2012 Medicare Open Enrollment
Medicare open enrollment began October 15, 2011 and will end December 7, 2011. This is the one time of year when everyone with Medicare can make changes to their health and prescription drug plans for coming year.
Client Testimonial
We are a growing company and use Cleary for all our insurance coverages. It makes our lives easier to deal with one company who can handle all our insurance needs. Everyone at Cleary is incredibly responsive, and they certainly have demonstrated many times their ability to handle all our issues.
Irene Costello
Co-founder
Effie’s Homemade
Cost Cutting Health Benefits
Reviewing Your Options
Like many employees, businesses consider ways they can cut expenses during difficult economic times. One common focal point of such is employee benefits programs, especially in the area of health benefits. Considering that health benefits are frequently the most expensive aspect of a company’s benefits program, this may seem like a reasonable, logical place for an employer to take cost-cutting measures. However, employers should carefully consider what the consequences will be from making cuts to their employee benefits programs; whether or not there are any alternative cost-cutting options available; and, if benefits cuts are a must, how they can lessen the impact.
The Consequences
Perhaps you, as an employer, have decided to target your employee benefits program and make some significant cost shifts toward your employees with the idea that you will cut costs and save money. If the cost shift involves higher deductibles and/or co-pays for employees, then they may procrastinate seeing a physician when they’re suffering symptoms of illness or injury, forgo or delay filling vital prescription medications, and do without wellness care. If the cost shift involves premium increases, then many employees, especially young and relatively healthy ones, might decide to drop coverage all together. The exodus could leave your plan with a larger and more undesirable risk pool.
These types of cost shifts can very well cost the health plan more money over the long run. Furthermore, it can negatively impact your company’s financial bottom line when it comes to employee morale, productivity, disability costs, and absenteeism.
An Alternative
An alternative to cost shifts would be to focus your benefit dollars on the measures that will enhance employee well-being and overall health. Some ideas would include:
- Using incentives to motivate employees to participate in wellness activities, such as weight loss and fitness programs, tobacco cessation classes, and nutrition education and counseling
- Using incentives to motivate employees to participate in activities that can screen and detect serious medical conditions, such as glucose level testing, blood pressure screenings, cholesterol testing, and completion of health risk assessments
- Providing extensive preventive care coverage
- Having an employee assistance program (EAP) available to your employees can be especially helpful during poor economic conditions since it can provide resources and/or referrals for things like financial counseling, crisis intervention, and stress management
If You Must…
Despite the negative consequences, you might feel that cost-shifting is your only feasible option. If so, make sure that you do everything possible to soften the blow to your employees, such as:
- Offer voluntary benefits to your employees. This will cost you little, if any, money. While the employee will be responsible for most to all of the cost, they’ll benefit from group rates, convenient payroll deductions for the premiums, and the ability to personalize their coverage selections to meet their own unique needs.
- Offer flexible spending accounts (FSAs). FSAs let employees pay for health care expenses with pre-tax dollars and get the most of their health care dollars.
- Offer employees consumer-directed health plans (CDHPs). These plans combine a health savings account (HSA) with a health plan that has a higher deductible.
All of the above options have a commonality in that they each require an employee to get more personally involved in their own health and the management of their health-related benefits. Whether the change makes the employee more vigilant in scheduling preventive care visits, participating in wellness activities, or budgeting their future health care expenses, the point is that the employee is assuming more responsibility for their health care and management thereof. It is this greater individual responsibility on the part of the employee that can be one of the best long-term cost-management tools available to an employer.
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 or contact us by e-mail 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.
SCA Contracts
Impending Legislation
The Department of Labor (DOL) published a final rule on August 29, 2011 implementing Executive Order #13495 on “Non -Displacement of Qualified Workers” under SCA contracts. This rule will not be effective until the Federal Acquisition Council issues regulations, which should happen very soon. It will pertain to every contract under the Service Contract Act and the only exemptions must be approved by the head of the contracting department. Employees of the predecessor contractor must work for three months before being eligible “to be offered the first right of refusal“. An employment offer must be made to all the predecessor employees in writing or electronically. The predecessor employees will be given ten days to accept an offer from the successor contractor. All workers eligible must be service employees. A successor can refuse to hire a predecessor employee if they can prove that the employee is not qualified. The predecessor must provide a list of their employees within ten days before the end of their contract. The prime contractor is also responsible to ensure that these rules are flowed down to all their subcontractors. The DOL’s Wage and Hours Division will be responsible for auditing these rules.
Earlier, on August 10, 2011, the Office of Federal Contract Compliance Programs (OFCCP) published an advance notice of proposed rulemaking in the Federal Register on a new Compensation Data Collection Tool. OFCCP is increasing its audit and investigative activity, and this would be another tool to root out non-compliance with Equal Employment Opportunity and anti- discrimination requirements. While a proposed rule is likely in the next several months, a number of questions regarding the scope and details of the data collection tool and related items must be addressed.
The Professional Services Council’s (PSC) Labor Relations Committee has invited OFCCP to speak at their next meeting on September 21, 2001 in Arlington, VA. They will be exploring these two important rules, both of which have wide ranging implications for the government services industry.
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 or contact us by e-mail and we will work with you to create a plan that meets your fringe benefit obligations and provides your employees with valuable benefits.
Earthquake Insurance
Why It’s Important for Everywhere
When most people think about earthquakes in the United States, Alaska and California are the first two states they think of. However, Tuesday’s earthquake in Virginia shattered this idea. The initial 5.8 magnitude quake was followed by several aftershocks, which were felt as far away as Georgia, Chicago and Toronto. Although there hasn’t been extensive physical damage, the feeling of safety many people had was shaken. Many residents of the larger cities on the East Coast relocated there after experiencing tremendous earthquakes in California. One of the most important things that has become apparent from the Virginia earthquake is the need for preparedness and ample insurance coverage.
Earthquake damage isn’t covered under most business or homeowners insurance policies. Chris Hackett, Director of Personal Lines Policies for Property Casualty Insurers Association of America, stated that most policies don’t cover damage from sinkholes or earth movement. However, fires or other incidents that are triggered by an earthquake may be covered by property insurance. He encourages policyholders to thoroughly read their policies to understand any exclusions.
Many people think they won’t experience a major earthquake during their lifetime. This is especially true for those who live in areas where earthquakes happen every 100 years or less. Although many people may not experience a strong earthquake like the recent Virginia incident, there are over 5,000 incidents recorded each year by the USGS. Damage from earthquakes has been recorded in all 50 states in history. There have been reports of damage in 39 states alone since 1900. This proves that while some people may not live in areas that commonly experience earthquakes, they’re still not immune to the threat.
Earthquake coverage can be purchased as a rider to a personal or business property insurance policy, and insurance costs vary by location, building type and the age of the building:
It’s much more expensive to insure older buildings
Brick structures are more expensive to insure
Buildings with wood frames withstand the force of earthquakes better, so it’s cheaper to insure them
Every earthquake policy also has a deductible. This means that homeowners must pay upfront for a portion of the damages before the insurer pays the remaining amount. The deductible may be up to 20% of the structure’s replacement value. The percentage depends on the insurer and the location of the structure.
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 or contact us by e-mail.
Business Insurance Reviews
Why Annual Reviews Matter
Most new business owners are concerned that everything is favorable for the success and safety of their business, including obtaining the protection of business insurance. However, longevity and success can cause complacency.
Let’s say you started your business 10 years ago with just a small space and computer desk. Today, you have an office full of employees and equipment. Do you still have the same insurance policies from 10 years ago? If so, you might not realize how under-insured you’ve become.
Business owners need to ensure they’re annually reviewing their business insurance programs. Errors happen and circumstances change, even when policies were initially obtained with care and caution. Without yearly examinations, substantial expense and risk can ensue.
It’s common for small businesses to start out with basic insurances, such as commercial property and general liability policies. However, as they evolve, most find they need other types of insurance, such as:
- Excess Liability or Umbrella – covers claims exceeding your standard policy’s limits
- Workers’ Compensation – once your business reaches a certain number of employees, this type of insurance will actually be required in most states to provide payments for an employee’s lost wages and medical expenses following a workplace injury
- Professional Liability – covers your service-provided mistakes and usually your attorney fees.
- Auto, Hired & Non-owned – protects your business should an employee cause a vehicle accident in their personal or rented vehicle
- Commercial Auto – coverage not under personal auto policies, such as to your business and for employees unloading and loading
- Employment Practices Liability – coverage for HR issues, such as those related to termination, harassment, and discrimination laws
- Directors & Officers Liability – financial protection for Directors and Officers should they be sued for wrongful acts stemming from performance of their duties
- Employee Benefits Liability – covers liability issues from an omission or error in the administration of an employee’s benefits that results in the employee incurring a cost, such as a terminated employer losing benefits after not being providing with COBRA information
Depending on your business, many of these insurances may be essential to adequately protect yourself. An annual insurance review is an ideal time to discuss these insurances, as well as your need for them, with your agent. Ensure the following elements are considered as you begin the review:
- Revenue. More business is good, but it also means a greater potential for liability. Have annual sales changed?
- Property. Have you added equipment, computers, and such that would create a need to increase your commercial property policy’s limits?
- Location. Your business owner’s or general liability policy could be impacted if you’ve added, closed, or moved locations.
- Travel. A hired and non-owned auto policy may be needed if your employees are frequently driving rented vehicles.
- Employees. Have you had an increase in your workforce, turnover rate, or use of contractors? Consider
- Employment Practices Liability Insurance for high turnover rates. Workers’ Compensation insurance may be a new requirement if you’ve added to your workforce.
- Services. Are you offering additional services? For certain types of work, you may need additional endorsements to your general liability policy.
- Customers. Are you serving new clients or industries? This may cause problems with your professional liability policy if you’re servicing high concentrations of high-risk clients/industries.
The above answers will be different for every business and usually won’t remain the same over the business’s life. That’s why insurance isn’t a one-size-fits-all, unchangeable product. Take advantage of these attributes and annually review your business for exposures and insurance needs. Insurance may not cover everything, but it can certainly mitigate your risks. Start your annual business insurance review today by setting up a meeting with Cleary Insurance to discuss the above issues and how they relate to your current insurance needs.
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 or click here to contact us by e-mail.
Wessling Architects’ Integration Philosophy
Our new client Wessling Architects uses a unique, award winning integrated approach to all their design and architecture projects. According to Stephen J. Wessling, President & CEO, this approach “enhances the design process and protects the interests of our clients not only due to the efficiency, but through comprehensive professional services, strong communication, and a deeper reliance on partnering.”
Asset Protection
A Vital Part of a Wealth Management Plan
Thanks to a soft economy, the up and down stock market, and the loss of equity in many homes, more people than ever are considering ways to protect their assets. Threats such as a forced bankruptcy filing, a frivolous lawsuit or an IRS audit are all reasons to implement strategies to shield your property from potential creditors, litigation and other legal hazards. Let’s explore two asset protection techniques that may be right for your situation.
1. Transferring assets to a trust
Placing assets into a trust is one way to protect them from potential creditors. But not all types of trusts will provide asset protection. A common estate planning tool, the irrevocable life insurance trust (ILIT), is a trust that does. You set up and fund a trust that uses those funds to buy an insurance policy on your life — or you can transfer an existing policy to the trust. Either way, the policy’s value is protected because you’re no longer considered the legal owner. (This also means the policy isn’t included in your taxable estate.) At the same time, the trust also protects it — until funds are distributed — from your beneficiaries’ creditors.
Other trusts also are available to protect your assets. In recent years, several states have followed Alaska’s lead and passed laws to provide protection to “self-settled” trusts. These trusts are available to residents of any state, but the costs of setting them up and maintaining them are typically higher than with normal living trusts and should be weighed against their asset protection benefits.
Offshore trusts are an option, but they come with their own set of costs and risks. These trusts can offer significant protection. But they not only must comply with the laws in the country in which they’re established, but also must be structured in accordance with U.S. tax laws and regulations.
2. Establishing a family limited partnership
A family limited partnership (FLP) is another estate planning tool that shields assets from creditors. You establish an FLP by setting up a partnership and transferring assets to it in exchange for limited partnership interests for you and your family. You also can use a properly structured FLP to reduce gift and estate taxes.
In general, a limited partner’s creditors cannot reach the FLP’s assets — they can only obtain rights to receive any distributions made from the FLP to the limited partner. By retaining a small general partnership interest (1%, for example), you can retain control over the property while providing some level of protection from potential creditors.
In recent years the IRS has challenged valuation discounts on FLP interests and also attempted to have FLP assets included in the taxable estate of the person who funds the partnership. But a properly structured and operated FLP likely will survive most challenges.
Who owns that asset?
Your ability to protect a certain asset greatly depends on how you own it. One type of ownership, tenancy by the entirety, is common and easy to accomplish.
Tenancy by the entirety is a form of joint tenancy with right of survivorship that can apply to personal residences. Available in most states, it’s perhaps the simplest and least intrusive form of asset protection and allows you to protect your home for as long as you and your spouse continue to use it. Unfortunately, persistent creditors can eventually succeed to ownership of the property when you sell or on your or your spouse’s death, regardless of who dies first.
If one spouse is more likely to be the object of a lawsuit than the other, an alternative approach is to shift assets to the “safer” partner to protect them. Understand, though, that shifting too much property to one spouse could interfere with the estate planning goal of balancing assets to take advantage of each person’s estate tax exemption. Then again, holding a home in tenancy by the entirety may not help achieve your estate planning goals either.
Consider your options
No matter what the economic climate is, asset protection should always be part of your overall wealth management plan. Setting up trusts and FLPs are just two techniques to help ensure your assets stay with you or go where you want them to. Discuss with your financial advisor these and other asset protection measures that fit your specific situation.
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 or contact us by e-mail and let us know how we can help you.
SCA Health and Welfare Fringe Benefit Changes
The prevailing health and welfare fringe benefit issued under SCA increased on June 17, 2011. The U.S. Department of Labor sent a memo dated June 10, 2011 to all contracting agencies of the Federal Government and the District of Columbia titled DOL ALL AGENCY MEMORANDUM NUMBER 210.
Effective June 17, 2011 the SCA health and welfare benefit increased from $3.50 to $3.59 per hour. You can find the updated postings on the Wage Determination www.wdol.gov and Wage and Hour Division (WHD) www.dol.gov/whd websites.
The agency memo includes a history of wage determinations, what contracts are affected and the wage determination for the state of Hawaii. If you have any questions about this memo, please feel free to contact Maral, LLC.
Many contractors have called us recently stating that their contracts have both fringe benefit rates in their respective wage determinations, and wondering if it is a mistake? We advised them that the “high” rate is only used for grandfathered contracts. Unless a new contract is issued which should have the “low” rate, there can only be one fringe rate on your contract for all sites under that procurement.
Please remember to have the contracting officer modify the new Health and Welfare rate in your contract before you begin paying it!
Effective Estate Planning
Make Good Decisions Now
A well-designed estate plan can help provide your family financial security – and give you peace of mind right now. The goal of estate planning is to help you accumulate, manage and conserve capital and income – taking into account your resources, goals and tax considerations – and preserve those assets for your heirs. It can also help you manage property in an efficient, profitable way during your lifetime. Every case is unique, but some of the key estate-planning challenges include the following.
Estate Taxes
Estate taxes can be a major concern for those with significant net worth. Without an effective plan in place, estate taxes can force heirs to sell real estate and other assets to raise cash to pay the taxes. However, planning can help reduce estate taxes by making lifetime transfers to heirs and providing a source of money to pay taxes, such as an irrevocable life insurance trust (see How an ILIT is used for estate planning).
Expect the Unexpected
To understand the value of working with a professional, you only have to take a look at recent changes to the estate tax code. The federal estate tax was officially repealed as of January 1, 2010, but is slated to return in 2011 with an even lower exemption amount and a higher tax rate. During 2010, beneficiaries could still be exposed to capital-gains liability because of a limitation to something known as the “‘step-up in basis’ for estate assets.” And additional changes to the estate tax structure are also possible before the tax returns in 2011. If you’re confused, you’re not alone.
Business Succession
For many business owners, their single biggest asset is the business itself, and they often plan to pass that business on to children or others who are actively involved in it. For that, they tend to hire a lawyer (similar to a Denver estate planning lawyer) for equal distribution of wealth and assets. In the event that estate planning is not handled properly, it could result in the heirs or children splitting a smaller part of the estate, which could be further reduced by estate taxes as well. If providing equal inheritances to your heirs is a goal, one possible solution is life insurance, used either to pay the estate taxes or to equalize the values going to children who are not involved in the business.
Gifts
Gifts made during your lifetime can allow you to transfer assets that will significantly appreciate, and would drive up estate taxes if still in your name when you die. In order to reduce the size of the taxable estate, you can transfer assets each year up to the level of the annual gift-tax exclusion. Another option could be a charitable remainder trust, which can allow you to direct income from certain appreciated properties to a designated charity, with possible tax advantages.
Other Options
There are a number of more complex solutions that may be appropriate depending on your specific situation and goals. These include Grantor Retained Annuity Trusts, Qualified Personal Residence Trusts, private annuities, and installment sales.
Estate tax issues are not impossible to solve. But to ensure you end up with the solution that addresses your situation most effectively, it makes sense to consult a trusted financial professional and your legal advisor.