Leaders often talk about how the traits of accountability and transparency helped make them who they are, but to retired Navy Adm. Mike Mullen, who served as the chairman of the Joint Chiefs of Staff for four years under President George W. Bush and President Barack Obama, leadership is quite simply how you listen, learn and lead.
It’s not just a coincidence that communication is as important in the war zone as it is in an organization — and that’s where Mullen emphasizes listening to what his team members have on their minds.
Smart Business talked with Mullen about the challenges of being in command:
Q. What do you see as the most important trait that any leader must possess?
A. Integrity. Be true to yourself, and obviously true to your values. The value of integrity intrinsically has been a driver for me since I was a midshipman at the U.S. Naval Academy. It has served me exceptionally well.
Integrity encompasses being honest, truthful and consistent — both publicly and privately in leadership positions — and representing that in every situation. It is most evident in the toughest decisions you have to make.
Q. And how can you ensure integrity is present in leadership?
A. What I loved about command was the responsibility and authority that came with it. But more than anything else, the other piece was accountability — accountable leadership. That is not just having someone hold you accountable, but having enough strength yourself as a leader to hold yourself accountable.
I just found that even with those decisions that can be very unpopular, if you are true to that value of integrity, even if it may not seem to some to be the best decision, it [integrity] holds you in the best stead as a leader over the long term. And because of that, it becomes incredibly supportive of those very, very tough decisions.
Q. So what can help a leader make those tough decisions more effectively?
A. As a more senior leader, I learned to keep a diversity of views around me. The more senior I got, the more diverse the people, the recommendations and the discussions had to be in order for me to make the right decision.
I had people around me who were willing to say, ‘Hey, this is when you got it wrong,’ as opposed to the opposite, which is isolation, where nobody will tell the emperor [he] doesn’t have any clothes on.
Q. You’ve mentioned the importance of listening to others in order to help you become a better leader. How did you do that?
A. Everywhere I went, whether we had a town hall meeting or we could call an all-hands meeting, I would take questions from the audience. So, for example, when a young enlisted man would give me a question of which I didn’t know the answer, I said, “I don’t know the answer, but give me your email address. I will go research it and get back to you.”
I did that. I went back and looked at whatever their concern was. And some of those concerns generated significant changes in the military, or in the particular service they were in. For me, as chairman, that was a vital part of trying to understand what I was asking them to do, and then taking that feedback and trying to fix the problem that they raised — if it made sense to do it.
A good leader can make such a difference, and create something out of nothing, whereas a bad leader is unable to do that. The ingredient that makes a difference is leadership. ●
Retired Navy Adm. Mike Mullen served more than 43 years in the Navy, having served as the chairman of the Joint Chiefs of Staff from 2007 to 2011, and as chief of naval operations from 2005 to 2007. He will be the keynote speaker at the Dec. 5 American Red Cross Hero Awards. Learn more about the Hero Awards at www.clevelandheroes.com.
Saving money on 2013 taxes, health care reform and hiring best practices are among the topics featured in November’s Insights articles
SeibertKeck: How the wealthy can prevent coverage gaps in their personal insurance
Kevin Franczkowski, Client advisor
Accounting & Consulting
SS&G: How wealthy families can centrally manage assets through family offices
Floyd Trouten, Director, Tax
Banking & Finance
FirstMerit Bank: How business owners can profit from expanded, enhanced SBA lending
Tim Dixon, SBA program manager, senior vice president
Brouse McDowell: How to vet a job candidate and reduce legal risk
Karen C. Lefton, Partner, Labor & Employment practice group
Sequent: How dropping health insurance benefits may not save you money
William F. Hutter, CEO
Retirement Planning Services
Tegrit Group: How to prepare for, survive and thrive after a retirement audit
Mike Spickard, CEO, Chief Actuary
Cendrowski Corporate Advisors: How an operational assessment can help an organization identify risk
James P. Martin, CMA, CIA, CFE, Managing director
Novack and Macey: How understanding damages is critical in commercial litigation
Eric N. Macey, Partner
Benefitdecisions: How the DOMA ruling has changed benefit plans
Stephanie Martinez, PHR, Director, HR Services
HealthLink: How to fulfill your Affordable Care Act responsibilities
Mark Haegele, Director, sales and account management
CompManagement: How to get workers' compensation discounts for things you already do
Randy Jones, Senior vice president, TPA Operations
RiskSOURCE Clark-Theders: How to protect your company against cyberthreats
Jayce Stewart, MBA, Commercial Risk Consultant
WTP Advisors: Distributors, software firms, architects, others missing tax savings
Amit Mathur, CPA, Director
Fay Sharpe LLP: Why your U.S. patent won’t help you overseas
John S. Zanghi, Partner
Accounting & Consulting
Skoda Minotti: Moves you can make now to save money on your 2013 tax return
Steve Gross, CPA, Partner
John Carroll University: How to react when you suspect an employee of fraud
Mariah Webinger, Ph.D., Assistant professor of accountancy
Leverity Insurance Group: How to rebuild your business in the event of a catastrophe
Derek M. Hoch, President
CRESCO: How to get the most from your property management services
Eliot Kijewski, SIOR, Senior vice president, CRESCO
Judy L. Simon, CPM, Assistant vice president, Continental Realty
Rea & Associates: How your business can get tax benefits from research activities
Christopher E. Axene, CPA, Principal, Tax Services
Kegler, Brown, Hill & Ritter: How to deal with cybersquatters and other domain name issues
Jeff Nein, Associate
Ohio.net: How to implement cutting-edge VoIP technologies with a dash of caution
Alex Desberg, Sales and marketing director
SeibertKeck: How the wealthy can prevent coverage gaps in their personal insurance
Marc McTeague, President
Crowe Horwath: How to apply accounting rules for related-party transactions
Wayne Williams, Partner
Banking & Finance
First State Bank: How local banks offer better service and drive your hometown economy
Eugene Lovell, President and CEO
Weaver: How forensic accountants and the public sector combat fraud
Trish Fritsche, CPA, CFF, CITP, CGMA, Senior manager, Forensics and Litigation Services
Momentous Insurance Brokerage: How to achieve cost savings by managing workers’ comp claims
Kimaili “Ken” Davis, ARM, Assistant vice president
Los Angeles/Orange County
Woodbury University: How non-profit financial practices can boost for-profit businesses
Kenneth Jones, Vice president for finance and administration, CFO
Los Angeles/Orange County/Northern California
Banking & Finance
California Bank & Trust: How to enhance sales with merchant services
Jan Mitrovich, Manager, Treasury Management, Merchant Services
Ropers Majeski Kohn & Bentley PC: How to weigh the pros and cons of SIRs vs. deductibles
Michael T. Ohira, Partner
Montage Insurance: Unlocking health care reform: A look at the individual mandate
Tobias Kennedy, Executive vice president
Human Resources Outsourcing
TriNet: How the process of attracting and hiring employees has changed
Mary Oslin, Manager, Talent Acquisition
Accounting & Consulting
Moss Adams LLP: How fair value reporting is hitting your company’s books
Bryan Cartwright, Financial services assurance partner
California State University, East Bay: How more market oversight delivers better investment in private equity
Sinan Goktan, Ph.D., Assistant professor of finance, College of Business and Economics
Sensiba San Filippo: How health care reform demands a strategic approach from businesses
Bill Norwalk, Tax partner-in-charge
Wealth Management & Finance
Mosaic Financial Partners: How personality styles affect performance and team synergy
Ricci M. Victorio, CSP, CPCC, ACC, Managing partner
Ropers Majeski Kohn & Bentley PC: How civil cases can be settled with alternative dispute resolution
Brock R. Lyle, Partner
Banking & Finance
Bridge Bank: How to discover resources available to California businesses
Gloria Ferguson, Senior vice president, market manager, Corporate Banking Division
Stradling Yocca Carlson & Rauth: How the JOBS Act makes it easier for companies to raise money
Mark L. Skaist, Shareholder, co-chair, Corporate and Securities
ECBM: Transparency in purchasing benefits, the time has come
Matthew R. Huttlin, Vice president, Employee Benefits Division
Comcast Business: How Ethernet helps businesses realize cloud computing potential
Kevin Conmy, Regional vice president, Business Services
Semanoff Ormsby Greenberg & Torchia: How letters of intent provide a road map for business transactions
Peter J. Smith, Member
Accounting & Consulting
Kreischer Miller: How business owners are paying key employees for performance
Tyler A. Ridgeway, Director, Human Capital Resources
First Commonwealth Bank: Business development in a male dominated energy industry
Megan A. White, Vice President, Regional Manager
SMC Consulting: How design firms add certainty, cost efficiency to office furniture selection
Kelly Colamarino, Interior designer
ChamberChoice: How to create flexible, employee-centric benefits that reduce overhead
Ron Carmassi, Sales executive
UPMC Health Plan: How population health management delivers better, lower cost outcomes
Dr. Marc Manley, M.P.H., Vice president, Population Health Management, UPMC Insurance Services Division
Brown Smith Wallace: How the ACA and the end of Bush-era cuts affect tax strategy
Cathy Goldsticker, CPA, Partner, Tax Services
Businesses in certain industries frequently overlook the Interest-Charge Domestic International Sales Corporation (IC-DISC) provisions of the tax code, which encourage U.S. manufacturing and exporting. The incentive essentially reduces the top federal tax rate on income from certain qualified goods and services from 39.6 percent to 20 percent.
“Because it is thought of as only a manufacturer’s incentive, many companies in certain eligible industries have never heard of the IC-DISC, or have summarily dismissed the incentive,” says Amit Mathur, CPA, director at WTP Advisors.
Rob MacKinlay, president of Cohen & Company, says, “Distributors, as well as industries that produce certain products and services, repeatedly overlook the IC-DISC. We have helped many of these companies realize that they are indeed eligible for the significant and easy-to-implement savings from this federal incentive that does not disrupt business operations whatsoever.”
Smart Business spoke with Mathur and some of the top accounting firms in the region about the IC-DISC and some of the industries that frequently miss, or underutilize, the valuable incentive.
Can distributors, brokers use an IC-DISC?
Distributors of U.S.-made products are eligible for IC-DISC benefits on those goods that are exported. Since many distributors have been told that they do not qualify for the ‘Domestic Production Activities’ deduction, which does indeed require manufacture by the taxpayer claiming the deduction, they have assumed that they aren’t eligible to use an IC-DISC.
“While the exported goods must be finished in the U.S., both the final manufacturer as well as the distributor that does the actual exporting are eligible to use the IC-DISC. Unfortunately, both parties often miss out on the opportunity,” says Jim Bowen, tax partner at Bober Markey Fedorovich.
Are architects and engineers entitled to claim savings under this provision?
Architectural and engineering services furnished in connection with foreign construction projects and facility expansions can qualify for IC-DISC benefits.
“Regardless where the architectural and engineering services are performed, and even if the project never comes to fruition, such services are eligible,” says Pete Chudyk, senior tax shareholder at Maloney + Novotny.
Can software firms save with the IC-DISC?
Licenses and sales of software programs used abroad, as well as in Canada and Mexico, may be eligible for IC-DISC benefits.
Mike Luxeder, tax director at Libman Goldstine Kopperman & Wolf says, “Software companies should examine where their products are ultimately used. The IRS recently clarified its position that software sales, licenses and royalties can indeed qualify for the IC-DISC.”
How might recyclers use the IC-DISC?
Recycled products, as long as they undergo the requisite amount of U.S. manufacturing and are ultimately exported, can be eligible for the IC-DISC. The IC-DISC tax regulations consider any product to be manufactured in the U.S. if at least 20 percent of the costs to produce the product are related to U.S. labor and factory burden. This includes labor related to destroying, cleaning and treating scrap or waste materials such as metals.
How can food producers and growers get the benefits of this tax provision?
Products that are ‘manufactured, produced, grown or extracted’ in the U.S., and are ultimately exported, are eligible for the IC-DISC. Ohio’s chief agricultural exports, such as soy and corn, are often missed. Raw, processed and semi-processed foods, livestock, pelts, etc., are also eligible.
Many farmers and ranchers, particularly those selling through certain cooperatives, are just now starting to realize the opportunity to participate in the tax savings from the IC-DISC.
If you’ve passed over the IC-DISC before because you’ve bought into the notion that this incentive is only for manufacturers and exporters, you may be losing money. There are many industries that can draw a benefit. However, it’s advisable that you contact a specialist to help your business navigate the complex rules. ●
Insights Tax Incentives is brought to you by WTP Advisors
Population health management is becoming an increasingly popular concept for health care organizations. Population health management — defined as an approach to health that aims to improve the health of an entire population — goes far beyond the concept of only treating patients in need of immediate care.
“Population health management helps health care delivery organizations better manage all aspects of health, from wellness to complex care,” says Dr. Marc Manley, vice president of Population Health Management for UPMC Health Plan. “Population health management has the ability to deliver better health outcomes at a lower cost.”
Smart Business spoke with Manley about population health management and how it will affect health care results and costs.
Why is population health management getting more attention now?
Population health management is gaining more attention because the fee-for-service model is going away. Hospitals, health care systems and physicians understand that they are living in a world that increasingly rewards those who meet quality objectives for their entire population, not just those who present themselves for care.
Population health management also shows the promise of delivering better health at a lower cost by creating an integrated system of care, rather than forcing consumers to figure out how to make their own way through the current health care system.
Aren’t many factors that influence the health of a population beyond the scope of any care organization?
There are many factors that influence the health of a region: environmental factors, economic factors, the social structure, etc. But many health care organizations are already involved in community efforts to improve health. In a lot of ways, population health management complements these organized efforts by addressing factors that impact an entire population. Population health management also puts added emphasis on reducing health care delivery inequities.
How does population health management impact providers?
Most clinicians already recognize the limitations of traditional care in keeping people healthy, and they’re looking for ways to be more effective. But preparing for population health management requires a significant change for providers.
Providers will no longer be rewarded for doing more, but rather for producing quality outcomes more efficiently. Providers need to assess the health of their entire population across the entire spectrum of health — that includes those who are well, and who can stay well by getting appropriate preventive services. Those who have health risks need help changing their health behaviors in order not to develop the diseases for which they are at risk. For those with chronic conditions, providers can prevent further complications by closing care gaps and working on health behaviors.
Technology will have a key role in population health management, as it can help to assess and stratify patients and target interventions to the right people.
What are the objectives of population health management?
Population health management strives to keep a patient population as healthy as possible, thereby minimizing the need for costly interventions such as emergency department visits, hospitalizations, imaging tests and procedures. In addition to being less costly, it redefines health care as being more than just reactive sick care. By considering the needs of an entire population, population health management systematically addresses the preventive and chronic care needs of every patient.
What is essential to make this work?
First of all, it will require those of us involved with health care to think in new ways and be willing to try new things. It will also require new financial arrangements in health care that reward positive health outcomes, not more services. And there must be a strong technology foundation, including Web-based tools for patients and providers, and data systems that support analytics across a wide spectrum of inpatient, outpatient, post-acute and community services. ●
Insights Health Care is brought to you by UPMC Health Plan
Workplace dynamics continue to change. Regardless of industry, employers need to set themselves apart.
“With more women in the workforce, a divorce rate of 50 percent creating more single parents, and a significant increase in mobile or remote employees, the need for a competitive and employee-centric benefits package is critical,” says Ron Carmassi, a sales executive at JRG Advisors, the management arm of ChamberChoice.
“A package that includes voluntary benefits will help attract and retain quality employees, while at the same time reducing overhead and improving morale. A win-win scenario,” he says.
Smart Business spoke with Carmassi about how your company can use voluntary benefits to create flexibility for employees, while saving money on benefit premiums and underwriting.
What are voluntary benefits?
Voluntary benefits consist of a variety of insurance products offered at the workplace through the convenience of payroll deduction. They can be added to your current benefits package.
Employers might offer a mix of products including critical illness, cancer, accident, disability, life, pet, auto, homeowners insurance and more. Employees then have the flexibility to choose the coverage that fits their personal needs and budget.
What is the value of voluntary benefits?
The needs of each employee vary based on family and financial dynamics. There is no one-size-fits-all solution for benefits in today’s work environment.
Full-time employees still expect their employer to provide some level of health insurance. However, they are looking for additional offerings to protect themselves and their families. One employee may have a need for pet insurance. Another may have young children and find peace of mind in an accident plan. While another has a family history of cancer, thereby finding great value in a cancer policy.
In addition to choice, voluntary benefits offer a one-stop shopping experience, making it easier for employees to purchase insurance that typically is not offered at the workplace, such as auto and homeowners. These types of benefit packages also often have discounted premiums and/or reduced underwriting.
What is the future of voluntary benefits?
There is a marked increase in the number of employers offering a defined contribution model, which provides a complementary platform for voluntary products. A defined contribution or cafeteria-style approach offers choice among medical, dental and vision benefits and also includes a variety of voluntary benefits.
The defined contribution model allows employers to identify a specific dollar amount or ‘defined contribution’ for each employee, typically by coverage tier. Each employee selects benefits based on their individual needs. Any costs in excess of the defined contribution allowance are the responsibility of the employee.
The defined contribution model gets away from the one-size-fits-all mentality and allows employees greater choice while offering the employer more budget certainty.
How can business owners get started with adding voluntary benefits to their benefits package?
Voluntary benefits are a great way to enhance your benefits package, differentiate from competitors and increase employee satisfaction — all with little or no impact on your budget.
Work with your advisor to decide what voluntary product offering makes sense for your team and educate your employees on the advantages of these voluntary benefits so you both can reap the rewards. ●
Insights Employee Benefits is brought to you by ChamberChoice
So the construction of your new office is nearly done and you’re getting ready to move in. Have you considered how you’ll populate your space with furniture, what type it will be and where you’ll purchase it?
“Practicality and well-being should be considered first when selecting office furniture,” says Kelly Colamarino, interior designer at SMC Consulting, LLC. “We all want our offices to look cool, but aesthetics should be accompanied by functionality. Choosing the right furniture for your office will increase productivity, employee satisfaction and company profits.”
Smart Business spoke with Colamarino about selecting furniture for your office space — from comfort and aesthetics to styles and finishes, and even where to go for the best prices and service.
What’s involved in the furniture selection process?
The first step in selecting furniture for your office is to hire a design firm to do programming on your current employees’ needs. Programming includes evaluating your existing furniture to find out what is working and what isn’t. It also involves assessing the way your employees and company groups work — whether they need an open, collaborative space to work together or closed spaces for privacy. This will help determine what type of furniture will work best in your office.
The next step is to select a furniture style. A design firm can help to decide if traditional, modern or transitional furniture is best for your office. The firm also will make sure to select finishes that relate well to the atmosphere and functionality of your office. Careful selection of fabrics and finishes will enhance office functionality.
Make sure to keep your future needs in mind while going through the furniture selection process. If your company is projecting growth in the next few years, it might be smart to look into systems furniture that can be easily reconfigured and added to, which will accommodate additional workspaces.
What comes after choosing furniture?
Now that you’ve selected your office furniture, you need to decide where to make your purchases.
There are many furniture stores that sell practical office furniture but do not offer the same benefits as purchasing through a dealership. A design firm can provide expert advice and guidance to help you select a furniture vendor, offering an objective opinion when it comes to vendor selection, and negotiating on your behalf. Your designer will review each vendor’s bid and help you understand the content of each, reading between the lines to provide insight.
Designers at the firm will help you find furniture that is within your budget. However, it is important to hold value over price. With furniture, like most purchases, you get what you pay for. Buying an inexpensive chair might help your immediate budget, but in the long run you must think about the costs of repairs and replacements of cheap chairs. Rather, it’s often better to pay a little extra upfront for something that will last longer.
What are the benefits of hiring a design firm to help furnish an office?
Hiring a design firm establishes a long-term relationship with the firm as well as the dealer. A good design firm will ensure that the dealer will be there for your company long after the point of sale.
After you’ve made your purchase, client support is necessary for any problems that may arise with your furniture. The firm will be there to help with any issues that may arise through the furniture purchasing process. It will work with the dealer to give you warranty information, as well as replacements for damaged or defective purchases. The firm also will keep your furniture selections on file, making it easy for the firm to contact the dealer to purchase additional furniture as needed.
Selecting office furniture is an important process every company should go through wisely. Working with a design firm through the process can ensure a functional and aesthetically pleasing office. ●
Insights Facilities is brought to you by SMC Consulting, LLC
The growing prevalence of cloud computing has driven astronomical growth in the amount of data center traffic passing through networks. A 2011 survey projects this traffic to hit 468 Exabytes in 2016. To put that in context, worldwide Internet traffic surpassed one Exabyte for the first time in 2003.
The fuel behind this widespread adoption is cloud computing’s cost-effectiveness. With a “pay only for what you use” pricing structure, midsize companies can ramp up or down with minimal startup costs. In addition, there are tax benefits to having cloud computing as an operating expense, rather than a capital expenditure.
However, one factor stands in the way for many businesses — an outdated network infrastructure that is unable to operate efficiently using cloud-based systems.
Smart Business spoke with Kevin Conmy, regional vice president, Business Services, at Comcast Business, about how businesses can use Ethernet to maximize cloud computing, and the competitive advantage it brings.
Why are some companies unable or slow to take full advantage of the cloud’s potential?
The first hurdle to get over is the trust factor. Business owners are hesitant to hand over sensitive information and transactions to a third party. But as the use of cloud applications becomes widespread and the ease of the applications themselves make them harder to resist, more and more companies are jumping on board.
The second obstacle is often the company’s network and whether they are using the public Internet or a private Ethernet.
While a public Internet service is cost-effective and accessible from just about anywhere, the flipside to that is increased security risks that are a very credible concern.
Latency — the time it takes for data to make a round trip between two points, such as from your office to the data center where the cloud application is hosted and back — is another problem when using a public connection. Some applications, such as email, can tolerate longer latency, but others like video, are latency-intolerant.
How is private connectivity, Ethernet, better matched to cloud services?
For mission-critical applications hosted at a data center or cloud provider, private connectivity provides secure, high availability and low-latency access.
Ethernet technology, which has been around for 40 years, has become the de facto technology in offices around the world, linking computers and servers together in a high-speed local area network (LAN). A metropolitan area network (MAN) can link computers over a larger area, like between buildings in a metro area, with low latency.
One service provider manages the Ethernet traffic and applications within the private network, resulting in better security and performance. Companies still have the ability to integrate Internet traffic, but the low latency causes remote offices, and even those applications hosted in third-party data centers, to feel like they are on the LAN.
Data centers and cloud providers generally don’t provide dedicated network infrastructure with their cloud offerings, but they are reporting that clients are increasingly purchasing dedicated high-speed fiber connections from separate service providers for accessing these cloud services.
Do businesses leaders understand how important it is to have the right network services?
A recent CIO/Computerworld survey found that 70 percent of IT executives considered reliable, high-capacity bandwidth as a transformational or strategic asset, up from 42 percent two years ago. The majority of respondents believe high-performance connectivity increases productivity and efficiency. It’s clear that business owners increasingly view high-performance network services as a prerequisite for future growth. ●
Insights Telecommunications is brought to you by Comcast Business
Business owners have been watching the slow rollout of the Patient Protection and Affordable Care Act (PPACA) for a while now. But that doesn’t mean they have a firm grasp on the breadth of the challenges, requirements and decisions that are inherent to its wide-reaching health care and insurance changes.
“If you’re like most business owners, you have already spent significant time gathering and processing information,” says Bill Norwalk, tax partner-in-charge at Sensiba San Filippo LLP. “Very soon, you will make vital decisions that will have significant effects on the future success of your organization.”
Norwalk says it’s critical for business owners not to get too caught up in the political maneuvering and analysis that fills the news coverage.
“Regardless of emotion or political leanings, business owners must understand that the PPACA is a reality and needs to be addressed like any other challenge,” he says. “Taking an unbiased, strategic look at the law and its ramifications for your business will allow you to make decisions that aren’t clouded by emotion or outside factors.”
Smart Business spoke with Norwalk about the PPACA, its ramifications and how businesses can adapt to its effects.
How will businesses be affected by health care reform implementation?
The PPACA will have an impact on benefits planning, tax planning and your ability to compete in a challenging labor market. Making the best decisions will require you to understand all of the decisions and consider their varied consequences.
Taking a decision-and-consequences-based approach to your analysis will help you understand the potential effects of your choices. Many businesses are considering the pros and cons of offering qualifying health insurance versus dropping health coverage and allowing employees to utilize newly established insurance exchanges. While the analysis of direct costs may be straightforward, you need to understand how your employees will view a change in coverage. Changes in health care benefits could have a substantial impact on your ability to attract and retain talent.
What are the potential tax effects and what can businesses and individuals do to plan?
Tax implications of the PPACA are wide reaching for both businesses and their shareholders. New taxes were introduced that could result in significant tax increases — especially for business owners and managers who don’t plan ahead.
Corporation shareholders and shareholders of pass-through entities could both be affected by the 3.8 percent tax on net investment income. An additional 0.9 percent Medicare surtax was also introduced by the PPACA. Shifting from investment income to regular income could be an effective strategy, but the analysis is often far more complex. Depending on your wage level, an additional self-employment tax on regular income could more than offset potential savings from decreasing net investment income. Alternative minimum tax considerations can further muddy the waters. The PPACA simply makes tax planning more convoluted. Fortunately, qualified professionals will have the tools and resources needed to help you consider various scenarios and develop a plan to minimize your liability.
Where should business owners turn for guidance?
Decisions related to PPACA implementation will affect human resources, tax strategy and the broader organization. Business owners must first identify the key decisions and then weigh the consequences of each. If your strategic plan related to the PPACA isn’t complete, it’s time for you to speak with someone who can help.
Work with an insurance or benefits adviser. He or she can help you understand your coverage alternatives and the associated costs. An experienced accountant can offer assistance with compliance, tax and organizational planning. The right information, advisers and analysis will allow for decisions that can minimize negative consequences and maybe even provide a competitive advantage. ●
For more health care reform information and tax tips, visit Sensiba San Filippo's blog.
Insights Accounting is brought to you by Sensiba San Filippo LLP
With so many health care reform law changes and updates, human resources professionals and companies are asking for a boiled down version of some of the main points that need to be highlighted, regarding the Affordable Care Act (ACA) and key pending action items.
Smart Business spoke with Tobias Kennedy, executive vice president, Montage Insurance Solutions, about what you need to know and do with the ACA.
What are a couple of immediate concerns for everyone?
First and foremost, make sure you got your notice out to your employees on their rights to the new marketplaces, or exchanges. Then, make sure the notice gets added to your new hire kit for future staff.
Next, employers need to look at their waiting periods and their compliance with California’s Assembly Bill 1083, which is a state law that expounds a little on the ACA. If this law applies to you, you may need to clip your waiting period if it extends beyond the allotted 60 days. Be aware this is separate than the federal bill and is set for a 2014 start date.
What extra steps do large employers need to take?
To find out if you need to comply with the employer shared responsibility provision, you have to evaluate your employees. Basically, the question is: Do you employ an average of at least 50 full-time people, including full- time equivalents. For some groups, this is an easy question. Others may waiver near the border, so it’s important to know the correct method for calculation.
If you do trigger the shared responsibility provision, you now need to be aware of exactly whom you are supposed to be offering benefits to, and exactly what types of benefits will qualify.
How should large employers keep track of their employees’ hours?
It’s a good idea for employer groups to start doing a regular check — monthly, quarterly, etc. — to see which employees are being offered coverage versus which employees are averaging more than 30 hours per week. Remember, just because you think they’re part-timers doesn’t mean they aren’t a manager’s go-to when someone calls in sick, or the workload gets hefty. It’s not uncommon for overtime hours to add up and alter a person’s average hours worked.
You’ll want to have a handle on the average hours worked by people that are not offered your benefits by running a payroll report and watching out for staff who edge up near the 30-hour average mark.
What’s key to know about insurance renewals?
You will want to note that, beginning with the upcoming January 2014 renewals, this is your last renewal to come into compliance before facing fines. Are your plan designs compliant? Is your employer/employee premium split compliant? If not, you may want to see where you are versus where you need to be. You’ll need to see what, if any, transitional steps you want to take this renewal, so you’re not so far off in 2015 when the potential for fines enters the picture. ●
Insights Business Insurance is brought to you by Montage Insurance Solutions
The biggest employer piece of the Affordable Care Act (ACA) has been delayed until 2015. Unfortunately, it looks like some of the transitional relief rules for the 2013 year went by the wayside with it, so it is incredibly important for employers to know that, as of now, the government is expecting you to use the 2014 gift year to get yourself into compliance — a year in which, technically, the ACA is still the law of the land, although there will be no penalties for the shared responsibility provision.
“Employers should really be aware of the fact that, beginning with the upcoming Jan. 1 renewals, your next renewal is your last renewal to implement the necessary changes before we enter 2015 and you begin to ‘go live’ in terms of facing noncompliance penalties,” says Tobias Kennedy, executive vice president, Montage Insurance Solutions.
Smart Business spoke with Kennedy about what exactly is the employer shared responsibility.
What does the employer responsibility really entail?
To break it down, you need to know the answer to three questions:
- Are you large enough to trigger it?
- If so, is your coverage considered affordable?
- Are you covering all of the people you’re required to cover?
How can employer groups know if they are large enough?
Technically the provision only applies to companies with 50 full-time or full-time equivalent employees. If you have more than 50 full-timers, it’s easy to know that you must comply.
Groups that can be trickier are those with part-timers. Even though you are not required to cover them, you are required to count their hours worked for the purposes of determining large employer status. Basically, most every hour worked by a part-timer goes into the calculation and you assign one full-time equivalent for every 120 hours your part-time staff works. In other words, if you add up all the part-timers’ hours and it comes to 1,200 hours for the month, you would add 10 bodies to your head count because that’s the equivalent of 10 full-timers, per the law. If you average more than 50 for the year, you must offer the people who are truly full-timers affordable coverage or face a penalty.
When is coverage considered affordable?
This actually has two parts to it. The first is the actuarial value of the plan, which is a fancy way of ensuring the plan is not a mini-med plan. So, first and foremost, regardless of what you charge the employees in premium, the plan has to have a 60 percent actuarial value. A Kaiser Family Foundation study set 60 percent at, approximately, a $2,750 deductible, 30 percent coinsurance and an out-of-pocket max of $6,350 — so it’s a fairly lenient plan design to meet.
Apart from that, you have to make sure that the employee-only tier costs less than 9.5 percent of an employee’s salary. You don’t need to worry about dependent buy-ups. There are a few safe harbors for figuring employees’ salaries, including using what’s reported in Box 1 on Form W-2 or comparing the premium to the Federal Poverty Level. You are only responsible for ensuring one of your plan options meets this threshold. In other words, dependent buy-ups can still be done at the cost of the employee, as well as buy-ups to richer coverage/lower deductible plans.
How do you know if you’re offering the plan to the right people?
First, the legislation defines full time as 30 hours or more per week, which might be a change for some employers still using the traditional 40-hour threshold.
Apart from that, one of the more complicated parts of the ACA centers on how employers with variable-hour employees offer coverage. Basically, you have the option of averaging out hours worked over a pre-defined time frame, up to 12 months. You can use that longer time frame to level out spikes in work for employees who toggle between working more some weeks and less in others. You can review their annual average and offer them coverage based on hours worked in the year.
You need to cover at least 95 percent of those the law says you’re supposed to cover, so you’ll want to work with your consultant to be sure you cast an appropriate net over the people that you’re required to make eligible. ●
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