after they become familiar with the company and its culture.

Companies have to get good people who are highly productive and are focused on meeting a businesses’ goals, and who have the skills and confidence to create ways to meet those goals. MBAs bring a level of knowledge, experience and leadership qualities that companies need to keep moving forward in the marketplace.

JASPER ARNOLD is director of the executive MBA program at the University of Texas at Dallas. He teaches in the areas of corporate finance and management. Reach him at (972) 883-4235 or

Monday, 26 June 2006 09:52

Benefiting from knowing your banker

For generations, conventional wisdom dictated that businesspeople distribute their financial business among several banking institutions. The idea was to protect their finances and save on fees and rates. In fact, according to a 2003 survey by Forrester Consumer Technographics, banking consumers are traditionally less loyal than users of other financial services, because only 28 percent of respondents were committed to doing business with their banks. Responding consumers indicated more loyalty to their credit unions (44 percent), their brokerage firms (44 percent) and their insurers (46 percent).

In response, banks are encouraging commercial customers to form relationships with their bankers. At the center of this “relationship banking” concept is the notion that bankers who know their customers can deliver better and more appropriate services.

“Establishing good client-bank relationships is a win-win situation for the customer and for everyone,” says Jeffrey Snyder, vice president of commercial banking for Sky Bank.

Smart Business spoke with Snyder about “relationship banking.”

How does relationship banking differ from traditional banker-customer relations?
Relationship banking is about advocacy. Most banks offer a variety of products including checking and personal accounts, loans, letters of credit and online services. Many also offer wealth management, employee benefits services, insurance and treasury management.

All things being equal, relationship banking allows the client to get the benefit of specialists in each of those areas on both the commercial and personal sides. Also, by building relationships, bankers get to know their clients and their specific needs. If the banker is familiar with a client and his business, the bank can act more quickly and efficiently to meet those needs.

What are the economic benefits of relationship banking?
Generally, the more a banker knows about a client and the client’s business, the more cost effective it is for the bank. As a result, banking fees may be reduced or otherwise modified.

Also, there is a lot of gray area in commercial lending, and much of it has to do with character. In relationship banking, the bank knows the client’s history. Additionally, clients with relationships can generally get better interest rates and structures on loans and on credit lines.

How can businesspeople begin searching for a relationship banker familiar with the client’s specific industry?
Get referrals from others in your industry, from your attorney or your accountant. Interview banks to learn about their services. Talk to a commercial lending officer; tell him about your business and your needs. Ask if the bank is already doing business with others in your industry. For example, a contractor might seek a bank doing business with other contractors. Those bankers will understand the industry, the cycles of the business, and that those clients need certain products at certain times.

A banker with many clients in the same industry is more likely to understand that the needs of two clients may be different, even though they are in the same business.

What traits should businesspeople seek in a relationship banker?
Look for advocacy — that is, someone who is interested in what’s good for the client as well as for the bank. The banker should be asking questions about the client and his goals. During the interview, the banker should listen to the client and tell him what he needs now and in the future to achieve his goals.

A client should remember that he’s sharing intimate information about his finances with the banker and should have a level of comfort with that particular person.

How might a banking relationship start?
It’s beneficial for the client to provide as much information as possible to the banker. Clients can begin slowly with only a few services, such as a personal and business checking account, and then watch how the relationship develops. Over time, as the client and banker become more familiar with one another, other services can be added, and relationships can be expanded to other specialists within the bank.

Does a personnel change affect the client/bank relationship?
When a client has just one account or is using just one service, and the person with whom he’s doing business leaves, no one else in the bank knows the client. Relationship banking takes a layered approach, whereby the client is working with more people. If one person leaves, others can seamlessly continue the relationship.

When clients are choosing between competing financial institutions, they should consider the long term. Over time, clients with banking relationships can realize benefits even beyond savings on fees and rates.

JEFFREY SNYDER is vice president of commercial lending for Sky Bank. Reach him at (330) 258-4441 or For more information, visit

Wednesday, 24 May 2006 20:00

Relating to the community’s needs

 When it comes to supporting charitable causes, businesspeople have a history of being generous. According to Charity Navigator, a New Jersey-based nonprofit organization that tracks individual and corporate charitable giving in the U.S., corporate contributions to charities totaled $12 billion in 2004.

Helping national causes is sure to capture media attention, but many companies look closer to home for worthy nonprofits. And, increasingly, their charitable works involve more than just opening their checkbooks.

“In the past, community involvement might have meant paying for the shirts for a local T-ball team,” says Rick Hull, president for Sky Bank’s Western Region. “Now companies are getting away from the mindset of simply writing a check to a charity. There’s an effort to fill real and tangible needs within the community.”

Smart Business spoke with Hull to learn how companies can use community relations policies and programs to transform their communities and reap business benefits along the way.

How can effective community relations programs be established?
You start by identifying community improvement projects sponsored by institutions such as the Salvation Army, the United Way and others. Also, ask organizations such as Habitat for Humanity, local food pantries and domestic violence prevention initiatives if you can be of assistance. Finally, you can also ask employees what local causes they are passionate about, and you can network within the community.

Funds should be set aside to support worthy projects, and employees should be assigned to work with organizations sponsoring the projects.

How do you choose projects?
You can form a committee of staff members to investigate possible community improvement projects and to recommend others on a case-by-case basis. You should evaluate each project on the basis of its longevity, its legitimacy, the legitimacy of its leadership and whether it is fulfilling its mission in the community.

Also, the process should consider the project’s benefits to both the community and to the company.

How are community relations commitments carried out?
Employees volunteer to serve on boards of organizations or devote voluntary time — for example, to pack holiday food baskets or perform some other service. Companies can track employee involvement in community projects and present awards and incentives for outstanding community service.

How often should a company re-evaluate its community relations program?
It’s a good idea to do so twice a year. Reviewing projects is necessary to ensure the community projects are still viable, and that the need for them continues to exist. Over time, support for some projects may no longer be needed. For example, an organization may become stable enough to sustain itself; construction of a house built through a nonprofit organization may be completed; or a local major hospital expansion may be finished.

Projects should be reviewed to examine what the company has spent on each, and what the business and the community have each reaped from the investment.

Re-evaluation is also a way to introduce new projects can take the place of beneficiaries that have reached their goals.

How do businesses benefit from community relations initiatives?
When most companies reach a certain size, the only thing that differentiates them from their competition is their relationship with customers and community. So investing in community relations becomes a part of branding. The return on the investment is generally better than returns from other promotional spending options.

There are also other organizational benefits.

  • A shared philanthropic philosophy encourages low employee turnover. Employees view themselves not only as part of a business, but also as a concerned member of the larger community.

  • A reputation for community involvement tends to draw potential employees with the same community-conscious mindset to fill positions where turnover does exist.

  • Customers and potential customers recognize the company’s community improvement efforts. Customers who view a company as an active member of the community are generally likely to support it with their business.

Does community involvement require a long-term commitment?
Yes. Eventually, the tendency toward community involvement becomes part of the corporate fabric. Both employees and customers identify the company with good service and good citizenship.

It’s not pie-in-the-sky. Businesses are still commercial operations, not philanthropic ones. But they have an obligation to the community as well as to their shareholders, employees and customers.

Having happy employees, satisfied customers and solid involvement in the community is good for business.

RICK HULL is president of Sky Bank’s Western Region. Reach him at (330) 258-4434 or

Tuesday, 25 April 2006 05:40

Another look at deferred compensation

When it was signed into law nearly two years ago, the American Jobs Creation Act of 2004 was described by tax specialists as the first major piece of tax-related legislation since the Internal Revenue code was revised in 1986. At the core of the legislation are measures designed to stimulate job creation in the manufacturing sector. But the so-called 2004 Jobs Act also contains provisions with significant tax implications for corporations in all economic sectors.

Internal Revenue Code (IRC) Section 409A establishes rules governing corporate deferred-compensation plans, including traditional elective deferral plans, equity-based compensation arrangements such as stock appreciation rights and restricted stock, supplemental executive retirement benefits, and individual employment and severance agreements. Failure to comply with the new rules carries significant tax implications for covered employees.

In light of the new rules and their tax-related implications, many corporate decision-makers are reviewing their deferred-compensation plans and policies, says Scott Mayfield, tax partner in Whitley Penn LLP, a regional accounting and consulting firm with offices in Dallas and Fort Worth.

Smart Business spoke with Mayfield to discover how corporate managers can evaluate their deferred-compensation plans to ensure 409A compliance.

How does Section 409A affect deferred-compensation agreements?
IRC Section 409A was enacted as part of the 2004 Jobs Act. The Treasury Department has enforcement jurisdiction of the law that covers all deferred-compensation agreements, including individual agreements such as executive contracts that contain a deferred-compensation clause.

Beginning in 2005, all deferred-compensation agreements that provide for future payment of current compensation must comply with tax rules relative to 409A. If the agreements are not in compliance, the individual receiving the compensation is liable for penalties. Non-compliance eliminates the deferral benefit and changes deferred income to current income, subjecting the income to a 20 percent excise tax on the amount deferred, along with an IRS underpayment penalty plus one point.

Penalties are imposed for each year beyond 2005. For example, if the deferred income is not to be paid until 2007, a noncomplying agreement would subject the individual to taxes and penalties for 2006.

State and local noncompliance penalties may be applied if those entities follow the federal legislation regarding deferred compensation.

How can managers ensure their deferred compensation agreements comply with Section 409A?
Most big companies will have already complied, but it’s still important to review every arrangement for each individual who has a legal binding right to compensation paid in a subsequent tax year.

How can managers evaluate agreements?
Each contract must be in compliance in the areas of distribution of benefits, acceleration of benefits and election of benefits.

Under Section 409A, a deferral election must be made before the beginning of the tax year or, for first-time participants, within 30 days after they become eligible to participate in the plan. If the deferred compensation is performance based for services of a period of 12 months or more, the election must be made within six months of the time the services begin.

Also, the time schedule of benefits cannot be accelerated except if specified by the IRS. Compensation cannot be distributed earlier than separation of service, disability, death, unforeseeable emergency and a date irrevocably determined at the time of at the deferral election. Compensation may be generally deferred only if the deferred election is made prior to the year during which the compensation is earned.

However, companies may continue to offer short-term deferred-compensation plans, as these still qualify for compliance under Section 409A — so long as the compensation is paid within 2.5 months after the current tax year.

How should reviews be carried out?
Managers of human resources departments in larger companies will be familiar with Section 409A and its noncompliance consequences, and larger companies may have internal controls for reviewing deferred-compensation agreements. Companies that do not have in-house human resource specialists should start with the tax advisers and their attorneys.

How do managers bring plans into compliance?
If agreements are not in compliance, they may not be terminated. They must be renegotiated. Tax advisers and attorneys should review renegotiated agreements.

How are companies changing their compensation policies as a result of the new rules?
As a result of the new rules established in Section 409A of the 2004 Jobs Act, many companies are replacing deferred-compensation plans with other programs such as qualified retirement plans such as 401(k)s, vacation pay, sick leave, disability and death benefits, incentive stock offerings and medical Health Savings Accounts (HSAs).

The cost of administering deferred-compensation agreements under Section 409A rules is driving this change. Overall, the new rules are encouraging companies to rethink their compensation policies to include diverse benefits packages.

SCOTT MAYFIELD is a tax partner in the Fort Worth, Texas, office of Whitley Penn LLP. Reach him at (817) 258-9173 or

Tuesday, 21 March 2006 19:00

Form 990

In 2004, charitable giving in the United States reached an estimated record total of nearly $250 billion, according to “Giving USA,” the 2005 annual report by the Giving USA Foundation.

Form 990 is an annual information return that non-profits file with the Internal Revenue Service that contains information about the organization’s programs and accomplishments, financial condition and board members. An organization’s Form 990 is open to inspection by the general public and available upon request online at

Form 990 can be useful in showcasing an organization’s strengths to potential donors, according to Angela Dotson, tax manager for Tauber & Balser, P.C., an Atlanta, Ga.-based accounting and consulting firm whose clients include public and privately held companies in the construction, hospitality, manufacturing, not-for-profit, professional services, real estate, retail, technology and wholesale/distribution industries.

Smart Business talked with Dotson to discover how Form 990 can be used to communicate non-profit organizations’ missions as well as their financial condition.

Who must file IRS Form 990 and when is it due?
In general, tax-exempt organizations with annual gross receipts of more than $25,000 must file Form 990 or Form 990-EZ. Non-profit organizations should consult their tax advisors to determine their filing requirements. Forms must be filed on the 15th day of the fifth month following the close of the organization’s year. Non-profits with $100,000 in revenue and total assets of more than $250,000 must file Form 990 rather than Form 990EZ.

What kind of information is disclosed on Form 990?
Information related to an organization’s income in terms of how much income and the sources from which it is derived, which provides readers with an indication of the size of an organization’s operations and its ability to garner financial support in the future. The revenue section on the first page is broken down into 11 different sources. Revenue source information is critical because it demonstrates whether organizations rely primarily on contributions from the public or whether they are more entrepreneurial in nature by earning revenue based on their services. A steady flow of income from one source over several years may indicate the likelihood this income stream will continue into the future.

Form 990 contains information related to an organization’s expenses. Expenses are broken down into three functional categories — program services, management and fund-raising — and depict how non-profits spend the resources they receive. The public wants to know what portion of the resources are being used for the actual mission and program services versus the other categories. For example, the executive director’s salary of a typical organization should be allocated to all three categories due to the director’s involvement with each.

An organization’s net assets are listed on Form 990. Net asset information is useful in making reasonable assumptions as to the future of the non-profit. It can be analyzed to determine what portion of the assets are available to help meet future financial obligations. By comparing the beginning and ending net asset balance, you can determine if the organization operated at a surplus or deficit for the year. Unrestricted net assets are not subject to donor-imposed restrictions. Permanently restricted and temporarily restricted net assets, which are restricted by the donor, can only be used for the specific purpose intended.

It is recommended that three years of 990 returns be reviewed to obtain a better idea of the organization’s overall financial condition.

Beyond the numbers, what do 990 forms say about an organization?
Form 990 lists the organization’s mission and accomplishments and is an excellent place for organizations to market or advertise their activities. The information is used by the public to compare one non-profit organization to another. It also provides accountability to the regulatory authorities by ensuring their exempt purpose. Board members and the compensation of key staff are listed on Form 990.

Organizations should have written policies on how compensation is determined. It is a good practice to compare salaries of other organizations that are similar in size and nature to determine reasonableness.

What are the most common errors found on Form 990?
According to the IRS the five most common mistakes are:

  • Not completing Schedule A, which requires organizations to list the salaries and benefits of the key people and the top paid independent contractors;
  • Not completing Schedule B, which all organizations must complete and requires the reporting of contributions made over $5,000 by single donors or certifying they are not required to attach the schedule because they did not meet the $5,000 single donor requirement;
  • Filing the wrong form;
  • Not signing the return and
  • Listing the incorrect tax year at the top of the form.

ANGELA DOTSON is a tax manager for Tauber & Balser P.C., an accounting and consulting firm in Atlanta, Ga. Contact her at (404) 814-4981 or e-mail

Tuesday, 31 January 2006 11:32

Banking on community development

In the late 1970s, Congress passed legislation compelling banks and other financial institutions to abandon their formerly general practice of ignoring the financial services needs of low- and moderate-income borrowers and other segments of their market areas. The Community Reinvestment Act mandated that banks establish clear policies to become active partners in the redevelopment of declining neighborhoods as well as in economic development strategies throughout their market areas.

During the three decades since the act became law, banks have become significant players in helping communities realize their economic development and redevelopment plans, says Brian Matthews, community reinvestment officer for the Western Reserve Region of Sky Bank, headquartered in Bowling Green, Ohio.

Smart Business spoke with Matthews about how banks are working with local business and nonprofit groups, as well as government agencies, to strengthen local economies, and why all businesses should adopt community reinvestment policies of their own.

Why was the Community Reinvestment Act instituted?
Prior to 1977, many banks were not lending money or providing services in certain areas of their markets such as low- and moderate-income neighborhoods or in certain ethnic communities. Basically, they were redlining those communities. The Community Reinvestment Act states that banks will do business within the entire market area which they serve.

How do banks comply?
Essentially, banks participate in community reinvestment by lending money for affordable housing developments, or business loans. Banks build partnerships through employee community involvement with nonprofit, for profit and governmental organizations, which help them identify donation and investment opportunities within the community.

Federal bank examiners evaluate if and how a bank is meeting those community reinvestment requirements.

How do banks identify community reinvestment opportunities?
Through their community development officers, banks develop relationships with organizations within the communities they serve, and become involved in opportunities to transform the community. Community development officers also work with chambers of commerce, executive directors of community development organizations, and with community planners to understand where the marketplace is going, and what planners have in mind for the community.

What kinds of projects are generally considered opportunities for community reinvestment?
Projects typically considered are opportunities to create or promote affordable housing, economic development initiatives in both urban and rural areas, small business startups, existing small businesses’ growth, and economic revitalization initiatives in urban neighborhoods and elsewhere that will create new jobs.

What kind of commitment does participating in community development projects require?
It’s a long-term investment in time and resources. Community reinvestment means working with people to create lasting relationships throughout the community. It also means working with them on projects that are two, three or four years down the road. At the same time, it’s working to understand what the new community development trends are and how to invest in those initiatives.

There are rewards. When a person who has been renting a place to live for 20 years finally gets their own home, or when a small business that has five or six employees can grow to 25 or 30 employees, it’s well worth it.

What are the practical business benefits to community reinvestment?
If a business is involved in community reinvestment, it’s seen as a responsible corporate citizen. Community development involvement can be touted in a business’s literature and in other publications. Beyond that, community reinvestment provides an opportunity to grow market share in new areas and cultivate new customers throughout the market.

What are the general benefits of reinvestment to the community?
Generally, community reinvestment on the part of banks and other businesses is a development tool for community leaders, including economic development agencies, to draw new businesses into the community. It sends the message that companies are interested in the needs of the community and are trying to capitalize on new opportunities. It sends a positive message that the community wants new business.

It also means the business community is progressive in identifying the value in the community.

Can businesses outside of banking also benefit from adopting community reinvestment policies?
Community reinvestment is a win-win situation for all businesses and communities. By choosing to be a responsible community partner, businesses will foster an environment that spurs job growth and investment in the community, thus making their business’ success an integral part of a community’s success.

Brian Matthews is the community development officer for the Western Reserve Region of Sky Bank, and is based at Sky Bank’s Akron office. Sky Bank serves communities in Ohio, Pennsylvania, Michigan, Indiana and West Virginia. Contact Matthews at (330) 258-2353 or For more information, visit

Wednesday, 28 December 2005 05:14

Going paperless

From operations management to manufacturing, technology works to help businesspeople do more, faster, without sacrificing efficiency. Computer and Internet technologies have long been staples on the factory and sales floors, but business owners are now discovering that, thanks to 2004 federal Check 21 legislation allowing electronic check images to replace paper drafts in banking, they can use technology to streamline their remittance and banking operations, too.

Electronic remittance systems represent a new wave of applied technology that also helps small and mid-market firms better manage the flow of their payments and reduce handling and processing costs, according to Judy Hill, senior vice president of treasury management for MB Financial Bank. MB Financial Bank is the lead bank for MB Financial Inc., a Chicago-based, $5 billion holding company.

Smart Business spoke with Hill about ways remote-capture remittance services can help small and mid-market companies streamline their remittance procedures and save cash and time in the process.

What are remote-capture remittance systems?
Remote capture services allow businesspeople to electronically deposit checks received from their clients into their own business bank accounts without having to leave their offices. These are checkless payments that are created when a written check becomes an electronic check. Deposits are recorded immediately.

Tracking numbers on checks are used to create deposit and account reports. Companies can get immediate account information and can work with their banks on other services such as intra-day reports on cash flow.

What do businesspeople need in terms of equipment to make that conversion?
In order to use the remote capture system, companies need a scanner and related software developed specifically for the paperless deposit. The scanner is about the size of a small telephone and connects to a PC. Paper checks are scanned into the PC and become electronic images. Once the checks are scanned, the person can go to their bank’s Web site, log in and make the deposit.

What are the advantages of making paperless deposits?
For companies — including small and mid-market companies — there are savings because it eliminates the transportation of paper. Some companies hire messengers or even armored cars to carry their deposits to the bank. Those costs are significant.

Also, in many companies, someone goes to the bank to make the deposit. Sometimes, time prevents those deposits from being made every day. Instead of having checks hanging around in the cash drawer and risk being lost or stolen, they (can) be deposited every single day without an employee having to leave the facility to go to the bank.

Finally, if a company has six or seven offices in different locations, the paperless system gives the company the opportunity to consolidate and centralize their banking functions.

What happens to the paper checks that are scanned into the system?
Checks have tracking numbers that are used for verification, so you still have to keep the checks until you have confirmation that they have been fully processed through the banking system. Some companies keep the checks for 20 days, others for 30 days, but it’s not recommended that checks be saved for longer than 30 or 45 days.

How do system users prevent those on-hand, scanned checks from being stolen?
A lot of companies are keeping them in safes. Then, after the 30 to 45 day period, checks are shredded prior to disposal. Some companies do the shredding at a secure location. Either way, it’s important to get a good quality shredder.

How much money must business owners invest in equipment and training to use paperless remittance systems?
The equipment costs about $1,500 and there is some training to learn to use it. Training is most often done by the bank and most don’t charge their clients for training sessions.

On average, how long does it take to recoup that investment?
Every company is different, and the payback time depends upon how much a company uses the system. But on average, the payback on the equipment investment is about 12 months. However, if a company is paying a messenger services $375 a week to get their money to the bank, the payback is about two months.

Is remote capture usage growing among small and mid-market businesses?
There are a lot of toes in the water, but not many companies are jumping in all the way yet. However, in the next 12 months we’re going to see a lot more activity because banks are going to offer it and because companies may be more willing to accept it understanding that going paperless is going to happen across the board eventually.

Judy Hill is senior vice president of treasury management for MB Financial Bank. Reach her at (847) 653-1974 or

Thursday, 27 April 2006 11:11

Building healthier benefits

According to a recent United States General Accounting Office report, nearly half of all domestic workers receive employee benefits. Those benefits — including paid leave, retirement insurance income and health insurance — now account for 70 percent of total employee compensation. Health insurance costs to employers have skyrocketed in the period from 1991 to the present.

“Employees don’t understand that, while they may contribute $25 each pay period for health benefits, their employers contribute may $250 per pay period,” says Robert W. Fisher, senior vice president of Sky Insurance, a division of Sky Financial Group.

Despite the costs, the availability of health insurance benefits factors significantly in a company’s ability to attract and retain a quality workforce, Fisher says. Companies must find ways to meet their employee health insurance obligations cost effectively, he adds.

Smart Business spoke with Fisher to learn how business owners and managers can control costs and still offer attractive health insurance benefits to employees.

How can employers choose among health coverage options to remain cost effective?
Companies do have options in providing health insurance, life insurance and dental and vision insurance to their employees. They can offer traditional group coverage or high-deductible health plans coupled with Health Savings Accounts (HSAs). HSAs allow employees and employers to set aside pre-tax dollars that may be used to cover deductibles and other health-related expenses not covered by the underlying policies. Unused funds carry over from year to year, and may be taken by employees upon retirement to pay for medical expenses.

A good broker who knows the medical marketplace can help employers navigate the market. The broker will meet with the employer and discuss their specific needs, in order to decide which plans provide appropriate coverage.

How can employers control costs while choosing the most appropriate plan?
There is no silver bullet. Costs are determined mostly by how much employees are using the plan, as well as the demographics of the employee population. As a result, most employers consider cost-reducing options, such as raising deductibles or increasing prescription co-pays. The new high-deductible health plans, coupled with HSAs, are designed to control cost by providing employees with the tools they need to make better, more informed, health care buying decisions.

Can controlling eligibility help contain costs?
Companies can control employee eligibility, but many insurance companies require that employers cover 60 percent to 75 percent of their employees in order to qualify for group plans.

How do employee wellness programs affect insurance costs?
Typically, 20 percent of a company’s employees account for 80 percent of the health insurance costs due to large claims related to catastrophic health conditions. Most of those conditions are lifestyle driven.

Company-sponsored wellness initiatives — smoking cessation, weight counseling, nutrition counseling, incentives for regular physical exams, vaccinations for dependents, and recommended medical screenings — are things all employers should do. However, they won’t see an immediate reduction in health benefit costs. That will happen over time as employees adopt healthier lifestyles.

How often should employers review their health benefit packages?
Every year. The review should examine the current plan and compare it to other plans in the marketplace to make sure the coverage is still meeting their needs. It is not recommended that employers change plans annually, but a thorough review is recommended at least annually.

How can employers communicate benefit information to employees?
Health and wellness information in employee newsletters is useful. Also, many companies are now using Internet-based communication tools to educate employees on benefit and health care-related issues. New companies are also providing coaching services to help employees become better health care consumers.

Are there other new strategies employers can adopt?
One of the new cost control tools is to provide incentives for employees to enroll dependents in other coverage when available through their spouse’s employer-sponsored plan. In this case, the couple decides which of them will include dependents on which employer’s health plan.

How will employer health plan benefits change in the future?
In the next five years, employers may probably adopt plans with higher deductibles, and there will be more use of HSAs. As employees understand the costs and realize they can make contributions to HSAs that accumulate toward retirement, they may have incentives to use benefits wisely and engage in lifestyle changes that promote wellness.

ROBERT W. FISHER is senior vice president of Sky Insurance. Reach him at (330) 492-3373, or

Monday, 27 March 2006 08:50

High potential bucks

Successful businesspeople know the value of a good plan. In fact, their businesses almost certainly began with a well crafted and executed comprehensive plan. But when it comes to personal planning, even those most successful at accumulating wealth may not be as savvy about how to ensure that their own assets are at work to achieve personal and financial goals. Wealth management is crucial to maintaining, growing and appropriately allocating financial assets to their highest potential, says John Gulas, CEO of the Trust Division of Sky Bank NA.

Smart Business spoke with Gulas to learn how wealth management and its planning process can serve as a roadmap to meeting personal financial goals.

What is wealth management?
The definition of wealth management varies depending upon who is answering the question. But generally it applies to managing the finances of individuals who have high net wealth such as entrepreneurs, doctors, lawyers, accountants, corporate executives or individuals with generational wealth.

What is the wealth management process?
The process assesses and creates a plan to reach a series of present or future goals , such as investments, retirement, current income tax, capital gains tax, asset protection, cash flow and debt management,. It should also include looking into long-term care, health and life insurances, estate planning allocations for family members, and charitable contributions.

Why enter the process?
In this country, 50 percent of the wealth is held by owners of small and medium-sized businesses, who range in age from their middle 40s to their early 60s. Eventually, entrepreneurs, professionals and others with high net wealth are going to be making transitions. So they will be asking questions about where cash will flow to transition a business to a management team, or to start a new enterprise, or to change careers to some avocation that has become a passion. Wealth management creates a plan to grow and maintain financial assets to answer those questions.

What are considerations for creating a wealth management plan?
Goals are unique to each individual, but there are some general things to consider. First, the plan should be flexible because things will change over time.

Second, a person should consider their risk comfort level in allocating assets. A person who can’t tolerate any type of loss should make conservative asset allocations in terms of investments. When considering estate planning, people should take into account allocations and resulting tax implications for family members.

What is the best mix of allocations for growing and managing wealth?
That varies. The wealth management plan must fit the individual’s unique goals. Someone whose primary goal is to transition to a new career or new enterprise will be different from someone whose primary goal is to pass wealth on to the next generation.

Goals change and circumstances change. When most people plan for wealth management, the plan often becomes stagnant, because people will create the plan, then file it away and not review it again for five years or longer. The plan should be reviewed every year and every time the things driving the plan change.

What’s the role of wealth management service providers?
They are advisers. They look at the client’s current wealth and position, what the individual’s current needs are, future goals and the individual’s risk tolerance. They then go out to find the best possible solutions to meeting the client’s needs.

What are considerations when choosing a wealth management adviser?
Wealth management has to be a collaborative effort. The consultant must indicate that the plan needs to be all about the client as an individual, and that the client comes first. Ask questions about how the consultant is to be compensated, and make sure the answer is very clear. In some cases, the annual fees for wealth management services are low, but there are hidden costs such as separate costs for different services like estate planning or investment research.

Also, find out if the consultant is attached to an organization with a lot of proprietary products. How hard are they pushing those products? An organization with an “open architecture,” or a policy of reviewing several products to find the one that best serves the client’s needs, is a better option.

Beware of an adviser who claims never to have lost money for a client. Choose someone who will be honest about the downside of an investment or allocation.

Baby-boomers are unique because they will be the first generation in history likely never to retire. Wealth management is a tool for reaching personal financial goals. It’s an ongoing process of making decisions about your life.

JOHN GULAS is the chief executive officer of the Trust Division of Sky Bank NA. Reach him at (216) 206-1961 or Headquartered in Bowling Green, Ohio, Sky Bank serves communities in Ohio, Pennsylvania, Michigan, Indiana and West Virginia.

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