I am often asked what made the difference for my success as a bestselling author and fitness and nutrition expert — and I tell people that you simply need to take action.
Too many entrepreneurs are afraid to act. You have to be willing to take imperfect action.
If it’s not quite right, put it out there anyway. You have to act, and that is more important than getting everything perfect.
Another thing I did that has been invaluable was to form a Master Mind group. This type of group was first described in the 1930s and the idea of has grown and evolved to become a frequent tool of successful individuals.
This lets you get bright ideas from others that can help move your business forward. Part of this is setting goals — but make them “stretch goals,” ones that will get you motivated and off the couch. I take these goals and tell the people in my Master Mind group what they are. The funny thing is I have now met all the ones I set!
Learn how to focus
Another critical area is the ability to focus. Entrepreneurs have to focus on their goals and ignore activities that do not progress toward them. You can get involved in a lot of different activities — but will they really help you progress toward your goals? If not, ignore them.
Keeping focused also plays a big part in handling stress. You have to be able to handle stress, and beyond staying focused, a major part of this is taking proper care of yourself. Exercise, enough sleep, proper diet — these are all vital.
The way I have grown my business is through information marketing, and particularly important is a reliable fulfillment company for production, inventory, and shipping of print and CD/DVD materials as well as direct mail and marketing collateral. My fulfillment company is very flexible and really works with me.
When I came to them, I had been using other companies who recognized I was kind of stuck — needing to get out product but having to do small runs — and they took advantage of that. My fulfillment company, Disk.com, doesn’t do that. I needed one-stop, full package production of CDs, DVDs, printing, packaging and integrated fulfillment.
Business are faced with questions like, “How do you start when you don’t know how much you are going to need?” You generally need to do small orders to begin with, and you don’t want to carry inventory.
Then if you need to accelerate quickly, is your fulfillment company flexible enough to do it? My fulfillment company helped me. They would do small runs and would not charge us a lot to do it.
Customers, you see, are unforgiving of a late or unfulfilled product. I just had a sales rush on my website and needed 500 units produced and shipped in a couple of days — and it was done and delivered!
JJ Virgin is a fitness and nutrition expert who has earned recognition as a weight loss expert. Author of two bestselling books, “The Virgin Diet: Drop 7 Foods, Lose 7 Pounds, Just 7 Days” and “Six Weeks to Sleeveless and Sexy,” she is based in Rancho Mirage, Calif. Her website is www.jjvirgin.com.
It would be nice to be able to have the philosophy that you can’t put a price on health, but the reality of rising costs in the health care industry means that approach can’t work.
“As a country, we can’t continue to spend 20 percent of our gross domestic product on health care without making sure we’re getting the best possible value,” says Dr. Brandon Koretz, associate professor of clinical medicine at the David Geffen School of Medicine and student in the Executive MBA Program at the UCLA Anderson School of Management.
Koretz says before entering the MBA program he had a tendency to spend whatever it cost to provide a valuable resource.
“My perspective was, ‘let’s get it.’ Now I understand that every dollar spent on one thing is a dollar that is not available for something else. I understand more fully the trade-offs and their implications,” he says.
Smart Business spoke with Koretz about the MBA program and the perspective it has given him on the health care industry.
Why were you interested in the MBA program?
I’m a geriatrician by training and care for Medicare patients. I also work at an academic health center and teach others how to provide care.
Medicare is at the cutting edge of financial changes in health care, and there’s a need to provide the best possible care at the most reasonable price; I need to understand the financial principles to ensure that is occurring. My Hippocratic oath isn’t just a promise to the patient in front of me, it’s also an obligation to be a good custodian of resources provided by society, which is paying for that patient’s care.
How has the program changed your views regarding the health care industry?
It’s given me another tool set to use when considering problems, a perspective I didn’t have before. In medical school, I didn’t have a finance or accounting class. I’m now a much more informed decision-maker when making budgets.
I’ve been able to bring business principles back to the people I teach. UCLA’s medical school is great about training doctors to understand up-to-date scientific literature, but we not only need to provide technically good service, we also need to meet patients’ emotional needs. If you’re rude, patients aren’t going to come back or may not follow your medical advice. So I’ve initiated discussions about things like wait time and how it can be improved. In years past, doctors would say, ‘That’s not my job.’ But, of course, it is; evidence is being accumulated that shows clinical outcomes are better when there’s a stronger connection between patient and doctor. A conscious focus on service can strengthen these connections.
How does the Anderson experience differ from other MBA programs?
What’s amazing at Anderson is how it is a community of learners. There’s an incredible diversity among students. Faculty can walk me through the fundamental concepts of finance while teaching people who work in the finance industry. Students are also sensitive to that diversity, and a person with a financial background will help me during a break when there’s something I don’t understand. There’s no ego or shame involved. People tutor each other — one group came in weekends on their own time and set up a series of tutoring sessions for students who didn’t understand accounting.
The expression I hear is, ‘At Anderson we take care of our own.’ Everyone works together to ensure the best possible learning experience. I’ve been able to develop a broad network of people in many industries. One project involved gathering information about the travel industry. Using resources at Anderson, a dozen interviews were set up within days. When it comes to Anderson, whatever else you’re doing stops. We really take care of each other.
Dr. Brandon Koretz is associate professor, clinical medicine, David Geffen School of Medicine at UCLA. Reach him at (310) 206-8272 or email@example.com.
Insights Executive Education is brought to you by UCLA Anderson School of Management
Businesses with multiple locations or branches, in many cases, are not leveraging computer network efficiencies by taking advantage of existing technologies to limit equipment deployment and enhance cost efficiencies.
“Branch offices are too often set up with unique data centers instead of having centrally located servers,” says Pervez Delawalla, president and CEO of Net2EZ.
Deploying a great deal of equipment at each office diminishes the computing power of servers at the individual branches.
“Their capacity isn’t being utilized completely at a branch and is unavailable enterprise-wide,” he says.
Smart Business spoke with Delawalla about leveraging data centers for maximum efficiency in cost and use.
What are some keys to centralizing a data source?
One important element is connectivity. If an enterprise sits in a major metropolitan area, then connectivity infrastructure should be reliable and readily available. However, when outsourcing to a data center, the connectivity piece is the least of a company’s challenges because data centers offer higher-capacity connections through multiple technologies, such as Multiprotocol Label Switching, point-to-point connection or bandwidth compression. This enables an enterprise to limit the amount of equipment it needs to deploy.
In what way does connectivity affect a business?
How a company sets itself up to utilize a data center hinges in part on the number of user accounts at that location. A smaller office with 10 or fewer employees could be well served by multiple 10-megabit connections that link to centralized hardware at a data center. Consider using an authentication server at each location. Employees log in through this server so passwords and usernames don’t travel outside of the building. Once a user is authenticated, he or she has access to all of the company’s data, enterprise-wide, housed in the data center.
Bandwidth capacity can always be added through a local provider as a company grows. From a technology perspective, it’s simply an upgrade to the connection and not a deployment of new equipment. Operationally, it amounts to simplifying that connection so it’s easier to support, monitor and track. The increased capacity of that connection helps facilitate the centralization of hardware, which allows the hardware burden to be decreased.
What savings can be realized through centralizing hardware?
A multi-branch enterprise is often using applications that are common across offices. Centralizing those common applications in a data center helps improve application management, which eliminates the need to employ IT personnel at individual locations because support can be provided at one site. It also means not having to deploy multiple servers for multiple sites, so cost savings can be realized by not buying as many server boxes.
Maintenance and upgrades also are made easier with a central data center because those don’t need to be accomplished on an individual basis. And if a security patch comes in it can be handled from one location. Further, having fewer servers means purchasing fewer licenses for software. Updates become easier, and license fees are less of an expense because software doesn’t have to be deployed in all locations.
However, just because hardware is centralized doesn’t mean everything is housed on a single server. The number of physical servers needed depends on capacity and redundancy needs of the company.
What can companies expect after centralizing their hardware?
The main benefits of centralizing are that the efficiency for support to the end user improves, deployment of upgrades becomes simpler and cost savings can be realized from reducing physical hardware. Having centrally located hardware also provides better security, management and handling of company assets. Security is improved because hardware can be physically monitored from a single location and server access can be better controlled. With less equipment to manage, limiting access becomes easier, meaning there’s less chance a costly mistake is made.
Pervez Delawalla is president and CEO at Net2EZ. Reach him at (310) 426-6700 or firstname.lastname@example.org.
Insights Technology is brought to you by Net2EZ
Identifying the intrinsic value of your company is an extraordinarily beneficial exercise, especially when business owners are looking to maximize the sale of their company, says Joshua Geffon, a shareholder at Stradling Yocca Carlson & Rauth.
“The crown jewel of an enterprise may be intellectual property (IP), the management team, key customers or brand recognition, and/or any combination of these ingredients. The key for an entrepreneur is to recognize, exploit and promote these attributes to gain maximum value for the enterprise during the acquisition process,” Geffon says.
Smart Business spoke with Geffon about what business owners should know before engaging in the acquisition process.
What are some mistakes owners make that jeopardize the sale of their companies?
A fairly common mistake is not doing enough to secure the company’s IP. Confidentiality and IP assignment agreements, patent filings and related IP protection should be in place to have clear and strong IP ownership and title.
Broad indemnification by the seller on contracts creates risk that buyers of companies don’t like. Material contracts that allow customers, suppliers, service providers or other partners to easily terminate can significantly undermine a seller’s value proposition.
Also, tax and planning is critical. Overlooking tax-related filings often leads to significant turmoil and financial hardship. Inversely, proactive corporate and personal tax planning for founders and executives also can create real economic benefits.
What’s important to have in order before initiating the acquisition process?
Be sure you are prepared to provide copies of well-organized and complete corporate, capitalization and financial records, as well as material contracts, as part of a due diligence review by the buyer. Being well organized on these matters ahead of time will buy a lot of credibility with the buyer. Messy or inaccurate records will cast doubt on the value of your company.
What legal pitfalls often trip up the sale?
Buyers are always concerned about risk. Risk comes from inside your company in the form of personnel — employees, consultants and others — and outside from lawsuits, warranty and return claims, supplier terminations and limits on business operations.
Employees are often the company’s greatest asset and typically a company’s largest expense. Sellers usually engage in pre-emptive measures to entice employees to stay by offering equity, cash and other incentives that require personnel to work as diligently for the buyer as they did prior to the transaction.
Your company’s value proposition may be significantly weakened, and deals have died, if buyers identify agreements that limit rights to develop, manufacture, assemble, distribute, market or sell products.
How do you determine a realistic price?
Depending on the stage of your business and the industry, there are a few methodologies available. The most common are discounted cash flows and price to sales, but this relies upon a history of revenues and costs and/or sales. Early stage companies have a harder time utilizing these valuation methods.
When traditional valuation models are inapplicable, recent transactions in the sector or the valuation of similar public companies can be used. Gauging your value proposition with board members, advisers and strategic partners can help you solidify an approximate value.
Remember that buyers are valuing your business on your financial statements, projections, business plan and opportunities in your industry, along with synergistic opportunities with the buyer.
Who should help a business owner in a sale?
Secure competent, experienced service providers. These people will help you get a better sense of the market, your company’s value and your risk exposures. Get them involved well before the sale to ensure the process runs as efficiently as possible.
A good merger and acquisitions attorney will lead you through the process, identify and mitigate risks, and explore potential resolutions to issues ahead of the transaction. An independent accountant who can review and audit your financial statements also may be needed.
Joshua Geffon is a shareholder at Stradling Yocca Carlson & Rauth. Reach him at (424) 214-7000 or email@example.com.
Social media: Learn more about Joshua Geffon.
Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth
Engaged employees know your company’s expectations and believe their job descriptions implicitly include exceeding them. They use their talents to excel, connect well with colleagues and customers, and move their companies forward.
To learn more about transforming engagement levels in the workplace, Smart Business spoke with Diana Hendel, Pharm.D., CEO of three MemorialCare hospitals in Long Beach. MemorialCare is recognized as one of only 32 companies worldwide to receive the 2013 Gallup Great Workplace award.
How can you recognize an engaged employee?
When engaged employees walk past visitors in our hospitals’ hallways they make eye contact, smile and stop to help people find their way. Disengaged employees hurry by, believing that’s not in their job description. Engaged employees are more productive, customer-centric, safe and successful. They are 3.5 times more likely to be thriving in their lives, experience better days and have fewer unhealthy days. We see a direct correlation between high employee engagement and the service satisfaction scores we receive from our patients and their families.
What’s the first step to improve engagement?
Creating a work environment that values people and aims to ensure each employee has an emotional connection to the company’s mission is at the heart of sustaining employee engagement. Become an active partner with your employees to maintain or improve their health and wellness. Create an environment that makes being healthy easier, with nutritious on-site food options, walking challenges, weight reduction programs, gyms, smoke-free campuses, activity days, health information and more.
Encourage teams to take walking rather than sitting meetings, take activity breaks and make walking workstations available. In MemorialCare’s case, implementing these core aspects of a wellness program resulted in 77 percent of our employees reporting that their organization makes an effort to help them improve their health.
What are the next steps to partnering with employees?
Once you’ve implemented the foundation of a wellness program, the next step is to provide your employees with the knowledge they need to impact their risk factors for chronic disease. Understanding the key biometric numbers of blood pressure, blood sugar, cholesterol and body mass index, and their connection to heart disease and diabetes can help individuals lower their risk. Chronic diseases like high blood pressure, diabetes, asthma and depression are responsible for two-thirds of the total increase in health care spending, so reducing these conditions can help lower health care expenses.
Actively partner with employees who need the most help managing chronic conditions. The latest evidence shows that the support of a team including a wellness coach, nurse, dietician and physician can give individuals with chronic conditions what they need to make important changes.
MemorialCare partners with our employees with chronic conditions to make long-lasting lifestyle changes, lessen complications, improve outcomes, and lower medical and pharmaceutical costs through our program, The Good Life — In Balance. With 93 percent participant retention, the program has led to significant improvements in participants’ blood glucose and blood pressure.
How can employers improve the workplace?
Help identify key factors in moving the dial on your employees’ engagement by participating in a survey, like those initiated by Gallup. These surveys compare your results with other companies so you can learn where you excel or need improvement. There is a direct connection between investing in employees’ wellness and achieving internationally recognized employee engagement levels. By creating a culture where well-being is valued, you can improve health, morale and productivity, while reducing absenteeism as well as the costs of workers’ compensation and health
Diana Hendel, Pharm.D, CEO, Long Beach Memorial, Miller Children’s Hospital Long Beach, Community Hospital Long Beach. Reach her at firstname.lastname@example.org.
Website: See more health and wellness information, podcasts and videos.
Insights Health Care is brought to you by MemorialCare Health System
In this day and age, insurance is a very important line item for businesses. And you don’t want a broker who is unable to deliver results.
Managing Director David Toth, of Momentous Insurance Brokerage, Inc., says it’s critical for your insurance agent or broker to be familiar with your specific industry. If you make widgets, the broker should have experience with manufacturers. If you’re running a hospital, the broker needs experience in the health care industry.
“Experience and past performance of underwriting the business successfully is key,” he says. “You don’t want to be a guinea pig.”
Smart Business spoke with Toth about how to vet and ensure good service from your insurance broker.
What should you be looking for and asking about when vetting a new agent?
Use the vetting process to make sure you have a broker who understands your business, is responsive and shows flexibility. For example, in the entertainment field, you need special insurance enhancements and carefully crafted policy language to ensure the broadest coverage possible. You also need a broker who is capable of adhering to your wishes — it’s not how the broker wants it, it’s how the client wants it.
Ask for referrals, which most brokers are more than willing to share, rather than depending solely on a firm’s website. Also take time to meet the key people in the firm.
Inquire thoroughly about what insurance markets are available, because the more competition the broker can foster for your insurance, the better your program. In addition, inquire whether people from the brokerage sit on any of the governing boards of the carriers they represent, as this means they have influence on policy decisions and/or claims procedures.
One more point of qualification to ask a new broker is: What limit of errors and omissions insurance do you carry? If the brokerage only carries $1 million, is this enough if a broker’s mistake results in a loss to your business? Keep in mind this is the limit they carry for all clients in the firm.
Are there ways to tell if an agent provides good service?
It depends on whom you ask. Some clients might place responsiveness at the top of the list, while others need to be kept abreast of changes in the industry, including trends with insurance prices. So, for example, is the agent sharing the upcoming changes with the Patient Protection and Affordable Care Act? Has the brokerage advised you that if you’re in California your workers’ compensation rates might increase because of changes with the insurance code? Do you already know that with insurance carriers exiting the California management liability market, those lines could increase dramatically?
Other service concerns are:
• How does the agent keep you up to date on the claims process? Does he or she regularly follow up?
• What does the broker do in terms of your premium rates? Is he or she doing all he or she can to obtain the best rates for you?
• Is the agent delivering the renewal two weeks prior to renewal, or waiting until the last minute? Do you feel as if you are part of the process and have control?
• How available is the agent? If it’s important to you on a Saturday, it should be important to the broker on a Saturday.
How do you know whether to stay with your current broker or to move on?
Loyalty is a great thing, but it doesn’t hurt to have another set of eyes. Ask an independent insurance broker to review your insurance program — usually at no cost — and make sure you don’t have duplicate coverage or coverage gaps, while double-checking for extra benefits and/or cost savings. And if someone else can’t improve upon your insurance policies significantly, it confirms that your current broker is doing a good job.
David Toth is managing director at Momentous Insurance Brokerage, Inc. Reach him at (818) 933-2721 or email@example.com.
Blog: Insurance strategies are constantly changing as the market evolves. To keep up, subscribe to our blog.
Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.
Small business owners still remain concerned about access to capital and making sure that they have access to the best solutions for improving their cash flow and finances.
So what specific financial solutions can truly help small businesses throughout the state grow and prosper?
Smart Business spoke with California Bank & Trust Executive Vice President Betty Rengifo Uribe about ways small business owners can leverage some helpful financial solutions to save money and streamline operations.
What specific types of financial solutions should small business owners be considering right now?
There are several different solutions that many business owners can use to improve their finances.
Since access to capital is still a critical issue for many small business owners, entrepreneurs should consider a wide range of solutions, including loans, lines of credit, leases and, perhaps most importantly, Small Business Administration (SBA) loans that may offer very favorable rates and terms.
Beyond that, any solution that can help grow revenues and streamline operations is worth a further look. Some of the most useful include: merchant services, business credit cards and remote deposit.
How can small businesses use merchant services to their best advantage?
Any business, large or small, should be offering customers as many payment options as possible. With the right merchant services solutions and technology, you can accept credit cards, debit cards and even gift cards.
What’s your advice for using business credit cards?
One of the best cases for using a business credit card is that it allows you to keep your business expenses completely separate from your personal expenses. With many cards, you will receive detailed reports of expenses that are already sorted by categories. That can make it a lot easier for both you and your accountant during tax season — saving time and resources.
Many small business owners have cards issued to employees. You have to be careful and monitor spending, but imagine how much easier it is for employees to pay their expenses with a credit card instead of dealing with the tedious paperwork of requesting reimbursement checks. This allows your employees more time to focus on their core job responsibilities.
Additionally, you get the usual benefits of credit cards, such as various rewards programs, a credit line that you’re able to access and protection against fraud for purchases made with the card.
What is remote deposit, and how does it help small business owners?
Business owners and their employees need to make the best use of their time. One way to do that is to avoid frequent trips to the bank to make deposits.
With remote deposit, you can deposit checks right from your office. You simply scan checks and they’re automatically deposited into your account. That means you can make deposits anytime — on weekends or in the evening — which can give you an extended deposit window for crediting funds to your account.
Remote deposit also allows you to store images of checks electronically so there’s no need to store physical copies of deposited items.
What do you say to business owners who don’t see value in solutions like these?
Time and time again these solutions and others really move the needle in terms of streamlining operations and enhancing revenue opportunities. Not every solution fits every business, of course, but with a wide range of choices, your business banker can help you customize solutions that address your goals and add more value to your business.
Betty Rengifo Uribe is executive vice president at California Bank & Trust.
Website: Helpful resources for small businesses.
Insights Banking & Finance is brought to you by California Bank & Trust
Over the past few years, the term “managed services” has become more prevalent in the IT services community. It’s how many companies these days are consuming IT services, especially companies without the need or the budget for a full-time IT department. In its most basic sense, managed service delivery is the utilization of remote tools in which an IT service company can remotely manage and support a client’s IT environment.
These tools allow the remote monitoring, patching, upgrading and support of a client’s servers, workstations, and network devices. These services are usually priced on a “per device or user/per month” model, with the idea that a network can be maintained for a “fixed fee” per month.
“There are distinct advantages to this IT service delivery model, both to the IT company as well as to the client,” says Zack Schuler, founder and CEO of Cal Net Technology Group. “First, from the IT company’s perspective, they can automate most of the routine tasks that are associated with maintaining a computing environment. These remote management tools have many automated processes that can be turned on, thus saving the IT company time and money.”
Smart Business spoke to Schuler about how to get the most from managed IT services.
How do businesses benefit from managed services?
First, this service delivery model helps clients manage their IT budgets a bit more closely, as many of the services are delivered on a fixed fee. This adds predictability to the ongoing cost of IT. Next, if the IT company has perfected its own processes around these tools, the ‘human error’ factor of manual maintenance goes away.
With all of the benefits to managed services, if a company looks at it as its only answer to IT services, it is doing itself a huge disservice. While managed services might be the answer to basic maintenance of the system, it neglects helping companies to truly drive value out of their IT resources. Managed services, when pitched as the solution, put consumers in a highly commoditized mindset. IT services should not be viewed as commodity services since, if delivered correctly, they can add serious bottom line advantages to the business.
How can businesses ensure these services are effective?
A less known term in the industry is ‘blended services.’ Blended services are a strategic combination of managed services and professional services that are packaged together to deliver the ultimate amount of value to the customer. This consists of looking hard at those services that can take advantage of remote tool sets and automation, and subsequently injecting intellectual capital into every other facet of IT that cannot be automated.
Part of blended services consist of pre-scheduled on-site consulting time. The face-to-face interaction that occurs during this time is invaluable to the business. It is during this time that questions like, ‘What is the best way to do such and such on my computer?’ or ‘What application can solve this business process issue that we have?’ are more likely to get answered. It is this face-to-face interaction that leads to new efficiencies being discovered, and people at the company ultimately being more productive.
If services are delivered 100 percent remotely, the chances are slim that a person will pick up the phone and call a relative stranger to ask about the best way to do something.
How can executives be sure they derive value from managed services?
They need to see the value in IT and its effectiveness as a bottom line tool. Too many executives at companies have traditionally been ‘technophobes’ and view IT strictly as overhead, a necessary evil, as opposed to a bottom-line boosting critical part of the business. In short, when consuming IT services, make sure that you are as equally engaged as your service provider.
Make sure that you see past the commoditized services being sold to you, and that you ask your IT company to do more and to prove its real value. Assuming you are paired up with the right organization, they will help you take your company to the next level. This might cost more in the very short run, but in the not too distant future, the ROI will be there.
Zack Schuler is the founder and CEO of Cal Net Technology Group. Reach him at firstname.lastname@example.org.
Insights Technology is brought to you by Cal Net Technology Group
Under the Patient Protection and Accountable Care Act (PPACA), large employers may know that to avoid penalties, they need to offer coverage that is affordable and qualified to full-time staff. But how do you treat a new hire to fold him or her into full-time staff so the employer shared responsibility rule can be applied?
Smart Business spoke with Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions, about how to handle new hires, in the final of a three-part series on the employer shared responsibility provision.
When must health coverage be offered to new hires?
Per the PPACA, new hires must be offered coverage within 90 days if you reasonably expect the person to be full time. However, if, at the time of hire, you cannot reasonably predict whether the person will be full or part time, you can submit the employee to a similar set of measurement/stability periods as the full-time ongoing staff. (For more information on ongoing staff measurement/stability periods, see the second article in this series.) The term ‘standard measurement’ was created to distinguish ongoing staff from what you can use for new hires, which is called an initial measurement period.
How does the initial measurement period work?
Like the standard measurement, the initial measurement period must be continuous months of between three and 12 months. Also, you have an administration period and an associated stability period where, as long as the person remains employed, you treat him or her according to the results of the hourly average from the measurement period.
What administration period rules need to be satisfied for new hires?
First, the period is no longer than 90 days — same as for ongoing staff. However, there is a caveat that the 90 days actually starts counting upon date of hire, keeps counting until you start your initial measurement period, where it pauses, and begins counting again for the period from the close of the measurement period through to the start of coverage. This is pertinent if you don’t measure from date of hire, such as beginning to measure the first of the month following date of hire, so some days between hire date and measurement beginning are deducted from the total 90-day allotment.
Also, the administration period when added to the initial measurement period cannot exceed the first of the month following 30 days of an employee’s anniversary. The longest an employee can possibly go from date of hire to coverage effective is 13 months and some change.
How does the stability period operate for new hires?
Like the ongoing staff, if a 12-month measurement period is chosen, then a 12-month stability period must be chosen. So, if an employee were hired on May 15, 2014, the employer would use a 12-month initial measurement period beginning the first of the month following date of hire, June 1, 2014, to May 31, 2015. Because the employee’s anniversary is May 15, 2015, the first of the month following 30 days of that is July 1, and the employer’s only option for administration is the month of June. If the new hire was deemed full time, he or she is offered coverage for a 12-month stability period beginning July 1, 2015, through June 30, 2016.
So, in this example, what happens with the employee on June 30, 2016?
The employee’s timeline runs from May 15, 2014, to June 30, 2016, so there is enough time for him or her to have eclipsed whatever time frame the employer uses as the standard measurement period for ongoing staff. If this new hire worked for an employer who measures ongoing employees from Nov. 1 to Oct. 31 every year, what happens to benefits on June 30 would be contingent upon the average hours worked from Nov. 1, 2014, to Oct. 31, 2015.
If the employee were full time during this time frame, the benefits would continue to the end of the year, per a 2016 stability period associated with that standard measurement period. If the employee was not full time in the standard measurement period but was during his or her initial measurement, benefits will continue through to June 30, 2016. And if the employee was not full time in either measurement period, benefits don’t have to be offered through the end of 2016.
It’s important to note that if an employee was not full time during the initial measurement but was full time during the standard measurement, you will need to add him or her to the benefits. So, in the running example, if an employee didn’t qualify based on June 1, 2014, to May 31, 2015, hours worked, but you re-measure according to your ongoing rules and find the person was full time during the Nov. 1, 2014, to Oct. 31, 2015 period, then the 12-month new hire stability period of not having benefits is clipped short. It’s replaced by the guarantee of benefits for the full 2016 plan year with an effective date of coverage of Jan. 1, 2016.
This can be complicated, but you should be fine as long as you work with a good consultant and utilize the tools your payroll vendor provides.
Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or email@example.com.
Insights Business Insurance is brought to you by Montage Insurance Solutions
The Patient Protection and Accountable Care Act (PPACA) has a number of employer provisions generally called the “employer shared responsibility.” So, with this responsibility, who, exactly, do you have to offer coverage to as full-time employees?
“It’s not always as easy as 100 percent of your staff sitting in a chair from 8 a.m. to noon, then again from 1 to 5 p.m.,” says Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions. “The reality is employers will have project-based staff, variable-hour employees and other factors that make figuring out ‘full time’ slightly tricky.”
Smart Business spoke with Kennedy about the PPACA’s look back/stability safe harbor, in this second of a three-part series on the employer shared responsibility provision. The first article discussed how the penalties are triggered under employer shared responsibility.
How does the look back/stability safe harbor work?
This provision allows an employer to look at ongoing staff and make a technical calculation on whether or not a person is supposed to be offered benefits under the PPACA. The legislation applies month-to-month, but because the government realizes that a monthly application would be administratively crippling, an optional safe harbor exists where you can extend the length of time used to measure employee hours, and then that data determines which employees qualify.
For ongoing staff, you get three new time frames to calculate with: a measurement period, an administration period and a stability period.
What is a measurement period?
The measurement period is a time frame you get to select — it has to be continuous months and can last anywhere from three to 12 months. Obviously, the shorter the period, the more likely to have irregular spikes; the longer the period, the more it’s a true measure of an employee’s average.
Essentially, you simply define the period of time, and those are the months that an employer uses to calculate employee hours worked. For example, the employer might select a 12-month measurement period and choose to run it from Nov. 1 to Oct. 31 every year. In this case, the employer would look at the hours worked over this period of time to determine each employee’s average hours worked to see if it is more or less than the PPACA-mandated 30 hours — thus qualifying, or not qualifying, for benefits.
What’s involved during the administration period?
The administration period is where you, the employer, have time to evaluate the results of your measurement period, and take care of logistics. This period cannot be longer than 90 days. For practical purposes, this would be used to see who is benefit eligible, plan your open enrollment meetings, distribute benefit information and then collect/process all of the applications for the upcoming plan year.
Using the previous example’s time frame, an employer might have this period run from the end of the measurement period to the end of the year, e.g., Nov. 1 to Dec. 31.
Once an employer moves on to the stability period, what happens?
In the stability period, as long as an employee remains employed, employers must treat him or her according to whatever average the measurement period deemed them — either full time or part time — regardless of the hours worked. So, if an employee measured as full time during the measurement period, you have to continue to offer him or her benefits through the entire stability period even if hours dip lower, as long as the person is still employed.
The stability period has to be at least six months and also no shorter than the time chosen as the measurement period. So, in the example from before, because the measurement was 12 months, the stability period also needs to be 12 months. If employees were measured from Nov. 1, 2014, through to Oct. 31, 2015, the employer would enroll employees throughout the end of 2015 for their 2016 plan year.
Then, the measurement, administration and stability periods continue to go on, overlapping such that every plan year occurs back to back without a break, and each plan year’s eligibility is associated with the hourly performance of employees during the preceding associated measurement period.
In the final of this three-part series, we’ll discuss how to treat a new hire to eventually fold him or her into your employee hourly average calculations.
Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or firstname.lastname@example.org.
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