Cascade Capital Awards 2013 --Technology category -- Best Story
As technology evolves, AtNetPlus Inc. evolves along with it.
The managed IT services provider was an early adopter of several technologies that have changed the industry. For instance, AtNetPlus offered online backup solutions years before competitors, was one of the first to become certified by VMware, and embraced the managed services business model long before it was common practice in the industry.
AtNetPlus takes pride in its cutting-edge technology solutions designed to fit the needs and budgets of small and midsized organizations. From moving companies to the cloud to providing managed IT services and network design and installation, the company’s certified IT specialists deliver headache-free monitoring, maintenance and support.
Jay Mellon, CEO, and Jim Laber, president, have driven the company’s success by creating customer-centered service and recognizing which emerging technologies are viable solutions for small business.
Cybersecurity is a critical issue currently facing all businesses. AtNetPlus has developed a comprehensive solution called Attack Safe, designed to make cybersecurity accessible and affordable for its clients. Designed to evaluate clients’ current security policies and procedures, Attack Safe identifies gaps and implements a prioritized plan to lower risk.
With continued dedication to customer-centric solutions and services, AtNetPlus has experienced sustained growth over the past several years. The number of clients served has increased along with the company’s own headcount and market presence. To accommodate this growth, the company is implementing plans to physically expand its current offices. ●
How to reach: AtNetPlus Inc., (330) 945-5685 or www.atnetplus.com
Every business, regardless of size, desires to maximize value to its shareholders. And maximizing value usually means minimizing tax liability. For many businesses, the decision between filing as a C corporation versus S corporation can have a significant effect on overall tax liability, and by extension shareholder value.
“As a business owner, you should be asking yourself, ‘Is our filing status maximizing shareholder value?’ If you’re not sure, it is probably time to talk to a professional,” says Wonsun Willey, tax partner at Sensiba San Filippo LLP.
Smart Business spoke with Willey about the benefits of C-corps and S-corps.
What makes an S-corp different from a C-corp?
C-corps and S-corps both provide the same legal benefits. The difference lies in how the corporations are taxed. Income from a C-corp is actually taxed twice. The C-corp itself is taxed on its net income at its corporate tax rate. Then, after paying tax at the corporate level, shareholders also pay dividend tax on distributions. Income from an S-corp, on the other hand, is only taxed at the shareholder level at individual income tax rates.
Common sense would indicate that it’s better to be taxed once rather than twice. In many cases, that’s exactly right. But it’s not always that simple. Variances in tax rates, the availability of incentives, ownership requirements and investment opportunities can cloud the picture. There isn’t one ‘right answer’ that applies to every organization, but there is almost certainly a right answer for your organization.
What businesses are eligible for S-corp status?
S-corp filing status is intended as a filing option only for small corporations. An S-corp can have no more than 100 shareholders, can only include U.S. citizens and resident aliens, and must have a calendar fiscal year. An S-corp also does not have the ability to have different classes of stock. So organizations that have foreign ownership, a large investor group or that may seek private equity investments are not good candidates for S-corp status.
What is involved in making or terminating an S-corp election?
Making the S-corp election is relatively simple. An existing corporation must file a Form 2553 with the IRS. If the election is made within 75 days of formation of the corporation, there are no additional tax ramifications.
Converting a long-established C-corp to an S-corp can be more complicated. The accounting rules for S-corps are different, often making the conversion a cumbersome task. An S-corp can also face additional tax on net unrealized ‘built-in gains’ from the C-corp. Gains recognized during the 10 years following conversion are subject to the highest corporate tax rate of 35 percent. Selling a business within 10 years of converting to S-corp status can trigger a substantial tax liability.
Changing from an S-corp back to a C-corp has fewer challenges, but should be carefully considered before action is taken. Once you give up your S-corp election, you can’t go back to being an S-corp for five years.
How should a business decide which status is best?
For many small businesses, especially start-ups, S-corps are clearly preferable. They provide significant tax savings and any losses incurred can be passed through to the personal level rather than being trapped within the corporation. Businesses seeking outside funding, looking for rapid expansion or needing multiple stock classes are limited to C-corp status.
Small C-corps that meet the requirements for S-corp status frequently benefit from making an S-corp election, even years after formation. Ultimately, the decision should be made based on the individual circumstances of the organization following consultation with a qualified adviser. •
For more tips and best practices, visit Sensiba San Filippo LLP's blog.
Insights Accounting is brought to you by Sensiba San Filippo LLP
The United States Supreme Court’s decision in the case of The United States v. Windsor essentially ruled the federal Defense of Marriage Act (DOMA) unconstitutional and allows for same-sex couples who are validly married under state law to be treated as married for federal purposes. While this case is viewed as a huge civil rights win, it could potentially be a huge financial win for same-sex couples, but the ruling has raised as many questions as it has answered particularly in states such as Ohio that do not currently recognize same-sex marriage. Here is what the recent ruling on DOMA means from a financial standpoint.
Tax advantages of being married for federal purposes
From a purely tax perspective and especially for couples with a primary breadwinner, the tax advantages of being married for federal purposes generally trump filing separate returns. In the wake of Windsor, legally married same sex couples may actually now be required to file joint Federal returns just as their different sexed counterparts do or face the negative impact of married filing separately status. For those same sex couples legally married for state purposes, the following Federal tax benefits should now be available:
- Joint filing of income tax returns
- Spousal inherited IRAs & required minimum distributions
- Tax-free employer benefits
- Income, estate & gift tax relief for spousal transfers
- Deductible alimony
- Favorable divorce tax treatment
- Adoption tax credit
Additionally, a host of other Federal benefits including Social Security, Medicare, Medicaid, family medical leave, and military benefits may now be available for legally married same-sex couples.
Seem too good to be true?
Possibly, at least for now for same-sex couples residing in Ohio. The couple in the Windsor case resided in New York which currently is among the 13 states that recognize same-sex marriage. It seems clear that legally married couples residing in states that recognize same sex marriage will be treated as married for federal purposes. However, further guidance is still needed for residents of states such as Ohio which currently has a constitutional amendment banning recognition of same sex marriage. It remains unclear whether the state in which the marriage took place or the state of domicile controls for federal purposes.
Guidance may be forthcoming. In a recent case from the Southern District of Ohio, Obergefell v. Kasich, the plaintiffs are challenging the constitutionality of the Ohio laws forbidding recognition of legal same sex marriages from other states. The judge overseeing the case issued a temporary restraining order barring the local Ohio registrar of death certificates from accepting a death certificate which did not recognize a legal same sex marriage solemnized outside of Ohio. The judge’s order points out that “throughout Ohio’s history, Ohio law has been clear: a marriage solemnized outside of Ohio is valid in Ohio if it is valid where solemnized.”  Ultimately, it remains to be seen how state law will be decided in Obergefell and similar cases, but the discussion has already begun on whether a same-sex marriage from another state will be valid under Ohio law.
What steps should you take following Windsor?
The resolution of the various state issues and your individual circumstances will be major factors in helping you decide your financial options. Are you currently married? Considering marriage? How much do you and your partner earn? Is your spouse already included in your estate plan? Have you made lifetime transfers to your partner? Legally married same sex couples may want to consider filing amended individual income, gift, and/or estate tax returns for years still open under statute or filing protective claims for refunds depending upon their answers to the above questions. Other planning items to consider include reviewing your health plan options given that many plans will now cover same-sex spouses, reviewing your estate plan and beneficiary designations, and filing for federal benefits such as social security. Non-married same-sex couples who have long desired to marry may find new financial incentive to move forward.
The Internal Revenue Service responded to Windsor by issuing a statement that additional guidance will be forthcoming. In the meantime, the professionals at Zinner & Co. LLP can help you analyze the tax and financial impact of these recent changes and advise on an appropriate course of action, so you are well positioned to take advantage of these new benefits as the situation evolves.
Andrew L. Whitehair, CPA, is a Tax Manager at Zinner & Co. LLP. Reach him at (216) 831-0733 or firstname.lastname@example.org.
Obergefell v. Kasich United State District Court Southern District of Ohio Western Division. Case No. 1:13-cv-501. Judge Timothy S. Black. July 22, 2013.
Companies using the Interest-Charge Domestic International Sales Corporation (IC-DISC) provisions of the tax code, which are intended to help U.S. companies compete internationally, already know that the incentive essentially reduces the top federal tax rate on certain income from qualified goods and services from 39.6 to 20 percent.
“What you may not realize is that the intended and allowable available savings are often much, much greater,” says Amit Mathur, CPA, director at WTP Advisors.
Rob MacKinlay, president of Cohen & Company, says, “Many companies use basic, aggregate IC-DISC calculation methods, though other allowable methods explicitly encouraged in the regulations yield a much higher result. This can be the equivalent of claiming a standard deduction on your individual tax return when itemized deductions are much higher. Many of our clients have dramatically increased savings with a transactional analysis.”
Smart Business spoke with Mathur and his industry peers about IC-DISC and how business owners can extract more value from its proper implementation.
How can IC-DISC savings be maximized?
Most companies utilizing the IC-DISC enjoy the reduced tax arbitrage for either 4 percent of their qualified export gross sales, which is limited to the taxable income from those sales, or 50 percent of the taxable income from qualified export sales. Many believe that these are the maximum amounts used to determine the IC-DISC commission, which is subject to a top rate of 20 percent, rather than 39.6 percent. In reality, these amounts should be considered the minimum commission that results from the two simplest, basic methods.
Truly maximizing the intended and allowable benefits from the IC-DISC requires a more in-depth calculation, but may not take much more time. Each transaction can utilize a choice of many other attractive methods explicitly defined and encouraged in the regulations. For instance, transactions that yield a loss can generate commission. Transactions for products with less-than-average profitability compared with their product group or line also may yield additional benefits.
An analysis utilizing the most beneficial of these methods for different transactions will yield higher results, often more than double, compared with using the basic methods at an aggregate level.
Steve Switaj, CFO of Three D Metals, a company that has used transactional analysis in conjunction with the IC-DISC for years, says, ‘While fluctuation in material prices and unforeseen costs are constant concerns, the increased IC-DISC savings that often results from such variability is a nice feature of the incentive, and enables us to compete in export markets more effectively.’
Can prior year IC-DISC savings be improved?
Re-determinations of IC-DISC benefits can be performed for any open tax years. As Jim Bowen, tax partner at Bober, Markey, Fedorovich & Company, puts it, ‘If the savings from a transactional analysis of IC-DISC benefits is significant, amending the results should be considered, particularly for companies under audit for given tax years.’
Are you overlooking the IC-DISC entirely?
Closely held manufacturers, distributors, growers, software producers, equipment leasing companies, and architectural or engineering firms should consider it.
Mark Klimek, head of the tax practice at McDonald Hopkins, LLC, says, ‘Manufacturers and distributors not fully exploring this incentive may be missing significant tax benefits from a relatively inexpensive to implement government incentive that does not disrupt business operations.’
If products and services are ultimately used outside of the U.S., they will typically qualify. The rules for component parts ultimately sent outside of the U.S. are even more generous — generally, they can even return to the U.S. after being incorporated into another product. Tod Wagner, of Libman Goldstine Kopperman & Wolf, says, ‘Because of the favorable rules defining qualified export property, many companies eligible to use an IC-DISC are overlooking the incentive entirely as they do not think of themselves as manufacturers or exporters. In reality, they may need not to be either.’
Amit Mathur, CPA, is a director at WTP Advisors. Reach him at (216) 292-6732 or email@example.com.
Insights Tax Incentives is brought to you by WTP Advisors
Regardless of industry, geography or size, one thing is certain: Risks to organizations are changing, becoming more complex and are more interrelated than ever before.
“An organization’s ability to identify, assess and respond to the key risks that it faces is critical to its sustainability. The companies that excel in this area are the ones that will be able to react quickly to new challenges,” says Kevin Pastoor, managing director at Aon Risk Solutions.
“The first step is identifying the top risks to your organization, and Aon’s Global Risk Management Survey is an excellent place to start.”
Smart Business spoke with Pastoor about the survey and some of the key findings of the fourth biennial Aon Global Risk Management Survey with more than 1,400 companies of all sizes, both public and private, from a broad section of geographies and industries, responding.
How have results changed compared to prior surveys?
This was the first year that political risk/uncertainties entered the list of the top 10 risks, coming in at No. 10 and projected to be No. 6 in three years.
This indicates that companies, regardless of size, are becoming more global and are now exposed to things like physical damage to assets from political violence or, even worse, the kidnaping of employees. As global expansion continues, companies need to continually address their political and security risks.
A rather disturbing trend in the survey is that loss of income from the top 10 risks has increased from 28 percent in 2011 to 42 percent in 2013, yet organizations reported a decrease in readiness from 66 percent to 59 percent over that same time period. In addition, respondents who say they have tracked and managed all components of their total cost of risk have dropped from 39 to 33 percent.
What is the No. 1 business risk and why?
The No. 1 risk cited has been the same for the last three surveys and projected to remain the No. 1 risk three years from now — economic slowdown/slow recovery.
With issues like the continuing weakness in the eurozone, slowing growth forecasts in India and China, the continued uncertainties related to U.S. fiscal policy and elevated unemployment worldwide, it is no wonder that this continues to be the No. 1 concern.
Many organizations are only now starting to scratch the surface in terms of their understanding of the impact events in other parts of the world can have on them, even if they do not have global operations. Organizations need to look beyond daily operations and take a more holistic approach to examining risk in order to remain flexible and adapt to issues that can have a detrimental effect on the bottom line if not properly managed.
What else did the survey reveal?
The survey also revealed some interesting differences by region of the world. For example, computer crimes/hacking/viruses/malicious code is the eighth-rated risk by respondents in North America. However, in other parts of the world this was rated much lower — Asia Pacific, 37th; Europe, 19th; Latin America, 35th; and the Middle East and Africa, 19th.
These types of attacks are becoming common in the U.S., with new reports almost weekly about data security breaches, so this is already high on U.S. companies’ radar screens. Now that we are seeing more worldwide breaches, such as the cyberattack on the European Commission, the ranking of this risk in other regions of the world should increase in future surveys.
By identifying their top risks, as well as comparing peer companies by industry, region and organizational size, companies can be off to a great start in terms of better understanding their own organizations — and knowing how to respond when these risks come up.
Kevin Pastoor is managing director at Aon Risk Solutions. Reach him at (248) 936-5346 or firstname.lastname@example.org.
Insights Risk Management is brought to you by Aon Risk Services
Since its enactment in 2010, the Affordable Care Act (ACA) has garnered a great deal of attention, political and otherwise, for the far-reaching changes that it brings health care and health insurance. However, as stakeholders across the country prepare for its implementation, some of the law’s provisions have escaped widespread notice. Among these are rules that allow employers to reward their workers for actively pursuing a healthier lifestyle.
“Wellness initiatives are a big, but often overlooked, part of health care reform,” says Sheryl Kashuba, chief legal officer and vice president of Health Policy and Government Relations at UPMC Health Plan. “There is a growing interest in wellness programs on the part of employers, and the ACA provides new flexibility to create incentives for employees who participate in programs.”
Smart Business spoke with Kashuba about the ACA’s impact on wellness programs.
Will the ACA impact the growth of wellness programs?
The ACA has the potential to promote the continued growth of wellness programs. Employers have increasingly shown interest in a variety of wellness initiatives as a way to reduce employee absenteeism, boost productivity and slow employee turnover. Many have also found that successful programs can decrease their health care costs over time with reduced incidences of illness and chronic disease.
As of 2014, the ACA will increase the ability of employers to reward employees for wellness program participation and achievement of health goals. Under current law, the maximum ‘wellness reward’ offered cannot exceed 20 percent of the total cost of health plan coverage. This limit will increase to 30 percent for most programs and 50 percent for programs focusing on tobacco cessation. The ACA also authorizes federal regulators to make additional increases later. These new limits increase employers’ ability to offer financial incentives or consequences, both of which can increase participation.
How widespread are wellness programs?
According to the Kaiser Family Foundation, 67 percent of employers with three or more employees offered at least one wellness program with their employer-sponsored health benefits. More than half of those also offered wellness programs to employees’ spouses or dependents. And the larger the company, the more likely it is to have a program. Ninety-two percent of employers with 200 or more employees offer a wellness program, while virtually all companies with 1,000 or more employees offer one.
What do wellness programs consist of?
Most programs offer health risk assessments and screenings for chronic disease markers such as high blood pressure and cholesterol; behavior modification programs such as tobacco cessation, weight management and exercise; health education; and subsidized fitness club memberships. When integrated within a comprehensive program that promotes overall employee health, these initiatives have reduced employee medical costs and absenteeism, while also offering a better quality of life for employees.
Are there different, distinct types of wellness programs under the law?
Wellness programs generally fall into two categories. In ‘participatory wellness programs,’ rewards are available without regard to an individual’s health status. These might include reimbursement for fitness club memberships or financial rewards for completing a comprehensive health risk assessment. ‘Health contingent wellness programs’ require participants to achieve a specific health status or goal, such as rewarding employees who quit smoking or achieve a specific cholesterol goal. The ACA’s expanded flexibility applies to both.
Are some incentives unfair to employees?
Important safeguards ensure that wellness programs are fair for all employees. For example, an employer offering a health contingent wellness reward is required to offer a ‘reasonable alternative,’ a means of earning the reward if the required activity would be unreasonably difficult to complete because of a medical condition. The law gives employers the option to offer a widely applicable alternative standard or tailor the alternative to an employee’s situation. An employer can even waive a program requirement if no reasonable alternative can be put in place.
Sheryl Kashuba is a chief legal officer and vice president of Health Policy and Government Relations at UPMC Health Plan. Reach her at (412) 454-7706 or email@example.com.
Find more information about the Affordable Care Act and wellness programs.
Insights Health Care is brought to you by UPMC Health Plan
Interior design is a very structured process involving both coordination and creativity. It includes a vast scope of services that must ultimately balance the client’s wants and needs.
“Not all designs are driven by aesthetics; functionality of the space usually takes precedence because employees have to work in the office every day,” says Michelle Yurkovac, interior designer at SMC Consulting, LLC.
Smart Business spoke with Yurkovac about the design process and what is required to create an office that is aesthetically pleasing, yet practical and functional.
Why are employee needs central to design?
Most office designs seek to reflect the latest and greatest trends, which is perfectly fine. One of the designer’s goals should be to achieve the right look for his or her client. A good designer should consider how a person feels coming into the space every day.
However, it’s not always about the ‘wow’ factor. Just because something looks great or goes with the design scheme doesn’t mean it will be comfortable, functional or promote productivity. For example, sitting in an uncomfortable chair for eight hours reflects a bad design choice. Without considering functionality in the design process, the office space will only look good.
What is the key factor in the design process?
Programming, which is simply working to understand the challenges employees and companies are facing with their current space that led them to initiate a change, is essential for a great design. This allows the designer to connect with the employees and identify their needs.
Designing for employees’ needs in a typical office setting tends to be the driving factor in most modern designs. Following the latest trends can lead to breathtaking work environments, but can also create inefficiencies and hinder performance. It’s central to a designer’s job to determine what your current space lacks that could be improved to create a functional, comfortable and productive work environment.
Programming also helps a designer understand what employees do every day, because not everyone has the same tasks or requirements. For example, while many might like the idea of an open-plan environment, it could be beneficial for some and a disadvantage to others. Open-plan offices encourage teamwork, collaboration and creativity, and allow employees to share information faster and easier. Conversely, it may create a stressful environment or distract employees given the increase in noise and lack of privacy.
This is why it’s crucial to analyze employees’ existing space and surroundings to fully understand how they work on a daily basis. Expect the designer to do a lot of research to develop documents, drawings and diagrams that will outline the information that was collected from employees. This will serve as a great guide to customize the design according to each employee. At the end of the day, you want your success to be their satisfaction.
How does the design process work?
The design process should follow a very detailed approach to acquire both creative and technical solutions for a client. Some of those tasks include:
- Researching and analyzing the client’s requirements/goals.
- Developing conceptual drawings.
- Selecting colors, finishes, furniture, equipment, etc.
- Preparing project budgets and schedules.
- Preparing construction documents.
- Coordinating with other design professionals.
- Providing contract documents and bids.
- Observing and reporting the progression of the project.
- Providing post-evaluation reports.
What should be gained from a new design?
There are plenty of measurable results that you should immediately notice after you have implemented a new design. The designer, through the programming process, should have identified any inefficiencies in your previous space and addressed those in the new design. You should see an increase in productivity as a result. Improved morale seems to be one of the first and most noticeable results that you should expect to see, and for many, is also the most rewarding.
Michelle Yurkovac is an interior designer at SMC Consulting, LLC. Reach her at (724) 728-8625 or firstname.lastname@example.org.
Insights Facilities is brought to you by SMC Consulting, LLC
The Affordable Care Act’s (ACA) employer mandate is delayed until Jan. 1, 2015. The employer-shared responsibilities of the ACA, also referred to as “pay or play” rules, impose penalties on large employers that do not offer affordable, minimum value coverage to their full-time employees and their dependents. For purposes of these rules, a large employer is one that employs on average at least 50 full-time employees (including full-time equivalents) on business days during the preceding calendar year.
Smart Business spoke with Amy Broadbent, vice president at JRG Advisors, the management arm of ChamberChoice, about what employers can expect with this delay.
What does this delay allow employers to do now?
The pay or play rules were originally set to take effect Jan. 1, 2014. The delay will provide business owners additional time to understand the rules and make decisions about providing health care coverage, including:
- A final determination as to the number of full-time equivalent employees.
- The look-back period that will be the basis for the calculation and coverage requirements.
- The decision to ‘play’ — sponsor employee health insurance, or ‘pay’ — pay the penalty for not sponsoring employee health insurance.
- An opportunity to compare the plans and pricing available on the insurance marketplace (public exchange) versus what is available in the private marketplace.
Why did the federal government decide to hold off on implementing certain provisions?
According to the U.S. Department of Treasury, the delay of the employer mandate penalties was required because of issues related to the reporting requirements and rules that apply to insurers, self-insuring employers and other parties that provide health coverage. The administration’s decision was based on concerns about the complexity of the requirements and the need for more time to implement them effectively.
The additional implementation period will be used to consider ways to simplify the new reporting requirements with the ACA. With these rules delayed, it would be nearly impossible to determine which employers owed penalties under the shared responsibility provisions. Therefore, these payments will not apply for 2014.
What about the rest of the health care reform law?
The delay does not affect any other provisions of the ACA, including an individual’s access to premium tax credits or coverage through an exchange. Open enrollment within the public insurance marketplace is scheduled to begin Oct. 1, 2013, so that individuals not insured otherwise can have coverage in place by Jan. 1, 2014.
It is uncertain how the new deadline will impact guidance that has already been issued.
Although the employer mandate is delayed, many employers have non-calendar year benefit plans — meaning their contract renewal date could come prior to Jan. 1, 2015 — and will want to be in compliance with the ACA prior to Jan. 1, 2015.
What are employers’ next steps?
Employers should consider ‘staying the course’ and continue to plan and implement a strategy beginning Jan. 1, 2014. If nothing else, these employers will have gained a year of experience in addressing cost-sharing, coverage requirements, employee perception and reaction to the employer-sponsored plan versus the public marketplace, administrative issues, etc. They will be in a better position beginning Jan. 1, 2015.
On the other hand, if the delay would be deemed unconstitutional at some point later this year or next, and the penalties would take effect Jan. 1, 2014, these employers will find themselves protected.
The pay or play regulations issued earlier this year left many unanswered questions for employers. The employer mandate delay gives the IRS and Treasury the opportunity to provide more comprehensive guidance on implementing these requirements. Your adviser should continue to monitor developments and keep you informed of the latest updates.
Amy Broadbent is a vice president at JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7250 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
As the economy begins to improve, with increasing sales and corporate profits gaining some momentum, now is a good time for companies to consider directors and officers liability insurance to help secure their growth.
Smart Business spoke with Philip K. Glick, senior vice president at ECBM and a registered professional liability underwriter, about some issues companies should be addressing in this area.
Are you seeing a growth in claims?
Mergers and acquisitions and other business combinations have begun to increase. This activity has resulted in more directors and officers liability claims brought by disgruntled shareholder groups that question their buyout’s valuation. Also, if a merger or acquisition falls through, one or both parties may file a claim against the other for breakup fees or other damages.
In addition, the number of wage and hour claims filed by current and former employees continues to increase. These claims involve a range of allegations, including failure to pay overtime; failure to pay for break periods; failure to pay for the time involved in getting in and out of uniforms; and failure to reimburse employees for the cost of uniforms and other job-related expenses.
With more litigation, are there changes in the directors and officers liability market?
As a result of litigation trends and the overall tightening of the property and liability insurance marketplace, renewal premiums are increasing by 8 to 10 percent for directors and officers liability, including employment practices liability. Companies with recent claims face larger increases.
Insurance companies also are restricting coverage terms and conditions offered. With respect to employment practices liability, often written as a part of directors and officers liability coverage, many insurers are eliminating coverage for wage and hour claims — even for legal defense costs routinely covered in prior years. Some insurers may be willing to provide a sub-limit for these costs.
Carriers are eliminating coverage for claims brought by former directors or officers against the company, even if they haven’t been with the company for years. Examples include failure to pay post-termination benefits or cheating a former shareholder out of the real value of prior stock holdings upon the company’s sale to a third-party buyer today. These restrictions might be changed with a carve back only excluding claims if a former officer/director has been gone less than two or three years.
Are coverage extensions or improvements available to broaden your coverage?
Even with market tightening, the directors and officers liability marketplace remains competitive with many coverage enhancements available, if specifically requested. For example, the cost of legal defense is often included in the policy limits, but many insurers are willing to provide an extra limit of coverage for defense of claims, if the overall policy limit has been used up by the payment of awards.
Some insurance companies also provide an ‘excess side A’ limit of protection, giving additional coverage to individual directors and officers in the event claims against the company have used up policy limits. It’s an extra level of protection to insulate personal assets from third-party claims.
Another expanded coverage involves the selection of defense counsel. Traditionally, smaller private companies’ coverage was written on a ‘duty to defend’ basis where the insurance company appointed defense counsel for claims. Today, carriers may allow the insured to get approval for their own counsel choice, or to select counsel from a preapproved list.
Many insurers are offering directors and officers liability in combination with other specialty coverages, such as employment related practices, fiduciary liability and crime insurance, under an overall blanket professional liability menu of coverages. This can be subject to an overall shared aggregate limit for all claims or separate limits of protection for each part. Blanket coverage costs less and has broader terms and conditions than separate policies.
Insurance companies also are willing to provide coverage for potential whistle-blower claims in which current or former employees allege the company violated laws involving government-funded contracts.
Philip K. Glick is a senior vice president and registered professional liability underwriter at ECBM. Reach him at (610) 668-7100, ext. 1310, or firstname.lastname@example.org.
For more information about risk management, visit ECBM's blog.
Insights Risk Management is brought to you by ECBM
Wouldn’t it be great if every day we woke up and all was good in the world — no poor or mediocre operating results, no people issues, no customer or supplier issues, no worries.
Unfortunately, that is not the world we live in today. The most successful companies and their leaders have one thing in common — they are effective in dealing with difficult decisions that can have profound results.
“Many people can identify what should be done, but not everyone is courageous enough to act,” says Stephen W. Christian, managing director at Kreischer Miller.
Smart Business spoke with Christian about the obstacles to dealing with troubling issues and a path toward more effectively resolving them.
What are some of the toughest decisions facing executives?
Without a doubt, people issues are most prevalent. Examples include investing in strategic hires, counseling poor performers and retooling the organization chart. Other areas that often result in decision paralysis include investing in equipment or a physical plant, exiting or entering geographic regions, and walking away from a customer or service line.
Why is it important to quickly and effectively deal with tough decisions?
Decisions are required every day, some routine and some critical. Managers make routine decisions, but leaders make the critical ones. Effectively tackling performance and strategic issues guides our future and puts us on a path toward success. As leaders, we have people watching us and counting on us to do the right thing for the organization. We may be the owners or top executives, but our team members’ livelihoods depend on us effectively dealing with tough decisions.
What gets in the way of addressing difficult business issues?
Unfortunately, there is no shortage of reasons to ignore or postpone important actions. A day becomes a week, a week becomes a month, a month becomes a year, and before we know it, a decision we knew was necessary never takes place. Some reasons for this are lack of accountability, uncertainty about what we are trying to accomplish, fear of failure, worries about short-term consequences, failure to embrace the opportunity and concerns over what others might think.
What puts executives in the best position to make timely and effective decisions regarding complex and difficult matters?
Successful leaders utilize a variety of techniques to ensure they resolve difficult decisions. These techniques include defining the discrete decision at hand — focusing on the issue, not all the noise surrounding the matter; outlining the opportunities arising from the action; and defining the costs, both monetary and process change related.
From there, a plan of action is determined and commitment to a time frame is established. Along the way, seek the counsel of those whose judgments you trust to validate the plan and remind yourself that the goal is to advance the cause of the organization. There are no risk free, perfect answers.
Can you read a book to become a better decision-maker?
What you can read in a book are techniques to overcome obstacles and reinforcement of the importance of making effective decisions. The ability to actually effectuate what you know should be done comes from your inner being. Remind yourself that successful companies are led by people who identify critical issues, take risks, are decisive and accept responsibility. Action is what it is all about.
The world is full of people who understand what the issues are. Not all of them have the skill to determine the solution to a problem, and even fewer have the ability to effect and sustain change.
Stephen W. Christian is a managing director at Kreischer Miller. Reach him at (215) 441-4600 or email@example.com.
For more governance and leadership topics, check out the Center for Private Company Excellence blog.
Insights Accounting & Consulting is brought to you by Kreischer Miller