The Sarbanes-Oxley Act of 2002 mandates that publicly held companies rotate the lead partner in an audit firm off the audit project every five years. Many private entities have followed suit, accepting audit rotation as a regular business practice even though they aren’t bound by any requirement.

But they’re missing out on benefits that come with an established working relationship, says Mark Van Benschoten, a principal with Rea & Associates.

“My ability to offer valuable advice only increases with the amount of time spent with a client,” he says. “When you change auditors, you lose that ability to cement a relationship where you fully understand each other.”

Smart Business spoke to Van Benschoten about misconceptions regarding audit rotation and the various benefits derived from a long-term relationship with an audit firm.

Why do companies rotate auditors?

Sarbanes-Oxley came about after the Enron scandal when there was a perception that the auditing firm was too close to the company. The thought was that switching auditors would ensure an independent perspective. Private companies followed the mandate even though it doesn’t apply to them. Many of those same business leaders encouraged boards of the not-for-profit organizations they are a part of to require an auditor change every three to five years. As a result, businesses and organizations severed ties with auditing firms that had done excellent work.

What is required by the law?

People misinterpret the mandate to mean that they must switch audit firms. However, only the lead partner in the audit firm must rotate off the project every five years. Businesses can get a new set of eyes on the audit without changing firms. Auditors have a professional responsibility to be objective. But if you believe someone may be too close, working with a different manager or partner accomplishes the same thing. This way you get a fresh perspective while maintaining the benefits that come with a long-standing relationship.

What are the benefits of keeping the same audit firm?

One is institutional knowledge. When there is a change in staff, an auditor can help educate from a historical perspective, explaining how something came about. This is extremely beneficial with nonprofits that have term limits for board members and experience changes in leadership.

You also can take advantage of an auditor’s industry experience. Someone with more than 100 manufacturing clients can take expertise from one and leverage that among other clients. For example, if a business owner is too focused on one specific area and is not abreast of what’s occurring in the whole manufacturing universe, an auditor can add value by discussing those issues with the owner.

There’s also a cost to getting a deficient audit. If a firm doesn’t catch some bad financial reporting, it will come back to haunt you.

Are there benefits derived from switching auditors?

If your auditor is not doing the job — not looking at key areas, responding to your needs or is tardy in providing service — you should change even if you have a commitment.

But change in itself does not bring any benefit; it’s more a result of not thinking through goals for the auditor selection process. What are you trying to accomplish with the audit? Audits have become very commoditized; some companies just solicit bids regularly and go for the lowest cost. The only thing they value is getting that opinion letter. You can get too focused on cost and miss out on added value.

What should you look for when choosing an auditor?

Find someone who knows your industry and can make a commitment to the timing and staffing levels needed so the audit isn’t obtrusive. Do some due diligence — find out if they have similar clients and talk to references.

Many companies have audits because a bank or funder requires it, and they want to get through the audit with the least amount of pain. But auditors should also add value.

Mark Van Benschoten is a principal at Rea & Associates. Reach him at (614) 889-8725 or mark.vanbenschoten@reacpa.com.

Website: Is your business sellable? Find your sellability score.

Insights Accounting is brought to you by Rea & Associates

 

Published in Columbus

Additional Medicare taxes went into effect Jan. 1, 2013, for high-income earners, but many may not consider these taxes until they start filing their 2013 returns — and writing the checks.

“You want to take the time to go through this now, and lay the groundwork, because the decisions you make will have ramifications for next year,” says Chris Paris, regional tax leader of the Greater Bay Area at Moss Adams LLP.

“We’re spending a considerable amount of time dealing with this. People are asking: How is this going to impact us? Is there anything we can do to structure around it?”

Smart Business spoke with Paris about the impact of these taxes and what you need to know.

What are the new Medicare surtaxes?

The Unearned Income Medicare Contributions Tax (UIMCT) is a 3.8 percent tax on net investment income for higher income individuals. The other surtax is a 0.9 percent tax increase on wages and self-employment earnings for higher income individuals, for a combined employer/employee tax rate of 3.8 percent.

The taxes are designed to help cover about half the cost of the Patient Protection and Affordable Care Act, passed in 2010.

How does the IRS define higher income individuals?

Both taxes apply to individuals that meet an income threshold of $200,000 or more, or those married and filing jointly that meet a threshold of $250,000 or more.

If a taxpayer earns wages in excess of $200,000, his or her employer is required to withhold the 0.9 percent, in addition to the 2.9 percent previously taken out (1.45 percent for the employer and 1.45 percent for the employee). However, the 3.8 percent on net investment income is a new type of tax that may take some by surprise.

What’s so unusual about the UIMCT?

This is the first time the government has taxed net investment income to pay for the cost of Medicare. Net investment income includes interest income, dividends, royalties, rental income, and income flowing through passive investments like private equity funds, hedge funds and venture capital funds.

Rental income is going to be a big factor because many higher income earners own a lot of real estate, don’t qualify as real estate professionals and will be subject to this tax. It also could impact middle market companies where the owner of the business owns the real estate, although there may be ways of grouping activities together to reduce the impact of the tax. Further guidance regarding these issues is anticipated in the final version of the tax regulations.

How can those affected by these taxes plan?

First, be cognizant of the fact that it’s happening, so you can factor it into your 2013 tax planning. Estimated taxes are usually based on what you owed the prior year, so your figures may now be too low.

Secondly, you can potentially reduce the impact of the UIMCT by recharacterizing passive income subject to the 3.8 percent tax to ‘Trade or Business’ income, which is not subject to the surtax. For example, an individual who owns multiple businesses or rental properties may be able to group the multiple activities into a single activity by making an election pursuant to Revenue Procedure 2010-13. However, the activities must also rise to the level of a trade or business, a requirement that currently lacks clarity in the proposed regulations. Further guidance may be provided when the final tax regulations are released. The grouping election is particularly attractive if you haven’t filed your 2012 extended return because you can put the IRS on notice now to be in a better position to potentially reduce the UIMCT next year.

Questions also remain about whether certain people qualify as a real estate professional — whose rental income may not be subject to the UIMCT— which is another reason to reach out to your advisers now.

In addition, it may be time to discuss choice of entity, how you operate your business. An LLC with two active owners in the maximum tax bracket could be looking at a combined 43.4 percent federal tax rate on income, whereas a C corporation has a maximum tax rate of 35 percent. However, any dividends from the C corporation would also be taxed, hence there could be double taxation. Further, tax consequences alone may not be enough of a reason to switch, and exit alternatives such as asset sales need to be considered.

Some taxpayers are exploring alternative investments, such as tax-exempt interest income like municipal securities, non-dividend paying equities in certain rapid growth companies, tax-deferred annuities and investments, as well as considering capital gain planning, loss harvesting, installment sales and more.

Whatever strategy you decide to undertake to help control what you pay, don’t wait to plan — or you may not have the most desirable result.

Chris Paris is Regional tax leader, Greater Bay Area, at Moss Adams. Reach him at (415) 677-8352 or chris.paris@mossadams.com.

Insights Accounting & Consulting is brought to you by Moss Adams LLP.

Published in National

PFSweb, a growing business providing e-commerce solutions to many major retailers, was courted by several communities when it was looking for a new location for its professional staff of more than 400 employees.

The company ended up opening its new facility in April 2012 in Allen because the city and the Allen Economic Development Corporation best understood its needs.

“The entire economic development group listened well in terms of what our needs and requirements were. The city’s been great,” says Mark Layton, founder and former CEO of PFSweb. “One year in, I don’t have anything negative to say about our experience in Allen.”

Smart Business spoke with Layton, who recently left PFSweb to pursue other business opportunities, about the factors that led to the move and a 10-year lease in Allen.

Why was PFSweb looking to leave its Plano, Texas facility?

We had been there about 20 years and there were growth issues, as well as a parking problem. Our real estate professionals encouraged us to take a broader look at the market and it became apparent that there was an opportunity to create competition.

The challenge was that we had two distinct uses — a worldwide data center and a call center operation — that potentially required different types of facility solutions. Vacancy rates had been so high in downtown Dallas that it was cost effective to relocate to a space that also gives us significant ability to expand and contract to meet our needs.

The city of Allen didn’t have a suitable site for the call center, but obviously played a part in relocation of our headquarters and technology development lab.

What separated Allen from the competition?

The building our commercial real estate representatives and the economic development corporation brought to us had some great amenities and potential. The owner offered flexibility in configuring the space correctly for us, building out a corporate park with a running track, basketball courts, horseshoe pits, etc. He also allowed us to be single tenant even though the space was bigger than what we needed — he delayed a requirement for us to lease the space for several years, giving us room to grow.

What role did the city and Allen Economic Development Corporation play?

Their help regarding financial supplements was very important. Dallas, Richardson and Frisco were also aggressive in trying to lure us, particularly when the call center piece was separated and we had about 400 relatively high-paying jobs that were very attractive.

The city of Allen and its economic development group showed a lot of awareness and understanding of our challenges relating to accounting regulations and how the incentives could be shown on our books to help reduce overall expense. Accounting regulations want you to take incentives in a lump sum; our profit and loss statement would have shown a higher rental through the entire 10-year term and a big financial windfall in the final quarter.

Other economic development corporations handed us a standard contract and didn’t show a desire to change the terms and conditions. With Allen, they had dealt with these issues with other public companies, and their familiarity was a breath of fresh air. We didn’t have to do a lot of education as we did with the other groups. Language needed to be structured correctly and it required flexibility as their legal group worked with our accountants. That was a differentiator for us.

Would you recommend the city to other companies looking to relocate?

Certainly, from my standpoint it has been a great experience. The only drawback is that Allen doesn’t have a large inventory of buildings, although the city is addressing that situation and there is land that can be developed if companies want to build to suit.

It’s been a great relationship and the economic development corporation did a wonderful job for us. We would absolutely recommend Allen to other companies looking for this type of office space.

Mark Layton is the founder and former CEO of PFSweb. Reach him at (972) 881-2900 or mlayton@pfsweb.com.

Reach the Allen Economic Development Corporation at www.allentx.com or call (972) 727-0250.

Published in Los Angeles

Practically no one reads software licensing agreements, but the terms they set allow software companies to access your computer network for an audit. And when they decide they want an audit, software companies may attempt to gather information without executive management knowing.

“They will send the audit request in an email because a formal letter has a greater chance of going up the chain to management. The email will say the audit right is in the contract and to run the attached script on your computer system,” says Jason H. Beehler, an associate with Kegler, Brown, Hill & Ritter.

“That script was created to find as much usage as possible. It will look for any occurrence of the software’s name, even if it has no correlation to the installation of the software. The company, usually without thinking, will go ahead and run it and it comes back with an unbelievable number. All of a sudden the software company is asking for $100,000 or $500,000 or more, depending on how extensive they allege the overuse is,” says Beehler.

Smart Business spoke with Beehler about procedures companies should follow to manage software licenses and what to do if a software company requests an audit.

How should companies respond to an audit request?

Treat it like an audit request from the IRS. Whoever receives the request should notify someone on the executive side — CEO, CFO, CIO — and the executive should contact in-house or outside counsel to review the licensing agreement and understand the company’s rights. What is the script designed to look for? Is the license agreement valid and enforceable?

You also want to make sure that, before any audit request comes in, the person who manages software purchases is proactively tracking software licenses and usage. A person may have moved on to another job or department and the copy still exists, although no one is using it. Simply removing software from computers prior to the audit can legitimately decrease your exposure by reducing the number of users.

Often employees have software programs they don’t use. From an IT perspective, it’s easier to create a master template for a desktop software suite that is loaded on computers. You may have what registers as 100 users of the software, but the number of people actually using it is 15.

What if the script has been run?

If you get a letter that says you owe $200,000, contact your counsel, and then together you can call the software company’s general counsel and see if you can negotiate. It could be that $60,000 of that total is interest and, of the remaining $140,000, maybe half corresponds to the actual number of unpurchased licenses in use. If there’s legitimate overuse, you can structure a settlement and offer to pay over a period of some months or years.

If you can’t reach a settlement, consider filing suit before the software company files, so you can choose the court. It’s much better to fight on your turf and your terms. When you file, the software company may very well countersue for copyright infringement and breach of contract. But at least you will define the case on your terms, and you may not have to litigate in the software company’s backyard.

Are more software audits being conducted?

Yes. It could be a function of a difficult economy, either because the software companies are feeling the pinch or because they suspect that users may be engaging in unauthorized copying in order to save money. The prevalence of downloaded software presents an opportunity for software companies if they suspect people aren’t tracking their licenses well.

IT experts say software companies could put controls in place to prevent unauthorized copying. That’s what makes these claims interesting, and that issue should be explored if it comes to litigation. The argument that the software company had an opportunity to prevent copying and now seeks damages for activity it could have stopped could be a significant issue at trial.

Jason H. Beehler is an associate at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5452 or jbeehler@keglerbrown.com.

For more information on Kegler, Brown, Hill & Ritter, please visit www.keglerbrown.com.

Insights Legal Affairs is brought to you by Kegler, Brown, Hill & Ritter

Published in Columbus

We’ve all been there before. A call that should take mere seconds extends 10 minutes or more because of an aggravating and antiquated phone system that fails to connect you to the proper party or does not notify the person who you are trying to reach.

There are ways to improve customer service simply by updating technology and making the switch to Voice over Internet Protocol (VoIP). Some businesses are using automated systems to improve screening, routing and transitions to the right professional, while others are using VoIP to ensure a more personal touch. Neither way is wrong. The important thing is that customers aren’t left on the phone fuming.

“With VoIP you can choose between the two extremes; you can make it very personable or leverage technology for maximum efficiency,” says Alex Desberg, sales and marketing director at Ohio.net.

Smart Business spoke with Desberg about how VoIP can enhance customer service, improvements on the horizon and the importance of customization.

How can VoIP services help enhance customer service?

Customer service takes so many different forms — it ranges from one extreme to another. Some companies, typically smaller businesses, believe that good customer service requires every incoming call be answered live, and they strive for one-call support. On the flip side, larger organizations want to make sure that technology is in place so the customer can reach the person or department that he or she wants to speak with. This can take the form of auto attendants or dial-by-name directories. VoIP allows large businesses to maximize efficiency and small businesses to add layers to their phone systems, both of which enhance the customer service experience.

What VoIP changes and improvements are on the horizon that will help companies connect with their customers?

First, it’s important to note that companies can keep the current technologies they have in place, such as an inbound dialing system, while moving into the VoIP realm. New technologies on the horizon include virtual PBX systems that will allow more hands-on control and management. Virtual PBX, a private branch exchange phone system offered as a hosted service, can be a very useful tool for marketing efforts. With this system, you can direct people to call the store they are most likely to shop at rather than a call center, where they will have to be redirected.

How can companies identify the right size for their VoIP configuration?

This boils down to picking the right technologies for your mode of communications. I recently worked with a midsize company that has multiple locations in various communities. It’s extremely important for this business that when someone calls them they are connected to the correct office. They don’t want their customers to get shuffled around or transferred to the wrong extension. The system they now have in place allows their customers to call a local number that supports the local office, while from a grand-scheme perspective, they are able to manage their telecommunications under one large phone system so there is four-digit dialing and no long distance between offices.

How can companies customize their VoIP system to improve customer service?

Once you move out of the traditional analog phone world, you can start using a mix-and-match platform. For example, if you determine that you need specialized services for a regional or remote location, it’s possible to incorporate a virtual PBX system into your VoIP solution. This allows you to keep adding bits and pieces to the existing platform under the management of a single supplier. Internally, a person handling a VoIP call might notice a difference with the phone, but customers will have a seamless experience — they will simply reach the person who can serve them best.

Alex Desberg is sales and marketing director at Ohio.net. Reach him at adesberg@ohio.net.

Visit www.ohio.net for a list of educational seminars.

Insights telecommunications is brought to you by Ohio.net.

Published in Akron/Canton

Cloud computing is the use of applications that are housed on servers outside of a business’s location and accessed using the Internet. Instead of deploying servers internally and building a network infrastructure within their walls, companies contract with a cloud-computing provider that hosts the applications.

“Cloud computing is a key component of any company’s infrastructure these days, whether you’re Fortune 500 or a sole proprietorship,” says Eric Folkman, manager of managed services at Blue Technologies. “There’s a piece of it now that can fit pretty much any company. It wasn’t that way a few years ago, but the technology has progressed and the costs have come down so far that there’s something there for everybody.”

Smart Business spoke with Folkman about getting started with cloud computing.

Why should you look into utilizing the cloud to help your company?

Three simple reasons are:

  • Financial benefits.
  • Increased availability of data, whether for your employees or the public.
  • Reducing your disaster risk with some form of backup.

What specifically can be taken to the cloud?

The ability to move applications to the cloud has exploded. It may sound cliché, but the better question might be: What can’t you take to the cloud?

Some applications are better than others in the cloud environment, such as email, financial systems, customer relationship management (CRM) systems, data backup and Microsoft Office-type products like Word and Excel. In addition, voice is gaining popularity, which works by routing your phones through the Internet. This can reduce your business phone bills and provide flexibility to telecom costs.

When is the right time to go to the cloud?

It depends on the situation, but anytime a company is considering a major change to its technology — whether a server upgrade or application change — that’s an appropriate time to consider the cloud.

Here’s a scenario I run across three or four times a week: A company is running an older, internal email server and decides to upgrade. It could spend tens of thousands of dollars on hardware, software licensing and implementation. The business gets an upgraded server but still has maintenance costs, security risks and the potential for downtime if something happens to the physical servers.

The alternative is to host email through the cloud. There’s no need to secure and maintain an internal server, and email is more accessible via the Internet. There’s also no disaster recovery component — you know the provider has mechanisms to keep your data safe. However, sometimes you have so many users going to the cloud that it doesn’t make sense, as opposed to doing it in-house, from a cost perspective.

What’s an easy way to get started?

Cloud-based data backup is a low-cost, low-risk way for a company to dip its toe in the water. Companies see savings quickly and don’t have to mess with tapes and the risk of someone (usually the receptionist) manually rotating tapes off-site. Although there are some configuration changes, it’s not a mission-critical application.

Email and a CRM, like salesforce.com, are two others to consider doing sooner rather than later with a quick payback.

How is the value of cloud usage measured?

Like any business process, do your homework and build a business case. Not every company is perfect for it, but it’s an option executives should at least look at. It can be difficult and cumbersome to figure out if you’re not familiar with IT and don’t understand all the pros and cons of the cloud environment. A little advice in the beginning could really help get you beyond the learning curve.

Once you’re using the cloud, many providers offer advanced reporting and monitoring tools, so if something goes wrong you can take corrective action. For instance, most backup providers offer a dashboard. You can see how many computers are backing up, how much from each, how long it takes, how many failed to back up, etc. You also want your cloud contracts to include flexibility to add services or make changes as needed.

Eric Folkman is manager of managed services at Blue Technologies. Reach him at (216) 271-4800 or efolkman@btohio.com.

Blue Technologies offers further insight on this and other topics affecting businesses on its blog. Learn more by visiting www.btohio.com/news-resources.

Insights Technology is brought to you by Blue Technologies

Published in Akron/Canton

Every day more than 10,000 baby boomers turn 65, and during the next 15 years it’s expected that more than 1.3 million home health and personal care aides will be needed to accommodate them. In addition, in-home care can be costly. On average, a caregiver or client will spend $18,000 a year for 20 hours a week of care.

“Long-term care insurance can fund home care that will allow you to remain at home where you are most comfortable, with safety and independence,” says Tim Able, client advisor and life sciences specialist at SeibertKeck Insurance.

Smart Business spoke with Able about how to maximize your long-term care insurance for home health care.

Do people mistakenly associate long-term care with nursing homes?

Yes, but the opposite is also true. According to the American Association for Long-Term Care Insurance, 7.6 million individuals currently receive care at home because of long-term health conditions, permanent disability or terminal illness, but there are just 1.8 million individuals in nursing homes. Many buy long-term care insurance just so they can receive care in their own home.

Who typically uses home health care?

Every day, guardians, care managers and family members make long-term health care decisions for their clients and loved ones. Home health care can be an appropriate solution for those who wish to age at home.

However, it’s important to understand the differences in home care providers to make informed decisions. The Agency for Health Care Administration licenses home health care agencies following a comprehensive survey. A home health agency can assist with personal care and offer skilled nursing services including medication management. Certified nursing assistants or home health aides provide all personal care, and home health agencies are required to have a nurse available 24/7. A home health agency is a good choice when you desire nursing involvement or assistance with daily living.

What’s key to know when hiring a caregiver?

Here are some steps to follow:

  • Look for a home caregiver from a reputable agency, where he or she is licensed, bonded and insured. Also, check that the caregiver is covered by workers’ compensation insurance.
  • The caregiver should be supervised by a licensed professional who makes unannounced visits.
  • When hiring, review two to three references and require a recent criminal background check, as well as random drug tests, TB tests and a recent physical exam. The caregiver should have a minimum of two to three years of experience.
  • If the position involves driving, determine that the caregiver’s driver’s license and car insurance are current and valid.

How does long-term care insurance cover home health care?

Activities of daily living (ADL) refers to what we do on a daily basis to care for ourselves, including bathing, dressing and using the bathroom. Individuals with chronic diseases often have trouble performing some of these ADL, so the measure is used to assess long-term care insurance benefit eligibility.

Depending on your policy, you might have a waiting period before you can access your funds. Does your policy allow you to start collecting benefits on the day you begin receiving assistance, or are you subject to a waiting period of anywhere from 30 to 120 days? It’s important to get advice from your broker when deciding which policy is best.

Also, seriously consider when you can initiate a claim. The waiting period often corresponds to the benefit period, or the maximum amount of time that the insurance company will pay benefits. The longer the waiting period before benefits begin, the longer the company may pay for care. Benefits typically last three to five years.

When is a good time to buy?

Many people don’t realize the significant benefits to purchasing long-term care insurance earlier in life. For the same policy, yearly premiums for policies purchased at age 50 are notably less than premiums at 70. Also, the earlier you purchase, the more likely your application will be approved. By planning ahead, you will be best prepared to secure an affordable policy that helps you stay at home when the time comes.

Tim Able is a client advisor and life sciences specialist at SeibertKeck Insurance. Reach him at (330) 294-1363 or table@seibertkeck.com.

Visit SeibertKeck on Twitter @SeibertKeck or online at www.SeibertKeck.com/page/skmedical.

Insights Business Insurance is brought to you by SeibertKeck

Published in Akron/Canton

Every day more than 10,000 baby boomers turn 65, and during the next 15 years it’s expected that more than 1.3 million home health and personal care aides will be needed to accommodate them. In addition, in-home care can be costly. On average, a caregiver or client will spend $18,000 a year for 20 hours a week of care.

“Long-term care insurance can fund home care that will allow you to remain at home where you are most comfortable, with safety and independence,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck.

Smart Business spoke with McTeague about how to maximize your long-term care insurance for home health care.

Do people mistakenly associate long-term care with nursing homes?

Yes, but the opposite is also true. According to the American Association for Long-Term Care Insurance, 7.6 million individuals currently receive care at home because of long-term health conditions, permanent disability or terminal illness, but there are just 1.8 million individuals in nursing homes. Many buy long-term care insurance just so they can receive care in their own home.

Who typically uses home health care?

Every day, guardians, care managers and family members make long-term health care decisions for their clients and loved ones. Home health care can be an appropriate solution for those who wish to age at home.

However, it’s important to understand the differences in home care providers to make informed decisions. The Agency for Health Care Administration licenses home health care agencies following a comprehensive survey. A home health agency can assist with personal care and offer skilled nursing services including medication management. Certified nursing assistants or home health aides provide all personal care, and home health agencies are required to have a nurse available 24/7. A home health agency is a good choice when you desire nursing involvement or assistance with daily living.

What’s key to know when hiring a caregiver?

Here are some steps to follow:

  • Look for a home caregiver from a reputable agency, where he or she is licensed, bonded and insured. Also, check that the caregiver is covered by workers’ compensation insurance.
  • The caregiver should be supervised by a licensed professional who makes unannounced visits.
  • When hiring, review two to three references and require a recent criminal background check, as well as random drug tests, TB tests and a recent physical exam. The caregiver should have a minimum of two to three years of experience.
  • If the position involves driving, determine that the caregiver’s driver’s license and car insurance are current and valid.

How does long-term care insurance cover home health care?

Activities of daily living (ADL) refers to what we do on a daily basis to care for ourselves, including bathing, dressing and using the bathroom. Individuals with chronic diseases often have trouble performing some of these ADL, so the measure is used to assess long-term care insurance benefit eligibility.

Depending on your policy, you might have a waiting period before you can access your funds. Does your policy allow you to start collecting benefits on the day you begin receiving assistance, or are you subject to a waiting period of anywhere from 30 to 120 days? It’s important to get advice from your broker when deciding which policy is best.

Also, seriously consider when you can initiate a claim. The waiting period often corresponds to the benefit period, or the maximum amount of time that the insurance company will pay benefits. The longer the waiting period before benefits begin, the longer the company may pay for care. Benefits typically last three to five years.

When is a good time to buy?

Many people don’t realize the significant benefits to purchasing long-term care insurance earlier in life. For the same policy, yearly premiums for policies purchased at age 50 are notably less than premiums at 70. Also, the earlier you purchase, the more likely your application will be approved. By planning ahead, you will be best prepared to secure an affordable policy that helps you stay at home when the time comes.

Marc McTeague is president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. Reach him at (614) 246-RISK or mmcteague@bhmins.com.

Visit SeibertKeck on Twitter @SeibertKeck or online at www.SeibertKeck.com/page/skmedical.

Insights Business Insurance is brought to you by SeibertKeck

Published in Columbus

Many companies train employees to enter phrases such as ‘confidential’ or ‘attorney work product’ and copy counsel when sending sensitive emails so that the information is protected under attorney-client privilege. In the event the company becomes embroiled in litigation, counsel would see such phrases and flag the messages as privileged, preventing them from inadvertently being produced to the other side during discovery.

However, while it’s a good idea to include such phrases in messages, it’s not always enough in the court’s eyes to designate it as privileged. Also, a computer’s auto-save feature may have saved versions of an email that didn’t include such phrases, leaving them unprotected. Both of these issues arose during Oracle America, Inc. v. Google, Inc.

“For each email being composed, Google’s system was saving multiple drafts of it. That’s probably something that you wouldn’t want to do,” says Jude A. Fry, a partner with Fay Sharpe LLP. “Then when the company got sued, there were, for this single email, multiple versions, and the only version put on the privileged log was the final one.”

Smart Business spoke with Fry about how companies can ensure privileged information sent through email is protected.

What happened in the Google case?

Oracle claimed Google’s Android smartphone platform infringed its patents, and the two entered into litigation. An email that included language that could be harmful to Google in the patent case was placed on a privileged log, a document describing items that can be withheld from a case under attorney-client privilege.

That internal email was sent to the vice president in charge of the Android smartphone platform at Google, copying Google’s counsel in the ‘to’ field. The email was captioned ‘attorney work product’ and ‘Google confidential.’

While the final version of the email was placed on a privileged log, auto-saves of the email were inadvertently produced to Oracle’s counsel during discovery. Since the auto-saved drafts did not include the phrases ‘attorney work product’ or ‘Google confidential,’ they were not caught by electronic scanning mechanisms.

Google demanded that Oracle return the emails under the clawback provision of the protective order, claiming the emails were privileged. Oracle returned the emails but filed a motion to compel their production. The district court ordered that the emails be reproduced.

How were the auto-saved drafts of the email not coded as privileged?

When doing the search, counsel was likely using key words to see what was coded as privileged. There were probably thousands of emails produced. Counsel was able to locate the final email because, by that point, the author had put the phrase ‘attorney work product’ in the email’s body and added the attorney as one of the recipients. However, in other auto-save versions those phrases weren’t included, so they didn’t get flagged.

What’s disturbing is that the system saved nine versions during the time it took to type it up. Why is it necessary to save all of those versions?

Consider only saving emails that are sent, and configure your email system to delete all other versions. Also, understand how your email system works — whether auto-drafts are saved, what happens to these drafts, where they’re stored. Figure this out now and not when a case is pending.

How should a corporate employee set up an email to make sure it is privileged?

Train your employees to direct the email to legal counsel in the ‘to’ field and salutation. State in the email that information is being given to or sought from the lawyer so that he or she can give legal advice. Also, include in the message that it is being prepared in anticipation of litigation, at the direction of an attorney, to further the provision of legal advice. Include headings such as ‘attorney work product,’ ‘privileged’ and ‘confidential.’ However, these headings alone will not make an email privileged, so limit the substance of the email to the legal issues.

People write a lot of emails but often don’t think about someone other than the intended recipient reading it. When doing business though email, consider who could possibly read the message and approach it accordingly. It’s a good practice to think carefully before you put something in writing.

Jude A. Fry is a partner at Fay Sharpe LLP. Reach her at (216) 363-9113 or jfry@faysharpe.com.

Insights Legal Affairs is brought to you by Fay Sharpe LLP

Published in Cleveland

A job change can be a stressful, busy time, which is why many people forget about 401(k) funds and simply leave them in a former employer’s plan.

“I can’t emphasize enough that people need to properly educate themselves about their options,” says Robert D. Coode, a principal at Skoda Minotti Financial Services. “Most people we encounter are hesitant to rollover old 401(k) funds because they aren’t aware of their options.”

There also is a tendency to think amounts aren’t significant enough to warrant attention. The average person holds 11 jobs between the ages of 18 and 44, according to the Bureau of Labor Statistics, so each 401(k) account might not be substantial.

“But when you start consolidating plans, they become more meaningful,” says Bob E. Coode, CSA, a partner with Skoda Minotti Financial Services.

Smart Business spoke with Robert and Bob Coode about options available for 401(k) plans when you leave a job.

Why shouldn’t you leave 401(k) funds with a former employer’s plan?

Many people wind up with up to seven retirement accounts during the course of their careers. That poses a problem with record keeping. But the bigger problem is not having anyone to help you manage these accounts. It makes sense to consolidate them into one IRA.

Some people think that having multiple plans makes them diverse. But, if there’s significant overlap among the accounts, it actually defeats the purpose.

When leaving a job, what options are available regarding 401(k) plans?

The options are:

  • Leaving funds in the old plan.

  • Transferring funds to the new employer’s plan.

  • Directly rolling over money into an IRA.

  • Taking a taxable distribution.

Taking a distribution is not recommended; too many people see old 401(k) accounts as found money. While some people don’t have a choice, many will regret taking the money early and having less money set aside for retirement. The distribution could drive up a person’s tax bracket, cost more in federal taxes, and impose a 10 percent penalty if the participant is under 59½ and there is no hardship, such as medical expenses or an impending foreclosure.

Usually, the recommended option is a direct rollover into an IRA, which provides freedom of choice. In employer-based plans, the employer or the company managing the plan makes all the decisions about the number and types of investments. Typical 401(k) plans offer 15 to 20 investment choices. An IRA rollover gives access to a much wider array of investments.

Every IRA account should have a combination of equity, bonds and fixed income, and alternative investments to varying degrees, depending on the person’s age and risk appetite.

What are alternative investments?

Examples are long/short mutual funds, managed futures, real estate, commodities and currencies.

People may be wary of the word ‘alternative,’ but these are simply investments that don’t necessarily correlate with the market. Alternative investments are favored primarily because their returns have a low correlation to the three traditional asset types — stocks, bonds and cash.

These investments have been available to large endowments and high net worth investors for a long time and worked so well that fund companies made them available to retail investors.

With a traditional equity mutual fund, all investments are long term. Managers are required to keep 85 to 95 percent invested in equities at all times. If the market is due for a correction or a bear market is anticipated, they can’t short a stock or move into cash to protect the investor. A long/short mutual fund, which can be considered an alternative investment, has the ability to hold stocks for a long time or short the market if a correction is due.

Advisory Services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a Registered Broker-Dealer, Member, FINRA & SIPC. Skoda Minotti is independent of ProEquities, Inc.

Robert D. Coode is a prinicipal at Skoda Minotti Financial Services. Reach him at (440) 605-7119 or rdcoode@smcofinancial.com.

Bob E. Coode, CSA, is a partner at Skoda Minotti Financial Services. Reach him at (440) 605-7182 or recoode@smcofinancial.com.

Insights Accounting & Consulting is brought to you by Skoda Minotti

Published in Cleveland