Meredyth McKenzie

Wednesday, 25 November 2009 19:00

Under lock and key

There is more than paperwork and finding a replacement when an employee leaves your company. Employees access and utilize a lot of information while working for you; information that can be devastating if it falls into the hands of a competitor.

Therefore, you need to take proactive steps to ensure that your information is kept confidential, even after the employee departs.

“A thorough exit interview will help ensure that all your proprietary data and information is accounted for,” says James J. Boutrous II, a member at McDonald Hopkins LLC, and co-chair of the Trade Secret, Non-Compete and Unfair Competition Practice Group. “It also shows that you will be vigilant in protecting the company and its intellectual property.”

Smart Business spoke with Boutrous about how to keep your trade secrets and confidential information guarded and protected.

How can you protect your business information and valued relationships?

Protecting your proprietary information when an employee departs requires attention to detail at the beginning and end of the employment relationship. A reasonably tailored noncompetition agreement can provide substantial protection by limiting a departing employee’s ability to make competitive use of information gathered during employment. You can also use patents, trademarks, copyrights, bilateral contracts and statutory trade secret law to protect your trade secrets and customer relationships.

Well-drafted covenants and proper internal measures can protect you on the front end, while employee exit interviews to assess any potential risks can protect you on the back end. You also need to be prepared to move swiftly and decisively when violations of the restrictive covenant, the Uniform Trade Secret Act, or both are discovered.

How can you secure your company’s assets?

Review your business to determine the assets that need to be protected. Identify the protected business interests that each employee is exposed to and utilizes in his or her position. These include client/customer relationships, supplier relationships, employees, bidding information, pricing and margin information, strategic plans, and prospective business opportunities, among others.

You need to draft restrictive agreements tailored for each level of employee. These can be less restrictive (confidentiality agreements) to the most restrictive (global noncompete agreements) depending upon the level of employee and his or her access to your confidential business data.

You need to enforce restrictive agreements by consistently addressing violations. Failure to take immediate action can affect any current issues and future enforcement actions. Move swiftly, aggressively and with a fine-tuned strategy that incorporates your needs, governing law and local state nuances.

How can you keep confidential information guarded?

Keep all information locked and stored, with limited access. Information should be available on a need-to-know basis. Access to storage rooms and information should only be able to be obtained through electronic keys, and confidential information should be clearly marked. Also, restrictions should be placed on visitors’ access to sensitive locations where information is stored.

Create an employee policy regarding the use of confidential information. Require routine verification and reminders of confidentiality procedures and policies. Follow-up with departing employees who have access to confidential information. Finally, prohibit the removal of confidential information from the company premises, restrict the copying of confidential information and conduct exit interviews with all departing employees.

What are the key aspects of a successful exit interview?

All information should be reported in an exit interview acknowledgment form, which is signed by the departing employee. This should obtain and confirm the departing employee’s new employer and nature of the new employment. It should contain an acknowledgment by the employee of his or her exposure to and use of trade secrets and/or confidential information, and his or her continuing obligations relative to that information.

The employee should be reminded that any use or disclosure of this information is strictly prohibited. Even if no proprietary information agreement was signed, employees should be reminded that they owe fiduciary obligations to not use or disclose confidential or trade secret information.

Employees should also be reminded of what information you consider to be secret or confidential. Specific items should be identified, so employees clearly understand that the list is not exclusive or limiting.

Also, the departing employee needs to be reminded and provided a copy of any restrictive covenant that he or she executed. The departing employee should acknowledge that all copies of confidential documents and information have been returned.

What are the benefits of exit interviews?

It shows that you are willing to take the steps necessary to protect your information, reaffirming your commitment to the protection of information. The departing employee is also put on notice about your concerns, if any, with his or her new employment.

The exit interview can be an effective barometer to gauge whether an individual employee may be a problem in the future. A departing employee who refuses to sign an acknowledgment form, or is less than candid in an exit interview, is indicative of potential issues post-employment. Further, evidence of a refusal will assist you in convincing a court that a clear threat of misappropriation exists. Failure to conduct an exit interview can create practical problems and make it more difficult to establish entitlement to post termination relief from a court.

James J. Boutrous II is a member at McDonald Hopkins LLC, and co-chair of the Trade Secret, Non-Compete and Unfair Competition Practice Group. Reach him at (248) 220-1355 or jboutrous@mcdonaldhopkins.com.

Wednesday, 25 November 2009 19:00

Road construction ahead

While the American Recovery and Reinvestment Act is investing in the nation’s transportation infrastructure, the projects it creates may also disrupt successful existing businesses. Changes to the configuration of roads connecting fully developed real estate sites will often generate significant impacts to adjacent businesses.

“When faced with condemnation, you should be aware of your legal rights and be on the lookout for the long-term interests of your business and real property,” says Ivy Cadle, an associate with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC.

Smart Business learned more from Cadle about various aspects of the condemnation process.

Can you prepare for condemnation?

Yes. An attorney can connect you with specialized land use experts, engineers and real estate appraisers who can best protect your interests because they work in this area on a routine basis. Preparation is especially important for income producing properties where legal formalities are often pivotal.

There is no such thing as a ‘standard condemnation clause’ and the clause’s language may favor different parties in different circumstances. Lessees and lessors should review their condemnation clauses and be aware of their terms.

Owner/operators need to be sure the business owner leases the real property from a distinct corporate owner. If the Department of Transportation takes only a portion of your property and severely disrupts your business, failure to heed this advice may foreclose your right to compensation for business losses.

Like many other aspects of business, a strong fundamental understanding of your rights is important as many factors will influence the outcome of your particular case.

What role will negotiation play in the condemnation process?

In Georgia, condemnors are legally required to negotiate with property owners. At times, condemnation may be avoided and damages mitigated through negotiation. You may be aware of a condemnation through public meetings or notices, but at some point, a right of way acquisition agent will provide you with an offer based on the condemnor’s independent appraisal.

When negotiating, it is important to know your rights. The condemnor must provide you with a written offer. This offer must be equal to or greater than the damages calculated by the condemnor’s independent appraiser. You also have a right to a summary of the basis for that estimate. You even have a right to commission an independent appraisal and use this information as you and your attorney see fit. Qualified experts can communicate your goals to the condemning authority while enhancing your understanding of the nuances of the project.

Good negotiation strategy allows you to explore your position while maximizing the value of your case. While negotiations are not always successful, they often result in a better understanding of the issues by both parties. Through negotiation, you may also be able to maintain critical characteristics of your property or business, like access and parking, that may have been lost to condemnation.

What happens during the actual condemnation process?

Condemnation is imminent when you receive a 10-day letter requiring you accept the offer on the table or face condemnation. To legally condemn property, compensation must be first paid. Georgia requires payment of just and adequate compensation but the standard varies by state. Just and adequate compensation is generally based on the property’s fair market value and includes compensation for consequential damages to any remaining property.

The day the property is condemned, the condemnor must pay money into the court’s registry. This payment is based on the condemnor’s estimate of just and adequate compensation. Payment of the funds and filing of the petition transfers title to the condemning authority so you no longer own the property, but you don’t know that until you are served with the lawsuit. After service, you must respond in 30 days or you will forfeit your right to dispute the valuation to the property that was, just a few days ago, under your ownership.

One element of damage that may be forfeited is business damages. This element of compensation is not typically included in the condemnor’s independent appraisal and is rarely included in an initial offer. Business damages may only be recovered in certain circumstances and a thorough knowledge of condemnation law is required to accurately assess recoverable business losses. One method includes comparing the business’s fair market value before and after the taking while considering lost profits or lost earning ability.

What do I need to know if I have been served with a condemnation petition?

If you are dissatisfied with the estimate of just and adequate compensation paid into court, you need to act quickly. Your property has been taken and you need to respond immediately. You should also know that each named condemnee has the right to prove his or her entitlement to any portion of the deposited compensation.

You may choose to fight the taking but it is rare that a property owner keeps his or her property. A rejected petition is often quickly cured and refiled. Rather than fighting the right to condemn, most trials focus on issues of value. Georgia property owners are entitled to a jury trial on the issue of compensation. Qualified attorneys and experts will allow you to assess the risks and rewards associated with litigation and they will help you proceed in a way that is adapted to your individual circumstances.

Ivy Cadle is an associate with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. Reach him at icadle@bakerdonelson.com or (404) 589-0009.

Tuesday, 10 November 2009 19:00

Understanding the plan

Many changes are occurring during this year’s health insurance open enrollment season. Carriers are seeing reductions in benefits and increases in employee costs. Many employers are also moving from large meetings to one-on-one sessions to discuss benefits with employees.

It’s important to give open enrollment the attention it deserves, so that everyone is able to make informed decisions.

“Employers benefit from employees who are educated well in advance, have the opportunity to understand the changes, see reasons for changes, and know the new benefits,” says Frank Jantzen, vice president of Client Service at AvMed Health Plans. “If employees know in advance, there will be fewer questions for the benefits person after enrollment.”

Smart Business spoke with Jantzen about open enrollment, how to get employees engaged and how to work with your health insurance provider during open enrollment.

How can you give open enrollment the attention it deserves?

Have established times or meetings where there’s a general session and everybody gets the same information. Make sure to publish employee questions and answers where everyone can see them. That helps everyone get the same information and dispels rumors. Employees can then make their own decisions based on facts and not on what their neighbor tells them might be true.

Remind employees to come prepared with Social Security numbers for spouses and dependents and necessary documentation so enrollment isn’t delayed. It’s frustrating if you sign up and think everything is fine, but when you go to use the insurance after the effective date, you find out your application is pending because information is missing.

What are key things to remember during the open enrollment process?

The employee doesn’t necessarily make the benefit decision — someone else, like a spouse, sometimes makes it. Depending on who is in your audience, it’s important that the spouse, not just the employee, understands the plan and how to get the most out of the benefits. You have to make sure the information goes home. That also means giving employees enough time to make a decision.

Employees moving from a co-pay to co-insurance design need to be given examples of the cost of care received. Give examples of hospital costs versus free-standing facilities. Make sure that information goes home to the spouse, as well.

How do you get employees engaged in the open enrollment process?

A lot of employers now are increasing the co-pay for hospital emergency rooms to make it significantly higher than going to an urgent care center. Urgent care centers are abundant right now, and they’re easy to get to. You may want to provide extra information to your employees on the cost of seeing a doctor at an ER versus an urgent care center. You can also distribute a list of urgent care centers to let employees know where they are and their hours. That would encourage them to use the urgent care center and avoid ERs when possible.

Another important item is prescription drugs. All plans seem to have similar formularies, yet there are differences. If you move from a carrier without a progressive medication program to one with a program, let employees know what drugs are pre-authorized and which ones will be questioned. This will give employees full exposure on the plan.

Provide a benefit calculator so employees can see how much their out-of-pocket costs would be for different medical procedures if they’re using a health reimbursement account or high-deductible plan with an HRA or health savings account. Let them know in advance when the deposits to their HSAs will be made so they can budget appropriately.

Contests and games are fun too. You have to grab their attention with some astounding facts, reward them with a gift card or something and then move into the education portion of the topic.

How can you help employees understand any changes that have been made to the plan?

You need to take ownership of the benefit decision. If there’s a change from one carrier to another, take time to explain to the employees why you switched. If it was cost — tell them what the increase would have been if you stayed and relate it back to their individual contribution. Most employees only think about what it’s costing them, not the employer’s total premium. Tell them what it costs and what it would have meant for them.

If you’re changing plan design, tell employees why the decision was made. It’s easy to avoid that conversation and let employees blame the new carrier. But it’s not the new carrier they’re unhappy with most of the time, it’s the plan design. Take ownership and tell employees why this plan was chosen, and how much it will cost or save them.

If you’re moving to a high-deductible plan, provide examples of how employees can avoid high-cost procedures, including how much an MRI will cost at a hospital versus an urgent care center. Give them hard numbers.

How can you work with your health insurance provider during open enrollment?

Share information with the carrier about your contribution. Some information may only be given to the employee and not the carrier, which makes it difficult. The carrier is then not able to step up, answer questions and help out. When you talk about the decision, what the employer/employee contributions are and what, if any, HSA deposits are, have the health plan provide details on benefits and specific ways to get the most cost-effective, quality care.

Your presence at all meetings is very valuable. It should be a team effort. The carrier will explain about the benefits and how employees can get value out of them. You can explain the decision and the reasons for selecting the plan. <<

FRANK JANTZEN is the vice president of Client Service at AvMed Health Plans. Reach him at frank.jantzen@avmed.org.

Monday, 26 October 2009 20:00

Managing your assets

With property valuations falling as a result of the economy, now is a perfect time to negotiate a more reasonable value for your business personal property assets.

“Taxing jurisdictions are trying their best to maintain revenue,” says Jenna Kerwood, principal and property tax practice leader at Brown Smith Wallace LLC. “Due to the downturn in the economy, states are conducting more audits and taking a more aggressive stance when valuing your property.”

Smart Business spoke with Kerwood about how property tax affects businesses and how a personal property review can help you cut costs.

What should a business owner understand about personal property tax?

Personal property tax is typically based on the fair market value of your tangible assets. The statutes refer to this legal standard of assessment in many ways, such as ‘true value’ or ‘cash value.’

The assessor typically requires property owners to report their assets’ historical cost by year of acquisition and then apply specific depreciation factors to arrive at an assessment.

Since historical cost of assets less depreciation rarely equates to fair market value, it is prudent to evaluate the propriety of your annual assessments by considering the accuracy of your fixed-asset accounting records, physical and economic life of assets, equipment utilization as compared to design capacity and the various state-offered exemptions.

What are the compliance requirements associated with property tax?

Currently, all but 10 states tax businesses’ tangible personal property. The states that tax personal property require a return or a personal property tax statement that must be submitted to each local jurisdiction, such as the county, township or village, each with their own due dates.

After filing, you’ll likely receive an assessment notice, although not all jurisdictions send notices. The notice will tell you the fair market value of your property according to the assessor.

Check the notice against your return value to make sure it’s what you were expecting. If it’s not, you can appeal the assessment. Time frames for appeals are often very short, some only 10 days. Because appeal deadlines are different for each state, and often each jurisdiction, the property owner must be aware of the timing. If you miss an appeal deadline, there is rarely any recourse.

Once you have appealed to the jurisdiction, you’ll have a hearing, which is your opportunity to prove your opinion of value. Sometimes these hearings escalate to the courts, but not often. Once you agree on a final assessed value, you’ll receive a tax bill for that year based on the revised value.

Another point to remember with property tax is that you’re responsible for paying it, even if you don’t receive the bill or it’s sent to the wrong address. No matter what the circumstances are, you have to pay the penalty if it’s late. It’s up to you to realize that your bill is late and call the jurisdiction to request a copy.

Is filing a property tax return straightforward?

Depending on the number of states that your business penetrates, number of locations, plants, stores, etc., and the dollar value and volume of fixed assets, compliance can quickly become a burden. Inventory is taxable in some states and must be reported as of the assessment date, which also varies. If you ship a portion of your inventory out of state, there may be freeport exemptions available that require annual applications.

Distinguishing between real and personal property can also be challenging depending on how projects are capitalized. If a real estate item such as an HVAC system is classified as machinery and equipment on your property tax return, then you are most likely creating a double assessment. Pollution control-related equipment may also be exempt, providing the assets are certified by the proper authority.

As with any tax, it is best to be proactive and understand each state’s laws and reporting requirements in an effort to minimize your tax liability.

How do I know if my property tax value is fair?

All property owners should at some point conduct an asset review. Make sure you understand all of the costs that are being capitalized and verify that they are considered part of the property for tax purposes.

Tour the facilities and talk with the plant managers, engineers and IT specialists. Ask questions regarding the condition, physical life, upgrades, repairs and utilization of equipment.

As you become more familiar with the assets and the various state laws, filing requirements and exemption opportunities, you will better understand the fair value of your company’s assets, which will enable you to minimize your tax liability and audit risk.

How much can I save with a personal property review, and what are some other benefits of doing one?

Savings can vary, depending on the accuracy of the fixed-asset listing and existing filing positions, but typically, an asset review can save upward of 20 to 25 percent.

Secondary benefits include cleaning up your asset listing, updating filing positions and identifying changes to your capitalization policy that will allow you to maximize your savings for future years.

Jenna Kerwood is a principal and leads the property tax practice at Brown Smith Wallace LLC. Reach her at (314) 983-1360 or jkerwood@bswllc.com.

Monday, 26 October 2009 20:00

Wrapping it up

Every construction project has its risks, and while you may attempt to transfer those risks to the contractor, some liabilities may not transfer. As a result, you need to determine who should be responsible for the risk and who should provide the coverage if that risk should be insured.

One solution is an insurance wrap-up, an approach that has evolved over the last decade into the most widely used risk management approach for insuring large construction projects. An insurance wrap-up is a project-specific insurance program that insures the owner, general contractor and all subcontractors under a single program.

“A wrap-up can be used on a single project, multiple projects or for plants that employ third-party maintenance contractors,” says Tim Walsh, regional director, national wrap-up group, for Aon Risk Services Central Inc., located in Southfield, Michigan.

Smart Business spoke with Walsh about how to use insurance wrap-ups and how this type of coverage can help you simplify your insurance project.

How does an insurance wrap-up work?

The process begins by having a business owner clearly define his or her goals for managing the risks on the construction project. Another key element is senior management support for using a wrap-up and engaging the insurance broker as early in the process as possible. The broker can prepare a pro-forma of protected cost savings for the project and guide the client on regulatory issues regarding the usage of wrap-up insurance on a given project. In a wrap-up insurance program, the insurance costs normally charged by contractors are removed from their bids for the construction project. The owner then pools these contractor charges to pay for the wrap-up policy.

A typical wrap-up program insures workers’ compensation, general liability and excess liability. In addition, the project-specific insurance coverage can include builder’s risk (damage to work while being constructed), professional liability and environmental liability. Each state has different minimum project size requirements for wrap-ups; in Michigan, it needs to be $65 million.

What should an owner consider before purchasing a wrap-up program?

While the owner receives significant coverage benefits over traditional insurance programs, the owner should be aware that he or she assumes certain administrative responsibilities for the program. The owner is responsible for purchasing the insurance coverage and reviewing all program documents, and attends various meetings with underwriters, periodic claims reviews and quarterly stewardship meetings.

It’s also important to understand the assumptions used in the financial pro-forma so that the owner has a realistic expectation on the amount of cost savings and potential financial risk. This takes an experienced broker that specializes in these types of programs.

Another consideration is that the owner may run into resistance from the contractors, as they generally would prefer not to participate in an owner-furnished wrap-up program because of increased administration, loss of profits on insurance charges and lack of control over insurance placement and issues.

What are the types of wrap-up insurance?

The first is a contractor-controlled insurance program, or CCIP, where the general contractor purchases the coverage on behalf of the subcontractors and also provides your insurance. The second is an owner-controlled insurance program, or OCIP, where the owner purchases the coverage.

There are advantages and disadvantages to both. If the owner wants to save money, he or she will purchase the coverage. But if the owner wants a project-specific insurance program without any of the administrative responsibilities or savings, that person will pick the CCIP. The ultimate decision is based on the owner’s goals and objectives.

What problems can occur if an owner does not use an insurance wrap-up?

The biggest issue is that an owner will pay the contractors to provide insurance protection for both parties, but it may not adequately insure the owner. If the owner tenders that lawsuit to the contractor and the contractor’s insurance doesn’t respond positively, the owner’s insurance would be required to pay both legal defense and claim costs. That can be problematic. An owner may have a high deductible, bearing, in some cases, up to $20 million in losses. The losses that get paid under the owner’s insurance program can also impact future premiums on operational insurance.

What are the benefits of an insurance wrap-up?

One significant benefit is that the owner will have insurance coverage control. He or she has first-named-insured status under the policy, known coverage limits and insurance carrier, and completed operations coverage. Often, these programs have much higher limits than the normal amounts carried by contractors.

There is also enhanced and heightened safety awareness on the project. The insurance wrap-up also provides a platform to formalize the risk management strategy regarding the owner’s construction risk.

There can also be a significant cost savings by using a wrap-up and pooling the insurance into one single package. An owner can save 25 to 50 percent of the total insurance cost, or one-half percent to 1 percent of construction costs. Contractors will also have reduced litigation because everyone is insured under the same policy.

In addition, it levels the playing field during the bid process to increase minority business enterprise and/or women business enterprise participation in the project.

Tim Walsh is regional director, national wrap-up group with Aon Risk Services Central Inc. Reach him at (248) 936-5321 or tim_walsh@ars.aon.com.

Monday, 26 October 2009 20:00

A new plan

The current economic recession has created several new opportunities in estate planning. Values of certain assets, such as businesses, marketable securities and real estate, are lower now than they were a year ago. This allows you to transfer more of each asset for a lower amount.

But there are people who have decided not to take advantage of these new opportunities and put off estate planning. They may not feel as wealthy, may have lost some wealth because of the economic crisis, or don’t feel as if their assets are valuable or won’t be increasing in value anytime soon. But it’s important to be proactive and start planning now.

“You want to take advantage of these low values and gift and transfer wealth now while you can still lock these values in,” says Brian Bornino, CPA/ABV, CFA, CBA, director of Valuation Services at GBQ Consulting LLC.

Smart Business spoke with Bornino about how to take advantage of the new opportunities in estate planning and different solutions for dividing your assets up equally among family members.

What are some key things to remember when gifting or transitioning wealth?

There are so many techniques and strategies that you can get bogged down in the details. It’s important to sit down with someone you trust and walk through your goals. Whom do you want to receive this money, what’s the ultimate estate plan, and who’s supposed to end up with your current assets?

Devise a plan that you’re comfortable and happy with. A lot of times advisers try to sell clients complicated plans that may provide better results, but may leave them uncomfortable. You need to be happy and comfortable with the plan, and understand that your money is being taken care of in the right way after you pass away.

How do you take advantage of the new opportunities available?

Gifting of shares needs to be based on a fair market value. When values are low, a greater percentage of your business may be transferred without triggering the gift tax. For taxable gifts, the gift tax will be lower because of today’s lower values. Values when planning for real estate can also go up and down with the economy. Values are generally down now, so it’s a good time to have real estate appraised and do transactions with real estate based on this lower value.

Why is a business valuation an important part of gifting and wealth transitioning?

Any type of transfer you make, whether it’s a sale, gift or transfer, is subject to review and scrutiny by the Internal Revenue Service because of the gift tax associated with these actions. You need to demonstrate and document the fair market value of the transferring shares and have a comprehensive report prepared to support the transaction.

Your business is also typically the largest asset in your estate, but it’s the hardest to divide. You need to know the business’s value if you’re trying to figure out who inherits what and how much wealth you’ll transfer to each person.

A good strategy can help in transitioning the business, because many different scenarios can happen, especially if your family is continuing the business. For example, you may have four children but only one is active in the business. You want your estate to be equally divided, but you don’t want the active child to be the only one with a piece of the business. You also don’t want everyone running the business. But there are many solutions to this situation.

How can you divide a business up equally among family members?

The first is recapitalization of voting and nonvoting shares in the business. You would do this to a small percentage of the business’s voting shares, for example 10 percent. The other 90 percent would be nonvoting shares, which you can transfer to the nonactive children. The active children can then maintain voting control of the business, while the nonactive children receive the same economic benefits. This also allows you to transfer ownership and wealth without transferring control of the business, since you can keep your voting control until you’re ready to transfer it.

A second strategy is to create a family LLC or FLP. For example, let’s say you have a $10 million piece of real estate that’s your primary asset. This is a difficult asset to break up among children, but you still want to maintain ownership in the real estate. You can put that building into a family LLC or FLP and gift units in that entity to children, almost like shares of a new company. The units are a function of the value of the real estate.

Why is gifting and transitioning your wealth so important?

There are several financial benefits. Estate tax is onerous and can quickly get up to as high as 50 percent once you cross the threshold of a taxable estate. Half of the wealth you’ve spent a lifetime accumulating can go away quickly if you don’t plan.

There are also psychological benefits. Many people worry about leaving their children and inheritance when they pass away. If you’re able to give away or gift value while you’re still alive, you can see your children receiving enjoyment from that gift. Most children would rather receive a gift while their parents were still alive rather than after they pass.

Brian Bornino, CPA/ABV, CFA, CBA, is the director of Valuation Services at GBQ Consulting LLC. Reach him at (614) 947-5212 or bbornino@gbq.com.

Friday, 25 September 2009 20:00

The bottom line on safety

Most business owners today will claim that safety is an important aspect of their business, but do they really realize how much their company’s safety culture impacts the bottom line? The way companies manage safety is what distinguishes them from their competition. Without the proper safety management, losses can occur at any time due to inadequate training for newly hired employees, unforeseen hazards, lack of internal accountability or, most often, as a result of focusing on getting the job done without making a safe environment a priority.

Regardless of the causes of accidents, the employer is legally and morally responsible for protecting employees from hazards and injuries in the workplace. The only way to protect yourself and your business is to put policies and programs in place to minimize those risks from happening and prevent future problems.

“Any time there are losses in a company, you face possible morale issues among employees and loss of production time to deal with the situation and subsequent investigations into the accident,” says Gerry McEwen, a safety/loss control representative with GMGS Insurance Services. “You also face employee downtime due to the loss and investigation. And if there’s a fatality, you will have to spend time and money on employee counseling. There will be major effects from such losses on the company overall, not just on the employees but to the bottom line.”

Smart Business spoke with McEwen about safety and risk management and the key components of effective programs.

What priorities should employers focus on to reduce safety risk and losses?

  • Be responsible for your employees; treat them like they are your greatest assets. Train your new hires and existing employees, making safety one of the forefronts of your business. Let employees know you will provide a safe environment for them to work in.
  • Hold all employees accountable. This includes everybody, from upper management all the way down the chain. If you do, everybody will benefit.
  • Complete regular inspections to ensure everything is safe and working properly in your company.
  • Establish proper engineering procedures and administrative controls.

What are the benefits of having safety and risk management programs in place?

Bottom line, your company will pay lower insurance premiums and reduced workers’ compensation costs. Insurance may pay the immediate costs of losses, but in the long run, a company always pays for its claims. Your employees will also be happier, more productive and morale will improve throughout the company. No matter what type of company you have, the happier the employees, the healthier the bottom line. Safety enforcement also becomes easier as employees see the benefits of maintaining the safety standards.

How do you educate your employees on safety programs and help them understand their importance?

Train your employees, and make sure they understand the benefits of your programs as soon as they are hired at the company. By making safety a precedent you will be able to more effectively train your employees and communicate your safety standards. Communicate the company’s commitment to the employees and to their personal safety. Encourage your employees to participate in evaluating the effectiveness of the training and improving your company’s safety program. If they help to create it, they are more likely to follow it. The ultimate result is for your employees to make your safety programs their safety programs.

How do you enforce and maintain these programs so they continue to reduce losses and risks?

Safety begins at the top and management must be 100 percent on board with the various programs. The programs will only be as effective as you enforce them to be. Once those written programs and procedures are in place, proper enforcement, accountability and documentation will keep your company and employees protected. Make sure you have somebody knowledgeable audit and evaluate the program’s effectiveness. Utilize all the tools available to you including internal and external resources. If your broker is focused on risk management and not just collecting insurance premiums he or she should be providing loss control services and also assisting in coordinating the loss control efforts of your chosen insurance carrier. Regardless, an employer must not merely rely on such outside sources to do the job; this moral and legal obligation cannot be delegated to others — it is your job.

A key aspect in an effective safety program includes reviewing the supervisor’s inspections and employee discipline and accident investigation. Are investigations done procedurally to list excuses without finding the root causes of the accident? Do investigations produce positive solutions and do they actually implement the corrections? You have to make sure your company identifies the desired goals and objectives in the programs.

How do you deal with a loss or risk if it does happen?

Take immediate care of your employees at the time of the accident, especially if they need emergency attention. When you assure the injured employee and his or her family that they will be taken care of, you can avoid many unnecessary legal costs in the future. It is paramount to determine the root cause of an accident and not just put a Band-Aid on it. Once you determine the cause, communicate this to all your employees. Every accident can be converted into a safety lesson and this will minimize future accidents while further protecting the company’s bottom line.

Gerry McEwen is the safety/loss control representative at GMGS Insurance Services. Reach her at gerrym@garrett-mosier.com or (949) 559-3372.

Friday, 25 September 2009 20:00

Golden chance

Now is a great time to start planning your estate or reviewing the plan you already have in place.

With the depressed value of assets, especially in the real estate and stock markets, and low interest rates, new and different opportunities for estate planning have emerged. Tax law changes, such as an increased applicable exemption amount and an increased exemption for annual gifts, have also made this a great time to start transferring your estate.

“Given the changes in the economy, interest rates and potential legislation, you should review your estate plan and update your asset list,” says Jennifer A. Davis, officer in the trust and estates practice group at Greensfelder, Hemker & Gale, P.C. “If you haven’t done any estate planning, now is an excellent time to do so to make sure you are not paying any unnecessary taxes.”

Smart Business spoke with Davis about the different estate planning opportunities available and why you should review your estate plan today.

How can you take advantage of today’s estate planning opportunities?

The simplest and most attractive opportunity is gifting, which reduces your taxable estate and moves assets from one generation to another. Now, more individuals are taking advantage of this technique because the decreased value of the gifted asset allows you to transfer more to your family. Even families not interested in complex estate planning can take advantage of gifting.

There are some limits to the gifting you can make before you face any tax implications. The first is the annual exclusion amount, which increased to $13,000 per individual in 2009. An individual can gift up to $13,000 to another individual on an annual basis, or a married couple can gift up to $26,000 jointly. We will know in December if the amount will increase in 2010.

There is also a lifetime gift exemption of $1 million per individual or $2 million per married couple if you want to make larger gifts.

How does a lower interest rate affect estate planning?

Interest rates come into play based upon the structure and value of the asset transactions. A lower interest rate would mean a lower amount of interest being paid or accruing. A simple technique that has gained popularity is a loan to a family member.

You cannot give an interest-free loan to your children without tax consequences. To avoid these tax implications, you must charge an interest rate at a specified level. That rate is at an all-time low.

Parents are now expressing more interest in structuring a loan to their children instead of making a gift. This can be done at little cost to their children and allows parents to retain some comfort as they are not giving away assets should they need them in the future.

There are also other, more complex estate planning techniques that are more efficient and attractive because of the low interest rate. One is a grantor-retained annuity trust, in which an individual sets up a trust and transfers assets to it, retaining the right to receive an annuity payment for a certain number of years. Any assets remaining at the end of that term are passed to specified beneficiaries. On this arrangement, you are trying to transfer a depressed asset into the trust in hopes that it appreciates at a rate greater than the annuity rate.

Another similar vehicle is the charitable lead trust, in which a charity receives the payments and the remainder of the amount at the end of the term goes to specified beneficiaries.

What pending laws could affect estate planning?

Congress is looking to pass legislation that revisits prior legislation, which changed the amount an individual can transfer on death before an estate tax is applied, known as the applicable exemption amount. That law also reduced the top estate tax.

This year, the applicable exemption amount increased to $3.5 million per person — the highest it has ever been. Under the current law, the estate tax goes away entirely next year, but comes back in 2011 with an applicable exemption amount of only $1 million per person.

Why is it important to review your estate plan?

You want to make sure it is properly funded. The plan will only be effective if you follow through with funding and transfer assets to the proper estate planning vehicles.

You also want to make sure it works under existing laws. For example, if one spouse has the bulk of the wealth, he or she may transfer a portion to the other spouse to ensure that assets are available to use both spouses’ applicable exemption amounts. There may need to be further transfers as the amount changes.

You also need to be aware of upcoming legislation. Most documents are drafted to accommodate changes in law and exemption amounts, but you should understand how those apply to your situation. Remember to review your documents, review how your assets are titled and work with your tax advisers to avoid any unintended results.

What are the benefits of taking advantage of these new opportunities?

You can save money on estate tax. Having a plan in place also ensures that your family or beneficiaries are taken care of in the manner that you want.

Jennifer A. Davis is an officer in the trust and estates practice group at Greensfelder, Hemker & Gale P.C. Reach her at (314) 345-4749 or jac@greensfelder.com.

Friday, 25 September 2009 20:00

The auditor is coming

Companies are making less money in this economic downturn, which means less tax collected by the states, causing revenue collections to fall below projections.

This has created significant state budget shortfalls across the country, including Ohio. The state has done various things to maintain a balanced budget, including cutting state funded programs. Another way the state can make up for losses is through state and local tax (SALT) audits to determine if you are in compliance with state and local tax laws and regulations.

“Unpaid or underpaid state and local taxes may pose a significant risk to a company,” says Matthew Stamp, the director of state and local tax services at GBQ Partners LLC. “The magnitude of the risk depends on your size, the nature of your activities, the number of states you operate in and the type of taxes you’re responsible for. An audit assessment can have a significant impact on cash flow if you’re unaware of your filing obligations and don’t have sufficient cash reserves.”

Smart Business spoke with Stamp about what to expect during a SALT audit and how to use audit information to help increase compliance.

What role do SALT audits have in helping states generate revenue?

If the state finds that you are not in compliance with its taxes, it will issue an assessment for unpaid or underpaid tax liabilities. These taxes, which would be additional revenue for the state, would not have been identified if you were not audited. For companies, states generally target income and franchise taxes, sales and use taxes, and personal property taxes.

For companies that are meeting their tax filing obligations, the state will attempt to identify additional revenue by scrutinizing other areas. You may take a tax position that the state doesn’t agree with or fail to collect sales tax or pay use tax on certain types of transactions.

If a filing obligation exists and tax returns have not been filed, many states may audit a period of up to ten years, although this varies from state to state. You would be responsible for back taxes and extensive interest and penalty charges.

What should you expect during a SALT audit?

You need to be prepared. You should perform an internal review prior to the start of the audit to understand areas of risk and identify potential overpayments to offset any tax liabilities discovered by the auditor. You should not rely on an auditor to identify tax overpayments.

Designate one person from your company as the point of contact with the auditor. Work with the auditor to create a timeline for audit completion and monitor the progress on an ongoing basis. Information provided to the auditor should be controlled, but the auditor should not be prohibited from obtaining financial records or meeting with company personnel.

You need to understand that an auditor is just doing his or her job and should be treated with respect. Personality conflicts with auditors do arise at times, and you may request a meeting with an audit supervisor or manager to ensure the audit is completed in an organized and timely manner.

How can you work to reduce your assessment from an audit?

Prior to the final assessment, the company will have the opportunity to work with the auditor to review the initial audit findings and understand the auditor’s position. You want to make sure all the facts surrounding each transaction or tax position are clearly identified. Additional information may be offered to provide support to justify a tax position or clarify a transaction. The goal is to convince the auditor that the company’s position is accurate. The closer the auditor is to finalizing the audit, the more difficult it becomes to remove items from the proposed assessment.

If the company and auditor continue to disagree, the company will have the opportunity to appeal the decision once the assessment is issued. However, the appeal process will cost you additional time and money, if outside assistance is required.

How can you take the information from a SALT audit and use it in your company?

Be proactive. You will want to incorporate the audit findings into your current compliance processes to reduce the opportunity for future assessments. A company will never be 100 percent perfect, but you want to be in a position to increase your state tax compliance and minimize the tax risk to your company.

Understand that issues, transactions or filing methodologies scrutinized by one state will most likely be examined by another. Don’t wait for additional states to send you a nexus questionnaire or audit notice, because a lot of times that’s too late. Review your business activities by state on a regular basis so you understand where you have a filing obligation and/or potential tax exposure.

Friday, 25 September 2009 20:00

Committed partners

You use your bank for a variety of business services each day, such as payroll and accounts receivable and payable, but you may not realize what else it can do for you.

Banks can offer numerous services to you and your employees, including financial programs, new products or simple financial advice that cost you nothing to take advantage of. Developing a relationship with your bank and offering these benefits to your employees can help you save money and retain employees.

“The partnership is a personalized, hands-on service that allows employees to work closely with the bankers and develop a relationship similar to the one that you as a business leader have with a bank,” says Rose Kurhayez, vice president, retail business development at MB Financial Bank. “A partnership can be a value-added service and it can also save your company money.”

Smart Business spoke with Kurhayez about how to develop a relationship with a bank and how doing so can benefit a business’s employees.

What benefits can a bank offer to business leaders and their employees?

Many banks offer packaged programs that give employees special benefits, such as premium rates on savings products, discounts on loans, special checking programs, health savings accounts at special rates and 401(k) plans. The programs are designed to educate employees and assist them in achieving their financial goals. By participating, employees can get rates not offered to the general public.

Banks can also assist businesses with employee services such as payroll. Implementing direct deposit can help decrease a business’s rising payroll costs because it doesn’t have to cut checks to employees, put stop payments on checks, or worry about lost or stolen checks. A business can also tailor banking services to its individual needs and those of its employees.

And if a business has a large number of employees from a particular ethnic background, some banks can offer training and assistance to these employees in their native language.

What educational benefits can businesses receive through working closely with their bank?

A business may have employees who spend an inordinate amount of time and money on things such as cashing checks, paying currency exchange fees, money transfers or loan fees. These employees are in need of financial training, which can be offered by some banks through a variety of seminars.

Numerous topics can be covered during these sessions, including credit counseling, how to prepare a budget, how to save money, how to buy a home, etc. These seminars can also be done at no cost to employees or the company.

How can business leaders use these benefits within their companies?

Businesses can leverage the partnership and benefits package as a way to recruit new employees. And when these employees do join a company, the bank relationship should be discussed as any other benefit would be so they are fully aware of the products and services available to them.

Businesses also need to promote this package of services as a benefit to the company and the advantages that employees will see from using these bank benefits.

How can a business develop a relationship with its bank so that it remains strong and continues to grow?

The best way is to have regularly scheduled visits by the bank to the company, either monthly or quarterly. This allows employees to develop a relationship with the bankers, so they’re more willing to ask questions and bring up concerns. Having that expert available for guidance and support on the various benefits is important to help employees make the best financial decisions.

Having these meetings also allows the bank to keep up with the lives of a business’s employees. Things change so quickly today, with people and in the market, so it’s important for the banks to get that periodic update.

The bank can then help the employee accommodate any changes, if necessary, or take advantage of a new program or service. Having a banker there on a regular basis helps develop that comfort level among employees.

If an employee happens to leave that company, he or she can still maintain that relationship with the bank.

What value do business leaders and their employees get from partnering with a bank?

Business leaders demonstrate to their employees that they are caring, that they are looking out for their best interest and that they want them to succeed. Employee loyalty and retention are offshoots from it, allowing a company to develop a good, loyal staff.

In addition, employees will receive all the special rates and discounts that the average customer wouldn’t get, and they get hands-on training, expert services and personalized banking that others would not get. There is also a cost savings by taking advantage of these benefits. Companies may be dealing with the growing cost of benefits, but receiving these benefits through a bank will save them money.

Rose Kurhayez is vice president of retail business development at MB Financial Bank. Reach her at (847) 653-1137 or rkurhayez@mbfinancial.com.