Today’s workforce is unique in that there are now four generations of people working together — traditionalists born from the 1920s to the 1940s, baby boomers, Generation X and millennials.

That presents challenges to employers in bridging generational gaps and getting workers on the same page.

“There are now four generations of people in the workforce, and they all bring something very different to the table. They have unique characteristics in terms of values and what is important to them personally,” says Liz Howe, Director of Business Development at Benefitdecisions, Inc.

“There is a lot of buzz about the lack of communication among the generations. They come from different places and have different ways of doing things. It’s about getting them to play in the same sandbox, if you will.”

Smart Business spoke with Howe about the differences between generations and the affect it has on the workplace.

There have always been multiple generations in the workforce, how is it different now?

It’s that there are still people born in the ‘20s to ‘40s in the workforce in high, C-level roles, along with baby boomers, Generation X and young kids out of college.

Combine that with the progress made over the last 20 or 30 years in technology and the Internet. The world is a completely different place and that can pose challenges in getting things done. One segment of workers says, ‘This is how it’s been done,” while another says, ‘Why do we do it this way?’

How can you bring them all together?

Companies need to consider what’s important to each group. The traditional generation was raised in a really hard time and tends to revert to how things used to be done; Generation Xers don’t identify with that. If you have a Gen Xer managing a traditionalist, he or she needs to think about what is important to that person — a flexible work arrangement, succession planning and teaching them technology.

That same manager would handle a millennial differently. Priorities to a millennial are having a work/life balance and having a relationship with his or her supervisor that doesn’t involve micromanagement, but more of a team-oriented approach. So it might be more of a mentorship than just being a work manager.

With baby boomers, no news is good news. If a manager isn’t calling and asking questions, they’re in good standing.

What is the danger of managing everyone the same?

You lose the employee engagement factor, which is a hot topic these days. Millennials aren’t as loyal to companies as baby boomers, and if they’re not happy they will leave for a company that better fits their culture. That has become more socially acceptable and other generations are seeing that. Ten to 15 years ago it wasn’t acceptable to have four or five companies on your resume, now tenure is three years before people want a promotion or a different role.

You need to be thoughtful about managing employees and what types of benefits you’re providing by catering to what they find important. There’s been a real push toward wellness programs. Some businesses provide different types of insurance — pet insurance is huge. Other companies will match charitable contributions to an organization of the employee’s choice rather than just giving a cash bonus. People today are much less monetarily driven than they’ve ever been.

What are the benefits of having all of these generations together?

It brings some depth and breath of knowledge to an organization, along with a wide variety of skill sets. It’s an advantage to have people raised at a time when there was little or no technology all the way down to people who don’t know anything but technology and the Internet.

The challenge is to get them to communicate with each other so you can take full advantage of their knowledge.

Liz Howe is director of Business Development at Benefitdecisions, Inc. Reach her at (312) 376-0452 or lhowe@benefitdecisions.com.

Insights Employee Benefits is brought to you by Benefitdecisions, Inc.

Published in Chicago

Lawsuits can pose a considerable threat to businesses, and actions related to employment practices should be a particular area of concern to business owners. According to researchers, about 60 percent of employers can expect to be sued by a prospective, current or former employee.

“It’s the increasingly litigious nature of our society,” says Derek M. Hoch, president of Leverity Insurance Group. “These lawsuits really started to trend upward when the market plummeted to its lowest point in combination with the state of the economy over the past four to five years. Desperate times can sometimes lead to desperate actions. When people couldn’t find employment, they filed suits against employers who let them go during that period of recession.”

Smart Business spoke with Hoch about how employment practices liability (EPL) insurance can help businesses manage risks associated with such lawsuits.

What are the most widely recognized types of employment-related lawsuits?

  • Wrongful termination — Discharging an employee for invalid reasons.

  • Discrimination — Denial of equal treatment to employees of a protected class.

  • Sexual harassment — Workers subject to unwelcome sexual advances, or obscene or offensive remarks.

Lawsuits can also be based on things such as wrongful failure to employ or promote, wrongful discipline and religious discrimination.

How can EPL insurance protect employers?

More than half of all claims for employment-related liabilities are against businesses with fewer than 50 employees. Claims can be costly, especially if a case has the ability to go on for an extended period of time. The average cost of an employment lawsuit exceeds $270,000. Even if the lawsuit is frivolous, it still takes time away from operating your business.

An EPL policy will help to pick up these defense costs and any judgments or claims assessed against your business. In some instances, these cases are settled before they even go to court; EPL will pay for settlement costs as well.

EPL also covers claims filed with the U.S. Equal Employment Opportunity Commission (EEOC). In 2012, the EEOC reported 99,947 charges for harassment, and costs of resolving these claims were $364.6 million.

Why is purchasing third-party EPL insurance so important?

Third-party EPL addresses the coverage gap that leaves employers vulnerable to discrimination and harassment lawsuits from customers, clients, vendors and suppliers. Standard EPL policies only cover actions related to employees or prospective employees, and most general liability policies specifically exclude harassment and discrimination.

More insurance carriers are including third-party coverage as part of EPL policies because every company is at risk. It’s vital for any business that deals with customers on a daily basis.

Other than insurance, what approaches can companies take to protect themselves?

Have a legal professional review your employee handbook to ensure it contains all the necessary information, including policies covering sexual harassment, discrimination, equal opportunity, grievances, discipline, termination, performance evaluations, Internet usage, pregnancy leave, hiring and employment at-will. Then make sure employees sign off that they’ve read it.

If you don’t have a handbook, you may not be able to secure EPL insurance because insurance carriers take this very seriously. They want to see that you’ve taken proper steps in terms of risk management and providing a safe workplace.

You can protect yourself even more by making sure you’re following proper procedures regarding hiring, firing, performance reviews and even interviewing prior to hiring someone.

Taking these steps also reduces risk, which will generally translate into lower insurance premiums. EPL insurance works hand-in-hand with your internal employment practices to provide necessary resources to defend your company against a lawsuit or claim.

Derek M. Hoch is the president at Leverity Insurance Group. Reach him at (216) 861-2727 or derek@leverity.com.

Request a quote on employment practices liability insurance or any other corporate coverage.

Insights Business Insurance is brought to you by Leverity Insurance Group

Published in Cleveland

Whether to buy or lease is a question real estate professionals hear from business owners all the time. It’s a difficult decision that’s based on several factors.

You should evaluate your needs, as well as your personal and business goals, with a qualified real estate consultant, says Joseph V. Barna, SIOR, principal at CRESCO Real Estate. Also, understand your motivation drivers — are you interested in the bottom-line cost of occupancy, long-term ownership, image or flexibility?

“You need to step back and look at where you’re at, where you want to go, and how important your personal goals on the ownership side are in order to understand the best manner in which to invest your money,” he says.

Smart Business spoke with Barna about what propels owners to buy or lease.

What drives owners to buy?

One example would be if you are in a specialized industry and you’re going to make a significant investment in the space’s infrastructure. You don’t want to be unable to come to terms on a down-the-road lease renewal or expansion and have to reinvest in another building.

Another scenario is that you don’t anticipate long-term future growth and the facility you identify is in a desirable location that meets your projected needs.

Many times, the deciding factor is whether you can buy a building, ‘right.’ If a building can be acquired in the lower range or below market value and/or combined with market-driven incentives, the opportunity is worth serious consideration.

Sometimes it comes back to pride of ownership. In Northeast Ohio, we are fortunate to have a wealth of successful entrepreneurs who want to own their real estate simply for pride or a desired image, even if they have to pay a premium for it.

Why do business owners decide to lease?

One reason would be that your space requirements could fluctuate, so you don’t want to be locked into a building. Often this can be market driven; your business grows when the market’s healthy and contracts when it’s not. Also, many large national or global companies lease space because they don’t want to be in the real estate business and worry about selling a property when they decide to relocate.

You also should look at the return on investment. In real estate, a typical return for a market transaction would be 8 to 13 percent on the property’s value. However, if you have a dynamic business that’s getting a 25 to 30 percent margin on your products, it may be better to put your cash into increasing manufacturing and market share for the higher ROI. In addition, our financial markets have changed over the past five years. In most cases, traditional real estate financing has higher equity requirements, such as 25 to 35 percent down, which could also be a deal killer.

How can a lease-purchase analysis help?

To determine the actual cost of occupancy, bring in a qualified broker or consultant to run a lease versus purchase analysis. On the lease side, you look at your base lease rate, utilities, pass throughs and any other additional costs. On the sale side, you’re weighing your equity requirement, mortgage payment, property upkeep, maintenance, insurance and taxes. The analysis gives you a clear-cut idea of whether you’re better off leasing or buying.

The final decision will not always be the lowest cost alternative, but this analysis will at least let you know where you stand based on the cost of occupancy. Then you can consider other factors, like proximity to your customer base as well as employees, flexibility and personal objectives.

How far out should you start considering whether to lease or buy?

The perfect situation is at least one-and-a-half to two years ahead of when you need to make a decision. You need to understand the current market trends, all of the logical lease and sale alternates and the price of new construction, while projecting where your business will be in five or 10 years combined with personal objectives. You can go into the market and identify the perfect alternative, but it could take a year to consummate a transaction — and even more time if you’re building new, retrofitting or applying for government incentives. If you let that fuse get too short, it limits your alternatives.

Joseph V. Barna, SIOR, is a principal at CRESCO Real Estate. Reach him at (216) 525-1464 or jbarna@crescorealestate.com.

Get analysis of trends in the industrial and office real estate markets by downloading our quarterly Market Beats report.

Insights Real Estate is brought to you by CRESCO

Published in Cleveland

Health care cost transparency is the ability of patients to learn how much a medical service or treatment costs, preferably before receiving the service or treatment. This is important because treatment and service costs vary widely from doctor to doctor and from facility to facility.

“In all my travels, with all the different hospitals I visit — hundreds of them — only one had the general charges of fees and services, like cost per day in the hospital, posted up on the wall. It just doesn’t exist today,” says Mark Haegele, director, sales and account management, at HealthLink.

“This system has made it difficult for people to get the information. We’re getting there, but a spotlight on transparency and the cost and options gives people a little more decision-making authority,” he says.

Smart Business spoke with Haegele about the shift toward transparency and helping employees shop for better health care prices.

Why do health care prices vary so much?

Physicians are just trying to diagnose you to help you get better. In addition, surgeons only get paid if they recommend surgery. So, cost doesn’t really weigh into whether patients get knee replacement surgery or are sent to therapy for six months.

If you go to a store and look for a refrigerator, one of the first things you try to figure out is the price. But if you go to the doctor, and you’re talking about getting your knee replaced, that conversation — if it ever comes up — comes up at the very end.

The average treatment for heart failure might vary by tens of thousands of dollars within the same city. A list of Medicare costs, released by the Centers for Medicare & Medicaid Services, found a difference of $21,000 to $46,000 in Denver, Colo., or $9,000 to $51,000 in Jackson, Miss.

Only some rate differences are because of health care’s complexity. If two people with the same insurance get a tonsillectomy at the same hospital, they still could have different doctors ordering different levels of anesthesia and pain medicine with different philosophies on hospital-stay length.

How does transparency lower costs?

As the government, media and patients push for reliable cost and quality information, it motivates the entire system to provide better care for less money. For example, according to the book “Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care,” the governor of New York mandated that hospitals publish their mortality rates for heart surgery. By the year following, hospitals started implementing quality metrics to reduce mortality, and the trend in the mortality rates dropped dramatically, which ultimately saved lives.

In another instance, a Thomson Reuters study of a Chicago employer found a cost variance of 125 percent for health insurance members receiving an MRI of the lower back without dye, with similar differences in diagnostic colonoscopies and knee arthroscopy procedures. If employees were given information to select providers at or below the median cost, it was estimated the company could save $83,000.

What can benefit administrators do to help facilitate transparency?

As a general rule we feel helpless, but there are some things benefit administrators can do to move costs. You’ve got to get information out to members, and then align incentives. The average member, once he or she meets the $2,000 out-of-pocket maximum, for example, doesn’t care if a hip replacement costs $5,300 or $223,000. They should — but most don’t make better purchasing decisions until it impacts them.

Under a self-funded health plan, you have more control over what you are able to publish and demonstrate to employees, as well as more ability to align incentives. But regardless, you need to start identifying costs of providers of key procedures to treat your health plan like an asset.

By putting together a best-in-class grid for your members, and then aligning incentives to ensure they use the lowest cost providers, such as giving a $200 gift card, you can empower your members and move the needle on health care cost.

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

Website: Visit the website to learn more about transparency and other key health care business trends.

Insights Health Care is brought to you by HealthLink

Published in Chicago

Companies using the Interest-Charge Domestic International Sales Corporation (IC-DISC) provisions of the tax code, which are intended to help U.S. companies compete internationally, already know that the incentive essentially reduces the top federal tax rate on certain income from qualified goods and services from 39.6 to 20 percent.

“What you may not realize is that the intended and allowable available savings are often much, much greater,” says Amit Mathur, CPA, director at WTP Advisors.

Rob MacKinlay, president of Cohen & Company, says, “Many companies use basic, aggregate IC-DISC calculation methods, though other allowable methods explicitly encouraged in the regulations yield a much higher result. This can be the equivalent of claiming a standard deduction on your individual tax return when itemized deductions are much higher. Many of our clients have dramatically increased savings with a transactional analysis.”

Smart Business spoke with Mathur and his industry peers about IC-DISC and how business owners can extract more value from its proper implementation.

How can IC-DISC savings be maximized?

Most companies utilizing the IC-DISC enjoy the reduced tax arbitrage for either 4 percent of their qualified export gross sales, which is limited to the taxable income from those sales, or 50 percent of the taxable income from qualified export sales. Many believe that these are the maximum amounts used to determine the IC-DISC commission, which is subject to a top rate of 20 percent, rather than 39.6 percent. In reality, these amounts should be considered the minimum commission that results from the two simplest, basic methods.

Truly maximizing the intended and allowable benefits from the IC-DISC requires a more in-depth calculation, but may not take much more time. Each transaction can utilize a choice of many other attractive methods explicitly defined and encouraged in the regulations. For instance, transactions that yield a loss can generate commission. Transactions for products with less-than-average profitability compared with their product group or line also may yield additional benefits.

An analysis utilizing the most beneficial of these methods for different transactions will yield higher results, often more than double, compared with using the basic methods at an aggregate level.

Steve Switaj, CFO of Three D Metals, a company that has used transactional analysis in conjunction with the IC-DISC for years, says, ‘While fluctuation in material prices and unforeseen costs are constant concerns, the increased IC-DISC savings that often results from such variability is a nice feature of the incentive, and enables us to compete in export markets more effectively.’

Can prior year IC-DISC savings be improved?

Re-determinations of IC-DISC benefits can be performed for any open tax years. As Jim Bowen, tax partner at Bober, Markey, Fedorovich & Company, puts it, ‘If the savings from a transactional analysis of IC-DISC benefits is significant, amending the results should be considered, particularly for companies under audit for given tax years.’

Are you overlooking the IC-DISC entirely?

Closely held manufacturers, distributors, growers, software producers, equipment leasing companies, and architectural or engineering firms should consider it.

Mark Klimek, head of the tax practice at McDonald Hopkins, LLC, says, ‘Manufacturers and distributors not fully exploring this incentive may be missing significant tax benefits from a relatively inexpensive to implement government incentive that does not disrupt business operations.’

If products and services are ultimately used outside of the U.S., they will typically qualify. The rules for component parts ultimately sent outside of the U.S. are even more generous — generally, they can even return to the U.S. after being incorporated into another product. Tod Wagner, of Libman Goldstine Kopperman & Wolf, says, ‘Because of the favorable rules defining qualified export property, many companies eligible to use an IC-DISC are overlooking the incentive entirely as they do not think of themselves as manufacturers or exporters. In reality, they may need not to be either.’

Amit Mathur, CPA, is a director at WTP Advisors. Reach him at (216) 292-6732 or amit.mathur@wtpadvisors.com.

Ready for a complimentary analysis of whether your IC-DISC benefits can be increased? Call Amit Mathur at (216) 292-6732.

Insights Tax Incentives is brought to you by WTP Advisors

Published in Cleveland

The purpose of an arbitration clause is to resolve disputes by means of a private proceeding that is generally perceived as quicker and less expensive than the court system. Yet many contracting parties do not fully analyze the arbitration clauses in their contracts, and so do not draft such provisions in a comprehensive and precise manner. These lapses can lead to costly and time-consuming disputes.

“Any party entering into an arbitration agreement, therefore, would be wise to carefully analyze the arbitration clause thoroughly, with a view to ensuring that it will accomplish all of the party’s goals,” says Courtney D. Tedrowe, a commercial litigation partner at Novack and Macey LLP.

Smart Business spoke with Tedrowe about what it takes to draft an effective arbitration clause.

What are the key considerations in drafting an arbitration clause?

Broadly speaking, there are two categories of issues to consider when drafting an arbitration clause. The first of these concerns the extent to which the court will be involved in pre-arbitration and post-arbitration issues. The second category concerns the parameters and procedures of the arbitration proceeding.

Why consider the court’s involvement in pre- and post-arbitration proceedings?

Just because you have an arbitration clause doesn’t mean that you will avoid court proceedings. Not infrequently, a party will oppose the arbitration demand on the grounds that it does not fall within the scope of the arbitration clause. Under the Federal Arbitration Act, courts are required to ensure that the claim is arbitrable. However, the arbitration clause can specify that the arbitrator decides such substantive ‘arbitrability’ issues, effectively limiting the court’s role from the very outset.

The parties may also restrict the court’s involvement in post-arbitration proceedings. Some post-arbitration judicial action is inevitable, since courts, not arbitrators, have the power to reduce the arbitration award to an enforceable judgment and to decide any challenges to the award. Here, the parties can use the arbitration clause to limit the grounds of appeal, further reducing the chances that the award is vacated, and minimizing the risk of lengthy appeals.

How should the arbitration clause be drafted to provide for procedural matters?

Parties can agree to pretty much whatever they want when it come to procedures. Typically, agreements simply select an organization’s rules, such as the American Arbitration Association, JAMS or ADR Systems.

There are two big pitfalls here. First, most organizations have more than one set of rules with sometimes very different deadlines, discovery options and evidentiary rules. When drafting the clause, be sure that you select not just the organization, but the specific set of rules most favorable to the particular situation.

Second, organizations change their rules regularly, meaning parties will likely be bound to use the rules in effect at the time of the dispute, which may have changed.

Can parties modify the applicable rules?

Yes. For example, although the rules of evidence do not typically apply in arbitration, parties may specify that they will apply, or that only certain rules of evidence apply. Parties also have the ability to craft the discovery process to their particular situation. The arbitration clause can set forth, among other things: whether parties may take depositions and, if so, how many; whether documents requests and interrogatories will be allowed and, if so, how many; and the parameters of any other discovery method.

The clause may also deal with the hearing location; pre- and post-arbitration motions, such as motions to dismiss; and the arbitrator’s power to fashion specific remedies.

How much freedom do the parties have to control the arbitrator selection process?

Parties have complete control over who arbitrates their dispute. The specific arbitrator could be identified in the clause, or the clause can set forth the rules by which an arbitrator is selected, either expressly or by selection of a particular organization’s rules.

Courtney D. Tedrowe is a commercial litigation partner at Novack and Macey LLP. Reach him at (312) 419-6900 or cdt@novackmacey.com.

Insights Legal Affairs is brought to you by Novack and Macey LLP

Published in Chicago

There are very few written policies that are required by law to be provided to employees, but there are certain policies companies can adopt to protect themselves and reduce their liability exposures. This can either be done though a company handbook or by distributing individual policies to employees.

“Courts have said that by advising employees of certain information, the burden shifts from the employer proving something didn’t happen to the employee proving something did. That can be a significant difference in an employer’s ability to defend itself both in terms of success and cost,” says Jeffrey Dinkin, a shareholder at Stradling Yocca Carlson & Rauth.

Smart Business spoke with Dinkin about key policies that should be included in employee handbooks and what other options exist.

What are some required policies suitable for an employee handbook?

All employers are required to have sexual harassment policies that clearly state to whom employees should report complaints. More than one person should be designated, but if that’s not possible, there are outside resources to which you could direct them.

For companies with five or more employees, if the company has leave policies, policies regarding pregnancy disability leave must be included. As a note, under recently enacted legislation there must be continued employer health insurance contributions during the period of pregnancy disability leave for up to four months. The California Family Rights Act also allows 12 weeks of baby bonding leave, with continued employer health insurance contributions now also being required.

Employers with 50 or more employees are covered by the Family and Medical Leave Act, which must be honored when you learn an employee is eligible for family medical leave, and requires a related employer policy.

Also, a new law dictates that employees paid in commissions need to be provided a clearly written commission agreement that describes how commission is calculated, earned and paid. It needs to be signed by, and a copy given to, the employee.

What else could an employer include in an employee handbook?

Employers should have a policy that requires employees to accurately record all time worked (the start and stop times), as well as the start and stop time for meal periods. The policy should clearly prohibit off-the-clock work. It is important to also address meals and rest periods provided by the company.

Technology and communications policies are increasingly necessary. It’s important that an employer indicate that the materials stored and communicated on devices owned by the employer belong to the employer, and it has the right to review and monitor those communications at its discretion.

There’s a lot of attention on bring-your-own-device workplaces. Employers need to communicate that work-related mobile activity is not private and information can be retrieved from a personal device including when the employee exits the company.

Is an employee handbook required?

Companies don’t need to have a handbook, but having one allows them to set forth some essential policies and employee rights and obligations that should be observed.  Handbooks enable everyone to have a reference to their rights and obligations.

What will suffice as notice in place of a handbook?

You can provide individual policies. Employers often provide new hires with the policy regarding sexual harassment, or there can be a separate meal and rest period policy. There is other information that must be provided to employees through permanent postings at the workplace or handouts.

Who should assemble the handbook?

An employment attorney is a good resource. He or she will typically have a model handbook that can provide a starting point that’s then customized to suit the employer’s needs. The chamber of commerce or an HR consultant have similar resources.

However, a big part of employers preparing a handbook is for them to become aware of their obligations and rights so they might better order their employment policies to protect themselves. It’s a good education tool and a chance for an employer to order its thoughts on how it wants to treat its workforce. ?

Jeffrey Dinkin is a shareholder at Stradling Yocca Carlson & Rauth. Reach him at (949) 725-4000 or jdinkin@sycr.com.

Website: Find Jeffrey Dinkin’s profile at www.sycr.com/Jeffrey-Dinkin.

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Published in Orange County

Much attention has been given to the fees and expenses of qualified retirement plans. Many questions are being asked about the reasonableness and quality of the current 401(k) landscape.

For decades, service providers have been charging excessive, and often hidden, fees to a countless number of plan participants. Similarly, plan investment options came under fire shortly after the 2008 financial crisis, which saw millions of workers lose significant portions of their retirement savings. This unfortunate combination — excessive fees and poor returns — was the driving force behind the recent regulatory changes.

Smart Business spoke with Eric N. Wulff and Christopher D. Bart, managing directors and principals at Aurum Wealth Management Group, about the Department of Labor’s (DOL) plan to address these issues.

What are some of the company’s fiduciary responsibilities relating to their retirement plan?

The three main concerns revolve around fees, service and investments.

On Feb. 3, 2012, the DOL issued a final regulation under the Employee Retirement Income Security Act of 1974 (ERISA). This regulation requires a 401(k) plan’s service providers to disclose all fee and compensation arrangements, effectively known as ‘full fee disclosure.’

From a service perspective, companies are required by the DOL to determine the reasonableness of fees. Industry best practices indicate the most effective means by which you can evaluate the reasonableness is to place the plan out to bid. Conducting a request for proposal process allows you to compare not only the cost and compensation arrangements, but also the nature and level of the service. If the service provider does not provide a level of service commensurate to its fee, it is the company’s fiduciary duty to terminate the provider.

As for investments, companies are required to maintain a documented process on the selection and monitoring of the investments in the 401(k) plan. Specifically, the DOL recently put out an advisory bulletin on target date funds requiring them to evaluate the absolute risk of these types of investments. Target date funds became a popular investment strategy because plan sponsors were given fiduciary relief if they offered them as a qualified default investment alternative. This turned out to be somewhat problematic when the market crashed in 2008 and 401(k) participants saw their investments drop by 20 percent or more.

How can companies minimize their fiduciary responsibility?

There are different types of advisers companies can engage to assist them with their responsibilities, and companies can do a better job understanding those options.

The two most common levels of fiduciary status under ERISA are 3(21) and 3(38). As a 3(21) fiduciary, the adviser serves as a co-fiduciary to the plan; in this role, the adviser monitors plan investments and makes investment recommendations to the plan sponsor, but does not have discretionary control of plan assets. As a 3(38) fiduciary, the adviser takes control of plan assets, makes all investment decisions and insulates the plan sponsor from fiduciary liability as it relates to plan investments. Hiring a 3(38) fiduciary is the highest level of fiduciary protection under ERISA.

Where do participants stand in all of this?

With most retirement plans, a big problem is that participants are not allocating assets correctly. So, many 401(k) plans are starting to implement more help features for participants. Studies show the average participant can earn an additional 2 or 3 percent per year by getting professional help. Unfortunately, the average participant tends to chase performance when determining their investment allocation.

Hopefully, these increased responsibilities on plan sponsors will continue to bring much needed change to help fix the nation’s structural problem with retirement savings.

Aurum Wealth Management Group is an affiliate of Skoda Minotti.

Eric N. Wulff is a managing director and principal at Aurum Wealth Management Group. Reach him at (440) 605-1900 or ewulff@aurumwealth.com.

Christopher D. Bart is a managing director and principal at Aurum Wealth Management Group. Reach him at (440) 605-1900 or cbart@aurumwealth.com.

Insights Accounting & Consulting is brought to you by Skoda Minotti

Published in Cleveland

An additional insured endorsement is an amendment to the named insured’s policy, usually the general liability policy, that extends coverage under the terms of the policy to another entity.

“This is usually required in a contract where company A needs to provide insurance coverage to company B, so company B enjoys protection from a new risk that arises out of company A’s conduct or operations,” says Shantih M. Charlton, CIC, CISR, senior account executive at Momentous Insurance Brokerage, Inc.

Smart Business spoke with Charlton about why you need additional insured endorsements from the companies you work with, and why you may need to provide them.

What are some examples of when an additional insured endorsement is needed?

A building owner/landlord may require a tenant to name the owner/landlord as an additional insured on the tenant’s insurance policies. If there is an accident or loss on the rented premises, such as a slip, trip or fall, the tenant’s insurance coverage can respond to the claim.

Another example would be a general contractor requiring subcontractors to name it and the owner as additional insureds on the subcontractor’s policies. Then, the subcontractor’s insurance protects the general contractor and owner if someone sues based on an accident arising from the work of the subcontractor.

Also, product manufacturers may cover its sellers as additional insureds. In these cases, the retailers are better protected from claims arising from products they sell.

How is additional insured status provided?

A certificate and endorsement are both required to provide additional insured status. The carrier needs to issue the endorsement, which is part of the policy. If you receive a certificate stating that additional insured status applies but there is no endorsement attached, request a copy of the actual endorsement or policy wording.

What is the cost to add this endorsement?

It might already be included in the policy premium, or it could cost $100 to $500 extra. The cost of adding an additional insured to a liability insurance policy is generally low, as compared to the costs of the original premium.

If you get a certificate from someone with the additional insured endorsement, do you still need your own insurance?

Yes. Additional insured status doesn’t mean you don’t need insurance. It only means the company receiving the additional insured status has insurance for the other company’s negligence. So if company A is an additional insured on company B’s policy, it is covered if company B’s negligence causes a claim and company A is named in a resulting lawsuit. If that same claim was actually due to company A’s negligence, or if company B’s insurance limits were not adequate, company A would need its own policy to protect its interests.

Is an additional insured endorsement the same thing as a named insured?

No. A named insured is the person designated in the policy as the insured. Additional insured status does not give the same rights under the policy terms as a ‘named insured’ or ‘insured.’

What should you keep in mind when entering into an agreement with another business?

Whenever your business enters into an agreement with another business, follow these general principals:

•  Never assume the other business has liability coverage. Obtain a certificate of insurance or copy of their policy.

•  Review both the contract and endorsement with legal and insurance representatives. Each situation presents unique risks, and contract wording and policy forms can vary greatly.

•  Understand what your additional insured coverage status covers. Consult with your insurance adviser to better understand how this affects your business.

Shantih M. Charlton, CIC, CISR, is a senior account executive at Momentous Insurance Brokerage, Inc. Reach her at (818) 933-9860 or scharlton@mmibi.com.

Blog: Get more information on this and other important insurance topics at the Momentous Insurance blog.

Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.

Published in Los Angeles

The executive order released Feb. 12, 2013, by the White House on improving critical infrastructure in many ways confirms cyberattacks have become a serious threat to national security.

While the order’s focus is on protecting critical infrastructure, such as power grids and hospitals, private sector companies also should take cyberattacks seriously.

“Business owners will lock their cars and protect their homes in sophisticated ways but won’t protect the most critical area, which is where their data sits,” says Pervez Delawalla, president and CEO of Net2EZ. “Because it’s not happening in front of us, but in the cyberworld, many tend to not pay attention.”

Smart Business spoke with Delawalla about cybersecurity, the threats that exist and how companies can protect themselves.

What are the threats?

The biggest threat facing our digital information is foreign governments trying to penetrate our systems for intelligence from which economic value can be gained. A great deal of proprietary information, such as designs and ideas for new products, is being stored on company servers. If that information were extracted, it could offer a competitive advantage.

The common thought used to be that a cyberattack would result in a company’s website going down. A hacker looking to make a name for him or herself would attack a site by bombarding it with bogus traffic, and it would cease to function. Now, hackers are looking to stay behind the scenes because the data they gain can be a lot more valuable than shutting down a site.

What could be the extent of the damage?

In extreme cases, a data breach could trigger the complete downfall of a company. Depending on the nature of the attack, a breach could cause customers to lose trust in the company and its brands. That’s in extreme cases. In other instances, valuable intellectual property could be lost and the associated R&D investment would be hard to recoup.

How can a company recognize its exposure to cyberthreats?

Many times exposures come from within the company, so it’s important to understand what employees are working on and who has access to what data.

Also, consider the risk when an executive travels overseas. When using his or her smartphone, it’s possible software can be downloaded on the phone without his or her knowledge. When that person comes back and connects to his or her office network, the software that was downloaded could penetrate into his or her network.

 

What are some critical components of good cybersecurity?

It’s important to establish layers of protection. For example, set criteria for employees to access certain company information on its servers. Similarly, companies should employ hardware in layers in order to protect critical data. There are hardware devices designed specifically to stop distributed denial-of-service attacks.

Intrusion protection systems can detect when someone penetrates a company’s network and identify who, where and how. Firewalls also are useful to block unwanted traffic, but have them periodically audited to ensure their effectiveness.

It’s important to have all of these systems audited. Too often companies set up these systems and forget about them until something bad happens.

Regarding mobile security, executives traveling overseas should take a conventional cellphone. Another option would be to back up the data on your smartphone before the trip, use the phone overseas, and then wipe the entire phone before connecting to any of your home networks again.

Who can help put a solid cybersecurity plan in place?

There are professionals who have expertise specifically in cybersecurity. Companies in some cases are adding chief security officers to work alongside chief technology officers. However, if a company is not large enough to appoint someone to such a position, then the best option is to work with a consultant who is focused on the security side or a company that provides cybersecurity services on an ongoing basis.

Pervez Delawalla is president and CEO at Net2EZ. Reach him at (310) 426-6700 or pervez@net2ez.com.

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Published in Los Angeles