Actum Inc.

Insulate Your Company from Rising Health Insurance Costs

Jeff Jefferson — Tue, 30 Mar 2010 11:14:38 +0000

A great article from wikiCFO.com.

How many times have your employees — or even potential employees — expressed concerns about the cost of the health insurance that your small business provides. It’s an employee concern that most small business owners dread discussing because providing comprehensive healthcare can be a substantial cost burden. There are small business owners who can afford to provide a competitive benefits package in the short-term, but many are not aware that their rates can increase in the long-term as the result of employee illnesses that require substantial medical care and cost.

Going It Alone

Often times, small businesses implement a health insurance plan one year, only to see their costs skyrocket in subsequent years due to the health experience of their small employee base. If there have been health conditions that resulted in significant costs, insurance rates for the small group plan rise, and a once competitive plan becomes a cost burden to the company. When a small or medium-sized business obtains its own health care coverage and is faced with a significant rate increase due to the performance or cost burden generated by the small pool of employees, difficult choices emerge:

• Eliminate or reduce coverage • Increase the employer contribution to the premium

• Increase employee premiums

Partnerships Can Help

To help protect themselves from these types of increases, many small businesses choose to partner with a Professional Employer Organization (PEO). PEOs operate under a co-employment model which is based on a commitment by the PEO to share employment-related risk with clients, thereby helping to reduce financial exposure.

In terms of health insurance, the co-employment model can provide extra protection for the client when facing the future impact of serious and costly employee medical conditions. Why? Because the co-employment model allows the fiscal impact of one person’s illness to be spread across the entire healthcare pool in the PEO co-employment relationship (e.g. thousands of employees), instead of just the small number of employees the small business has on its own. This buying power is something that typically would be only available to larger companies. Small employers cannot exercise these economies of scale on their own. (Milt Freudenheim, “At a Small Business, One Illness Can Send Insurance Costs Soaring,” Wall Street Journal, May 5, 2007, page A1.)

It’s important to consider partnering with a PEO before significant health care issues and rate increases occur. Once you are in the PEO relationship, as a co-employer, the PEO will no longer have visibility to health care performance of your individual company employees and rates will be determined based on the performance of the larger pool. When evaluating PEOs, be sure to ask for their average medical rate increase over the past few years to get an idea of what the experience of the pool has been. While not an indication of future performance, it will indicate how well the pool has been underwritten and managed in the past.

NAPEO Federal Government Advisory.

Jeff Jefferson — Fri, 26 Mar 2010 16:39:43 +0000

To:                   NAPEO Members

From:               Cheryl Gannon, Director of Federal Government Affairs

Date:                March 24, 2010

Healthcare reform is a multi-part, multi-phase process. The bill signed on March 23, 2010 is just one part of the process – albeit a big one. There is the reconciliation bill (sometimes called the “fix it” bill) that was passed by the House and is now in the Senate. There are also implementing regulations and guidance to be issued by relevant federal agencies, including Treasury, HHS and Labor.
NAPEO has worked and is continuing to work with Congressional leaders and regulators to obtain clarification of the application of the health reform legislation to PEO relationships. NAPEO will continue to provide members with up-to-the-minute information as it becomes available. Here is what we know at the present:
Small Business Tax Credits
Small employers with no more than 25 employees and average annual wages of less than $50,000 that purchase health insurance for employees will receive a tax credit. NAPEO is working diligently to assure that clients participating in a PEO arrangement will receive the benefit of this credit.

Phase I: For tax years 2010 through 2013 – a tax credit of up to 35% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium.
- The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases.
- Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium.
Phase II: For tax years 2014 and later – eligible small businesses that purchase coverage through the state Exchange will receive a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost. The credit will be available for two years.
- The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases.
- Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium.

Reinsurance for Older Workers -
Effective 90 Days after Enactment through Jan. 1, 2014

The Act creates a temporary reinsurance program for employers providing health insurance coverage to retirees over age 55 who are not eligible for Medicare. This program will reimburse employers or insurers for 80% of retiree claims between $15,000 and $90,000. Payments from the reinsurance program will be used to lower the costs for enrollees in the employer plan.

Employer mandates – January 1, 2014
More details to come after adoption of reconciliation bill in Senate

An employer with more than 50 employees that does not offer coverage and has at least one full-time employee who receives a premium tax credit will be assesses a fee of $750 per full-time employee.
An employer with more than 50 employees that offers coverage but has at least one full-time employee receiving a premium tax credit will be assesses the lesser of
$3,000 for each employee receiving a premium credit or
$750 for each full-time employee.
Employers that impose a waiting period before employees can enroll in coverage will be required to pay $400 for any full-time employee in a 30-60 day waiting period and $600 for any employee in a 60-90 day waiting period.
All employers that offer coverage to their employees must provide a free choice voucher to employees with incomes less than 400% of the federal poverty level whose share of the premium exceeds 8% but is less than 9.8% of their income and who choose to enroll in a plan in the Exchange. The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer’s plan and will be used to offset the premium costs for the plan in which the employee is enrolled. Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the Exchange.
Employers with with more than 200 employees must automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.

Discrimination Based on Salary Prohibited
– Effective six months after enactment.

Prohibits new group health plans from establishing any eligibility rules for health care coverage that have the effect of discriminating in favor of higher wage employees.

Next Steps for NAPEO

NAPEO will continue its efforts to obtain legislative and regulatory clarification that

for purposes of tax credits and “pay or play” mandates, there will be a “look through” to the client size for determining eligibility for tax credits and mandates and that non-discrimination testing is conducted at the client level.

Already, NAPEO succeeded in securing a floor statement from a senior Democrat in the House stating his understanding that the legislation looked through to clients for tax credits and non-discrimination testing. This type of statement can be useful in guiding regulatory agencies in determining legislative intent.

NAPEO is currently seeking a colloquy on the Senate side, or bill report language to the same effect. These will be of greater value in establishing legislative intent. Of course, NAPEO is also looking to the reconciliation bill or the next tax or health bill for an opportunity to insert statutory language if possible.

NAPEO staff and retained counsel are already gearing up to advance PEO goals within the appropriate agencies once the implementation process begins.

NAPEO, 707 N Saint Asaph Street, Alexandria, VA 22314
Phone (703) 836-0466, Fax (703) 836-0976You are receiving this message as a service of your company’s NAPEO membership and because you are signed up to receive E-Source. If you have any questions, please send an email to govtaffairs@napeo.org.

How Hard Was it to Run a Small Business Last Week? How about now?

Jeff Jefferson — Wed, 24 Mar 2010 15:20:35 +0000

Fact: small businesses are the backbone of the American economy. The SBA defines a small business as an independent business having fewer than 500 employees. Firms with fewer than 500 employees accounted for 64 percent (or 14.5 million) of the 22.5 million net new jobs (gains minus losses) between 1993 and the third quarter of 2008. Continuing firms accounted for 68 percent of net new jobs, and the other 32 percent reflect net new jobs from firm births minus those lost in firm closures (1993 to 2007). Additionally, of 119.9 million nonfarm private sector workers in 2006, small firms with fewer than 500 workers employed 60.2 million and large firms employed 59.7 million. Firms with fewer than 20 employees employed 21.6 million. So it leads me to the question of why does the government make it so difficult to own and operate a small business. The very small firms with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with federal regulations. These very small firms spend four and a half times as much per employee to comply with environmental regulations and 67 percent more per employee on tax compliance than their larger counterparts (See Chart). Now add to that the recent Health Care reform bill that was signed into law this week, and the small business owner doesn’t know which way is up or down. Below is a brief explanation of the timing and the scope of the impact. So, I ask the question, does what happened this week make it easier or more difficult to start and grow a small business?

Economies of Scale with a PEO

Jeff Jefferson — Mon, 22 Mar 2010 13:16:25 +0000

As I speak to small business owners every day, a very simple question is at the heart of those discussions. How can Actum, or any other PEO help my business save money? Well the answer lies in another wildly overused industry buzz word. “Economies of Scale”. When we tell small businesses that we can save them money on their group health care plan and worker’s compensation insurance, they immediately think that we are an insurance broker. Not the case, we have a broker just like they do. The way we can save companies money is through leveraging the co-employment relationship to get larger group pricing for those services. What that means, is that the employment relationship is outsourced to the PEO. While the business owner retains all of the day to day employer responsibilities, i.e. daily management, training, hiring & firing, performance improvement, etc… the PEO does all of the back office HR related activities i.e. paperwork processing and storage, payroll processing, WC claims management, healthcare plan administration, cobra administration, ERISA compliance, on-boarding training, off-boarding, compliance with the dozens of other employment related regulatory issues, etc…

We don’t sell insurance, we sell access to our group pricing. By offering that group pricing, the business owner is also removing a number of other non-revenue producing activities from their to-do list. We free the small business owner to go out and produce revenue, and we take care of the business of employment.

Do you actually handle time as money, not just give lip service to the idea?

Jeff Jefferson — Wed, 03 Mar 2010 13:27:47 +0000

Small business owners are always pressed for time. You wear many hats and are pulled in dozens of directions every single day. Being highly specific with your goals and prioritizing those goals are a key to managing your time effectively. I recenly read a post by Dan Kennedy on Entreprenuer.com that summed this up pretty well. http://ow.ly/1dDVh

Your philosophy can also be a question of how you relate time and goals. For me, these questions always hover: Will this use of my time move me measurably closer to my meaningful goals? Is there even a chance it will? If not, why do it?

If you are like most business owners you can very easily place a price on your time. If you are spending this valuable time doing anything else besides building, selling, fixing, or providing service for your widgets, you aren’t spending your time wisely. Outsourcing non reveune producing activities is a great way to maximize your valuable time. A PEO can handle the day to day HR, Payroll, Benefit and WC administration, and other employment related (aka, non revenue related) activites, while you go out and get new customers or keep your existing customers happy.

Just Like The Jeffersons… We’re Movin’ On UP!

Jeff Jefferson — Wed, 03 Mar 2010 12:37:00 +0000

Actum, Inc. has moved its Richmond office and is getting settled in nicely! We are still in Innsbrook, but have moved to 4470 Cox Road. We are excited about the latest chapter in our company’s story, and are poised for a breakout year in 2010. Our new contact information has been updated on the site, so please feel free to swing by and check out the new digs if you are ever in the area.

Health Care Rate Increases = Headache / PEO = Advil

Jeff Jefferson — Tue, 23 Feb 2010 14:41:05 +0000

With all of the uncertainty around both individual and small group health care plans, entrepreneurs are looking for ways to curb costs while maintaining coverage levels. Rates are on the rise all over the country, see Anthem California. With average rate increases, depending on who you ask, of between 5-25%in different parts of the country, many small business owners are dumping group plans, or not implementing them at all in an effort to save money. However, their ability to attract and retain top talent is significantly impacted by such decisions. On

top of that, the individual market for health care is on the rise, so you’re dambed if you do dambed if you don’t offer a group plan. As we talk with Central VA entrepreneurs we are finding that this problem is a significant cause for their splitting headaches.

As a Central VA based company specializing in PEO services, we have the ability to help small businesses curb these increases. On average a company who outsources their Human Resources and Health care Administration to a PEO will experience rate increases of 50% less than companies that don’t. The addtional benefits of PEO and HRO are huge as well, and include payroll and worker’s compensation administration, 401(k), performance management, recruiting support, paperwork and on-boarding compliance, etc… Partnering with a PEO can be great way to get rid of those pesky headaches, and will allow a small business owner to focus on producing revenue, or servicing their clients.

IRS Targeting 1099 Abuse

Jeff Jefferson — Mon, 22 Feb 2010 16:08:30 +0000

Businesses of all sizes are being targeted by the IRS in an effort to identify misclassification of employees as independent consultants. As we all know, the government is searching out any and all ways to increase revenue, and enforcement of employment related tax laws is just one route. I have recently read two similar articles http://ow.ly/19UUG and http://ow.ly/19UVm that detail these efforts. If you are a business owner, whether large or small, misclassification can end up being more expensive than you thought.

One way to avoid this expensive and potentially criminal situation is seek advice from a certified HR resource. A professional can help determine whether your situation is compliant, as well as fix the problem. There are firms that offer small businesses customized solutions that give them the piece of mind of knowing that their workforce is being employeed in compliance with the myriad of employment regulation and tax laws that exist today. Check out our White Paper on the subject as well http://ow.ly/19V9h.

Don’t Get Bogged Down by Employee Issues (from Entrepreneur.com)

Jeff Jefferson — Thu, 18 Feb 2010 12:45:40 +0000

A recent article from Women Entrepreneur.com on some reasons to use a PEO.

http://www.womenentrepreneur.com/2010/02/dont-get-bogged-down-by-employee-issues.php

When Beaverton, Ore., business owners Christine and David Vernier’s full-time human resources employee went on maternity leave 14 years ago, they contracted with a professional employer organization, Xenium, to fill in. Although the employee returned, the Verniers kept the PEO on board and have used it ever since.

PEOs are business-to-business companies that provide services including human resources, payroll and related taxes, risk management, compliance and employee benefits.

“I recommend PEOs to a lot of businesses. I’m surprised that more don’t use them,” says Christine Vernier, chief financial officer of Vernier Software & Technology, an 82-employee company that produces hardware and software for data collection in science classes.

Services, Co-Employment
“We can be a completely outsourced employer service for our clients who want one vendor who manages all those different programs,” says Anne Donovan, president of Portland-based Xenium.

In the contractual relationship between a company and a PEO, both are employers to the company’s workers, sharing rights, responsibilities and liabilities, says Milan P. Yager, president and chief executive officer of the National Association of Professional Employer Organizations, a 350-member trade association. PEOs use their names when, for their clients, they file employment taxes, issue paychecks and sponsor benefits.

PEOs offer and administer varied benefits that can include insurance, retirement plans and more. Clients may pick and choose from the PEO’s offerings.

PEOs secure and provide their own workers’ compensation policies and handle all related tasks. They ensure that their clients comply fully with all laws and regulations. Their human resources services are comprehensive, ranging from developing employee manuals to disciplining workers.

Some PEOs provide extras that may or may not be included in the overall cost, such as training, discounts, salary analysis and legal support.

“Whatever needs a client has, PEOs are willing to find the solutions,” Yager says.

PEOs are legal in all 50 states. They are subject to regulatory controls in 34 of them.

Cost, Ideal Size
PEOs charge a monthly fee per employee or a percentage of each month’s gross payroll. The cost typically encompasses amounts to be paid on behalf of the client’s employees for taxes, workers’ compensation and any other payroll-related expenses. The average client spends $1,000 to $1,500 a year per employee, depending on the risk and exposure for unemployment and workers’ compensation, says Bill Rosado. With his wife, Maureen, Rosado owns ManagedPAY, a Las Vegas-based PEO.

Paying a changing percentage makes sense for seasonal businesses, whose employee counts fluctuate. This is the case for April and Mike Tracy, whose two resort properties, Cabana Club and Cabana Breezes, peak during tourist season. They pay their PEO between 14 and 15 percent of each month’s gross payroll.

The price is fair, says Kathy Wilson, co-owner of Las Vegas-based Nevada Sales Agency, a 16-employee representative for manufacturers of lighting and control products and a ManagedPAY client.

“I could not employ a human resources person to do what they do, for the cost,” she adds.

For that reason, PEOs make sense generally for companies with 10 to 100 employees. They’re large enough to need the services but not so large that they can justify the cost of hiring employees to do the work. Conversely, companies with fewer than 10 employees sometimes can handle everything more cost effectively in-house.

Advantages
Using a PEO can free entrepreneurs to focus on the core of their businesses.

“If I hired somebody for human resources,” Wilson says, “I’d be managing that individual. I don’t manage the PEO. They manage me.”

With a PEO, companies have access to several professionals with expertise in various areas. This leads to peace of mind, Vernier says. With one employee situation alone, she spent hundreds of hours with attorneys, all of which were included in her monthly PEO fee.

Because PEOs can aggregate their clients’ employees, they typically can offer a benefits package that their clients alone can’t access or afford. With attractive benefits, companies are better able to recruit superior talent. The Tracys couldn’t obtain health insurance coverage on their own, primarily because of their companies’ Florida Keys location, but they did get it through their PEO.

“Being independent and a small business, we could never offer a program like that,” April says. “It’s enabled us to have better-quality managers.”

Downsides, Alternatives
Not all entrepreneurs like the PEO concept and relationship. Some are uncomfortable releasing confidential information to outsiders. Some object to the cost. Some don’t like others watching and bossing them.

Some owners don’t like feeling lost or powerless. If the PEO errs with payroll, for example, the entrepreneur can’t resolve it. If a problem arises on a weekend and the PEO is only available on weekdays, the issue has to wait.

“It’s out of your hands,” Wilson says. “You don’t have control of it.”

A PEO might not be a good fit for a company if it doesn’t need some of the organization’s offerings, Donovan says.

Because of these concerns, some PEOs now offer PEO-type services piecemeal and without the co-employer relationship. These services may fall under other names, such as administrative services outsourcing/organization or human resources outsourcing.

“We started down this path of viewing everything from the client’s viewpoint and providing whatever that client wanted from the buffet table,” says Dianna Sheppard, president and CEO of Tampa, Fla.-based Advantec, which offers PEO, ASO and HRO services. In addition, some companies are strictly ASOs or HROs, without a PEO option.

To find a PEO, visit NAPEO’s website. It contains a listing by state of all of its members, along with contact information and selection guidelines.

“Know the PEO is knowledgeable in all the areas of service it’s going to take over for you,” Wilson recommends. “Sit back and let the PEO do its job. It’s worth its weight in gold.”

The Fun of Selecting Vendors

Jeff Jefferson — Fri, 12 Feb 2010 14:30:08 +0000

As the owner of a business that provides a service to other business owners, I am aware of how important quality and customer service are in maintaining those relationships. What surprises me is the apparent lack of that understanding in other services based organizations, at least some of the ones that we have tried to give our hard earned money to over the past few months. As a small business owner we always have a budget in mind as we evaluate who to give our business to, so price is always a consideration. In that effort, location of the vendor really didn’t matter to us, so we were shopping with companies in North Carolina, Minnesota, Illinois, California, etc… Guess what, we got burned! So we made a concience effort to partner with vendors right here in Virginia, and in some cases right here in our building. Guess what, we’ve received great service, and the quality has been outstanding. The pricing has been competitive, not the cheapest, but well worth the extra few bucks to be able to walk down the hall when a problem arises. The term “throat to choke” has been used quite a bit lately, because we wanted to do just that with a vendor we chose, but flying to California to do it just wasn’t worth it.