Jayne Gest

As accountable care programs are implemented, health care providers are going through significant financial, clinical, operational and strategic transformation. This has profound effects not only on health care providers, but also on those touched by health care delivery.

Payment transformation, re-admission penalties and demographic shifts are creating a perfect storm where health care providers have to be very skilled, says Ron Calhoun, managing director, national health care practice leader, at Aon Risk Solutions.

“Providers are going to have to get it right,” he says. “They’ve got to be clinically integrated, and a majority of them are not.”

Smart Business spoke with Calhoun about the risks health care providers are facing in this new environment.

What are the impacts of payment transformation and re-admission initiatives?

Numerous payment reform programs are moving providers toward payment for value and outcomes, as opposed to volume or service. The Patient Protection and Affordable Care Act has increased emphasis on Medicare/Medicaid outcomes, which has in turn led to more commercial sector payment transformation. The fundamental question is how are health care providers going to clinically manage a population in a non-clinical environment with all of the quality measures by which they’re assessed?

In 2012, Medicare’s Hospital Re-admission Reduction Program started penalizing hospitals for re-admission of certain acute myocardial infarction (heart attack), heart failure and pneumonia patients. Reimbursement penalties are expected to be $280 million in year one, and to increase as penalties go up and the program expands.

With financial risks tied to reducing re-admissions, there is de-emphasis on acute care — short-term medical treatment — and emphasis on post-acute care. This puts more demand on non-physician clinicians like registered nurses. Hospitals also are managing discharged patients to reduce exposure by either pushing a patient into a post-acute setting earlier or managing that patient more aggressively. However, this has direct and vicarious liability implications.

How are demographic changes creating risk?

As Medicare and Medicaid grow, payment transformation models will proliferate, placing more emphasis on outcomes and value. Roughly 44.3 million Americans are on Medicaid, which will increase by 10 to 20 million, depending on how many state Medicaid programs expand. Michigan Gov. Rick Snyder included an expansion of about 320,000 residents in his budget proposal. Also, 60 percent of the 169 million with employer-sponsored health care are ages 40 to 65, so the Medicare population will double to 88.6 million by 2035.

The Centers for Medicare and Medicaid Services is bundling reimbursements with outcomes, which shifts liability to the provider. Health care providers need to adhere to established clinical protocols, narrow physician practice pattern variation, be highly communicative between specialties and with patient hand-offs, and have sophisticated clinical decision support capabilities within electronic medical record platforms. The tighter the clinical integration, the more confident the health care provider will be in participating in bundled or value-based reimbursement.

Why are family caregivers so important?

About 45 million Americans are unpaid, informal caregivers for those with dementia and/or the top 15 chronic conditions. In the next three to five years, care will systematically go into the home, increasing the demands on home health. Health care providers must connect to caregivers to drive outcomes, such as decreasing re-admissions or increasing medication compliance.

What’s the impact for consumers?

As health care providers move toward value-based or bundled reimbursement, health care networks may become narrower and include only the highly effective providers in a given geography. Consumers with higher deductible, more consumer-driven plans will demand that all providers demonstrate an ability to comply with quality measures. Group health plan providers are certainly going to demand quality, as well. Population management will only become more critical. Consumers and employers will want relevant medical data pushed beyond the hospital’s four walls and into their hands.

Ron Calhoun is a managing director, national health care practice leader, at Aon Risk Solutions. Reach him at (704) 343-4128 or ron.calhoun@aon.com.

 

Website: Aon’s health care reform microsite can help businesses navigate this complex issue. Visit www.aon.com/healthcarereform/ to learn more.

 

Insights Risk Management is brought to you by Aon Risk Solutions

 

The Financial Accounting Standards Board (FASB) has not-for-profit financial reporting on its horizon. The board is expected to propose new guidance on non-profit financial reporting standards in the second half of 2013.

“It’s exciting because the FASB is actively working to make the financial statements more understandable for the user and more comparable across the varying types of not-for-profit organizations, which will allow these organizations to better tell their story to donors.” says Liz Dollar, a partner in the Not-For-Profit and Government group at Moss Adams LLP.

Smart Business spoke with Dollar about how these changes originated and what they could mean for the not-for-profit world.

What is the FASB’s Not-For-Profit Advisory Committee?

This 17-member committee was established in 2009 to act as a standing resource for the FASB. The various users and preparers of not-for-profit financial statements now have a formal process to give input that guides the FASB on the impact of the current standards, and provides feedback on proposed updates. The committee also can assist in outreach activities to the sector.

How is the committee filling a need in the not-for-profit world?

The most impactful financial reporting standards for not-for-profits were statements on Financial Accounting Standards 116 and 117, but these standards were written almost two decades ago in the mid-90s. The committee has focused on determining whether these standards still make sense in the current financial environment. The committee also considers overall financial trends such as the convergence of international and U.S. standards as well as increased emphasis on reporting and transparency of financial information.

What has the committee recommended to FASB?

The committee and its three subcommittees, Reporting Financial Performance, Liquidity and Financial Health, and Telling a Story, recommended:

  • Focusing transparency on operating and non-operating activities in the statement of activities.

  • Suggestions for improving the cash flow statement, better linking it to the operating measures.

  • Reducing the net asset classes from three to two — unrestricted and restricted — in an effort to make financial statements easier to prepare and use, while adding some subcategories into the new net asset classes. Streamlining and improving the footnote disclosures, which have gotten long and can be unclear to many users.

  • Requiring some sort of management discussion and analysis in the financial statement that tells a story of what happened during the year. This could enhance the understanding of donors about the financial health and performance of the organization.

What is the FASB doing with these recommendations?

The FASB is currently working on a project entitled Not-for-Profit Financial Reporting: Financial Statements, which is focused on net asset classifications and the information provided in the footnotes about liquidity, financial performance and cash flow. An exposure draft is expected in the second half of 2013. After the comment period, changes likely would be implemented around 2015.

The FASB also added a research project looking at other financial communications, which could include requiring a management discussion and analysis in the financial statements.

Why should not-for-profit organizations be excited about these potential changes?

Not-for-profit organizations often need an audited financial statement because of a donor, statutory or lender requirement. However, they will tell you that most people don’t look at or understand these financial statements. When using a document to tell a story and solicit funds, the 990-tax form is often a more useful tool and something that is comparable among all not-for-profit organizations. The hope is that with the current project the FASB changes will simplify the financial statements, making them in turn more user friendly and useful to the reader.

What does this mean for business owners?

Not-for-profit financial statements typically are very different from for-profit financial statements. So, someone from a public company who serves on a not-for-profit board or who is a potential donor could have trouble reading the statement. With potential changes to the net asset classifications, focus on liquidity and streamlined disclosures, the not-for-profit financial statements should more clearly reflect an organization’s financial position and be more usable to those with a for-profit background.

Liz Dollar is a partner, Not-For-Profit and Government group, at Moss Adams LLP. Reach her at (415) 677-8247 or elizabeth.dollar@mossadams.com.

 

Upcoming live webcast: Register now for “Legislation with Social Purpose: Examining Regulations on International Activities and Social Purpose Corporations in the Context of Today’s Economy.” The webcast will be held from 10 to 11 a.m. PST Tuesday, March 12.

 

Insights Accounting & Consulting is brought to you by Moss Adams

Estate planning is important for everyone. But in the case of a business owner, not giving serious consideration to what could happen to your business could potentially shut it down entirely, thereby eliminating your family’s income at a time when it is critical.

“It’s important that business owners understand that their plan only works the way it’s set up to work if the circumstances that originally determined the nature of the plan remain the same,” says Carly Fagan Neals, J.D., senior trust officer and vice president at First Commonwealth Advisors. “So if there are changes in the business structure, goals or family structure, they have to be communicated to the adviser — the accountant, the lawyer, whoever put the plan in place.

“A business owner has to take an active role in making sure the plan still works because only he or she knows the facts as they are today,” she says.

Smart Business spoke with Neals about how a succession plan is thoughtfully created in conjunction with your estate plan and what factors need to be coordinated and reviewed.

Is there a good time to begin planning?

Every individual should have a will, a financial power of attorney and a health care power of attorney/living will. As soon as you have assets or children it’s imperative to plan because otherwise your assets don’t get to where they need to go and your heirs don’t necessarily get cared for the way you’d want. For many, this can occur at an early age.

What’s involved with establishing long-term goals and determining succession risks?

Every person’s long-term goals are different, and they often evolve and change. So continually question how you can accomplish what you need to, such as passing the business on when you retire or providing for your family in the event of your death or incapacitation.

If your long-term goals involve transferring the business to some specific person, constantly re-evaluate whether that person is able and willing. What training and education might be necessary? When do you start transferring the business, and is it in a monetary sense or just voting stock? And if you’re retiring, how and when do you phase yourself out?

What are some strategies for success?

Ensure there’s sufficient insurance on the owner’s life or the necessary liquidity for all situations, and hands-on training and education for whoever is taking over the business. Also, is a spouse with power of attorney making business decisions? Do you want it to work that way? Be aware of the capabilities and willingness of those you name to have this authority.

Estate and succession plans need to work in tandem. For example, company stock may be a very large asset of the estate, but you need to know how that stock will be used to provide the surviving spouse with the necessary cash flow. Does your business successor need a life insurance policy on you to buy the stock so the resulting cash can go into a trust for your spouse?

Regularly work with your advisers to analyze the possible tax consequences of any transfer or proposed transfer. You don’t want to trigger a big gain or loss as a result of a transfer without planning for it.

Finally, a business succession plan needs to take into account the business’s operating structure. Whether it’s a corporation, LLC or partnership, how will the business run during the period when the transfer is taking place? It can be a matter of signatory authority on bank accounts, being able to order inventory, or having someone authorized to sign for accounts payable or receivable to keep daily operations going.

How should you monitor these plans?

Any time there’s a change — in business operations, key employees, family dynamics, goals, etc. — communicate it with the people who helped put the plans in place. Even without changes, it doesn’t hurt to talk to your advisers annually, or at minimum every few years. Even though you may not meet with your accountant or lawyer every year, if you’re working with an investment manager or wealth adviser doing regular performance reviews, a good adviser will ask the questions necessary to help determine whether it’s time to go back and get in front of your other advisers including your accountant and/or lawyer.

Carly Fagan Neals, J.D., is a senior trust officer and vice president at First Commonwealth Advisors. Reach her at (412) 690-2131 or cneals@fcbanking.com.

 

WEBSITE: To learn more about succession planning, visit ask4fca.com.

 

Insights Wealth Management  is brought to you by First Commonwealth Bank

 

Michael J. Torchia, a managing member at Semanoff Ormsby Greenberg & Torchia, LLC, gave a seminar to executive clients on individual liability several months ago. “Even if some supervisors knew they had liability under a statute or two,” he says, “seeing their actual exposure to 12 or 14 statutes shocked them.”

“I don’t think business owners have any clue how vulnerable they are to being sued under various employment statutes,” Torchia says.

This exposure is prevalent in areas like discrimination cases, and wage and hour claims which include unpaid overtime, exempt and non-exempt employees, and independent contractor status.

Smart Business spoke with Torchia about individual liability and strategies for protection and avoidance.

How are executives vulnerable to individual liability? 

Many state and federal statutes explicitly state an employee has a right to relief against the employer and an individual.  Some simply define ‘employer’ to include certain individuals. Examples include the Pennsylvania Wage Payment and Collection Law; Fair Labor Standards Act; Family and Medical Leave Act; Pennsylvania Human Relations Act; Pennsylvania Whistleblower Act; Immigration Reform and Control Act; and COBRA. There are also common law court cases allowing an individual to be sued under a variety of claims such as intentional infliction of emotional distress and defamation. Although incorporation helps shield individual assets — as opposed to, for example, a sole proprietor — the corporate veil does not protect individuals here because the statutes specifically allow action against them.

How far into management is the risk?

Generally, if an executive, manager or supervisor is considered a decision maker when it comes to employee issues, especially with regard to compensation, benefits or termination, there could be individual liability. In some organizations, that could be those at the ‘C’ level, president or vice president, but in others a secondary or middle manager could be individually liable.

What about executives who say, ‘I was following orders’ or ‘It was unintentional’? 

‘Just following orders’ or ‘company policy’ may help, but is not an absolute defense. And whether the improper act was or wasn’t intentional is only relevant if the statute requires proving intent, bad faith or a knowing violation.

So, how can executives protect themselves?

At a minimum, managers, supervisors and executives should make certain they have adequate insurance. There are a variety of policies for individual exposure, such as employment practices liability, directors and officers, fiduciary liability, and errors and omissions. There are also lesser known policies that cover, for example, inadvertent disclosure of private information.

Another factor is asset protection. In Pennsylvania, assuming the executive is not already named in a lawsuit or under imminent threat of a claim, which could result in a fraudulent transfer claim, assets can be protected by putting a house, cars and bank accounts in joint names with a spouse.  If not married, executives may consider increasing contributions to retirement accounts, which are not usually subject to collection.

How can executives and their companies avoid problems in the first place?

Training and education for managers, supervisors and executives — especially your decision makers — is key. They need to know how to handle all aspects of their supervisory duties, such as hiring, discipline, firings and employee complaints.

The company’s written policies should be consistent with the manager training and what is actually done day to day. Policy review and training should occur at least every three years, and sooner if there is turnover or changes in the law. Seminars and in-person training for middle managers is routinely overlooked or disregarded as unnecessary, but that it is one of the most important steps a company can take.

Most often decision-making executives, managers and supervisors are not trying to violate the law. However, with authority to bind the company, they can unknowingly cause liability to themselves or the business.

Michael J. Torchia, Esq. is a managing member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-0200 or mtorchia@sogtlaw.com.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

 

To avoid elements of the Patient Protection and Affordable Care Act (PPACA) adversely affecting fully insured health plans, growing numbers of employers — especially smaller ones — are self-funding their plans.

“The problem is that everybody has been in a wait-and-see mode for two years, but now we’re starting to see the impact,” says Mark Haegele, director, sales and account management, at HealthLink. “I expect a lot of fully insured employers to make a change this year, mid-year. There are just so many compelling reasons to entertain it because self-funding policies still protect small employers and allow them to avoid many forthcoming taxes and rules.”

Smart Business spoke with Haegele about why the PPACA has prompted more employers to explore self-funding or partial self-funding.

How does medical loss ratio (MLR) reporting drive employers to self-funding?

Less service.

MLR reporting requires insurance companies to spend 80 or 85 percent — depending on their size — of premiums received on health care claims. Plan administration, such as overhead, payroll, sales efforts, network contracting, etc., comes from the remaining 15 to 20 percent.

MLR gives insurance companies an incentive to squeeze administrative services to make more profit. Some insurance companies have changed staffing and service models. One company had service people out to help with claim issues and problems for different segments — health insurance groups with two to 40 members, and 40 to 100 members. They recently bundled the segments into one, cutting staff and decreasing field service.

What will community rating rules do to health care costs?

Effective Jan. 1, 2014, insurers must comply with community rating factors based on geography, age, family composition and tobacco use. This means all fully insured small employers in an area or industry will pay the same for premiums. The idea is to get everybody to an affordable and stable price point, but many fully insured groups will be hit with big increases.

Here’s an example: in Missouri and Illinois, groups of fewer than 50 employees will be underwritten based on community rating rather than the specific group’s risk. A small, healthy employee group in Chicago can expect a 173 percent increase in 2014, according to the American Action Forum Survey of Insurance Companies. At the same time, a small Chicago group with older, less healthy members could have its premium decrease by 21 percent.

Under self-funding, healthy small groups are able to maintain rate stability based on the health of their own population.

How will the insurance tax affect health premiums for fully insured employers?

Starting in 2014, insurance carriers will be assessed a tax, projected to be $8 billion to $12 billion. The federal government will use this money to subsidize poor uninsured. However, insurance is a cost-plus business, so carriers will pass this on to employers. It’s still unclear how much the fully insured’s premium will increase as the tax is shared across the industry; it depends on your insurance company’s market share.

How will minimum essential benefits make self-funding more attractive?

Fully-insured plans sold in the small group market — fewer than 50 employees for Missouri and Illinois — will be required to limit annual deductibles to $2,000 for single coverage and $4,000 for family coverage, as of Jan. 1, 2014. This places upward pressure on premiums. If your current deductible is greater than $2,000, in order to decrease it premiums will go up because the insurance company faces more risk.

Also, for the past five years, many small employers’ deductibles have increased, which keeps premiums down, but employers haven’t passed it on. For example, because most members don’t use their deductibles, the employer could give employees a $1,000 deductible and use self-funding to cover the gap for the remaining $4,000 when the insurance company requires a $5,000 deductible to keep premium increases low.

Small employers could consider a self-funded platform in order to maintain their current deductible and keep rates stabilized.

Mark Haegele is a director, sales and account management, at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

 

VIDEO: Watch our videos, “Saving Money Through Self-Funding Parts 1 & 2.”

Insights Health Care is brought to you by HealthLink

A typical family business could have four generations working to manage and grow the business. “The Traditionalist” 82-year-old founder is cautious, shrewd, still comes to work every day and holds the controlling stock vote. This person has no immediate plans for retiring and feels relevant by providing “practical” advice. “The Boomer” 57-year-old son serving as president has spent his career in his father’s shadow and is responsible for day-to-day operations, but doesn’t have true authority. The “Generation X” 30- to 44-year-old grandchildren are uncertain who will be the third generation successor, but have high financial expectations. The children of the Baby Boomers and Generation X, “Gen Y” or “Millennials” are the keys to moving the business into the future and want to be engaged in meaningful activities, but are the most disconnected from the company’s creation and development.

Generational diversity can contribute to misunderstanding, miscommunication, conflict and loss of productivity. So, how can you get all four working together?

“It is important to bring the generations together to discuss important family business issues with someone who has spent time with each of the individuals involved,” says Ricci M. Victorio, CSP, CPCC, managing partner at the Mosaic Family Business Center.

Smart Business spoke with Victorio about building trust and resolving business issues among different generations.

How can family members address issues to ultimately strengthen the company?

A facilitator/coach often teaches family members how to talk about difficult subjects without blowing up or running away and also how to listen to each other. Feelings that have been bottling up for years can come pouring or shouting out.

The older generation could feel disrespected and uncomfortable, as they weren’t raised to talk about feelings. The younger generation sees nothing wrong with baring their moment-to-moment lives on social media. The retiring generation could feel those who grew up with an entitled lifestyle don’t appreciate the sacrifices and hard work it took to build the business, while the incoming members could resent their inability to fully contribute, or feel unacknowledged for their work.

An outside coach can break problems down into small topics, including unwrapping family and business issues, slowly working toward sensitive areas. It takes time to build trust and learn where everyone is coming from.

What should be in place for new generations entering the business?

Have an agreed upon plan to clarify how family members come into the business, whether as a shareholder or as an executive. As an example, the plan would define what that next generation needs to achieve, both in education and work experience, before they come in as a manager. This document needs to be continually updated as operations become more complicated.

Decide whether all family members deserve stock. Consider having a stock qualification policy where perhaps you have to work in the business in some capacity for a defined period of time.

Another consideration is preventing family members from failing into the business. If the next generation isn’t meeting certain standards, which are higher than those for other employees, there can be conflict. So, set up definitions of control for both entering and exiting family members. Define the point at which authority passes to the next generation, and ensure the retiring generation has personal financial security by redeeming their stock over a period of time.

Do non-family businesses have these issues?

Every organization encounters generational issues, whether in the public or private sector. However, without family ties people tend to be more outspoken and straightforward. Younger workers don’t do well in the non-collaborative environment of cubicles and want to work smarter to have more free time. Baby Boomers prefer to hold employees accountable not only for what they do, but the hours they put in.

As with family businesses, both groups need to decide how to communicate and what they expect of each other. And once the agreements are in place, play by those rules. ?

Ricci M. Victorio, CSP, CPCC, is managing partner at Mosaic Family Business Center. Reach her at  (415) 788-1952 or ricci@mosaicfbc.com.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

 

In 2012, Chief Executive rated Texas as the No. 1 state for business, while California was the worst. Both states have held their titles for eight years in a row. In the survey, based on 650 CEO responses, Texas earned high marks in business-friendly tax, regulatory environment and workforce quality.

Ryan K. Robinson, president and co-owner of Signal Metal Industries Inc., couldn’t imagine his manufacturing business anywhere else. A second-generation company in the area for 40 years, Signal specializes in building heavy equipment and machinery designed to specification.

“Texas is surely one of the most business-friendly states in the union,” Robinson says. “I think within Texas, the city of Irving is somewhat unique in that 70 percent of Irving’s tax base comes from businesses. So the city of Irving and the Greater Irving-Las Colinas Chamber understand that business is the driver of this community.”

Smart Business spoke with Robinson about why Irving is the best location for them, and how to create a good working relationship with municipal organizations.

Why is Irving, Texas, a good location for your business and others?

First and foremost, Irving is centrally located. My company builds large, heavy products that ship coast-to-coast and out of the deep-water port of Houston. Another factor is our plant is located within 10 minutes of the Dallas/Fort Worth International Airport.

Also, the workforce in Irving is great. North Irving is a bit glitzier and where Las Colinas is located. This, along with our new Orange Line light rail service, gives Irving sophistication, while South Irving residents are the blue collar, hard-working folks. Therefore, a manufacturing company has a tremendous pool of qualified workers to draw from.

Finally, the city and Greater Irving-Las Colinas Chamber of Commerce have a lot to offer. In Irving, there are headquarters of Fortune 500 companies, medium-sized companies like Signal Metal and a whole host of the mom-and-pop types. The city and chamber realize the value in all of them and tailor programs for the big guys, the medium guys and the small guys.

What makes a good relationship between a manufacturing company like yours and the city or chamber of commerce?

I became a member of the Greater Irving-Las Colinas Chamber three years ago, but my relationship is somewhat unique — as with all of us in Irving — because the chamber is the economic development wing of the city of Irving. Most cities have their own economic development department, but the city of Irving does not. As a member who sits on the chamber’s board, it gives me the ability to directly network with city managers and the mayor of Irving.

Why is this relationship important?

Once you have a relationship with the city, you understand how the city works. A lot of Irving chamber members are retail companies that sell locally, but I don’t have a single customer in Irving. However, you always have to deal with the bureaucracy of the city when you grow — as Signal has in the past five years — and buy property, construct buildings or expand existing facilities.

Since I’ve been involved in the chamber, it’s easier because I know who does what and I have a chance to visit with them. I think that gives me an advantage when getting through the red tape in a timely fashion.

Signal hasn’t grown because of its membership with the chamber, but the relationship with the chamber has facilitated that growth because the chamber has helped make sure everything is in line, whether it be with the fire department, building permits or code enforcement.

Do you have any advice about creating a smooth working relationship with city officials or a chamber of commerce?

My advice is to join and get involved. Your local chamber will welcome you with open arms to serve on a committee or to just take advantage of all the mixers and networking opportunities you get as a member.

Once you get involved in the chamber, you learn more about how the city operates because city officials sit on the board. You’re right there in the middle of it. Getting involved gets you plugged in, and then you can take it from there.

Ryan K. Robinson is president and co-owner at Signal Metal Industries Inc. Reach him at (972) 438-1022 or ryan@signalmetal.com.

Insights Economic Development is brought to you by the Greater Irving-Las Colinas Chamber of Commerce

 

Though overall hiring is still sluggish, highly skilled candidates are still in demand and the counteroffer can be a factor in retaining them.

“Recently, because of the economic uncertainly, it’s a little bit harder for us to get candidates to change jobs,” says Michael Stanley, a recruiter at The Daniel Group. “They’re a little less willing to make a move if they are fairly comfortable in their current position.”

Conversely, many companies are willing to make a counteroffer to retain existing employees, often because it’s cheaper and easier than replacing them, he says.

Smart Business spoke with Stanley about using counteroffer strategies to acquire and retain employees.

What steps can you take to avoid losing a job candidate to a counteroffer?

You can’t prevent a counteroffer, but you can prepare candidates to expect one. Throughout the interview, when speaking with candidates currently employed elsewhere, gauge their likelihood of making a change by asking, ‘What would your current employer have to do to keep you?’ This shows where they stand and gives insight into what an acceptable counteroffer looks like.

Also, ask about their true motivation for leaving, which can be easier to find when working with a recruiter. Candidates are usually more guarded with future employers, whereas conversations with a recruiter are much more open. It’s also important to get a full picture of their current benefits and total compensation so you know how that aligns with your company’s offering.

Additionally, it’s absolutely imperative to stay in contact with candidates because they typically provide their employer with a two-week notice before leaving. Keep them engaged during this time to lower the chances of a successful counteroffer by their current employer. Have an itinerary of the onboarding process, such as when you’re sending an offer letter and paperwork and doing background checks. It’s also a good idea to have the job candidate’s future manager take him or her to lunch.

Once a job candidate tells you about a counteroffer, what should you do?

Ask a lot of questions, such as the nature of the offer and how likely they are to accept it. Open up the lines of communication. This is when you can leverage your initial conversation that uncovered their motivation for making a move. If the candidate said there was no room for advancement and the counteroffer gives a 10 percent raise, you can start putting holes in the offer by pointing out the disconnect.

What if you can’t give more compensation to counter the counteroffer? 

Use your knowledge of the candidate’s motivations, current benefits and compensation to tailor a nonmonetary incentive. Some examples are a flexible schedule, more vacation days or a guaranteed pay review after six months. An employee’s decision to leave is rarely based solely on compensation.

It’s important to know what the market is currently dictating for the open position and to not go outside of that range. If you overpay on the front end when hiring, you may not be able to provide expected raises down the road. A staffing firm, which is dialed in to compensation and benefits, can help with this.

If a current employee is leaving, should you make a counteroffer? 

If the reason the employee is leaving is easily addressed, it may make sense to make an offer. But ask yourself, ‘Is this something for which I could justifiably make a concession?’ You also might learn something, as the employee leaving is likely not the only one who feels that way. In such cases an organization-wide change could improve employee morale, such as using flexible scheduling to improve work-life balance.

However, counteroffers should be used sparingly as they can create a toxic workplace environment. If other employees find out someone was given more money to stay, they may resent management and could threaten to quit. Additionally, if underlying issues aren’t resolved, you have just postponed the inevitable and the employee may end up leaving anyway.

Michael Stanley is a recruiter at The Daniel Group. Reach him at (713) 932-9313 or mstanley@danielgroupus.com.

Insights Staffing is brought to you by The Daniel Group

 

Too many business owners know they should save for retirement but put planning for it on the back burner. Forty percent of small business owners have no retirement savings or pension plan, according to a recent American College study, and some 75 percent have no written plan as to how to fund their retirement.

“Business owners shoulder the most responsibility for their businesses, yet often forget to pay themselves first,” says Jeff Manley, executive vice president, wealth services regional executive – Texas, at Cadence Bank. “But if they’re not taking care of themselves along the way, this can position them poorly for the future.”

Smart Business spoke with Manley about how business owners can plan for retirement.

What 401(k) plans suit business owners?

Small, medium and large businesses can use 401(k)s. These basic retirement plans work well for companies looking for a retirement plan that includes both the owner and employees. Making this more compelling is that the IRS raised contribution limits by $500 for 2013, making them $17,500 and $23,000 if age 50 or older, for the first time since 2008, boosting potential savings.

Individual 401(k)s and Uni-k plans are for sole proprietors, or one employee plus a spouse working for the business. These plans, which are similar yet with important differences, are the highest saving vehicles for individual business owners as they allow them to put money away on a pre-tax or after-tax basis, or a combination thereof. Business owners wear two hats — contributing $17,500 or $23,000 as an employee, and an additional 25 percent of income, up to a $51,000 maximum, as the employer. A trusted financial adviser can help determine which plan is best for you.

What IRA plans are available?

A traditional IRA is a tax-deferred retirement account, while a Roth IRA takes contributions after taxes. There are different theories on which is better for whom, with many business owners doing both. For 2013, both IRA types have maximum contributions of $5,500, $6,500 for those over age 50, so they can’t support a retiree.

A self-directed IRA is a tax-deferred account that allows creative, nontraditional investing such as private equity and real estate. Normally, IRAs only invest in securities registered with state or federal authorities. However, self-directed IRAs have a lot of regulations and not all investment advisers provide them.

A Savings Incentive Match Plan for Employees (SIMPLE) IRA, working like a traditional IRA, has relatively small contribution limits — $12,000 for 2013, with catch-up contributions of $2,500 for those over 50. Employees can get up to 3 percent company match. Although this doesn’t allow for much annual savings, it’s less expensive to administer than others.

A Simplified Employee Pension (SEP) IRA is a type of traditional IRA. The employer is the sole contributor, and the contribution must be an equivalent percentage for every employee. The 2013 contribution limit is 25 percent of a person’s salary, up to a maximum of $51,000 per employee. This plan works well with family-run businesses.

How much should be saved for retirement?

With the different contribution limits, the amount that can be saved annually varies dramatically — from $5,500 to $51,000 in 2013. Those early in their career should start saving now and try to max out the percentage they put away each year. Getting compounding earnings working early means more money in the future.

The general  rule is to save 10 to 15 percent of annual income in retirement-type savings vehicles. But those earning a good living now who want to continue their lifestyle through retirement may have to save millions. Ask a financial adviser about available options to understand what will work best for you. Retirement planning isn’t something that can be put off. Business owners need to weigh their options. ?

Guidance provided in this article is educational in nature, is not individualized, is not intended to provide legal or tax advice, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. You should consult with an attorney, tax or other qualified professional for specific advice regarding your unique circumstances.

Jeff Manley is executive vice president and wealth services regional executive – Texas at Cadence Bank. Reach him at (713) 871-3931 or jeff.manley@cadencebank.com.

Insights Banking & Finance is brought to you by Cadence Bank

 

Monday, 04 February 2013 10:47

How trademarking color could help your brand

Trademarking a color has become more common — UPS and brown, Target and red, John Deere and green and yellow.

However, Sandra M. Koenig, a partner at Fay Sharpe LLP, says it’s important to remember that trademarking a color isn’t limited to big companies, especially if you have a specific audience and can show the color is distinctive in a smaller segment of the industry.

Smart Business spoke with Koenig about trademarking colors and the law surrounding it.

What can be a trademark other than a word or logo?

Some nontraditional trademarks can be an overall appearance or trade dress, such as color, product shape, scent and sound. When trademarking color, it can be a combination of colors applied to products, packaging or something that represents a service, as well as just one color, called color per se. Consumers should be able to easily associate color with a product or service, or its source. You might be asked to prove the connection, perhaps with surveys.

What does it take to make a color a trademark?

There are certain criteria to get a color registered. It cannot be a color required in an area or acting as an industry standard, such as green’s association with the environment (for an environmental product). The color needs to be used consistently, but your use shouldn’t limit competitors. If it’s the cheapest color to use when manufacturing a product, you can’t keep it for yourself. The color should be unexpected and not related to its function.

Some companies get color or product configuration trademarks as a way to extend protection to something no longer covered by a patent, or never covered. Trademarks last forever, as long as you keep using and renewing them, while patents are good for 20 years from the day of filing and design patents last 14 years. Therefore, when a patent runs out, trademarking the color or shape is a way to keep a unique look under protection.

The registration process can take years, especially if it’s a single color or there are appeals. Last year, in one noteworthy case, Louboutin v. Yves Saint Laurent, a federal appeals court limited Christian Louboutin’s color trademark to shoes with a lacquered red sole and contrasting upper. However, once you have a registration for your color, you’ve got national prima facie exclusive rights.

Is it easy to prove you have a trademark in a color?

It depends on your field and with what the color is associated. Areas where products are supposed to have color, such as fashion or paint, are difficult. It’s also sometimes harder to trademark a product going to general consumers. A logo with a color like the yellow Shell gas station logo is fairly straightforward, a combination of colors absent shape or configuration is more difficult, and one color without limitation to shape or configuration is hardest to prove.

Another consideration is whether you’re registering a particular shade by the pantone number, a range of pantone numbers or a color without limitation to shade. Like with traditional trademark infringement, it comes down to the likelihood of confusion. If you registered the color orange per se and somebody has peach, is that confusingly similar? If you did a pantone range of a yellow, how far outside of that range is confusing?

If you want to protect the color of your product, how can you establish rights in order to register it?

Be proactive and consistent. Don’t dilute the color by offering the same product in an array of colors. If you want to be the supplier of a magenta-colored product, don’t sell the same product in purple, green, yellow and gray.

Promote it in advertising, including saying the color word. Use ‘look for’ advertising, like ‘look for the color red on your grocer’s shelves’ or ‘we’re the green people.’ It helps if your company colors are the same as the product you’re trying to protect. You also can tie the color with something relevant like Owens Corning did with the Pink Panther and its pink insulation. Anything to drive home the association with the color and you and your product.

Sandra M. Koenig is a partner at Fay Sharpe LLP. Reach her at (216) 363-9000 or skoenig@faysharpe.com.

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