Rona Gilbert

Sunday, 30 July 2006 08:00

Texas’s new margin tax law

A company’s tax burden is part of doing business, but a major overhaul in the Texas franchise tax rules means new requirements for many. What was previously a franchise tax is now a tax on taxable margin. Many businesses that were not required to pay the franchise tax will find themselves needing to understand and pay the new margin tax.

Enacted to offset a 33 percent decrease in property taxes, the new margin tax brings many businesses into the system that were previously not taxed. While the old system only affected corporations and limited liability companies (LLCs), the new system casts a much wider net, according to Toni Mayfield, a senior manager in the tax practice at Whitley Penn LLP.

“The new margin tax law affects a large population of businesses, including existing franchise taxpayers and many other categories of businesses that weren’t subject to the franchise tax,” she says. “All businesses need to take a close look at the tax law changes and understand the new requirements as a result of these changes.”

Smart Business spoke with Mayfield about the new margin tax law and how Texas businesses will be impacted.

How does the margin tax affect existing taxpayers?
The new margin tax will go into effect for tax returns originally due May 15, 2008. Existing franchise taxpayers start with the new system beginning with their tax reports that are due in May 2008. This first report will be is based on their taxable margin during any accounting period ending in 2007.

How does the gross margin tax affect new taxpayers?
For companies that were not subject to the old franchise tax but will be taxed under the new rules, the new system starts with tax years beginning June 1, 2007. Any new taxpayers whose tax year begins January through May will not be affected until the following year.

How is taxable margin calculated?
Instead of being taxed on capital or earned surplus, companies are now taxed on taxable margin, using the lowest of three calculations: 70 percent of total revenue; total revenue less cost of goods sold; or total revenue less compensation and benefits. While the tax rate is 1 percent for most entities, those in the wholesale or retail trade will pay a tax rate of 0.5 percent.

What entities are taxable under the new margin tax law?
In general, any partnership, corporation, LLC, business trust, professional association or joint venture will be liable under the new margin tax law. Professional associations in particular should pay attention to the new gross margin tax law as they enjoyed a special exemption under the old law.

What entities are exempt?
A number of entities are exempt from the new margin tax, including sole proprietorships; general partnerships owned entirely by natural persons; nonprofit organizations; family limited partnerships with at least 80 percent of the interest held by members of the same family and at least 90 percent passive income; Real Estate Investment Trusts (REITs); insurance companies; businesses with gross receipts of less than $300,000 or an annual tax liability of less than $1,000; and passive partnerships and trusts.

It’s important to note that the Texas definition of a passive business is different than the federal definition. For purposes of this law, a passive business is defined in Texas as a general or limited partnership or nonbusiness trust with at least 90 percent of its income from sources such as dividends, interest, foreign currency exchange gain, royalties, bonuses or delay rentals from nonoperating mineral interests or gains the sale of real property.

How does the new tax margin law affect unitary businesses?
Under the old law, all entities reported their income as a single taxable entity whether or not they were consolidated for federal purposes. Under the new law, certain affiliated groups will be required to file a combined report. Businesses must report income as a combined group if they are considered to have a unitary business. Businesses are considered to have a unitary business if there is at least 80 percent common ownership and the business is a single economic enterprise whose joint operations produce a synergy and mutual benefit to all entities in the group.

How can new filers prepare for their first gross tax margin filing?
The new margin tax repeals the existing business incentive credits. Businesses with existing business loss or credit carryovers can deduct any remaining amounts against the margin tax. However, taxpayers must file a written election with the state comptroller by March 1, 2007 to claim the credit in future years.

TONI MAYFIELD is a senior manager in the tax practice at Whitley Penn, LLP. Reach her at or (972) 392-6670.

Sunday, 30 July 2006 04:02

Social Security mismatch letters

Although employers understand that they are required to verify an employee’s eligibility to work in the United States, many employers are questioning their obligations in light of the recent political emphasis on illegal immigration. One area of confusion for many employers is what, if any, obligations they have if they receive a “mismatch” letter from the Social Security Administration (SSA) informing them that the information they provided on one or more of their employees doesn’t match SSA records.

In June, the Department of Homeland Security (DHS) issued a proposed regulation addressing mismatch letters. Although employers’ obligations will not be fully settled at least until mid-August when a final regulation may issue, there are specific steps an employer should take upon receipt of one of these letters, according to John Hinton, a partner at Gambrell & Stolz.

“Come late summer, the final regulation should be implemented and employers should have clearer guidance on their responsibilities when they receive a mismatch letter,” he says. “Employers need to understand that they cannot ignore these letters.”

Smart Business spoke with Hinton about Social Security mismatch letters and how employers should respond if they receive one.

Why should employers be concerned about mismatch letters?
Federal law prohibits employers from employing anyone who they know is not authorized to work in the United States. This can be actual knowledge, such as when the employee admits that he or she is not legally in the country, or it can be constructive knowledge, which occurs when an employer has reason to believe the employee might be an unauthorized worker.

The DHS’s proposed regulation states that an employer can be found to have constructive knowledge that an employee is an unauthorized worker if that employer fails to take reasonable steps in response to a mismatch letter. If the employer follows the reasonable steps outlined in the regulation, then the employer will usually avoid a charge of constructive knowledge.

How should an employer respond to a mismatch letter?
First and foremost, employers should not ignore it.

Second, an employer should use the same process to address each employee that is the subject of a mismatch letter.

Third, a mismatch letter does not necessarily mean an employee is an unauthorized worker, so employers should not terminate an employee solely because of a mismatch letter.

The DHS’ proposed regulation includes a set of reasonable steps that employers can take to avoid a charge of constructive knowledge arising from a mismatch letter.

Within 14 days of receiving the letter, an employer should verify there was no clerical or typographical error in the information it provided to the SSA. If an error is found, the employer should provide the SSA with the corrected information. Whenever corrected information is provided to the SSA, the employer should verify with the SSA that the new information is a match and record the time, date and manner of this verification.

If no clerical error was found, then the employer must ask the employee to verify the information. If the employee originally provided incorrect information, then the employer must supply the correct information to the SSA. If an employee verifies that the information provided was correct, then the employer should instruct the employee to go to the local Social Security office to correct the discrepancy. Again, this should take place within 14 days of receipt of the letter. If the employee is able to correct the discrepancy within 60 days of the employer’s receipt of the mismatch letter, then the employer should provide the corrected information to the SSA.

Under the new proposed regulation, if the discrepancy is not resolved within 60 days, then the employer should reverify the employee’s work eligibility through a modified I-9 procedure within three days. Because it isn’t clear that current regulations permit this reverification, an employer should consult with its legal counsel before taking this final step. Also, employers should consult their lawyer before terminating an employee based upon the belief that he or she is not an authorized worker.

Remember that the test for constructive knowledge involves the totality of the circumstances. An employer shouldn’t ignore red flags. Moreover, these steps don’t protect employers with actual knowledge of an employee’s work status. If you have questions, consult your lawyer.

Are there any steps that an employer can take to reduce the chances of receiving a mismatch letter?
The DHS has a pilot program that allows an employer to verify Social Security numbers immediately after the employee is hired. This process helps an employer avoid employing and training someone only to later find that he or she is not an authorized worker.

JOHN HINTON is a partner at Gambrell & Stolz, practicing in the areas of commercial, employment and construction litigation. Reach him at or (404) 221-6514.

Thursday, 27 April 2006 11:14

Monitoring your health

Busy professionals all too often do not take the time to care for themselves and can develop ailments and health problems that ultimately impact their job performance. According to Dr. Mark Belfer, director of the Center for Family Medicine at Akron General Medical Center, one of the simplest — but often overlooked — things professionals can do to help improve their health is to better understand and monitor their health, allowing them to catch and address problems or concerns early.

“People should arm themselves with some basic knowledge and information about their personal and family medical history and discuss that history regularly with their physician,” he says. “Working in partnership with a physician, people can greatly reduce their health risks by following a variety of preventive screening measures.”

Smart Business spoke with Belfer about how busy professionals can monitor their health and how this can help them increase their performance and effectiveness in the workplace.

How can a busy professional monitor his or her health?
While it is easy to know when you are not feeling well, there are things people can do to help keep illness and injury at bay. Knowing and following preventive care guidelines is excellent for monitoring your health. Following these preventive care guidelines allows you to work in partnership with your physician to monitor their health and catch potential problems early.

While some preventive screening measures are based on a person’s age or gender, there are some general things that everyone should do, including having their blood pressure and weight checked once a year. While we tend to rely less on an annual physical exam to find health problems, we are relying more on the past health history of a patient and his/her family history as an indicator of what we should be looking for and monitoring. It is extremely important to discuss your past medical and family history with your physician.

A wealth of information is available on the Internet, and several sites can provide information on preventive screening guidelines. Some I recommend include the American Cancer Society (, the United States Preventive Services Task Force ( and the American Academy of Family Physicians (

How can busy professionals improve their health?
The best things we can all do are eat right, get plenty of sleep and exercise more. Alcohol should be consumed in moderation, and all tobacco products should be avoided. People who do all of these things are probably going to be healthier as a result.

It is also important for people to know their “numbers.” This includes blood pressure, cholesterol and blood sugar; those are three things that can lead to an early demise. If they are borderline or elevated, they will need to be monitored regularly.

Finally, people should take the time to see a physician if something feels wrong. For some reason, women tend to be better about this than men, so it’s especially important that men not only make an effort to see a physician if they’re feeling any symptoms, but also to monitor any issues of concern like high blood pressure or cholesterol.

How does being healthier benefit professionals at work?
Healthy people take less time off due to sickness or injury and are generally more productive at work because they feel better. Someone who is in good shape and gets plenty of exercise usually sleeps better than someone who does not take care of him or herself, so the healthy person will be better rested and alert at the office.

How can employers support and encourage employees’ healthy habits?
Employers can allow employees time to exercise and even provide workout facilities or walking trails at the office. Businesses should not allow smoking in the workplace and should consider helping to pay for, or subsidizing, smoking cessation classes. It is also a good idea to provide access to nutritional information and advice.

Employers should consider offering benefits to personnel, such as providing gym memberships and other pro-health activities. There is a direct correlation to the company’s bottom line when employees are healthy, because there is less time off as well as fewer hospitalizations and medical claims.

MARK BELFER is director of the Center for Family Medicine at Akron General Medical Center. Reach him at (330) 344-7671 or

Wednesday, 22 March 2006 12:28

Staying sharp

With an increased emphasis on life-long learning and a constantly changing business world, businesses and business executives are turning to executive education as a way to help keep employees’ skills sharp as well as to stay abreast of business trends. Colleges and universities can provide ample opportunities for business executives to further their education. Many businesses, realizing the value to the company’s bottom line, are even willing to pick up the tab.

There are several significant trends in executive education today, but perhaps the biggest trend is the move toward customization of programs to meet the needs of a particular group of executives, says Hasan Pirkul, dean of the School of Management and Caruth Professor of Management Information Systems at the University of Texas at Dallas.

“There’s been a push for customizing MBA programs to fit very specific needs,” he says. “Companies are often willing to pay for their employees to participate in executive education programs, and they fully expect to gain value from those programs. Customizing programs to meet specific business or industry needs helps to ensure a return on the company’s and the employee’s investment.”

Smart Business spoke with Dean Pirkul about the latest trends in executive education and why investing in it is good for employees and employers alike.

What is executive education?
Executive education is basically furthering the education of mid-level managers who want to come back to school, maybe after several years or more of working, and make up for the deficiencies in their knowledge and prepare themselves for upper-level management jobs.

How can a business benefit by supporting its employees’ executive education?
Most of the time, a company is paying for the executive’s education because it’s not just providing value to the individual, but it is providing value to the company. For example, we have recently signed an agreement with a company where they send us multiple students throughout the year and we not only provide them with the basic curriculum, but they work on solving actual problems associated with their business or company. In this case, the company gets back a significant return on their investment, because issues the company faces are studied as projects in the classroom, and the students are able to go back and provide solutions to the real problems the company faces.

What are the current trends in executive education?
There is more flexibility in executive education programs, because executives are very busy people. Also, many schools are now emphasizing globalization issues in their programs, as that’s becoming increasingly important to large corporations. Other growing areas include governance, ethics and leadership training. While these are subjects that have always been covered in executive education programs, they are receiving a renewed emphasis due to current events and changes in the business world.

But perhaps the biggest trend is the move toward customization: developing programs to meet very specific needs of a particular group of executives. This can range from programs geared toward project managers to physician and health care executives to global leaders, and can include a mix of both campus and distance learning opportunities to meet the needs of business executives all over the world.

How should a corporate leader make use of these trends?

The key is to find an executive MBA program or courses that fit the needs of the individual, as well as the corporation. There are many differences among programs. For example, we emphasize a couple of things that aren’t typically emphasized by other programs, such as executive coaching. We also emphasize customization to meet each executive’s individual needs. When students come to us, we work with them to determine their strengths, weaknesses and professional goals so we can customize the program as much as possible to help them achieve their goals.

There’s a lot of competition with executive education programs. Corporate leaders and business executives can take advantage of this competition to seek the program that offers the right curriculum and best value in terms of results.

Why should a business executive pay attention to executive education trends?

I’m a firm believer in life-long learning, and the business world is changing very rapidly. If you’re not reading, learning and improving yourself and your understanding of the business climate, you’re going to fall behind.

With the move toward customization and tailoring executive education programs to meet specific industry needs, there’s now more opportunity than ever to derive a direct benefit from this type of education. There’s tremendous value for both the executive and the company.

HASAN PIRKUL is the dean of the School of Management and Caruth Professor of Management Information Systems at the University of Texas at Dallas. Reach him at (972) 883-6813 or

Tuesday, 28 February 2006 11:05

Education Strategies

Making a decision about what type of education to pursue in college can be challenging, and a legitimate question students and their parents often ask is, “How will this help me succeed in the real world?”

While students entering college may not always completely understand how a liberal arts and sciences education will help them on the job, today’s savvy employers appreciate the skills students gain while pursing a liberal arts and science education, says Alan deCourcy, associate academic dean for graduate studies at the College of Mount St. Joseph.

“Today’s employers are specifically looking for skills that are emphasized in the liberal arts education, including critical thinking, communication and the ability to integrate information,” he says.

A liberal arts and sciences background lays the perfect foundation for any course of study, says deCourcy. Students gain important skills and knowledge that they can apply to any job, making them a valuable addition to any workplace.

Smart Business spoke with deCourcy about the benefits of a liberal arts and sciences education, the kinds of skills students can expect to learn and why these skills are so important to employers.

Why study the liberal arts and sciences?
That’s a question that gets a lot of attention in academic circles these days for a number of reasons. Liberal arts attempts to educate the whole person, not so much for a career but for living a meaningful life. It provides students with both the skills and the knowledge that will help them in that journey.

What benefits does this course of study have over other areas?
The liberal arts can be a foundation for all courses of study, whether someone pursues a specific discipline or a profession. Regardless of a student’s chosen field, one still needs the basis of the liberal arts and sciences.

Certainly other areas of education can teach some of these basic skills, but the difference is really in the degree of focus. Liberal arts gives students a group of skills that will enhance their ability and functioning in any area of study a student might undertake.

What skills are developed through the liberal arts and sciences?
Students pursuing a liberal arts education can expect to learn critical thinking and effective communication, and will develop a capacity for integrating knowledge and information, which is critical in today’s world. Additionally, liberal arts seeks to expand students’ knowledge of other cultures. Perhaps most important, liberal arts education develops values and helps build an ethical orientation.

I also think the interdependent nature of knowledge in our world today — emphasizing that we are all connected — is an important aspect of a liberal arts education. We can no longer think only in terms of local citizenship, but also in terms of global citizenship. This is done by learning and understanding not only one’s own culture and personal biases but also by developing empathy with those whose lives may differ significantly from our own.

How do these skills translate to the corporate world?
In today’s workplace, there’s an increased emphasis on technology and how to assimilate and assess information, as well as a heightened awareness of the importance of diversity and multiculturalism. There are obviously also some significant questions about values and ethics in the business world, and there’s also a real need for leadership. My sense is employers are more appreciative of an education that will not just turn out someone who knows a field but who can function in that field as a leader.

Why do employers want employees with a liberal arts degree?
Liberal arts teaches people to think. Students learn to not just robotically give back information, but they learn to process information and become critical thinkers. Employers are looking for people who have learned to communicate ideas, both verbally and in writing, which is emphasized in a liberal arts education. And, following workplace trends, today’s liberal arts education puts a lot of focus on learning with others and how to work in a team environment.

What kinds of jobs are available for liberal arts and sciences students?
There are a variety of things a liberal arts graduate will be equipped to do. A liberal arts and sciences education prepares students for any job. The kinds of skills acquired through the liberal arts and sciences background make a great foundation for whatever profession a student pursues.

Alan deCourcy, D.Min., is associate academic dean for graduate studies and associate professor of religious studies at the College of Mount St. Joseph. DeCourcy oversees curriculum for master’s degree programs and teaches both undergraduate and graduate courses. He is also a past director of the Mount’s honors program. Reach him at (513) 244-4487 or

Tuesday, 28 February 2006 07:31

Sports medicine

Injuries can occur both on and off the job, and employees who incur sports injuries will often have to deal with the effects of the injury when going back to work. With the growing practice of sports medicine, athletes and weekend warriors alike have even more options for finding proper medical care when a sports injury occurs.

Finding a sports medicine physician can be an important key for properly diagnosing and treating a sports injury, and receiving early and proper treatment can mean the difference between a quick and full recovery and a lifetime of lingering effects, says Dr. John L. Pinkowski, director of sports medicine and physical therapy at the Akron General Medical Center.

“Employers can play an important role in helping injured employees get back to work,” Pinkowski says. “By working with the injured employee and helping the employee not only receive proper treatment, but also identifying gradual return-to-work programs, employers can help minimize the impact the injury has on the employee and the workplace.”

Smart Business spoke with Pinkowski about the field of sports medicine, how sports injuries can impact the workplace and how to know when an injury requires medical attention.

What is sports medicine?
Sports medicine is a specialty of medicine that encompasses the medical care of athletes and in particular their sports-related injuries.

How can employers accommodate an employee with injuries?
Employees can be viewed as athletes in their job. The employee often has special skills or abilities at the workplace. During their daily work routine, an accident or injury to the musculoskeletal system may occur that requires medical attention. Just as we try to return the athlete back to his or her sport in a quick and safe fashion, we try to return the worker back to his or her job in a quick and safe fashion.

Employers can spend their time and effort trying to prevent injuries in the workplace, provide quick access to health care and cooperate with the health care provider in trying to return the working in a safe fashion. This may include gradual return-to-work programs, light duty or the use of protective devices such as braces.

Does insurance cover sports injuries?
Most health care insurance policies will cover activity-related injuries. I cannot recall an insurance company preventing a covered patient for care of a sports-related injury. If the athlete is employed in professional sports, the injury is often considered a workers’ compensation injury, along with its method of access to care.

How can sports injuries be prevented?
Proper conditioning and technique can prevent most injuries. Take downhill skiing as an example. Downhill skiers must be in excellent condition aerobically, and have excellent lower extremity muscle strength and muscle flexibility.

A pre-participation conditioning and training program to address these needs can prevent injuries. In addition, learning proper technique from instruction or classes has been shown to reduce sports injuries. It’s also important for athletes to pay attention to the condition of their sports equipment. Properly fitted equipment that’s in good working order has been shown to reduce injuries. These concepts apply to all sports.

How do you know when an injury is serious enough to seek medical attention?
This is not an easy question to answer, as every injury is different. Pain and swelling (are) obvious guides. The inability to use the joint or bear weight are other worrisome signs. Tenderness over the bone may be a sign of facture (break). If the joint feels unstable or if there is significant swelling or deformity, medical attention will be required.

If there is any question, it’s better to contact a physician for information and evaluation. Many injuries can be treated more effectively early in their appearance, and even some injuries treated late can have poor results.

Dr. John L. Pinkowski is the director of sports medicine and physical therapy at the Akron General Medical Center. He is also an associate professor of orthopedic surgery at the Northeast Ohio Universities College of Medicine and a partner of Northeast Ohio Orthopaedic Associates Inc. Reach him at (330) 344-1980 or at 224 W. Exchange Street, Suite 440, Akron, OH, 44302.

Sunday, 31 December 2006 19:00

Family succession planning

Planning for the succession of a family business can be time-consuming and difficult, especially when issues of family dynamics come into play. Just making the decision to turn the business over to the next generation, rather than selling it to a third party, can be agonizing. Once that decision has been made, selecting members of the next generation to run the business takes a fair amount of time and planning.

Once developed, family business succession plans should be monitored and revisited over the years as the business and family dynamics change. It is important to understand that succession planning for a family business takes time, and careful consideration can help avoid conflict within the family, says Stephen C. Zivitz, a partner in the business department and chair of the Tax, Pensions and Estates Practice Group at White and Williams LLP. “There is an old saying that succession planning is a journey, not a destination,” he says. “It must constantly be re-evaluated as the family and business dynamics change.”

Smart Business spoke with Zivitz about the importance of succession planning for a family business and how the issues differ from nonfamily businesses.

How common is it for owners of family businesses to neglect succession planning?

I don’t see a lot of neglect, but I do see recognition that the decisions are difficult and time-consuming. There are basically three clusters of problems for family business owners to consider: whether to sell the family business to maximize value; who in the next generation will be selected to run the business if it is retained; and how to compensate family members who are not participating in the business. Each of these decisions can be difficult and can take some time for the business owners to think through.

How does succession planning differ between a family-owned business and other types of businesses?

In a nonfamily-owned business, decisions are generally made based purely on economics. In a family business, owners often make accommodations for the benefit of family members and do not necessarily try to maximize shareholder value. Additionally, family business owners need to consider the complexities and planning implications of death taxes as well as compensation for family members who are not active participants in the business.

When should owners of a family business begin succession planning?

As soon as possible — particularly if there are multiple owners in the current generation. In that situation, a buy-sell agreement is a must. It is important to remember that succession plans will often change over time. It is ultimately a result, but it is as much a constant re-evaluation and analysis as it is a target.

Succession plans need to be periodically reviewed and adjusted to meet any changes in the business and family dynamics. Members of the next generation who are under consideration to run the business in the future should be given as much time as possible on the job to learn and perfect the necessary skills.

How can owners of a family business objectively plan for succession?

This can be one of the greatest challenges facing a family-owned business. It is probably not possible to remain completely objective when it comes to succession planning, particularly when there are multiple business owners from the current generation, each with their own family members who may or may not be under consideration to take over the business.

In my view, it is not critical that individuals in the next generation who are in contention to be the owners are the best persons available. However, they must be capable, interested in running the business, and — ideally — the best among multiple competing family members.

How do family dynamics affect succession planning for a family-owned business?

Most of the problems that I see fall into two basic clusters of issues.

First, there is a perceived need to be fair to all members of the family, particularly those who are not involved in the business. However, fairness is often difficult to achieve due to differing perspectives. As a practical matter, those not involved in the business may have to receive less in order for the business to remain in the family and survive.

Second, family relationships and perceptions may have to be overridden when designing a success plan. For example, it may be natural to assume that the oldest child will be tapped to take over the business; but a younger sibling, or even a sibling’s spouse, may be more capable and/or more interested in doing so.

STEPHEN C. ZIVITZ is a partner in the Business Department and chair of the Tax, Pensions and Estates Practice Group at White and Williams LLP. Reach him at (215) 864-6240 or

Friday, 31 March 2006 19:00

Consumer-directed health care

Consumer-directed health care is a national trend that is being studied by employers of all sizes. As part of his emphasis on an ownership society, President Bush has endorsed the consumer-directed health care concept through his efforts to promote health savings accounts as a way to control spiraling health care costs and to help people take more personal responsibility for their health care purchases.

According to Phyllis Marino, senior vice president of marketing and public relations for Akron General Health System, high-deductible health plans and Health Savings Accounts were created by the Medicare Modernization Act of 2003 through changes in the tax code, but their popularity is just beginning to soar.

“Moving toward a consumer-directed health care model helps to take some of the burden off employers who provide health benefits,” she says. “Under this scenario, employees are empowered to take more financial responsibility for their own health care, and studies show that, in turn, this helps reduce the overall utilization rate and associated costs.”

Smart Business spoke with Marino about how the growing popularity of consumer-driven health care affects employees.

What is consumer-directed health care?

The whole premise behind consumer-directed or consumer-driven health care is that, in the future, consumers will have more responsibility and control over how their health care gets paid for. The hope is that they will then have more interest and input into the selection of providers, how the care is given and, ultimately, how their health care dollars are spent.

The term is most often used in reference to high-deductible health plans and Health Savings Accounts.

Why has consumer-directed health care become such a hot topic?

As employers understand, health care costs continue to rise and so does utilization of health care services. As a result, many employers have started requiring employees to pay more of the cost for health care themselves. The premise is that this will encourage providers to provide better information to consumers so that they can make the best decisions possible.

With advances in technology, there are more health care options today than ever before. But these advances often bring a steep cost as treatment becomes more expensive. When consumers are provided with all the information they need to make informed choices and have a greater financial stake in the costs associated with those choices, they are then more confident in making their own health care decisions.

What are Health Savings Accounts?

They are tax-advantaged savings plans used to pay for current and future medical expenses. Money can be deposited into a special savings account by either a consumer or an employer. The money can be used tax-free for medical expenses.

The account is similar to an IRA in that money in the account can be invested and grown tax-free and can be withdrawn without penalty at age 65. One of the most important features of these Health Savings Accounts is that they can be rolled over and either built over time or spent.

A typical Health Savings Account today might include funding at a set level, a deductible, a co-pay and a maximum out-of-pocket limit. A Health Savings Account in combination with a high-deductible health plan can protect a consumer against major financial loss because of a significant medical condition.

A high-deductible health plan is a plan with at least a $1,000 annual deductible for self-only coverage and a $2,000 deductible for family coverage.

What do employers need to know about Health Savings Accounts?

Employers have many health options today, and Health Savings Accounts could provide them with significant cost savings. It is best for employers to be aware of all their options and review them to determine how each best affects the company and employees. As Health Savings Accounts become more popular, more research and information on the topic will be available to employers.

What do consumers need to know about HSAs?

Health Savings Accounts and high-deductible health plans can offer many positive benefits to consumers, not the least of which is the ability to take a more proactive role in their own health care decisions. We encourage people to be aware of the specific options that are included in their health coverage.

More important, consumers should shop around when they select a health care provider. A great deal of quality information is available for consumers today, and it pays to be aware of the level of quality that your hospital or physician is providing.

PHYLLIS B. MARINO is senior vice president of marketing and public relations for Akron General Health System. Reach her at (330) 344-6161 or

Friday, 24 November 2006 19:00

Product liability

In an increasingly litigious society, it’s no surprise that product liability cases have drastically increased in the past 20 years.

Businesses — even those with good product safety policies and procedures — can’t afford to ignore the risk or not take product liability seriously.

Product liability is far-reaching, putting many different types of businesses — even those that don’t directly manufacture products — at risk, according to Jerrold Anders, a partner in the Product Liability Practice Group at White and Williams LLP.

“Product liability holds manufacturers, distributors, suppliers, retailers and others who make products available to the public responsible for the injuries those products cause,” he says. “It’s a very real business risk in today’s world.”

Smart Business spoke with Anders about product liability and how businesses can protect themselves against the risk of lawsuits.

What is product liability?

Product liability encompasses a number of legal claims that allow an injured party to recover financial compensation from the manufacturer or seller of a product, including negligence, strict liability, breach of warranty and various consumer protection claims.

Product liability laws vary widely from state to state, and each type of claim requires different elements to be proven to present a successful claim. It involves claims that the product was defective by design, a manufacturing flaw or because of a failure to warn about a risk or danger.

How concerned should the average business be about product liability litigation?

Product liability is a very real business risk, and not just to those who manufacture products.

A retailer has a responsibility as a seller who puts a product in the marketplace, and there’s also risk for sellers who install products. While some states offer pass-through liability for retailers — which provides some level of protection against product liability claims — here in Pennsylvania, a business must prove that it is entitled to be indemnified by the manufacturer. This may involve litigation to determine the facts and their legal effect.

What is product liability insurance?

Product liability insurance is an important type of insurance for any business that sells manufactured or assembled products. It covers damage to property or injuries to a person for which your business is held responsible, and it protects your business from a variety of lawsuits.

Business owners should check with their insurance carrier and lawyer to see if they are already covered. This is a complicated area involving completed operations, vendors endorsements and additional insured coverage.

What should businesses look for in a product liability insurance policy?

Most small-business owners may not realize that they can try to negotiate the right to appoint their own legal counsel to represent the business in a lawsuit. Even if the insurance carrier does appoint an attorney for the business, business owners should consider hiring an attorney with expertise in the area of overseeing and coordinating such cases to ensure that the business’s interests are protected during the course of the lawsuit. I frequently do this for retailers, manufacturers and component part suppliers.

How can a business protect itself against product liability lawsuits?

While there is no guarantee that a business can avoid a product liability lawsuit, there are some very basic things businesses should do.

First and foremost, be aware of — and comply with — all the guidelines for the product you’re making or selling, including government regulations, industry standards and trade association recommendations. While compliance may not save a company from liability, not complying can sink a business in a liability lawsuit.

Second, ensure you have good risk management and quality control programs in place, including periodic product testing and monitoring trade associations and industry standards. It’s important to understand that punitive damages are generally not covered under product liability insurance; so even if you lose the case, you want to demonstrate that you did not act in a willful, outrageous manner. A business will want to show that it had these programs in place and was acting in a reasonable manner.

A practical piece of advice is to simply follow up on warranty claims before they turn into product liability claims. Take customer complaints seriously. Don’t let a small problem become a big one.

A retailer dealing with manufacturers should try to have a type of vendor’s agreement saying that the retailer agrees to buy the product and sell it to the public, but if any lawsuit claims arise, the manufacturer agrees to defend and indemnify the retailer. It’s also possible to negotiate to be an additional insured on the manufacturer’s insurance policy.

JERROLD ANDERS is a partner in the Product Liability Practice Group at White and Williams LLP. Reach him at (215) 864-7003 or

For many people, the first images of Earth sent from space in the late 1960s ushered in a global awareness that has only intensified with the advent of TV, the Internet and cell phones. Suddenly, the world has become smaller and there’s a greater feeling that “we’re all in this together.” The global economy and global awareness have left many businesses more conscious of the environment and the impact that individual actions can have on the rest of the world.

As a result, today’s employers are seeking employees who are more than just “task-masters” — who are globally aware and willing to give back to society in some way, according to Sister Mary Bookser, the coordinator of service learning at the College of Mount St. Joseph, and Liz Seager, the college’s career development coordinator.

Smart Business spoke with Bookser and Seager about the ways that colleges are preparing students to work in the global economy and how employers benefit from this trend.

How can an employer benefit from hiring employees who are more globally aware?

Seager: In order to function globally, students need the skill sets that liberal arts colleges offer, and employers have started to value such an education. Employers can teach employees the ins and outs of their business, but employees who bring a global awareness and skills such as the adaptability to change, critical thinking, problem solving and recognition of the importance of diversity generally make for successful employees.

Sister Bookser: Obviously, multinational companies benefit from hiring employees who have an understanding and appreciation of different cultures and world views. These companies, in particular, need employees who are willing to travel, learn the culture, learn simple greetings in the local language, and possibly even live far away from home.

How are colleges preparing students to work in the global economy?

Sister Bookser: Many colleges have seen the need for students to get out of their own local way of thinking and get a more global perspective through culture-and service-immersion courses where students get experience with, and exposure to, other cultures. Some colleges provide opportunities for students to earn course credits while studying abroad for a semester.

Seager: Colleges often include cultural awareness and diversity as a part of their mission, so that filters down into the curriculum. Whether you’re taking a psychology, a basic career development or even a business class, each learning objective will include a global component.

What should an employer that is seeking a globally aware work force look for when interviewing and hiring?

Seager: I recommend that employers be on the lookout for a breadth and depth of experience, including co-ops or internships. Employers can also look for students who have had an opportunity to travel abroad or participate in an alternative spring break, during which they performed community service. These experiences demonstrate adaptability, flexibility and a willingness to try new things. When looking at volunteer experience, employers should look for those who were willing to push themselves out of their comfort zone by working with groups of people who are different from their peers.

Sister Bookser: It’s also important to look for prospective employees who have had some kind of service learning experience where they had an opportunity to participate in a community-based service that tied into their coursework. This shows an awareness of the importance of civic engagement and a desire to integrate life, their beliefs and values, and their learning.

How can employers best use their globally aware employees?

Sister Bookser: The desire to give back to the community has become an important part of many businesses, whether or not they consider themselves to be global companies, so hiring employees who share this interest helps them to further that part of their business mission. Many companies are recognizing that not only is it the right thing to do, but it also makes good business sense to be a good corporate citizen.

Seager: Globally aware employees are looking for a lot of stimulation. Even companies with a purely local customer base should find out where their employees’ strengths are. And if they’re globally aware, don’t chain them to their desks. Give them service projects to coordinate. The globally aware employee is constantly looking for the next challenge and the next way to use his or her strengths. It’s important to keep those employees engaged and give them the opportunity to try new things and be challenged.

SISTER MARY BOOKSER is the coordinator of service learning at the College of Mount St. Joseph. Reach her at (513) 244-4634 or

LIZ SEAGER is the career development coordinator at the College of Mount St. Joseph. Reach her at (513) 244-4484 or