If your company sponsors a pre-approved defined contribution retirement plan, such as a 401(k), money purchase or profit sharing plan, your plan documents will need to be completely revised and restated sometime between May 2014 and April 2016.
The IRS requires this restatement process every six years to incorporate all of the regulatory and legal changes that have been imposed by Congress. Without it, the plan will lose its tax-favored status.
Your retirement plan administrator should be having a dialog with you about this already, says Bonny Lightner, J.D., Manager of Technical and Legal Compliance at Tegrit Group.
“We try to get to people right away, especially if they haven’t done anything with their plan in the past six years,” she says. “If plan sponsors know in advance, they can budget for it and have time to be able to really look at it.”
Smart Business spoke with Lightner about what employers need to know regarding restatements, and how to take full advantage of this opportunity.
Which plans must undergo restatement?
About 80 percent of all retirement plans rely on pre-approval letters from the IRS, where the IRS gives its ‘blessing’ to a plan document format with certain limited elections for plan provisions. While all plan documents are extremely complex, a pre-approved document can make a plan less expensive to create and operate than an individually designed document.
All pre-approved defined contribution plans must undergo the restatement process during the upcoming two-year period.
What does the restatement process involve?
This process involves the document drafter — such as a third-party administrator — reviewing, rewriting and updating the plan and summary plan descriptions (SPD), and then assembling and delivering the plan, SPD and related policies to the plan sponsor for approval and signature. Related policies may include separate loan policies, qualified domestic relations orders policies — which are used as part of divorce settlements to divide up a participant’s 401(k) benefits — or withdrawal policies.
How else can business owners benefit from going through a restatement, aside from retaining their IRS tax-favored status?
The plan restatement process is an opportune time for a comprehensive plan review. Don’t just update and restate the document, have your document drafter take an in-depth look at the plan in order to see if it is really meeting your needs. Use this time to:
- Confirm the document provisions match the actions of how the plan is being operated.
- Identify whether changes are necessary or wanted going forward, such as wanting to add a Roth feature.
- Enhance the plan design to be more in line with your objectives, such as tax and retirement objectives, based on workforce demographics. For example, if a person is 50 years or older, he or she can defer catch-up contributions on top of his or her regular deferral amounts. If an employer sees its workforce is aging, the company might want to add that.
- Maximize the value of the plan by making sure that it still meets the needs of your company and its employees.
This type of consulting may or may not be part of the restatement fee, but either way it’s something to strongly consider. Otherwise, six months down the road, the plan sponsor might say, ‘I really don’t like X provision.’ The change will then require an amendment — and amendments have a fee.
Even if you love your plan the way it is and want to keep all plan provisions the same, you still must have your plan updated during the restatement period from May 2014 to April 2016. The fee to restate the plan for IRS compliance may be paid from the plan’s assets if the plan document permits.
Remember, failure to restate a pre-approved plan could result in loss of the plan’s tax-favored status with the IRS. This in turn could result in loss of deductibility of employer contributions to the plan, immediate recognition of income to plan participants on vested account balances and loss of tax-exempt status to the plan’s trust. Missing the restatement deadline is a serious matter. ●
Bonny Lightner, J.D., is manager of Technical and Legal Compliance at Tegrit Group. Reach her at (330) 983-0560 or email@example.com.
Insights Retirement Planning Services is brought to you by Tegrit Group
Restaurants, hotels and other hospitality companies that have not traditionally offered health insurance benefits to employees are struggling to meet the mandate to provide a plan or face penalties starting in 2015 under the Affordable Care Act (ACA).
That need has prompted the insurance industry to respond with cost-effective strategies to help companies with low-wage employees avoid some of the penalties for not providing health insurance coverage.
“There are gaps in the regulations that have allowed the insurance industry to create products to address this issue,” said Daniel L. Meracle, a partner at Benefitdecisions, Inc.
Smart Business spoke with Meracle about which health benefits solutions make sense for businesses in the hospitality industry.
What plans are available to address the need for companies to avoid penalties while controlling costs?
The ACA does not mandate that doctor or hospital visits, prescription drugs or laboratory services be included in the definition of minimum essential coverage (MEC). MEC is what employers are required to provide or pay a penalty of $2,000 per employee, minus the first 30 employees.
Also, self-funded plans do not have to offer coverage for any of the 10 essential health benefits. However, all group health plans must provide ‘recommended preventative services’ at 100 percent with no deductible, copayments or coinsurance. That leaves an opportunity for self-funded MEC plans that provide unlimited coverage for preventive services as the only benefit.
MEC plans are funded at the maximum liability level of about $50 per person, per month. An employer can have the employee pay the entire $50 premium or the employer can pay part or all of the premium. Just by offering MEC to employees, the employer avoids the $2,000 penalty while meeting the employee’s requirement for having coverage, so the employee isn’t liable for the individual mandate of $95 or 1 percent of income, whichever is greater.
In addition to the MEC, employers can add another layer of benefits by providing a limited medical plan that pays first dollar, meaningful benefits for emergency room, doctor’s office visits and prescriptions — the expenses that really impact the budgets of lower wage employees. Those plans start at $50 to $80 a month, and employers can have employees pay all or nothing.
Even if employees pay the entire cost, they can benefit by using pretax dollars if the plan is offered by the employer, rather than purchasing the coverage individually.
But wouldn’t the limited medical plan option still leave companies liable for penalties related to minimum value and affordability?
Yes, an employer would need to offer the next level of coverage, which is a minimum value plan, or be subject to a $3,000 penalty if an employee purchases a plan on the exchange and receives a subsidy. To meet the affordability test, the employee must pay no more than 9.5 percent of his or her income for the employee-only coverage.
However, you’re dealing with a smaller pool of employees at this point because, even at 9.5 percent of income, it’s going to cost the employee about $2,000 a year for a plan that has a deductible that ranges from $2,000 to $6,000. Employees will not see the value in that, since their contribution and the deductible will represent more than 45 percent of take home pay and they will decide to pay the individual penalty or take the MEC.
Therefore, many employers will stop after the first two options — MEC and limited medical benefits — and risk the liability of the $3,000 penalty because they will not be affected by that many employees. If you start with 10,000 employees and wind up with several hundred that actually go to the exchange, get coverage and receive a subsidy, you’ve reduced your liability tremendously from having to pay $2,000 per employee for all employees.
Even if the employee goes to the exchanges and receives a subsidy, their remaining cost for the plan and the same deductible levels of $2,000 to $6,000 will be a large portion of their take home pay, so many of them will not purchase the coverage in the exchanges either.
A number of insurance carriers have developed MEC and limited medical benefits plans because they see tremendous market potential in them. ●
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.
Expert witnesses are frequently used in the courtroom by attorneys. While many qualified experts exist, the “right” expert can greatly assist counsel and the litigation with his or her testimony.
An expert witness can offer testimony about a scientific, technical or professional issue in a court case. Finding the right expert is often a difficult task, but attorneys generally look for several attributes when selecting expert witnesses.
Smart Business spoke with John T. Alfonsi, managing director, Cendrowski Corporate Advisors LLC, about the qualities attorneys look for in an expert witness.
What are the key attributes an expert witness should possess?
Attorneys generally seek an expert witness who possesses at least four attributes: Relevant professional experience; a history of testimony in which that person has represented both plaintiffs and defendants; active involvement in his or her field of expertise; credentials.
Why are professional experience and testimony history both key qualities?
Opposing counsel may try to discredit an expert witness by demonstrating a lack of relevant business and/or courtroom experience. Though a potential expert may have years of experience, this does not necessarily mean he or she has a high level of expertise in the specific area of the case, or that his or her experience demonstrates the unbiased nature that an expert must possess.
For example, some experts have only provided their services on behalf of either the defendant or plaintiff. Such a track record might be used by opposing counsel to infer a bias on the part of the expert, even if the bias does not exist.
Why is active involvement an essential quality of an expert witness?
Active involvement often manifests itself in an expert’s writing and speech; both are key elements of his or her testimony. Experts who contribute to their field generally pride themselves on having a thorough understanding of the subject matter. They may be most up to date on recent rulings and opinions regarding relevant analytical techniques, and will generally ensure their testimony complies with these items.
Active involvement may also manifest in the expert’s ability to convey findings to nontechnicians. Experts primarily work with individuals who readily understand the technical terms and analytical methods of the field. This peer group may be quite different from a judge or jury pool.
Involved experts will recognize this difference and have a profound understanding of their area of expertise so they can better articulate their findings.
Do attorneys generally look for specific credentials in selecting an expert witness?
Attorneys generally engage experts who hold credentials in their field, requiring the expert to pass rigorous tests, participate in continuing education programs and/or possess significant related experience. Multiple credentials adhering to such criteria might exist in some fields.
For instance, business valuation credentials fitting the previously mentioned criteria include: Accredited in Business Valuation (ABV), Certified Valuation Analyst (CVA), Certified Business Appraiser (CBA) and Accredited Senior Appraiser (ASA). No one credential is generally better than the other, but credentials generally emphasize the expert’s commitment to his or her profession and understanding of the technical issues.
Is analytical ability the most important attribute of an expert?
It is a key attribute, but sometimes not the most important. Though an expert may have strong analytical abilities, it is important that he or she be able to articulate his or her findings in a clear and concise manner, both on the stand and in written testimony.
To specifically address this issue, some experts purposefully make liberal use of visual tools, including graphs and flowcharts, and include detailed explanations to ensure findings are well articulated and written at a level that nonbusiness professionals can fully comprehend. These experts might also assume a reader has little- understanding of the technical aspects of the case, or of the analytical methods employed.
This strategy helps ensure a reader or listener will not be confused by necessary technical jargon or methods that might otherwise be nonintuitive to a layperson. ●
Insights Accounting is brought to you by Cendrowski Corporate Advisors LLC
More legal disputes are being resolved through alternative dispute resolution (ADR) in an effort to sidestep the often high cost and long timeline of traditional litigation. ADR is often a mystery, however, because it doesn’t receive the same attention that typical courtroom proceedings do through traditional media. Parties considering ADR should know the differences between and benefits of arbitration and mediation.
In addition to often being less expensive and quicker than litigation, arbitration and mediation both rely on a neutral third party to assist the parties. Both proceedings are usually confidential, and the record and resolution do not become a matter for the public. But the similarities end there.
Smart Business spoke with Brian E. Cohen, an associate at Novack and Macey LLP, about when arbitration or mediation is the appropriate solution.
What is arbitration?
Arbitration is like a typical litigation proceeding in that the arbitrator, or arbitration panel, will, in many ways, act like a judge and determine the respective rights of the parties. An arbitrator’s ruling is a final, binding resolution.
A growing number of commercial contacts contain arbitration clauses that require the parties to use this ‘stripped down trial’ process rather than litigating their case in court. The specific form of arbitration differs from case to case, but often involves reduced document discovery, limited witness testimony and fewer procedural restrictions than accompany a traditional court case.
What is mediation?
Mediation is a less formal process through which the parties attempt to settle their dispute by mutually agreeing on the outcome. The mediator is there to facilitate a conversation that offers the parties an opportunity to express their interests, listen to the other side’s point of view, and, in some cases, agree to resolve their dispute.
Mediators do not deliver a judgment, determine the parties’ rights or declare one side the winner and one side the loser. He or she does not have the authority to compel the parties to do anything. In mediation, each party retains control over its fate rather than surrender that control to a judge or jury. At the end of the day, only the parties can decide whether or not they want to agree to a particular set of settlement terms.
How should clients prepare to enter into either mediation or arbitration?
As with a trial, the goal of arbitration is to ‘win.’ Is there anything the client should know about the arbitrator(s)? What are the strengths and weaknesses of the case? How can the client be helpful during the proceeding? Of course, attorneys and clients should discuss whether the client, or any of its employees, is going to testify at the arbitration, and be sure to go over that testimony.
Preparing for mediation is different, however, because the goal of mediation is not the same as the goal of arbitration. Attorneys and clients should discuss and agree on their particular goals ahead of time. Is it to settle at all costs? Is it to get close to settling with the hope that the other side’s offer might improve a few days later? Is it simply to have an opportunity to be heard by the other side — to hear their perspective?
After the goal has been established, logistical issues remain. Will the client speak to the mediator or to the other side during the mediation? Will the client or attorney make an opening statement? If the client is going to verbally participate, what kind of message would be best for the client to deliver?
In either case, clients should be sure to talk to their lawyers about what to expect from the process and how to best prepare for whichever form of ADR they are using. ●
Insights Legal Affairs is brought to you by Novack and Macey LLP
Emergency room overutilization is a prevailing problem for most employers. For example, looking at HealthLink’s book of business, almost invariably more than 65 percent of ER visits are for non-emergency reasons. They fall into the categories of disease and virus or symptom, such as headaches, gastroenteritis, sinusitis and influenza.
“The cost of an average ER visit ranges from $1,300 to $1,500, but the average urgent care or client visit ranges anywhere from $120 to $500,” says Mark Haegele, director of sales and account management at HealthLink.
“If you move any of those visits from the ER to other care settings, you’re saving roughly $1,000 per visit,” he says. “And hundreds of visits add up to hundreds of thousands of dollars.”
Smart Business spoke with Haegele about turning member information into intelligence, in order to control plan costs.
What’s the first step to creating a strategy to decrease ER utilization?
It’s important to look at your health plan membership data to find patterns. Then you can focus on a communication strategy and specific messaging to change behavior. It helps if your health care plan is partially self-funded or self-funded because you typically have access to more data.
To determine what actions to take to control ER utilization and cost, first look at the number of visits your group has in 12 months, comparing that year-over-year. Even if you’re not seeing an increase, there will be opportunities for cost containment.
Also, find out if you have a frequent flier issue. Are people going to the ER three or more times in a given year? Are some going five or more times? Determine what days of the week people are visiting the ER. If there’s a spike on weekends, educate members on how to access other care settings on Saturday or Sunday. You can look at where the emergency care is taking place. Is it isolated to a particular community or split across a region of the country? Finally, break the visits down by disease, virus and symptom versus injuries and poisonings. If someone breaks an arm, for example, he or she is going to go — and should go — to the emergency room.
Once you’ve examined the data, what’s next?
Once the data is gathered, and you’ve discovered some of the challenges, set up metrics. If your average number of ER visits have been consistently at X per 1,000, or X per year if your membership has been consistent, then the question becomes can you eliminate 30 or 40 percent of the visits for disease, virus or symptoms? That’s your target for the following year.
How can employers educate and influence health plan members?
You need to come up with a multi-faceted communication strategy. Create one piece of communication that goes to all members, such as a flier on the proper use of the ER. But you also should reach out to certain groups differently, such as frequent fliers.
Use the information about what hospitals members are visiting to generate a directory of urgent cares and clients in and around the same zip code. Nearly 80 percent of adults ages 18 to 64 visited the ER in 2011 due to lack of access to another provider, according to Amerigroup. Another way to influence members is to ensure they know the number for the health plan’s 24-hour informational nurse line, which most plans have.
The more you share specific costs in your communications, the better people will respond. Include a grid that specifically shows the cost to the employer and member for all different care settings.
Another idea is to communicate a list of non-emergency diseases or symptoms that create overutilization. This gives people food for thought. And put it in plain English. Don’t say gastroenteritis; say stomach pain. Don’t say urinary tract infection; say kidney pain. However, be careful how you coach this; you don’t want to tell people not to go to the ER. It’s more about awareness and education.
What about raising co-pays?
Yes, higher co-pays get people out of the ER, but raising the cost has become too abused — and it often gets shifted from the employer to members. Before you start digging into the member’s pocket, give them the opportunity to do the right thing on their own. ●
Insights Health Care is brought to you by HealthLink
There are many ways for fraud to be committed against your organization, but corporate checks are one of the more popular attack methods.
The problem is not a small one. Fraud against bank deposit accounts cost the industry $1.74 billion in losses in 2012, according to the American Bankers Association Deposit Account Fraud Survey. Of that amount, debit card fraud accounted for approximately 54 percent of losses, followed by check fraud at 37 percent.
To combat the problem, banks have added layers of fraud protection through services such as positive pay. By matching a list of checks issued by a business against the checks presented for payment, positive pay can spot discrepancies before fraud occurs.
“The positive pay service is essentially a fraud protection service,” says Korlin Scott, senior vice president and director of Commercial Product Management at FirstMerit Bank. “It’s a way for a business to monitor check disbursements and control items that might potentially be fraudulent.”
Smart Business spoke with Scott about how positive pay works and recent enhancements that provide additional security.
Why is positive pay a necessary business feature of corporate disbursement?
Phoenix-Hecht conducts an annual survey of corporate treasury managers at middle market and large corporations. The 2012 survey found 82.5 percent of midsize and 76 percent of large corporate respondents experienced attempted check fraud.
With the increasing sophistication of forgers and technology, corporations are turning to banks to detect and reduce fraud exposure. Large corporations are more likely to use positive pay, according to Phoenix-Hecht, with smaller corporations citing cost as the biggest reason for non-use. However, the relatively small fees pale in comparison to the potential costs incurred when a fraudulent incident occurs.
How exactly does positive pay combat corporate check fraud?
The service requires customers to provide the bank with a list of issued checks, which they can key in manually, upload as a spreadsheet or from an accounting system, or send automatically via direct connection. Then, as payees present checks, the bank matches details on each against the records.
There are extra levels of service in which checks are viewed systematically to match against things like the check microdata and the courtesy amount versus the legal amount. Other fields flag things like stale dated checks. By matching all components of information that are on a check against the issue record provided by the customer, the bank can provide the exception to the customer whenever there’s a discrepancy.
What are some recent improvements to positive pay services?
Standard positive pay services typically scan the check amount and serial number, but one enhancement adds another checkpoint: the payee name. If that name doesn’t match, exceptions are returned to customers daily for review and payment decision.
As the banking industry has moved to settle check payments by clearing check images, through processes like remote deposit capture, positive pay with payee name verification helps offset additional exposure to fraud due to loss of physical check stock security features.
In addition, checks are typically reviewed during a nightly posting process. Now, bank tellers scan checks as they’re passed across the counter, before the posting process begins. It gives tellers control at the point of presentation.
One of the biggest ways check fraud is committed is by fraudsters intercepting real checks and either washing the payee name off and adding their own name, or recreating the corporate check in their own name. Then, they’ll present those to the branch.
With its added layers of security, positive pay can proactively spot discrepancies before funds are paid out to help companies catch check fraud as well as prevent minor errors that throw accounts out of balance. The key, though, is being proactive.
People get excited about this when something actually happens to their account, but by then it’s too late. Positive pay is beneficial because it gives the ability to prevent potential losses by being proactive, instead of reactive.
Whether it’s actual fraud or error-related processing, you can mitigate potential losses that may be fairly notable. ●
Insights Banking & Finance is brought to you by FirstMerit Bank
Benjamin Franklin once stated, “In this world nothing can be said to be certain except death and taxes.” If he were alive today, he might include on his list of certainties an annual increase in health care costs for employers and employees.
Smart Business spoke with Jonathan L. Stark, a partner at Brouse McDowell, regarding the increased attention employers are giving to instituting wellness programs to combat spiraling health care costs and the potential issues that may arise when employers structure such programs.
Can employees be required to participate in a wellness program?
Yes, employers can institute mandatory wellness plans, but such plans cannot discriminate against plan participants or beneficiaries based upon eligibility, benefits, or premiums because of a ‘health factor,’ or violate other laws.
Health factors include a participant’s physical and mental illness, claims experience, medical history and genetic information. Discounted insurance premiums or rebates of deductibles or co-payments if the participant abides by health promotion or disease prevention programs are allowed.
What significant changes have the final wellness regulations generated?
The final rules, effective Jan. 1, 2014, implement a change in the Affordable Care Act that increases the maximum award allowed under a wellness program from 20 percent of the total cost of health care coverage (employee and employer cost) to 30 percent. The maximum reward can be 50 percent for wellness programs that prevent or reduce tobacco use. Also, the definition of a ‘participatory’ program has changed slightly. Previously, a program, such as a walking program, was participatory, but now it falls within the category of an ‘activity-only’ program which must offer the five wellness program requirements. Now, participatory programs are more passive, such as attending health education seminars or receiving reimbursement for purchasing a gym membership.
Can a wellness program dictate that employees not use tobacco?
A wellness program can condition rewards on a participant’s non-use of tobacco. However, employers should be aware that some states have laws that protect employees engaging in lawful conduct during off-duty hours, including protections for tobacco use.
If a program offers rewards to participants for achieving a health outcome, what problems could arise?
Employers should be careful in requiring participants to achieve any specific health outcome (e.g., specific cholesterol level or body mass index) to avoid issues in which health factors may lead to discrimination based on health status, genetic information, medical conditions and disabilities. If a specific target is used to measure compliance in a wellness program, or if a certain activity is required, there should be a reasonable alternative standard for a participant who may find the standard difficult to meet due to a medical condition or if the participant’s doctor advises the participant that satisfying the standard is too risky. An option to waive the standard must also be offered.
All outcome-based and activity-only wellness programs must meet the following five requirements:
- Eligible individuals must have the opportunity once a year to earn health-contingent awards.
- Available awards must not exceed 30 percent of total health plan coverage costs, however, if there are tobacco cessation rewards, those rewards may increase the reward limit to 50 percent.
- Programs must be ‘reasonably designed’ to promote health or prevent disease.
- Plan information must describe how the reward is earned and offer reasonable alternative means to obtain the reward.
- Participants must have the opportunity to earn the reward. Activity-only programs must offer a waiver of the requirement or a reasonable alternative to the initial standard if an individual’s medical condition makes it unreasonably difficult or medically inadvisable to achieve the initial standard. And outcome-based programs must offer a waiver or reasonable alternative to every participant. ●
Insights Legal Affairs is brought to you by Brouse McDowell
Health care reform news, and the ever-present talk of delays, has created confusion for employers and employees alike, but they still must consider certain tax issues for 2013 and 2014.
“There’s so much information, you might ask yourself, ‘Where do I turn?’” says Kimberly Flett, CPA, QPA, QKA, director of retirement plan services at SS&G.
Beyond starting with the major federal governmental agencies — the IRS, Department of Labor (DOL) and Department of Health and Human Services (HHS) — for the rules, employers need a team of well-informed advisers.
“A plan sponsor’s burden is to make sure that they have the right players,” she says.
Smart Business spoke with Flett about tax implications of health care reform that everyone needs to know.
What do taxpayers need to know for their 2013 taxes?
High wage earners — a $250,000 threshold for married filing jointly, $125,000 for married filing separately and $200,000 for all other taxpayers — must pay a Medicare tax of an additional 0.9 percent, for a total tax of 2.35 percent. Those with $200,000 or more of income had this tax withheld at the payroll level during the year, but it doesn’t take into account spousal income. As you get your tax information together, review your W-2 to ensure payroll withheld enough, and work with your tax adviser to determine if adjustments are needed on Form 1040.
A second Medicare tax of 3.8 percent will be assessed on net investment income of high wage earners, which includes gross income from interest dividends, royalties, rents and annuities; other gross income derived from a trade or business; and gain attributable to the disposition of property. This applies to many business owners who need to make sure they’ve kept good records for their tax advisers.
Another change is with the itemized deductions on Schedule A of Form 1040. The medical expense deduction increases from 7.5 to 10 percent for those under 65.
Is the individual mandate still going ahead?
The individual mandate is still going into effect for 2014 taxes, on an individual’s Form 1040, with few exemptions. Those without health insurance coverage will pay a penalty based on the household, so a taxpayer could be paying penalties for dependents as well. The 2014 penalty is the greater of either $95 or 1 percent of modified adjusted gross income. Over time, the $95 increases to $695.
What’s crucial for employers to understand about the upcoming year?
There’s a lot of confusion surrounding the Patient Centered Outcomes Research Institute (PCORI) fee, which helps pay for the Affordable Care Act. If your company sponsors a fully insured health plan, the carrier was required to pay $1 per covered life by July 31. An additional fee of $2 per covered life is due by July 31, 2014.
However, if your company self-funds its health plan, it was required to pay the PCORI fee in July. Many businesses missed this, and therefore need to talk to their tax advisers immediately. Although guidance is still evolving, the IRS may assess penalties.
If your company has a health reimbursement arrangement (HRA) or flexible spending account (FSA) that’s not affiliated with a medical program, it’s considered self-funded and could be subject to PCORI fees for employees. Again, many employers missed these fees.
Other areas to watch are:
- FSAs have been capped at $2,500, but an employer sponsoring one of those plans must have all document amendments related to this in place by the end of 2014.
- Self-funded health plan sponsors must pay a reinsurance fee — $63 times the covered lives — by the end of 2014. A head count is due to HHS by Nov. 15, 2014.
- The employer mandate may have been delayed, but 2014 is the time to plan. Start realizing how you can count your employees, and fulfill the requirements.
Finally, the DOL is now auditing health and welfare plans. They are looking to see if medical plans, HRAs and FSAs all have updated Summary Plan Descriptions. They also are checking on notice requirements, such as the Summary of Benefits and Coverage given to employees. This has been a highly unregulated area, but the DOL is starting to be active — and companies are coming under scrutiny. ●
Kimberly Flett, CPA, QPA, QKA, is director of retirement plan services at SS&G. Reach her at (330) 668-9696 or KFlett@SSandG.com.
Insights Accounting & Consulting is brought to you by SS&G
Many companies talk about the need for employee engagement, but few are taking the necessary steps to engage their workforce.
“While it’s a commonly used term, it’s not common practice. For example, 75 percent of leaders have no engagement strategy, yet 90 percent consider engagement to be a critical component of a company’s success,” says Beth Thomas, executive vice president and managing director of Consulting Services at Sequent.
“Right now, 70 percent of employees are disengaged at work, and it’s costing companies over $300 billion in lost productivity, turnover and diminished business success. Based on statistics, you would think that companies would view this as a critical initiative,” says Thomas.
Smart Business spoke with Thomas, author of “Powered by Happy: How to Get and Stay Happy at Work,” about how to boost employee engagement.
Why have companies been slow to address engagement?
There are several reasons. Some companies believe customer satisfaction is engagement — it’s not. You can have happy, disengaged employees who are genetically happy or pleased with the company, but are not engaged in their work or in the right role.
Surveys will address items like wages, benefits and the company café, but that doesn’t get into the emotional connection to work and employees’ desire to use discretionary effort to be the best performers they can be.
Sometimes companies conduct surveys and do nothing with the results, which creates even more disengagement.
What is the process of engaging employees?
We utilize a nine-step process:
- Create a vision. What do you want to achieve? What’s the value proposition?
- Determine the metrics of success. Use benchmarks and create performance goals needed to improve engagement, which will also build customer loyalty and your bottom line.
- Align expectations. Once you have a vision and decided how to measure success, develop an employee engagement survey designed to get the information needed to improve engagement.
- Execute the survey. We conduct an educational webinar first, so employees know why the survey is being done and their role in making it a success.
- Create an action plan based on the survey results. The plan should prioritize tasks and assign ownership and timing to each milestone. Communicate the survey results and how they are being used.
- Establish a team of influencers. This group will organize activities — based on survey results — to help achieve and sustain a higher level of engagement.
- Develop leaders and frontline managers. They need to understand how to impact the company culture and employees every day. Many managers think they are prepared to coach and lead engagement, but they really aren’t.
- Evaluate if course correction is needed. Training or action plan activities may need to be modified to ensure you’re set up for a successful journey toward engagement, rather than a pit stop.
- Ensure sustainability. Creating that initial engagement is easier than sustaining or improving engagement. We have an engagement application that provides managers with a support network of tips, tricks and hints on how to continually drive engagement. You have to create engagement as a habit; it occurs naturally because of the way you manage people.
What mistakes do companies make when implementing engagement strategies?
One is rewarding performance without behaviors. Someone might be a great producer, but have a bad attitude. Knowing that they have a bad attitude and rewarding them based on sheer numbers or performance is a mistake.
The management and leadership team also has to believe and drive the engagement process; it’s not enough just to say it’s an important initiative.
The benefits of engagement are so great that more companies should make it an emphasis. Engaged employees generate 40 percent more revenue than disengaged ones and are 87 percent less likely to leave. So being able to recruit, retain and benefit from engaged employees will impact your bottom line and the success of your company. ●
Insights HR Outsourcing is brought to you by Sequent
As you set your New Year’s business objectives and goals, the bulk of your attention is probably focused on driving revenue growth, budgeting, cost control and other operational matters. But these are all part of a greater business purpose: To serve your customer.
What better time than at the beginning of a new year to analyze who your customer and target audience really are? If you don’t know, then no matter how extensive your sales and marketing efforts are, they may ultimately prove fruitless.
Are you aware of your traditional customer’s current needs, attitudes and behaviors? Do you know if they’ve changed those behaviors? And if so, how and why?
With our own customers, for example, we hear a lot about aging supply chains, changing workforces and evolving customer bases. People that your team members have been working with for years are retiring. Your client — and your client’s client — has transformed.
Observe the landscape
There is a younger generation of buyers who look at things differently. Those leaving the workforce may not have relied as heavily on the Web. They may not have invested time, energy and resources thinking about search capabilities and their digital presence. But this new group does.
What is it that the new buyer wants? And is the person who used to knock on your door to see you now going to research you online before they’re willing to sit down and talk? Buyer behavior has changed, and you better know your changing customer because they know you.
According to a report from Forrester Research, “Buyers are often more than two-thirds of the way through their problem-solving cycle before they engage with a supplier’s sales department. By the time they interact with salespeople, they demand more detailed information and expertise, which requires marketing and sales to deliver a well-orchestrated buyer experience.”
This means by the time you actually make contact with that potential customer, he or she is already familiar with your organization. Your team better have the same message internally as the one you’re putting out there online. You never know where or how you’re going to be found.
Start this process by conducting an internal analysis of your customers. Learn how the new customers with whom you’ve worked over the past year found you and whether this is different than in the past. Look at your long-standing customers and identify where they met you. Was it at a trade show, through a referral or in the Yellow Pages? It’s likely that your more recent clients found you through completely different means.
Examine what you’ve found
Next, analyze the results. These will help you see whether you are marketing to where your new clients will find you.
Keep in mind that before you can effectively develop any marketing strategy and implement the tactics, you need to know how your target audience will consume your content and where. Don’t waste money attracting the wrong audience.
As they say in search, it’s not how much traffic you get; it’s whether you’re getting the right traffic. If converting your audience is the goal, then when you’re not reaching the right audience your message gets lost.
One way to ensure the right message for the right audience is by holding a customer roundtable. This not only provides the benefit of networking, it gives you the opportunity to directly ask your clients, “Why did you choose us? How did you find us? And what was the value proposition that ultimately was the decision-maker?”
You may think you know the answers, but getting a group of people together in an open forum could lead you to understanding behaviors and reasons you hadn’t previously recognized.
All of this may sound complicated, but it is really pretty simple stuff: The more you know your customer, and the more you know the best way to communicate with them, the more effective your relationship is going to be.
Dave Fazekas is vice president of digital marketing for Smart Business. Reach him at firstname.lastname@example.org or (440) 250-7056.