DOL Audits

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Over the past year a number of contractors have been subjected to audits by Department Of Labor (DOL) Investigators. ARRA (American Recovery and Reinvestment Act) funding has reinvigorated enforcement activities. It has also become apparent that these audits are becoming more complicated to resolve.

In some cases the audits have increased in complexity; with the DOL Investigators asking for a myriad of company records, and then leaving for several weeks or months without finalizing the audit. This leaves the contractor in limbo and causes apprehension with their various customers. We recommend that in these cases the contractor send a letter to the DOL Investigator’s Supervisor and include a copy to the Regional Wage Specialist, asking for closure on the audit.

Some DOL Investigators threaten to withhold contract funds if compliance is in question. On Form WH-56 “Summary of Unpaid Wages”, the investigator will list all of the employees whom the investigator determines are due back wages. Investigators may also threaten debarment if contractors do not pay all the employees noted in the Summary of Unpaid Wages.

The Professional Service Council met with DOL officials last December at The Wage and Hour Division in Washington, DC due to the vast number of complaints regarding DOL Audits. The DOL agreed to send some representatives from their Wage and Hour staff to the PSC- SCA Training program in Wash DC. This program was held in March 2013 and has an upcoming session in October.

Any contractors, who do not have experienced personnel capable of handling DOL audits, may benefit by sending some of their employees to the next SCA training class that covers DOL audits.

If you would like additional information on SCA training programs, you may contact Albert Corvigno at acorvigno@marallc.com or call him directly at 252-312-4853.

For additional information relating to SCA compliance please click here to read “Avoiding the Compliance Pitfalls of the Service Contract Act” co-authored by Al Corvigno.

SCA Update

Effective June 19, 2013, the SCA health and welfare benefit increased to $3.81.   Please click here to read the All Agency Memorandum Number 214.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe-benefit obligations and provides your employees with valuable benefits.

Client Spotlight: Captain Al’s Restaurant

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If you are looking for a way to beat the heat this summer we suggest a visit to Captain Al’s Restaurant & Tiki Bar.  Captain Al’s is a casual, family style seafood restaurant located adjacent to Continental Marina in Buzzards Bay on the Upper Cape.

In addition to an extensive menu with delicious food and drink choices, Captain Al’s features a spacious water-side deck with breath-taking views of Buttermilk Bay.

Captain Al’s is open daily from 12 noon to 12 midnight, please click here for directions.  The summer season passes quickly so plan a visit to Captain Al’s soon.

Retirement Income Planning: The Total Return Approach Vs. the Bucket Approach

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Presented by John B. Steiger

Most working Americans have only one source of steady income before they retire: their jobs. When you retire, however, your income will likely come from a number of sources, such as retirement accounts, social security benefits, pensions, and part-time work. When deciding how to manage your various assets (whether personally or with the help of a professional wealth manager) to ensure a steady retirement income stream, there are two main strategies to consider: the total return approach and the investment pool-or bucket-approach.

The total return approach

With a total return approach, you invest your assets in a diversified portfolio of investments with varying potential for growth, stability, and liquidity. The percentage you allot to each type of investment depends on your asset allocation plan, time horizon, risk tolerance, need for income, and other goals.

The objectives of your investment portfolio generally change over time, depending on how close you are to retirement:

Accumulation phase. During the accumulation phase, your portfolio’s objective is to increase in value as much as possible, with a focus on investments with growth potential.

Approaching retirement-age phase. As you near retirement, your portfolio becomes more conservative, moving toward more stable and liquid assets in order to help preserve your earnings.

Retirement phase. Once you retire, the idea is to withdraw from your portfolio at an even rate that allows you to enjoy a sustainable lifestyle.

Traditionally, the widely quoted withdrawal rate for the first year of retirement is 4 percent. Ideally, that 4 percent should be equal to the amount left over after you subtract your yearly retirement income (e.g., pensions, social security, and so on) from your total cost of living, including investment management fees. Each year, you will most likely increase your withdrawal percentage to keep up with inflation. Keep in mind, however, that the appropriate withdrawal rate for you will depend on your personal situation as well as the current economic environment.

The bucket approach

The bucket approach also begins with a diversified portfolio, following the total return approach throughout most of the accumulation period. Then, as retirement approaches, you divide your assets into several smaller portfolios (or buckets), each with different time horizons, to target specific needs.

There is no “right” number of buckets, but they are fairly common. In a three-bucket scenario:

The first bucket would cover the three years leading up to retirement and the two years following retirement, providing income for near-term spending. It would likely include investments that have historically been relatively stable, such as short-term bonds, CDs, money market funds, and cash.

The second bucket would be used in years three through nine of retirement. Designed to preserve some capital while generating retirement income, it would include more assets with growth potential, such as certain mutual funds and dividend-paying stocks.

The third bucket, designated to provide income in year 10 and beyond, would contain investments that have the most potential for growth, such as equities, commodities, real estate, and alternatives. Although the risk profile of this bucket is typically higher than the other two, its longer time horizon can help provide a buffer for short-term volatility.

As you enter the distribution phase, you draw from these buckets sequentially, using a withdrawal rate based on your specific lifestyle goals in a particular year.

The big picture

Many people are familiar with the total return approach, but the bucket approach has been gaining popularity recently, thanks in large part to its simplicity. It also accounts for different time periods during retirement, potentially allowing you to allocate money more effectively based on your personal situation.

Perhaps the greatest benefit of the bucket approach is that it can help provide a buffer during times of market volatility. For example, if the value of the investments in buckets two and three suddenly fluctuates due to market conditions, your immediate cash income is coming from bucket one, which is likely to be less volatile. This may also alleviate the need to sell investments that have lost money in order to generate retirement income.

Of course, while the bucket approach has its advantages, some investors simply feel more comfortable using the total return approach. Remember, the best strategy for your retirement is unique to you and your personal preferences and needs. However you choose to pursue your retirement dreams, it’s important to work with a financial professional who can help you create the most appropriate strategy based on your goals and situation.

Contact us today to learn more about the different paths you may take to pursue a sustainable and enjoyable retirement.

Diversification does not assure against market loss, and there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio.

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John B. Steiger is a financial consultant located at (460 Totten Pond Road Suite 600 Waltham, MA 02451. He offers securities as a Registered Representative of Commonwealth Financial Network , Member FINRA/SIPC. He can be reached at 781-547-5621 or at john@financialconnector.com.

2013 Commonwealth Financial Network

At Cleary, we are committed to a holistic approach of protecting and preserving our clients’ financial assets. Give us a call today at 617-723-0700 and let us know how we can help you.

Terrorism Insurance

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Before the 9/11 attacks, insurers didn’t charge for terrorism insurance, but now reinsurers believe they cannot price the risk. The Terrorism Risk Insurance Act (TRIA), enacted a year after the 9/11 attacks, makes the Federal Government the backstop for private insurance companies in the event of such catastrophes.  A terrorist act that is eligible for coverage under TRIA must be certified by the Secretary of the Treasury.

Since TRIA’s passage, the private industry’s willingness and ability to cover terrorism risk have increased. According to industry surveys, prices for terrorism coverage have generally trended downward, and approximately 60% of commercial policyholders have purchased coverage over the past few years.

Each time a business renews its commercial insurance policy, terrorism coverage is offered. Policyholders have the option to elect the coverage or decline the coverage.  (Workers Compensation policies automatically include terrorism; you can’t opt out of it!)  Prior to the April 15, 2013 Boston Marathon bombings only about 50% of Mike Regan’s commercial property clients actually purchased terrorism insurance.  Whether or not the bombings are deemed a “terrorist” act could have enormous financial implications for the businesses that suffered damages or closed during the police investigation.

It may seem obvious to many that the bombing was an act of terrorism, but whether it is certified as such means a great deal to the property owners affected by it. Think of this; a bomb damaging your building is not an excluded peril from “Special” (used to be called All Risk) property coverage’s. You would be covered even if you didn’t purchase terrorism coverage.  However, if it becomes a “certified” act of terror and you did not purchase the terrorism coverage you will not be covered! Multiple property claims from the bombing are in limbo until such time as the Secretary of the Treasury does or does not certify the event.

Mike Regan was recently quoted in a Boston Business Journal article titled “State of Exposure”.  The article discussed the resurgence of terrorism coverage in the wake of the Boston Marathon bombing.  “It’s definitely opened people’s eyes to having it”.  “After 9/11 it was a big item.  But, like most things, over time people tend not to think about it the same way and then some people stopped asking what it is, what it means, whether events are covered or not.  Now they’re starting to ask that again.”

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

Workers Compensation Audit Issues – Sole Proprietor

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The Massachusetts Workers Compensation Rating & Inspection Bureau has updated audit guidelines related to the hiring of sole proprietors and/or partnerships. These guidelines will have a greater impact on the construction field, but will impact other industries as well.

It is critical that businesses obtain Certificates of Insurance from contractors or firms hired to work on their behalf. If a hired subcontractor does not carry Workers Compensation coverage, then an injured employee of that subcontractor would collect on your coverage. For this reason auditors will ask about contractors, 1099’s and subcontractors you have hired and request to see the Certificates of Insurance which you have collected. The labor cost you paid to any uninsured parties will be added as payroll to your audit and generate additional premiums.

The Bureau has also clarified the audit guideline regarding the use of subcontracted sole proprietorships or partnerships. Sole proprietors and partners are not required to carry Workers Compensation coverage if they do not have any other employees. They can elect to obtain coverage on themselves, but are not legally required to do so. They are legally required to purchase the coverage if they have any employees, even if the workers are part-time. A Certificate of Insurance provided by a Sole Proprietor / Partnership that has Workers Compensation but has not elected coverage for the owners will be noted as such. The Bureau’s new guidelines stipulate that the auditors will pick up the payroll for the “uninsured” sole proprietor / partner if the Certificate states that they are excluded from coverage. Exceptions to this rule can be found in the following three-part test:

The individual/partner is free from control and direction in connection to performance of the service, both under his/her contract for the performance of service and in fact; and
The service is performed outside the usual course of the business of the employer; and
The individual/partner is customarily engaged in an independently established trade, occupation, profession or business.

Here is an example of how the rule would apply:

John Smith Carpentry, Inc. hires Stanley Jones dba Stanley Jones Plumbing to perform work on three projects over the course of the year. Stanley does not have employees at the time of the work but does have a Workers Compensation policy in case he needs a worker for larger projects. Stanley has elected to be excluded on his Workers Compensation policy. Stanley provides a Certificate of Insurance to John Smith Carpentry that shows Workers Compensation is in place but that he is excluded on the policy.

John Smith is insured with Boston Harbor Mutual. The auditor has requested copies of all insurance certificates for subcontractors hired during the year. A review of the Stanley Jones certificate shows that the sole proprietor is not insured. Boston Harbor Mutual’s auditor adds the payroll cost of the three projects to John Smith’s premium. John smith is unable to provide sufficient evidence relative to the “three-part test” to Boston Harbor Mutual that would reverse the charge. John Smith now must pay additional Workers Compensation premium.

It is important for businesses to be aware of this issue. The issue is more common with construction operations but is certainly applicable to any business that hires other businesses to provide a service or operation on their behalf, such as an insurance agency hiring an individual to clean the office. Be aware of these issues before you hire the business or individual so you can understand what insurance is in place and the potential cost in the future if their coverage is not sufficient or is in question.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

The History of Insurance Throughout the World

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Insurance has a history that dates back to the ancient world. Over the centuries, it has developed into a modern business of protecting people from various risks. The industry has been profitable for many years and has been an important aspect of private and public long-term finance.

First forms of insurance

In the ancient world, the first forms of insurance were recorded by the Babylonian and Chinese traders. To limit the loss of goods, merchants would divide their items among various ships that had to cross treacherous waters. One of the first documented loss limitation methods was noted in the Code of Hammurabi, which was written around 1750 BC. Under this method, a merchant receiving a loan would pay the lender an extra amount of money in exchange for a guarantee that the loan would be cancelled if the shipment were stolen. The first to insure their people were the Achaemenian monarchs, and insurance records were submitted to notary offices. Insurance was also noted for gifts of substantial value. These gifts were given to monarchs. By recording their gifts in a register, givers would receive help from a monarch by proving the gift’s existence if they were in trouble.

As the ancient world evolved, maritime loans with rates based on favorable seasons for traveling surfaced. Around 600 BC, the Greeks and Romans formed the first types of life and health insurance with their benevolent societies. These societies provided care for families of deceased citizens. Such societies continued for centuries in many different areas of the world and included funerary rituals. In the 12th century in Anatolia, a type of state insurance was introduced. If traders were robbed in the area, the state treasury would reimburse them for their losses.

First documented insurance policy

Standalone insurance policies that were not tied to contracts or loans surfaced in Genoa in the 14th century. This is where the first documented insurance policy came from in 1347. In the following century, standalone maritime insurance was formed. With this type of insurance, premiums varied based on unique risks. However, the separation of insurance from contracts and loans was a major change that would influence insurance for the rest of time.

The first book printed on the subject of insurance was penned by Pedro de Santarém, and the literature was published in 1552. As the Renaissance ended in Europe, insurance evolved into a much more sophisticated form of protection with several varieties of coverage. Until the late 17th century, many areas were still dominated by friendly societies that collected money to pay for medical expenses and funerals. However, the end of the 17th century introduced a rapid expansion of London’s importance in the world of trade. This also increased the need for cargo insurance. London became a hub for companies or people who were willing to underwrite the ventures of cargo ships and merchant traders. Lloyd’s of London, one of London’s leading insurers, is still a major insurance business in the city.

Insurgence of modern insurance

Modern insurance can be traced back to the city’s Great Fire of London, which occurred in 1666. After it destroyed more than 30,000 homes, a man named Nicholas Barbon started a building insurance business. He later introduced the city’s first fire insurance company. Accident insurance was made available in the late 19th century, and it was very similar to modern disability coverage. Nowadays, one can find different forms of disability insurance throughout the world. One such example could be the national disability insurance scheme (NDIS) of Australia. Such insurance can extend support to people with permanent or significant disabilities and might not require people to purchase an insurance policy. This form of support can be availed by both registered and unregistered NDIS providers. One can also start a business by applying to become a Ndis provider (you can click here to learn how to become an unregistered ndis provider).

In U.S. history, the first insurance company was based in South Carolina and opened in 1732 to offer fire coverage. Benjamin Franklin started a company in the 1750s, which collected contributions for preventing disastrous fires from destroying buildings. As the 1800s arrived and passed, insurance companies evolved to include life insurance and several other forms of coverage. No type of insurance was mandatory in the United States until the 1930s. At that time, the government created Social Security. In the 1940s, GI insurance surfaced. It helped ease the financial difficulties of women whose husbands died while fighting in World War II. It wasn’t until the 1980s that the need for car insurance grew enough that steps were taken to make it mandatory. Although insurance is an established business, it is still changing and will change in the future to meet the evolving needs of consumers.

Health Care Reform

On March 23, 2010 President Obama signed the health care reform bill, or Affordable Care Act (ACA) into law. Aca’s health care reforms which are primarily focused on reducing the uninsured population and decreasing health care costs will continue to be implemented over the next several years. Cleary Insurance has been working with our existing benefits clients to manage health care reform. We will continue to work with our clients through the final implementation as the requirements and obligations continue to evolve.

If you are not currently an employee benefits client and are interested in a health care reform business analysis please contact us today.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

Workers Compensation – Out of State Issues

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Do your employees travel to states other than where your business is domiciled? Do your employees perform work in other states? Understanding how Workers Compensation laws respond to interstate operations is important to ensure that you are in compliance with state employment laws.

Workers Compensation insurance is regulated at the state level. Benefit schedules for claims, interpretation of laws, rates and requirements will vary from state to state. Considerations for establishing where an employee is domiciled include: Where the employee lives? Where the employee primarily works? In what state was the employee hired?

Extraterritorial coverage issues arise when employees travel and work in a state that is not listed on the Workers Compensation policy. In general, domestic short term business trips to other states should not present a coverage problem. However, a number of states, such as NY and NH, are requiring that they be listed on the Workers Compensation policy even if the work only lasts a few days. Noncompliance with these requirements could open you up to a possible fine.

ND, WA, OH, and WY are “monopolistic” states.  Workers Compensation coverage for employees located in one these four states is only available through the respective state agency.  For example, a Workers Compensation policy would have to be purchased directly through www.ohioBWC.com for an Ohio based employee.

International travel presents additional complications for Workers Compensation. It is likely that your carrier will not have the resources to respond to an employee injured in a foreign location. Traditional Workers Compensation may not apply if the employee was injured during the trip but not engaged in employment related activities. International insurance policies are available to provide 24 hour protection for workers traveling on an overseas business trip.

Understanding how state laws impact your Workers Compensation coverage is important for compliance issues as well as ensuring that your employees are protected. We encourage you to discuss with us any questions you may have regarding your inter-state operations.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

Client Spotlight: Road To College

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Spring is right around the corner. For high school seniors, a lot will take place over the next few months. Between academics, sports, social activities like prom, and graduation looming, you have to make sure to stay on track with your college planning. Our client, Road To College™ , can help!

Road To College™ is a premier college consulting service offering personalized college preparation solutions to students and parents. Their goal is to provide parents and students from all over the world access to quality, affordable college counseling services.  They offer senior application services, freshman, sophomore, and junior strategic admission planning as well as graduate school programs.

Please click here to learn more about their services.

Understanding The HHS Rules For Essential Health Benefits

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Health and Human Services (HHS) ruled to establish the future of insurance issuer standards and health insurance exchanges for actuarial value and essential health benefits under the Patient Protection and Affordable Care Act (PPACA). The final rule creates a plan for when federal facilitated exchanges should accredit qualified health plans. When the PPACA goes into full effect, insurance plans that were not grandfathered into the small and individual market must provide coverage of services or benefits in 10 categories. They must also show the scope of benefits a typical employer plan covers. Qualified health plans are designed to provide benefits that cover essential health benefits, meet minimum value requirements and include cost-sharing limits.

Essential Health Benefits

Every state is allowed to have a single EHB benchmark plan. This is the plan that defines the standards for health benefits every Qualified Health Plan (QHP) must follow. One of these four options must be selected:

  • A state employee health plan, which comprises the three largest and most available enrollment-based state plans.
  • A small group plan, which is the largest enrollment-based plan in any of the three largest of the small group options.
  • The plan featuring the largest non-Medicaid insured commercial plan with enrollment through an HMO.
  • Any of the nation’s three largest Federal Employees Health Benefits Program choices offering aggregate enrollment.

When states do not decide on a plan, the default benchmark plan is what will be used. If the plan does not offer all of the required coverage in the 10 necessary categories, it must have supplemental provisions using the rule’s outlines. Multi-state plans must adhere to the benchmark standards set forth by the U.S. OPM.

Actuarial Value

The PPACA allows four levels of health plans through exchanges. Each one of these levels or tiers is defined by an actuarial value, which is a percentage of the total allowed benefits costs paid by the health plan. For example, a silver plan would have an actuarial value of 70 percent while a gold plan’s percentage would be 80. Values may vary by a positive or negative two percent. These levels were set in place to help potential enrollees and participants compare their options. To count toward the actuarial value calculation, amounts made available under HRAs and employer contributions to HSAs may only be used for cost sharing. In addition to this, the issuer must be made aware when the plan is purchased. Issues of integrating other types of HRAs will be addressed and amended when necessary.

Minimum Value

If the percentage of all allowed costs of benefits offered by an employer-sponsored plan equals less than 60 percent, the plan is said to provide minimum value. To determine their values, employers can use the minimum value calculator offered by the IRS and HHS. This calculator is similar to their actuarial value calculator. However, it is based on claims data that shows regular employer-sponsored plans.

Yearly Limits And Deductible Limitations

The HHS requires all group health plans to meet the annual cost-sharing limitation. However, only issuers and plans in the small group market must comply with the deductible limits. When the PPACA goes into effect, the limit for self coverage is set at $2,000. For those with insurance beyond self coverage, the limit is $4,000. Small group health coverage may exceed deductible limits if it is not able to reach a certain tier.

Cost Sharing

For annual out-of-pocket limits, the HHS says that self-insured plans and non-grandfathered group plans must meet the annual limit for the maximums defined in the ACA’s in §1302(c)(1). However, the Employee Benefits Security Administration (EBSA) guidance says that plans may have multiple service providers for administration purposes. If a plan’s annual out-of-pocket maximum limits meet the following, it may be considered satisfied:

The plan includes out-of-pocket maximum coverage that is not completely reliant on major medical coverage.

The plan meets all of the requirements for major medical coverage.

In relation to a specific time frame, the new rule says that exchanges in the future must create a uniform period for a QHP issuer that is not accredited but must gain accreditation. For answers to questions about these issues, discuss concerns with an agent.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

Spring Cleaning Safety

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Ah, springtime. That glorious time of year when you suddenly realize the lawn needs mowing, the garden needs weeding and the house could use a fresh coat of paint. But with many families’ budgets a little tighter this year, buying new spring-cleaning tools isn’t always possible.

Using last season’s tools is a good idea, provided they’re in good condition and can be used safely. The last thing you want to do is take a trip to the emergency room. Yet that’s exactly where more than 350,000 people end up every year, thanks to injuries from improperly used ladders, lawn mowers and power garden tools. So before you get too ambitious, take a few precautions to help keep your family safer.

  • If you’re reusing last season’s lawn and garden power tools, inspect them for frayed power cords and cracked or broken casings. If the item is damaged, have it repaired by a qualified technician or replace it.
  • Never carry a power tool by the cord or yank a power cord from a receptacle. When disconnecting the cord, always grasp the plug, not the wire. Keep cords away from heat, oil and sharp edges.
  • When pulling out the lawn mower for the first time this year, refresh your memory by reading the owner’s manual. Be sure you know how to stop the machine in case of an emergency.
  • If you have a gasoline-powered mower, store the gas in a UL Classified safety can.
  • Always start your mower outdoors. Never operate it where carbon monoxide can collect, such as in a closed garage, storage shed or basement.
  • Don’t operate an electric or gas-powered lawn mower on wet grass.
  • When you’re through with power tools and garden appliances, store them away from water sources to avoid electric shock. Never use them in the rain.
  • Whether your ladder is brand new or it has seen a few spring cleanings, read the instructions and warning labels before using it. They’ll help you choose the right ladder for the job and describe ladder weight and height limits.
  • Remember the 4-to-1 rule. For every four feet of ladder height, the bottom of the ladder should be one foot away from the wall or object it is leaning against.
  • Use a fiberglass ladder if you’re working near electricity or overhead power lines.
  • If you purchase new tools this spring, look for the UL Mark, which means representative samples of the product have been tested against stringent safety standards for fire, electric shock and other safety hazards.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines department will work with you to evaluate your insurance needs, identify exposures, and create a customized insurance portfolio. Give us a call today at 617-723-0700.