One law small businesses frequently underestimate is the misclassification of employees as being exempt from Fair Labor Standards Act (FLSA) overtime rules, an oversight that could cost millions in employee misclassification lawsuits.

Minimum wage rates also pose problems because there may be different standards at federal, state and local levels.

“Companies need to know the basics of the FLSA in order to determine if they’re in compliance,” says Tracy Baskin, payroll compliance analyst in Wage and Hour Compliance at TriNet, Inc.

Smart Business spoke with Baskin about FLSA issues and how to stay compliant.

What are typical FLSA compliance issues?

Many businesses have problems keeping in step with minimum wage rates. An employee, having worked a year or so at a given rate of pay, may be due retroactive payments because of an increase in state or local minimum wage rates. Employees paid at the lower rate of the previous calendar year could file a complaint with the Department of Labor (DOL), which could lead to an audit.

It can be even more of a problem with exempt employees — many companies aren’t even aware there is a minimum salary basis. Exempt employees paid at a rate less than minimum wage would need to be increased to at least $16 an hour to be in compliance with California’s requirement for executive, administrative and professional (exempt) employees. For example, computer professionals are employees who typically write or modify programming have their own minimum, which is $39.90 per hour.

The most impactful item is overtime compensation. Companies are not accurately calculating overtime pay because they aren’t including additional earnings such as bonuses or commissions, which need to be included to comply with the FLSA.

How do you determine if an employee should be classified as exempt and nonexempt?

The FLSA provides general guidelines. You’ll need to concentrate first on the employee’s primary duties. Are they managers who customarily and regularly direct the work of two or more employees? Do they set company policies, or authorize, suggest or recommend the hiring and firing of others?

Employees who have advanced knowledge in a field of science, whether college or beyond, may qualify for certain professional exemptions. However, college graduates are not necessarily exempt. In California, the professional exemption is reserved for those licensed or certified by the state, generally in the fields of law, medicine, dentistry, architecture, engineering, teaching and accounting. Typically, exempt employees must also be paid at least $455 per week on a salary or fee basis.

Nonexempt employees have to be paid a certain amount per hour. If they’re tipped, they must earn enough in tips to bring them up to minimum wage. They’re the average employee and are paid time and a half if they work in excess of 40 hours in a workweek.

While most exempt employees are required to receive salaries, not all salaried workers are necessarily exempt. As a rule of thumb, you can say that an employee whose duties include supervising two or more employees; authority to hire, fire and promote; and giving job assignments to others are usually exempt. But it’s not the job title that matters, it’s the actual job duties that determine whether an employee is exempt or not.

What are the penalties for noncompliance?

Penalties vary depending on what the employee has presented to the DOL, whether it’s an overtime violation, he or she wasn’t paid the minimum wage or a simple miscalculation. If the DOL considers the violation to be willful because a business has had this offense before and not corrected it, fines can be doubled or tripled.

Our recommendation is to pay employees what they are due. If you don’t, you should expect someone will eventually reach out to the DOL, which will open the company up to a much larger audit. The DOL will examine the status of all employees and ask for the documentation to see the criteria the business used to determine their status as exempt or nonexempt. So it’s best for everyone to make sure employees are classified properly and paid what they are owed.

See TriNet clients that have mitigated their HR risks.


Tracy Baskin is a payroll compliance analyst, Wage and Hour Compliance, at TriNet, Inc. Reach her at

Insights Human Resources Outsourcing is brought to you by TriNet, Inc.

Published in National

State and local governments and nonprofits that receive federal money often must complete Single Audits, also known as OMB A-133 audits. These ensure monies are spent properly according to the different program requirements, and that the relevant organizations only have to go through one consistent audit event.

However, the Office of Management and Budget (OMB) has proposed changes to the audit structure that could have direct and indirect impacts, including decreasing the number of organizations required to undertake a Single Audit.

“A lot of organizations may say, ‘this is great, I don’t have to pay for a Single Audit anymore,’” says Daniel L. Wander, CPA, director of assurance services at SS&G. “But if this does go through, they may need to react to it fairly early to determine what their funders are going to require in terms of any changes or additional procedures.”

Smart Business spoke with Wander about the proposed changes and their impact.

What are the proposed changes?

As of February, the OMB recommended that the annual spending threshold for federal funds that require an organization to have a Single Audit be raised from $500,000 to $750,000. This is partly because of inflation — the last threshold increase was in 2003 — and partly to increase efficiency. The American Institute of CPAs indicated last year that entities receiving less than $1 million in federal funds made up about 24 percent of the total Single Audits but only covered 1 percent of total expenditures. The audits for organizations receiving more than $3 million in federal funds, however, accounted for about 97 percent of total federal expenditures.

Once an organization determines it must undertake a Single Audit, major programs over a certain threshold undergo a compliance audit, at least on some kind of rotational basis, where the auditor renders an opinion. The OMB proposal also raises this threshold from $300,000 to $500,000.

Another change is the coverage rules for high risk and low risk auditees. Coverage means program dollars covered in the compliance audit as a major program. OMB is talking about reducing the coverage rules to 40 percent for high risk and 20 percent for low risk auditees, from 50 percent and 25 percent, respectively.

Finally, OMB wants to streamline the compliance testing areas from 14 to six, focusing on areas where money is going to be misspent, and putting a number of cost and administrative principle guides into one central document.

What’s the timeline on these changes?

The changes are still in proposal form, and the comment period has been extended to June 2. Therefore, the earliest the changes would be in effect would probably be beginning July 1, 2014, giving people a chance to plan.

What might be the impact of the changes?

The direct effect will be fewer entities required to have Single Audits. However, they will still need to follow federal rules and regulations, and could be subject to audits by either state or federal organizations that want to come in specifically.

A fallout may be more state or local entity involvement through audits or additional requirements in order to fulfill state or local monitoring responsibilities. Currently, these organizations get automatic easy oversight from receiving Single Audits each year.

What are some next steps for nonprofits?

First, if nonprofits have anything specific to say, use the extended comment period. Then, reach out at least to your major funders, usually state, local or county agencies, and open a dialog so there are no surprises. How do the funders think they will react? Will they be putting in additional requirements as part of their oversight?

A nonprofit’s costs may go down but it may need to reallocate. If a nonprofit is subject to a Single Audit, the cost can come from the federal portion of your budget. If somebody else is imposing certain audit costs, you’ll need to talk to that organization about where that’s going to be allowable. If Ohio is requiring something additional, it ought to be paid with state money.

Hopefully, no one begins to believe auditors won’t be looking at this anymore. You still have to comply with the federal regulations, and there’s a chance someone will look at your spending at some point.

Daniel L. Wander, CPA, is a director, Assurance Services, at SS&G. Reach him at (800) 869-1834 or


Save the Date: You have until June 2, to provide comments on the proposed revisions to OMB Circular A-133 and related grant reforms. The OMB must receive comments electronically.


Insights Accounting & Consulting is brought to you by SS&G


Published in Akron/Canton

Companies are being challenged to protect vast amounts of proprietary and confidential information. And now, many are being held to an even higher standard when it comes to protected health information (PHI).

“The Health Insurance Portability and Accountability Act (HIPAA) has existed since 1996. It’s well established that covered entities — health care providers, benefit plans and clearinghouses — have a responsibility to ensure the privacy and security of PHI. Recently, the rules have been tightened to also cover business associates — organizations with which a covered entity shares PHI. These changes mean that business associates now have to fully comply and be accountable under the HIPAA security rule,” says Tony Munns, member, Risk Advisory Services, at Brown Smith Wallace.

Smart Business spoke with Munns about the final omnibus rule and what actions businesses should take.

What prompted the new rule?

A significant number of data breaches were from business associates who were not as diligent as they should have been, and covered entities were not selecting business associates with the appropriate rigor. A notable example involved an insurance company that had a business associate who was responsible for off-site storage of sensitive data. The business associate was using a garage, which was left unlocked and wasn’t climate-controlled. That contracting choice has led to separate investigations by both California and federal regulators.

What action should companies be taking?

The Department of Health and Human Services said that it’s not sufficient to just have an agreement, there needs to be satisfactory assurance that the business associate can and does follow proper procedure. Entities covered by HIPAA have until Sept. 23, 2013, to update their business associate agreements. Current agreements do not have to be changed until they’re up for renewal, but in any case all agreements have to be updated by Sept. 22, 2014.

What steps should companies take to comply with the legislation?

  • Understand the new requirements and the impact on the business.

  • Update business associate agreements.

  • Apply the satisfactory assurance mandate.

Review existing agreements and perform due diligence to get comfortable with the practices of your business associates. This might involve requesting that audits be performed, such as Statement on Standards for Attestation Engagements No. 16 reports. In the insurance company example, no one examined whether the person contracted to provide off-site storage was capable of providing it to the level expected.

What are other requirements of the final omnibus rule?

The new rule requires that individuals be informed that their information has been breached. Managing breaches is no longer sufficient. Meanwhile, business associates are not required to provide a notice of privacy practices or designate a privacy official; they only need to comply with the general privacy requirements and all security measures, much like covered entities.

The definition of a breach was also changed from ‘a significant risk of financial, reputational or other harm to an individual’ to ‘an acquisition, use or disclosure of PHI in a manner not permitted.’ Under the old rule, companies that didn’t believe information was compromised didn’t need to classify it as a breach. Now they have to report the breach, but can apply mitigation to demonstrate there was a low probability of harm.

What are the penalties?

There are four categories:

  • Ordinary breaches, such as an error or lost equipment — $100 to $50,000 per violation.

  • If reasonable due diligence would have revealed the violation — $1,000 to $50,000 per violation.

  • Conscious, intentional failure or reckless indifference, but the breach was corrected — $10,000 to $50,000 per violation.

  • Conscious, intentional failure or reckless indifference and the breach was not corrected — $50,000 per violation.

For all violations, the cap is $1.5 million. And there will be more enforcement.

Tony Munns is a member, Risk Advisory Services at Brown Smith Wallace. Reach him at (314) 983-1297 or


We can help you with HIPAA compliance.


Insights Accounting is brought to you by Brown Smith Wallace LLC

Published in National

Many companies sponsoring 401(k) plans may not be aware that they’re facing a critical regulatory deadline on August 30.

That’s the federal deadline for disclosing to employees the amounts of fees that they’re paying for their plans. The overwhelming majority of these investors don’t have the vaguest idea how much they’re paying in fees.  If you’re an employer at a small or mid-sized company, there’s a good chance that you don’t either.

That’s right. Fees, one of the biggest determinants of whether 401(k) plans make or lose money for investors, are a big question mark. For decades, this has been neglected by employers, employees and federal regulators. This state of affairs has been fine for service providers, including the large insurance companies that package up these plans and supply them to employers. After all, less disclosure means less attention paid by investors, and higher fees for lack of comparison shopping.

Because of new federal rules that expand and reinforce existing regulations and reverse years of lax regulatory enforcement, all of this is changing. Employees will soon be informed exactly how much money is being deducted from their 401(k) accounts to pay fees. They’ll learn of these fees this fall in their account statements, as required by the new federal rules.

Previously, these statements merely showed investment account totals after fees were taken out, so employees likely attributed low returns to poor investment performance rather than damage done by fees.

The amounts of these fees shown in the statements will doubtless come as a rude surprise to many employees, sending them streaming into your company’s HR department. They won’t be smiling.

If you’re following federal rules, however, your employees will already know about these fees when they receive their accounts statements. The new rules require employers to send employees a simple document showing fees in an easy-to-understand format by August 30. This way, the fall account statements won’t come as a shock to employees. Employers are also required to determine whether these fees are reasonable relative to the broad market.

By adopting and enforcing the new rules, the U.S. Department of Labor (DOL) is shedding light on not only the fees service providers are charging, but also the quality of these plans.

For example, if plans are paying a service provider substantial fees but employees receive little, if any, education on how to construct and maintain their portfolios within their plans, this makes for the worst of all possible scenarios: high fees and poor service, resulting in low potential for good investment returns.

Without reasonable fees and knowledge of how to use their plans, employees can’t be effective in serving as their own financial planners, which is essentially their role as 401(k) investors.

Employers are required to prepare the disclosures due this month from information that they should have received by now from service providers.

But many employers, doubtless, will be between a rock and a hard place. While employers are on the hook for clear disclosure this month according to a set format, the new rules don’t require service providers to provide this kind of clarity when they supply the fee information to employers.

Regardless of their size, companies that fail to comply with the new rules may be hit with severe fines and other sanctions. This prospect is intimidating, but the sweeping new regulations should be viewed as an opportunity to make your plan work better for workers and management alike, possibly while lowering fees.

After determining what your plan’s fees are and what you’re getting in return, you’re required to determine whether they’re reasonable by benchmarking them against the current national market.

You may well find that you can get better service with lower fees – improving employees’ understanding of plans and increasing net returns after fees are taken out of their accounts.

But first, employers face rigors surrounding the disclosures of the coming weeks.

To deal with these challenges:

1. If you haven’t done so already, get to work pronto on the fee disclosures due August 30. The first step is to determine whether your service providers have fulfilled their regulatory obligations by supplying the fee information – including the specific services being provided for each amount – to your company.

2. If you’ve received this information, set to work interpreting these documents. This can be a lot tougher than it sounds, as some plan providers are burying pertinent information in lengthy documents. If, at the outset, this task seems too difficult or time-consuming, consider hiring an independent fiduciary advisor to assist you with this, as well as with benchmarking your fees against the market. Using a fiduciary can significantly reduce your company’s liability.

3. If service providers have failed to supply the required fee information, document this by writing to them and requesting speedy submission. This can insulate you from liability for not disclosing the information to employees on time. If these providers don’t respond immediately (after all, the deadline is fast approaching), protect your company by blowing the whistle on them with the DOL.

4. Prior to making the fee disclosures this month to employees, notify them in meetings and/or in emails of what is coming their way. Tell them this is the first step in a process to review – and, possibly, to lower – fees and to improve service, including the provision of better plan education. Again, an independent advisor can help with this.

5. Throughout this notification/disclosure process, document all questions that employees ask and the answers they receive. This helps manage your legal and regulatory liability, and it helps you develop the best answers to give when the same questions come up again.

If you haven’t started this process or are behind schedule, don’t think about water that’s passed under the bridge. Instead, look upstream. Even the sternest of regulators will acknowledge that well-meaning efforts to comply, however belated, are far better than inaction or ignorance of the new rules.

Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them.

An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement.

Kippins also serves as managing director of Institutional Fiduciary Assurance LLC, an organization that provides fiduciary advice to trustees of endowments, foundations, non-profit organizations and charitable trusts. He can be reached at

Published in Cincinnati

If you’re the HR director of a small or mid-size company, you’re probably familiar with the list of investments available to employees under your 401(k) plan.

Yet, chances are that no one at your company knows how your plan ended up with its particular selection of investments. That’s because these plans typically aren’t bought, but aggressively sold – by large insurance companies acting as plan providers.

Often, the fees these they charge are far too high, relative to the market, for the services being provided – a widespread reality that the federal government is trying to change by requiring employers to take steps to assure that these fees are reasonable.

This requirement is part of a larger regulatory effort to prompt companies sponsoring 401(k) plans to take a hard look at them. When scrutinizing their plans, many companies will find shortcomings including too few investments and lack of care in their selection. Answering the question of how investments got into their plans opens up a Pandora’s box of issues.

Many companies will realize that they’ve failed to adequately monitor the performance of investments in their plans or to assure that the risk/reward characteristics are fully explained to employees who depend on these plans to provide income during retirement.

When companies sign up for pre-packaged plans that may be deficient, they sincerely believed they were getting a good product. After all, large insurance companies have to be accountable for the integrity of their products because they have substantial legal liability for their suitability, right? Wrong. As plan sponsors, employers – not plan providers -- carry substantial civil and regulatory liability for their 401(k) plans.

Amid the examination of the plans that new federal rules will spur in the coming months, many employers will come to grasp the full extent of their legal responsibility – their fiduciary liability – for the first time.

These employers – as well as those who already have an inkling or even a full awareness of their fiduciary role – will be seeking tools to guide them through the process of evaluating and revamping their plans.

The most critical tool available for this purpose is an investment policy statement (IPS). This document includes a detailed list of a plan’s investments, the selection criteria used for their inclusion, how these criteria pertain to the company’s particular worker population, the monitoring processes used to continuously evaluate investment performance, the performance benchmarks these investments’ must meet to qualify for and remain in the plan, the governance processes the company uses to make substantive changes, provisions for disclosure of information on investments to employees, descriptions of programs for educating employees on investing concepts so they can understand these disclosures, and on and on.

Thus, an IPS is a soup-to-nuts blueprint for the plan, its administration and its ongoing maintenance. But a good IPS doesn’t stop there. It is a living, breathing document that shifts with long-term investment market trends and changes in employee demographics. It should be constantly re-evaluated and slavishly adhered to. If you’re changing any aspect of the plan, do these changes comport with the governance principles and guidelines set down in the IPS? They’d better – or else the company could lose sight of the plan’s goals, jeopardizing its capacity to influence positive retirement outcomes.

Investment policy statements aren’t just used by 401(k) plans. They are widely used by investment advisors, trust administrators and other financial fiduciaries to establish mutually agreed-upon principles and criteria for managing assets according to clients’ goals and risk tolerances.

In a sense, 401(k) plans themselves are financial planners insofar as they include investment options – though ultimately, investment choices are up to employees. An IPS for a 401(k) plan should bridge the gap between the plan and each employee to guide investment choices. And, just as financial advisors with integrity serve their clients in their best interests, communicating clearly about such issues as risk versus reward and allocating assets to achieve sufficient portfolio diversification, an IPS should assure that plans give employees a sufficient variety of choices to meet their goals and empower them to make the best choices.

Drafting an IPS should be the first thing a company does when establishing a 401(k) plan. And in a perfect world, this is what all companies would do. Many large-company 401(k) plans have investment policy statements – or something akin to them. But to HR managers and owners of many smaller companies, “IPS” understandably might sound more like an overnight parcel delivery service than a critical financial document that can determine whether employees have to keep working into their 70s and 80s.

Because of the new rules, many HR people at smaller companies will have to considerably increase their knowledge of how 401(k) plans are supposed to work – or their companies may risk severe regulatory sanctions from the U.S. Department of Labor.

Companies can start by obtaining a clear view of their plans to determine their deficiencies and decide what to change. Those changes should be reflected in an IPS which, if constructed correctly and followed carefully, can help companies exercise a high level of due diligence that can keep regulators and lawsuits away.

If you don’t know what an IPS is, it may be next to impossible to construct one yourself. In this case, it’s probably best to engage the services of an independent advisor who can also X-ray your plan and suggest changes.

If you or anyone at your company can remember the meetings with the broker who sold your company your 401(k) plan, you’ll recall that these sales people didn’t offer to construct an IPS. That’s because this is a service provided by fiduciaries. Plan providers and brokers avoid this status – and its attendant liability – like a bad rash.

To stay ahead of regulators, there’s much work to be done. The benefits of doing this hard work go far beyond staying out of trouble. Assuring that your company provides competitive benefits that help employees retire with dignity isn’t just the right thing to do; it can also aid recruiting and increase employee retention.

And when an employee asks how your plan’s investment selection came to be, you can pull out the IPS and read them the reasons.

Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them.

An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement.

Kippins also serves as managing director of Institutional Fiduciary Assurance LLC, an organization that provides fiduciary advice to trustees of endowments, foundations, non-profit organizations and charitable trusts. He can be reached at

Published in Cincinnati

More than 145 million people — or nearly half of all Americans — live with a chronic condition, according to Johns Hopkins University. That number is projected to increase by more than 1 percent each year through 2030, resulting in a chronically ill population of an estimated 171 million.

So what does this mean for employers that are already struggling to control health care costs?

“There are 29 chronic illnesses that make up 80 percent of all health plan costs,” says Mark Haegele, director, sales and account management, with HealthLink. “The problem is that, with a typical health plan, you are only managing five to seven of those diseases, reaching a significantly smaller component of the population.”

Smart Business spoke with Haegele about how to remove barriers to chronic illness compliance and manage health care costs.

How are chronic diseases typically managed?

Chronic disease management may include an evidence-based care treatment plan, with regular monitoring that follows guidelines developed by the American Medical Association, the American Heart Association and others, coordination of care among providers, medication management, and measuring care quality and outcomes.

How do chronic illnesses exponentially affect employee health insurance costs?

Patients with chronic conditions often are required to take one or more medications indefinitely. The combination of dormant symptoms, coupled with long-term treatment, means that patients don’t always follow the recommended daily regime for disease maintenance. If employees don’t manage chronic illness by following treatment protocols, they may end up in the emergency room or hospital, spending more on health care costs than if they had spent money to stay in compliance through testing and medication.

With the way the health care system is structured, a patient does not know the ultimate cost of going to a doctor. Months later, he or she will get a bill in the mail — hopefully with a corresponding explanation of payment from the insurance company — that might be for $50 or $250. This uncertainty can keep patients with chronic diseases from following wellness and disease management.

In addition, failing to manage chronic illness correctly can lead to complications, which increases costs. A University of Chicago study found that three out of five patients with Type 2 diabetes suffer from at least one significant complication, such as heart disease, stroke, eye damage, chronic kidney disease or foot problems. Consequently, the yearly medical expenses of a person with Type 2 diabetes complications are nearly $10,000, with nearly $1,600 paid out of pocket.

What challenges do employers face with chronic illness compliance?

There can be challenges with many fully insured health plans because benefit designs are limited to support chronic illness compliance. Most health benefit plans have an optional disease management program that impacts 5 to 9 percent of chronic diseases, such as asthma, diabetes, cardiovascular disease and chronic obstructive pulmonary disease. The problem is that many more types of chronic illnesses drive up health care costs, and the benefit design doesn’t change to support the highest chronic disease prevalence among your specific employees. In addition, a voluntary program won’t necessarily reach the employees who are increasing costs the most.

It takes time to change employee behavior. Even with the Patient Protection and Affordable Care Act, under which companies have been paying for 100 percent of preventive care such as immunizations and mammograms, there hasn’t been an uptick in services.

How can employers use value-based benefit plans to increase chronic illness compliance?

Traditionally, employers try to save money on health insurance plans by shifting costs to employees and encouraging generic medicine use. Now, some are lowering or eliminating copayments on medications to encourage adherence to regimens through value-based benefit design.

Companies can use a series of incentives and disincentives to shape employee behavior. For example, smokers may have to pay a higher premium than nonsmokers, and employees who undergo a biometric screening each year could qualify for a plan with better benefits.

This is where the flexibility of a self-funded plan can help. If a company has a disproportionate number of diabetics, it can design its health plan to remove barriers to following a health treatment plan by taking steps such as fully paying for diabetic test strips. In addition, an employer can fluctuate employee members between plan levels based on their compliance throughout the year, rewarding good health practices with better benefits.

In a recent study of a 30,000-member business coalition in Clinton, Ill., of 250 diabetics studied, those who followed a value-based benefit plan with aligned incentives had health costs that were half those of other diabetics.

How can employers ensure that adding health care costs by lowering or eliminating copayments saves money?

You can hire professional consultants to evaluate health plan vendors, but effective communication is critical. When looking at programs, those with motivational coaching are the most effective. They get employees on board by motivating them as opposed to informing them of a checklist, then calling to ask why they aren’t following it. In addition, the program should also be communicating both with the member and primary care doctor.

You need to understand your health care population and then monitor progress monthly, quarterly or yearly to see your return on your investment. One self-funded program found that more than 90 percent of the population identified with high cholesterol had gotten cholesterol levels down to normal following a value-based health plan that ultimately lowers overall health care costs.

Mark Haegele is a director, sales and account management, with HealthLink. Reach him at (314) 753-2100 or

Insights Health Care is brought to you by HealthLink®

Published in Chicago

The current economic climate has made it necessary for many companies to change the roles of their employees.

Often, this results in company safety responsibilities falling to an employee who may not have much experience in managing and implementing a safety program. This, coupled with a new enforcement-oriented posture from the Occupational Safety and Health Administration (OSHA), can result in a deficiency gap between OSHA compliance and the safety conditions that actually exist in a company, says Brad Swinehart, senior safety consultant at Sequent, Safety & Risk Reduction.

“This enforcement-oriented position is based on recent changes to the OSHA administrative penalty structure — changes that could result in increased fines, especially to employers in high-hazard industries,” says Swinehart. “If your facility does not already have a formal safety and health program, it can be overwhelming to put together a plan to achieve OSHA compliance, especially if you don’t have experience in developing or implementing a health and safety program.”

Smart Business spoke with Swinehart about the steps to take to put you on the road to OSHA compliance and provide a safer workplace for your employees.

What is the first step toward OSHA compliance?

First, conduct and document some form of safety training on a monthly basis.

Many people have the idea that safety training involves spending multiple hours in a conference room watching videos or reading handouts which, to many people, is not the most interesting way to spend their time. But this does not need to be the case. Safety training can consist of a variety of more interactive methods such as:

  • Pre-shift toolbox talks require just 10 to 15 minutes and can be used to address a recent workplace safety issue or possibly a hazard associated with a task that may be completed during that shift.
  • Hands-on training, such as lockout/tagout procedures, is helpful for those adult learners who learn by doing as opposed to watching videos or reading handouts.
  • New hire orientation training is a great opportunity to establish basic safety expectations. Once an employee arrives in his or her department, the supervisor may provide training around specific safety topics.

Proper documentation is another important  component of safety training. For every training-related exercise you conduct, provide a sign-in sheet for all employees in attendance. This critical documentation serves as a record of what safety topics have been covered for the year as well as who completed the training.

The method you choose to conduct the training is entirely up to you. However, training success should be judged by effectiveness, not merely by making sure that every employee attends.

Comprehension of training may be measured by using written tests, hands-on demonstration of the task or a combination of both. Some OSHA regulations outline the preferred types of testing to be applied to measure comprehension and verify competency.

What is the next step?

The second step toward OSHA compliance is the implementation of a safety management system. The recommended approach is to use a process based on the ANSI Z10 standards: ‘Plan, Do, Check, Act.’

  • Plan: Identify the goals you hope to accomplish.
  • Do: Implement your plan to achieve your goals.
  • Check: Make sure that your goals were fully accomplished.
  • Act: For any goals that were not achieved, take action.

This process is designed to be an iterative process for continuous improvement to your overall safety program. The implementation of a safety management system essentially involves looking for OSHA deficiencies and establishing a means and target date to resolve those deficiencies.

Developing a proper plan can be overwhelming, but it doesn’t need to be. First, identify your goals through an audit of the facility, equipment and observation of employee behaviors. Once these three areas of the audit process have been completed, prioritize the list based on level of risk.

Then develop a plan for how to best mitigate the hazards or behaviors, using administrative and engineering controls, as well as personal protective equipment. During this phase of the plan, it is important to involve all levels of employees which, in most cases, leads to a better, more comprehensive solution.

How can you increase the chances of success?

In order for a process of continuous improvement to be successful, it is important to clearly define the roles and responsibilities of employees, managers and executives. This allows a business to understand who is responsible for what level of the safety program.

In addition, a corrective action log should be developed and maintained to document the actions needed in order to implement the program. This log should identify the task, person(s) responsible for completion and an anticipated completion date. This log is critical for tracking task completion and for identifying accountability of responsible parties.

Once your plan has been developed and implemented, conduct ongoing audits and reviews to determine the effectiveness of the plan. These may consist of employee interviews, observation of tasks being completed, and audits of equipment and facilities.

The data collected from the audits and reviews can then be analyzed to determine the level of success of the plan and of your overall safety program. When deficiencies are found, review your plan and make necessary adjustments in training, policies or equipment to achieve the required results.

Following these steps will provide the tools necessary for the development and implementation of a successful safety program.



Brad Swinehart is a senior safety consultant with Sequent, Safety & Risk Reduction. Reach him at (888) 456-3627 or

Insights HR Outsourcing is brought to you by Sequent

Published in Cincinnati

New federal rules regulating 401(k) plans will ultimately have the effect of driving down fees — but, in many cases, at a cost.  One result of an increased emphasis on price will be a lack of attention to value. The result of this could be a commoditization of plans that makes them less expensive but not necessarily any better for participants, and in some cases worse.

The new rules from the federal Department of Labor (DOL) require employers to determine, and all service providers to disclose, all fees and the services they cover by July 1. Though the DOL has sent plan sponsors reams of documents outlining its requirements under the new rules — and listing fines that could befall them for not complying — many of these employers remain unaware of this deadline.

Those who are dutifully on schedule for this compliance are also probably aware that they must then determine whether these fees are reasonable — that is, where these charges fall in the national market. If employers find that these fees are relatively high, they must make arrangements to assure that they’re reasonable, perhaps by changing service providers.

Previously, federal rules didn’t require these service providers, including the large financial institutions that package 401(k) plans and sell them to companies, to disclose all fees. Though service providers have long been required to disclose fees when asked, mandatory disclosure rules stemming from the Employee Retirement Income Security Act (ERISA) of 1974 haven’t come close to covering the plethora of fees charged by plan providers, investment companies supplying investments for plans and the advisors engaged by sponsors.

Thus ensued decades of murkiness about fees, further beclouded by the benign neglect of overworked HR people at small and midsize companies. Aware that this state of affairs has led to excessive fees in many cases, the DOL is trying to do something about it to stanch the unnecessary hemorrhaging from employees’ retirement accounts. By requiring employers to know these fees and seek out lower ones when appropriate, goes the federal logic, excessive fees will inevitably shrink under the sunlight of disclosure.

There’s little doubt that the new rules will have this effect — accelerated by the entrée of low-cost providers in what will be an increasingly low-cost arena — but they will also have an unintended consequence: commoditizing 401(k) plans, often to the detriment of participants. Like most quantitative analyses, benchmarking fees will inevitably result in apples-to-oranges comparisons. How else can one say, without reams of nettlesome footnotes, precisely where one service provider’s fees land relative to those of its competitors?

The DOL is seeking to retain a focus not just on price, but on value, as the new rules require employers to determine and benchmark fees “for services provided.” Yet in plan sponsors’ rush to benchmark fees — and, in many cases, after getting eye-opening results, to seek lower ones — this stipulation doubtless will receive short shrift unless sponsors steadfastly maintain a quality orientation.

The rationale for preventing excessive fees is to enable employees to accumulate more wealth to get them through retirement. Yet if employers fail to also focus on services, plans won’t be able to serve participants by delivering the best returns for their particular situations: their age (time horizon for retirement), retirement goals, risk tolerance, retirement goals and existing wealth.

It’s entirely possible that after plans’ fees are benchmarked, some sponsors will find service providers who will do the same work as their current providers but at a far lower cost. Or these sponsors might hit the jackpot by finding lower fees accompanied by much better service. Yet the powerful tide of commoditization will surge against the likelihood of these outcomes unless sponsors view the new rules as a wake-up call for positive action; they should view them as an opportunity to lower fees and improve service.

This conscientious mentality compels consideration of what the components of good service might be. These include governance to maintain a steadfast dedication to employees’ interests, investment evaluation to examine the worthwhileness of specific items such as mutual funds, and education to empower employees to make intelligent, unbiased choices for their 401(k) portfolios.

Without sufficient plan education, a 60-year-old employee might end up with the same portfolio risk levels as 25-year-old, exposing him to potential losses from which he will never have time to recover and thus jeopardizing his retirement.

The new rules also require sponsors to make clear distinctions between fiduciaries, who are legally bound to advise clients in their best interests, and brokers, who are prohibited by ERISA rules from advising participants on the suitability of specific investment products.

So, at a time when the lead service provider in many 401(k) plans is a broker whose services may be fraught with conflicts of interest, it’s more important than ever for plan sponsors who want to enhance plan quality to seek the advice of a wholly independent fiduciary. Moreover, in an era when people change jobs and investment markets put on different faces from year to year, such advisors can play a highly beneficial role in assessing the fees of plan providers on a regular basis, preferably every 90 days.

Discipline is essential not only to get plans in shape, but also to keep them that way. Staying in shape may require a personal trainer working with you in your interest; this doesn’t necessarily come with the lowest-price gym membership.

Aside from doing the right thing for your employees, there’s another reason to assure that the rush to lower fees doesn’t eclipse considerations of quality: It’s smart business.

Remember that one reason your company has a 401(k) plan in the first place is to be competitive in the marketplace for skilled employees. Sponsors whose plans have the best returns and best employee outcomes will have an edge as the economy recovers and the labor market gradually ceases to be a buyer’s market.

This is not a lure that you can fashion in short order. To attract the best employees five years from now, you must begin work on your plans today. The new DOL rules present an unprecedented opportunity to do so.

Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them.

An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement.

Kippins also serves as managing director of Institutional Fiduciary Assurance LLC, an organization that provides fiduciary advice to trustees of endowments, foundations, non-profit organizations and charitable trusts. He can be reached at

Published in Cincinnati

For some companies sponsoring 401(k) plans, the next few months may be a period of whistle blowing – with painful consequences.

If these sponsors fail to comply with new federal regulations, employees may blow the whistle on them with federal regulators, potentially triggering costly fines and other sanctions and paving the way for employee lawsuits; most federal investigations of this type start with employee complaints.

To prevent this unfortunate scenario, some companies may have to blow the whistle on the large financial institutions that provide their plans for failing to provide required information they need to assure their plans comply with the new rules from the U.S. Department of Labor (DOL).

Central to this potential consternation is the reality that many employers — especially small and mid-size companies — aren’t aware of precisely how much their 401(k) plans cost, what their plans and participating employees are receiving in return for these fees and where this value, or lack thereof, lands in the national spectrum of plan pricing for the services provided.

In issuing the new regulations, the DOL is seeking to make employers and employees aware of the value they’re getting for the fees they’re paying as part of a larger effort to enable plan participants to make more informed investment choices. Fees are among the most significant factors affecting total investment returns.

The regulations require employers to know all such fees, and what they’re getting for them, by July 1, and to ascertain whether these fees are reasonable for the services being provided. That means they’ll have to determine where this value stands in the national marketplace by benchmarking fees, which is no simple undertaking.

Also by July 1, the financial services companies, brokerages and insurance companies that provide 401(k) plans are required to have given plan sponsors a rundown on all fees and the services these fees cover. If employers don’t receive this information, they’ll be hamstrung in their efforts to benchmark fees against the market to determine whether they’re reasonable. In such cases, employers will have no choice but to blow the whistle on their plan providers.

However, the companies that provide 401(k) plans tend to be large, highly sophisticated institutions with significant in-house and outsourced legal resources, so they’re amply equipped to protect themselves from liability. Most, if not all, of these companies are expected to deliver the required fee-for-services information to plan sponsors.

But in many cases, this information may be strewn throughout a document the size of a phone book — a document that the human resources people overseeing 401(k) plans at many companies don’t have time to read, much less interpret.

With the July 1 deadline approaching, many employers should have a great sense of urgency. Yet many, unaware of the new rules or their seriousness, do not. In many cases, employers who are aware of the rules aren’t concerned because they’re receiving informal, oral assurances from their plan providers that everything will be all right.

Yet this handholding means nothing because, unlike their sponsor clients, these institutions don’t have fiduciary responsibility, with all the attendant risk and liability. As long as providers meet their disclosure obligations under the new laws, they’ll be fine. Meanwhile, employers who fail to act on this information as required will be left twisting in the wind.

One way that sponsors can reduce their liability is to outsource their regulatory obligations to an independent fiduciary advisor who evaluates plans from the ground up.  This way, sponsors can get an unbiased view of providers’ fee-for-service disclosures and benchmark fees against the national market to determine whether they’re reasonable. If they aren’t, these employers could attempt to negotiate them downward or put their plans out to bid for a new provider. Further, an independent advisor can X-ray plans to see if they’re achieving their various goals and meeting all federal requirements.

This way, they’ll have a better story to tell federal regulators – and employees who may become outraged when they read their statements next fall and learn of the whopping fees being deducted from their accounts. These statements will be the first to show all fees. Currently, statements merely show account totals after these fees have been siphoned off.

Most people outside the 401(k) industry would find it astonishing that 401(k) plan sponsors and participants don’t know the fees involved or specifically what services these fees cover.  Unfortunately, this is a tale of benign neglect for overworked HR departments, especially at small companies that lack in-house expertise in defined contribution plans. There’s always more pressing work to do, and many plan administrators are understandably reluctant to lift the hood on plans that may have longstanding deficiencies. Now, the new DOL rules are changing this state of affairs.

The key language in the new rules is “fees for services provided,” because this focuses on value: Are employees getting services worth the fees being charged? In many cases, they’ll find they aren’t.

Employers who become aware of this sooner than later and act on it in accordance with the new rules will be taking a major step toward protecting their companies and assuring the integrity of their plans and their capacity to help employees build their resources for retirement.

Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Cincinnati-based financial services company that provides retirement-plan fiduciary services and employee-benefit solutions to small companies. Kippins holds the AIFA (Accredited Investment Fiduciary Analyst) designation. He can be reached at

Published in Cincinnati

Across the country, companies that sponsor 401(k) plans have been going about their business every day, unaware of an impending deadline for compliance with sweeping new government regulations.

When the deadlines pass, no alarm will sound. Instead, dire consequences will eventually befall plan sponsors without warning.

The silent alarm goes off July 1, by which time sponsors are required to be aware of all fees charged by their plan service providers and the services they’re receiving for these fees. (The original deadline was April 1.)

Moreover, they must determine whether these fees are reasonable for the services being provided — a complex undertaking that involves benchmarking the fees against comparable plans. Many sponsors will find that their plans are paying far too much for far too little.

Awareness of the new requirements and their comprehensiveness is astonishingly low. Few companies are doing much, if anything, to gear up for the new requirements. By remaining uninvolved, they’re unwittingly bringing on a world of hurt upon themselves.

Until now, sponsoring companies have been able to remain largely ignorant of the full extent of the fees coming out of their employees’ accounts, though federal rules have long required awareness of these matters.

New regulations from the U.S. Department of Labor seek to end this lack of compliance by reinforcing and expanding existing rules.

The quarterly account statements employees now receive from plan providers show returns net of fees. In the fall, these statements will show actual returns and fees in tabular form.  As a result, employees will see for the first time how much their investments have earned and how much plan service providers have taken out of their accounts in fees.

Many employees will see red. They’ll line up outside the doors of HR offices, demanding to know why they’re paying so much.

Companies will get a rude awakening from the clamor of employees reacting to the news that big chunks of their retirement assets are lining the pockets of service providers. They’re going to share this pain with company executives.

The refrain of questions and expressions of outrage will seem never-ending: “How long has this being going on? Why didn’t you tell us? Why haven’t you taken steps to lower fees? Can’t we get lower fees elsewhere?”

This is only part of the pain. The DOL is ramping up staff to monitor — and, potentially, fine — plan sponsors who are tardy meeting these deadlines. It gets worse: Companies that fail to comply with the new regulatory regimen could have their entire plans disqualified, as every transaction conducted on the wrong side of the law could potentially be classified as prohibited.

Since plan sponsors have rigorous fiduciary obligations to their participants, this state of compliance disarray could be a springboard for lawsuits by employees. Indeed, many lawyers who specialize in this kind of action are doubtless licking their chops over the potential for lucrative class-action litigation. Unlike many employers, these attorneys are well aware of the new rules.

No less daunting is the potential for regulatory sanctions stemming from tips from employee whistle-blowers who learn about the new rules from friends at other companies.

If the capital markets act predictably, indications of shakeouts in the 401(k) plan provider marketplace may become readily apparent. Golf and tennis tournament broadcasts this summer may show ads from competitive plan providers seeking to take business away from high-fee providers. HR departments learning about their new burdens this way will be far behind in the extensive preparations required to fully comply with the new rules.

Some plan providers, including large financial services companies, have doubtless given plan sponsors generalized — and, notably, nonbinding — assurances that all will be well. Yet these large companies are committed to nothing because, as non-fiduciaries, they don’t have the same obligations as their sponsor clients, nor do they have any appreciable liability in the matter.

One of the goals of the new rules is to make a clear distinction between advisors and brokers. Although non-fiduciary brokers are prohibited from dispensing actual investment advice, many do. The rules don’t require plans to have an advisor per se, but if they do, this advisor should be a fiduciary. Such arrangements can enable sponsors to effectively outsource some of their fiduciary responsibility.

Moreover, plan sponsors must evaluate newly required compensation disclosures from service providers to determine the motivations involved in determining investment options for the plan. For example, many plan providers charge investment companies for shelf space, which makes such selections biased.

The new rules are designed to support the goal of transparency by helping employees (and company owners, who are in these plans themselves) keep more of their investor returns. Thus, they help everyone in a company achieve the goal of a more dignified retirement. Assuring compliance with these rules advances this mutual goal of labor and management.

Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Cincinnati-based financial services company that provides retirement-plan fiduciary services and employee-benefit solutions to small companies. Kippins holds the AIFA (Accredited Investment Fiduciary Analyst) designation. He can be reached at

Published in Cincinnati
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