Insurance Services

: : Roland A. Vitanza, J.D.
Specialist in Life Disability and Long Term Care Insurance
631.923.1595 ext. 342  
G.R. Reid Consulting Services, LLC  

Whole Life Insurance "...The Most Versatile Financial Instrument Ever Devised for The Protection of Families and Businesses…."

The Insurance team of G.R. Reid Consulting Services strongly believes in the worth Whole Life Insurance can provide for its clients.  Whole life insurance has several different guaranteed and non-guaranteed values. However, the diverse range of uses for the values Whole Life Insurance provides are truly what set it apart from other assets.  This article will give a review of the attributes, tax savings, and uses involved with Whole Life Insurance.  



Guaranteed and Non-Guaranteed Value of Whole Life Insurance:
Guaranteed Values of Whole Life Insurance:
A Guaranteed Death Benefit
A Guaranteed Level Premium
A Guaranteed Cash Value, which grows yearly until it is equal to the face amount of the policy at a specified age, usually age 121.



Non-Guaranteed Value:

Mutual companies will provide a whole life insurance policyholder with a yearly dividend, this benefit is not guaranteed. Dividends can either be paid in cash, they can be used to reduce policy premiums, or they can be used to purchase additional insurance.  



Diverse Uses of Whole Life Insurance: 

Human Life Value and Estate Planning

Human life value is equivalent to the income earning potential of an individual over their lifetime. The ability to provide income for one’s family must be protected from death.  Therefore, whole life insurance can be used to replace the lifetime earning potential of a family’s breadwinners. Furthermore, the death benefit allows for the capability to pay estate and inheritance taxes at death, while also leaving a legacy for heirs.



Business Protection

Whole life insurance has many uses when it comes to business planning. Whole life insurance can fund buy-sell agreements and stock redemption plans; fund of supplemental retirement programs; create indemnification from loss of key employees; and assist in paying loans and mortgages.



Asset Maximization

The presence of Whole Life insurance allows the policyholder to consume more of their assets in retirement because their assets will be replaced through the presence of a permanent and guaranteed death benefit. Therefore, through correct planning, Whole Life Insurance owners may permit themselves to spend down their assets during retirement and rely on a tax-free death benefit to replenish the entire value of their estate. This would increase cash availability in retirement while insuring beneficiaries receive the maximum value of the estate, tax-free.


The G.R. Reid Consulting Services Insurance Team is waiting to assist you in finding the correct insurance coverage for you and your family. 


Human Resource Services

: : Karen Randle, Director, Human Resource Services
631.923.1595 ext. 334
G.R. Reid Consulting Services, LLC


G.R. Reid Human Resource Audits Are a Vital Means of Avoiding Legal And/Or Regulatory Liability

Regardless of the industry you conduct business is, or how many employees you have, today it is critical that you are following the labor laws.  The Department of Labor does not discriminate when they choose to do a random audit of your employment practices!

The purpose in conducting a comprehensive Human Resource Audit plan is to take an objective look at your Human Resource policies, procedures and practices. This type of comprehensive review of your company’s current state can help you identify whether specific practice areas or processes are in compliance, adequate and effective.

Human Resource audits are a vital means of avoiding legal and/or regulatory liability that may arise from your current Human Resource policies and practices. It is an opportunity to assess what you are doing right, as well as how things might be done differently, more effectively and before they become unmanageable or illegal.

The results obtained from this review will help you identify gaps in Human Resource practices, legal compliance and determine the scope of immediate legal risks, ongoing Human Resource support needs and training, if necessary.

Information Technology Services

: : Angel LaRocca, Operations Manager, Information Technology Services
631.923.1595 ext. 339
G.R. Reid Consulting Services, LLC 

Essential I/T Disaster Recovery Planning

Businesses of all sizes rely on information technology as a crucial component of their day-to-day operations. Because data availability is a top priority, the need for companies to compile a thorough disaster recovery plan is essential. According to Info-Tech Research Group, however, almost 60% of North American businesses do not have a disaster recovery plan in place to resume IT services in case of crisis - a recipe for possible business failure. Faulkner Information Services found that 50% of companies that lose their data due to disasters go out of business within 24 months, while the U.S. Bureau of Labor indicates that 93% are out of business within five years.


Identify The Risks:
Although disaster recovery planning is most often described in terms of planning for major geographical disaster, for most businesses it is about something happening to your business location. A minor or major fire for example, having your building vandalized, your systems being "hacked," or heavy water/flood damage. Any of these events can pretty much destroy your computers and all your company/business data. Protecting your data is even more important if you are using document imaging.

The Right Solution For Your Business Depends on Several Factors:
• Your tolerance for risk.
• The amount of "downtime/recovery time" your business operations can tolerate.
• Determining the maximum amount of “down-time & data-loss” vs. cost.

What Are The Best Strategies?
Most individuals think this is a complicated process but actually it's fairly simple. You start with what you have and build on it. There are strategies to protect your business so that you can fully recover in the event of a disaster.

First, identify all critical data on your systems:
• Is everything being backed up on a regular basis?
• Are the back-ups periodically checked?

If you have a server and several workstations your data should be stored on the server. If it is, then is there a backup:
• on tape cartridges
• external hard drives
• in cyber space
• offsite via the internet.

Now here is the next step:
• Can you confirm there is actual data on your back-ups?
• What is the date of the data?
• Did you try to restore any of this data to make sure it's actually there?
The same holds true for external hard drives and Internet backups. Ensure the data you want is there for you in the event of a disaster.

Additional options include:
• Replication software - continuous data replication throughout the day.
• Second servers - identical to your main server to put in place in an event of a full disaster.
• Server “Virtualization” - which makes it more efficient to transfer your server to new hardware.

If we can help you develop a sound Disaster Recovery Strategy or if you would like more information about or other support services, please contact us. We offer backup monitoring daily for a minimal monthly charge. For less than a dollar a day, we will check that your backup was successful, and if not, will inform you what/if anything you may need to do.

Commercial Insurance Services

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

When Good Employees Go Bad:
Does Your Current Insurance Protect Your Business Assets From Dishonest Employees?

An employee in a high school's finance department steals $279,000 to support her gambling habit and cover her mortgage payments. A bank employee in Pennsylvania allegedly embezzles $750,000. The former CEO of a Colorado insurance brokerage pleads guilty to stealing $353,400 from the brokerage's employee benefits plan. The office manager of a Texas law firm gets four years in prison for forging checks and depositing client payments in her personal bank account. When people become desperate, they may succumb to temptation and turn to crime. The FBI reported that one in 28.2 employees was caught stealing from an employer in 2007, and that was before the worst of the recent economic downturn. Vendors' employees and other visitors to an organization's premises may also have the opportunity to steal computer equipment or network passwords.

Most business property insurance policies cover losses resulting from some types of crime. For example, they will cover the cost of cleaning up graffiti that vandals spray paint on an exterior wall or the value of merchandise burglars steal, plus the cost of repairing the damage they did breaking into the store. However, insurance companies did not design these policies to cover money stolen from a cash register or deposits never made to a bank; in fact, the policies almost never cover employee crime.

Every Organization Should Consider Buying Employee Dishonesty Coverage
Employee dishonesty insurance, often called fidelity coverage, pays for losses due to employee theft of money, securities, and other property. It covers property the organization owns or leases, property of others in the organization's custody, and property for which the organization has legal liability. Insurance companies can provide one amount of insurance that applies separately to each loss, regardless of how many employees were involved in the theft and regardless of whether the employer can actually identify the responsible employees. Alternatively, the policy can contain a list (known as a schedule) of either employee names or positions with a separate amount of insurance listed next to each one. The policy can cover permanent, temporary and leased employees for up to 30 days or more after they terminate employment. Some companies will extend coverage to certain non-employees who may have the opportunity to commit theft, such as equipment support technicians, consultants, and vendors.

Many policies include a "prior dishonesty" clause. This immediately cancels coverage for an individual employee if the organization discovers that the employee has committed a dishonest act, including acts other than theft and acts he committed prior to his current employment. Even relatively minor dishonest acts will eliminate coverage for that employee. Some insurance companies will amend the policy to cover certain individuals on a case-by-case basis, so the employer should work with the insurance agent and company to arrange coverage. Insurance companies offer this coverage either as a separate policy or as part of a package policy. If it comes as part of a package, the employer should carefully review the policy to determine whether the amount of insurance provided is adequate. Package policies often come with certain insurance limits built in, and they may or may not be enough for a given situation. For example, a package policy that automatically provides $100,000 coverage may be fine for the smallest of businesses, but it would have been way too small to cover the losses described at the beginning of this article. Employees can either make a business successful or drag it down. No organization wants to believe that its workers would steal from it, but unfortunately some of them will. To make sure that they have adequate protection, all employers should work with a professional insurance agent and purchase employee dishonesty coverage. With the right insurance, the organization and its trustworthy employees will survive a large loss caused by the untrustworthy few.

Life, Disability and Long Term Care Insurance

:: Roland Vitanza, J.D.
Specialist in Life, Disability and Long Term Care Insurance
G. R. Reid Consulting Services, LLC

Long Term Care: Government Coverage Shortcomings and Long Term Care Insurance Coverage Advantages

Government Coverage: 
Medicare

Medicare's skilled nursing facility benefit ("SNF") does not cover most nursing home care. Medicare will pay the cost of some skilled care in an approved nursing home or in your home, but only in specific situations. The SNF benefit only applies if a medical professional says you need daily skilled care after you have been in the hospital for at least three days and you are receiving that care in a nursing home that is a Medicare-certified skilled nursing facility. Medicare MAY cover up to 100 days of skilled nursing home care per benefit period, after 20 days beneficiaries must pay a coinsurance fee, in 2008 that fee was $128 per day. Medicare does not pay for homemaker services. In addition, Medicare doesn't pay for home health aides to give you personal care unless you are homebound and are also getting skilled care, such as nursing or therapy. Furthermore Medicare Supplement Insurance does not cover long-term care costs.

Medicaid
Medicaid is a government-funded program that pays nursing home care only for individuals who are low income and who have spent most of their assets. Most people who qualify for Medicaid have low income and have spent most of their assets and with the recent economic hardships the government will strictly adhere to Medicaid qualification so as to not overpay for care.

Long Term Care Insurance
Long Term Care Insurance is one other way you may pay for long-term care. This type of insurance will pay or reimburse you for some or all of your long-term care.

Tax Advantages:

Individual Care:
The Health Insurance Portability and Accountability Act of 1996 or HIPAA, gives some federal income tax advantages to people who buy certain long-term care insurance policies. These policies are called Tax-Qualified Long Term Care Insurance Contracts. New York State also rewards individuals who purchase long term care insurance policies with an additional state tax advantage, up to 20%.

Group Long Term Care Coverage:
For the corporate client, creating a group Long Term Care plan for employees, partners, or administrators could be extremely beneficial. Depending on the corporate structure, Group Long Term Care Plans can be tax deductible for the employer, if the corporation pays the benefit. Secondly, in the state of New York an added tax benefit of 20% will be granted to the corporation.

What Services Are Covered?
It is important that you understand what services your long term care insurance policy covers and hot it covers the many types of long-term care services you might need to use. Policies may cover the following:

- Nursing Home Care
- Home Health Care
- Respite Care
- Hospice Care
- Personal Care in your Home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities

Our G.R. Reid Consulting Insurance team is always available to discuss Long Term Care Insurance needs and benefits, how they apply to our clients, and how to apply them so our clients are optimally protected.

Accounting & Tax News

G. R. Reid Associates, LLP

What Are Your Chances for Being Audited?

IRS has recently issued its annual data book, which provides statistical data on its fiscal year (FY) 2010 activities. As this article explains, the data book provides valuable information about how many tax returns IRS examines (audits), and what categories of returns IRS is focusing its resources on, as well as data on other enforcement activities, such as collections. The figures and percentages in this article compare returns filed in calendar year 2009 and audited in FY 2010 to returns filed in calendar year 2008 and audited in FY 2009.

What are the chances of being audited? 
Of the 142,823,105 total individual income tax returns with a filing requirement, 1,581,394 were audited. This works out to roughly 1.1%, a bit higher than the 1% rate for the previous year. Of the total number of individual income tax returns audited in FY 2010, 473,999 (30%) were for returns with an earned income tax credit (EITC) claim, a decrease from the 35.64% of all audited returns for FY 2009.
Only 21.7% of the individual audits were conducted by revenue agents, tax compliance officers, tax examiners and revenue officer examiners; the bulk of the audits (about 78.3%) were correspondence audits. The percentages for FY 2009 were 22.8% and 77.1% respectively.

Following are selected audit rates for individuals not claiming the EITC:

... For business returns other than farm returns showing total gross receipts of $100,000 to $200,000, 4.7% of returns were audited in FY 2010, up from 4.2% in FY 2009.
... For business returns other than farm returns showing total gross receipts of $200,000 or more, 3.3% of returns were audited in FY 2010, versus 3.2% in FY 2009.
... Of the returns showing farm (Schedule F) income, .4% were audited in FY 2010 versus .3% in FY 2009.
... For returns showing total positive income of $200,000 to $1 million, 2.5% of returns not showing business activity were audited, and 2.9% of returns showing business activity were audited; for FY 2009, these percentages were 2.3% and 3.1% respectively.
... For FY 2010, the audit rate for returns with total positive income of $1 million or more was 8.4%, a substantial increase from the 6.4% rate in FY 2009.

Not surprisingly, examination coverage increases for higher income earners. For example, the percentage was .71% for those returns with adjusted gross income (AGI) between $100,000 and $200,000 (up from .67% for FY 2009), and 1.92% for those with $200,000 to $500,000 of AGI (up slightly from 1.86% for FY 2009). Exam coverage increased to 6.67% for those with at least $1 million but less than $5 million of AGI (up from 5.35% for FY 2008). Similarly, coverage increased for those with at least $5 million but less than $10 million of AGI, as well as for those with AGI of $10 million or more.

The audit rates for business returns were as follows:
•    For all corporate returns other than Form 1120S, 1.4%, versus 1.3% for the year before.
•    For small corporations with total assets of: $250,000 to $1 million, 1.4%; $1–$5 million, 1.7%; and $5–10 million, 3%. For FY 2009, the percentages were, respectively, 1.3%, 1.8%, and 2.7%.
•    For large corporations with total assets of $10 million or more, the overall audit rate was 16.6%, up from 14.5% for FY 2009. The audit rate for these corporations increased with the size of the entity. For example, the audit rates were 13.4% for those with total assets of $10–$50 million (up from 10.1% for FY 2009); 16.1% for those with $250–$500 million (versus 15.8% for FY 2009); 45.3% for those with $5–20 billion (down from 48.7% for FY 2009), and 98% for those with $20 billion or more (down from 100% for FY 2009).
•    For partnership and S corporation returns, the audit rate was .4%, the same as for the year before.
IRS's activity on other fronts. Here's a roundup of some of the other valuable information carried in the new IRS Data Book.

Number of returns filed. 
The number of partnership returns filed (Form 1065) dropped by 1.6%, and the number of S corporation returns (Form 1120S) grew by .3%. The number of C or other corporation (e.g., REMIC, REIT, RIC) returns dropped by 4.8%.
The number of individual income tax returns (Forms 1040, 1040A, 1040EZ, 1040EZ-T) dropped 6.7%, from FY 2008 to FY 2009, but in FY 2010 the percentage fell only 2% from the year before, reflecting some improvement in economic activity.

Math errors on individual returns
Of the roughly 10.5 million math error notices that IRS sent out relating to the 2009 return, 60.8% were attributable to the making work pay credit (MWPC), which was a refundable tax credit based on earned income and was available to taxpayers in 2009 and 2010.
Of the total math error notices, 9% were for tax calculation/other taxes (which includes errors related to self-employment tax, alternative minimum tax, and household employment tax), 4.9% related to exemption number/amount, 4.4% related to the EITC, 4.1% related to the standard/itemized deduction, and 1.3% related to the first-time homebuyer credit.

Penalties
In FY 2009, IRS assessed 27.1 million civil penalties against individual taxpayers, up from 26.387 million civil penalties assessed in the previous year. Of the FY 2010 assessments, the “top three” penalties in percentage terms were 57.3% for failure to pay, 27.3% for underpayment of estimated tax, and 13% for delinquency. On the business side, there were a total of 1,145,931 civil penalty assessments (up from 970,098 for the year before), and 42.1% of these assessments was for either failure to pay or underpayment of estimated tax.

Offers-in-compromise
In FY 2010 57,000 offers-in-compromise were received by IRS (versus 52,000 for FY 2009), and 14,000 were accepted (11,000 for the year before).

Criminal cases.
IRS initiated 4,706 criminal investigations in FY 2010. There were 3,034 referrals for prosecution and 2,184 convictions. Of those sentenced, 81.5% were incarcerated (a term that includes imprisonment, home confinement, electronic monitoring, or a combination thereof). By way of comparison, in FY 2009, IRS initiated 4,121 criminal investigations, and there were 2,570 referrals for prosecution. Of those sentenced, 81.2% were incarcerated.

IR 2011-27 ; 2010 Data Book (Pub 55B), http://www.irs.gov/pub/irs-soi/10databk.pdf

Human Resource News

:: Deidre Siegel
Director, Human Resource Services
G. R. Reid Consulting Services, LLC
Read about G.R. Reid Human Resource Management Tools

Wage and Hour Compliance

 Minimum Wage
The New York State minimum wage is $7.25 per hour as of July 24, 2009 as a result of the increase in the federal wage rate.  Employers must be sure to display a Minimum Wage information poster in their establishment.  These posters can be found on the New York State Department of Labor Website.

Wage Theft Protection Act

Notice Obligations for New Hires:
Currently, New York Labor Law Section 195(1) mandates that employers inform all new hires in writing of their regular rate of pay, pay day, and overtime rate, if applicable.  Employers must obtain a written acknowledgment from the new hire that this information was provided to them in writing.  These forms are available on the New York State Department of Labor website.
Upon the Wage Theft Prevention Act’s April 12, 2011, effective date, the written notice must also include additional information, such as the method of payment, (hour, shift, day, week, salary, piece, or commission), as well as whether any allowances will be claimed as part of the minimum wage (tips, meals or lodging).  Employers will be required to furnish this information in both English and the employee’s primary language.

Annual Notice Obligations for All Employees:
The new law also requires that employers provide all current employees with an annual notice, reiterating their pay rate and other mandated information and obtain a written acknowledgment that the notice was received before February 1st of each year.  Being that the law does not go into effect until April 12th of this year, the first time employers will be asked to do this is prior to February 1st of 2012. The Department of Labor will provide compliant forms available for download on their site as the date nears.

Additional Notice Obligations:
The new law also requires employers to provide a written notice at least seven days before any changes to the information contained in the employee’s most recent notice are implemented, unless the modifications are reflected in the employee’s wage statement.  Therefore the easiest way to remain in compliance with this is to ensure the wage statement includes the following information: dates of work covered by the payment, employee name, employer name, address and telephone number, hours worked, rates paid and basis of those wages (hour, day, or week), gross wages, credits/allowances claimed (tips, meals or lodging), deductions, and net wages.

Recordkeeping Requirements:
Remaining consistent with current requirements for payroll records, all required notices, statements, and acknowledgments must be maintained for six years.



Hospitality Industry Wage Order
The New York State Department of Labor has issued the final Hospitality Industry Wage Order applicable to hotels and restaurants.  The new Wage Order became effective on January 1st, 2011. This order made substantial changes to the rules governing the payment of wages to employees working in the hospitality industry.  Employers were encouraged to be in full compliance by January 1st, 2011. Employers had the ability to delay implementation of this order as long as all retroactive payments were made prior to March 1st, 2011. Payroll records must reflect retroactive payments and employers who choose to take this route are responsible for posting an explanation to employees.
All necessary forms and posters are available on the New York State Department of Labor website.

New York State Construction Industry Fair Play Act 
Independent Contractor Status:
Under this law, effective October 25th, 2010 construction industry employers must notify all workers of their classification status as employees or independent contractors.  Employers must display a New York State Department of Labor notice about the Act, which will explain to workers their rights and protections. Misclassification of employees is becoming a major area of focus for the Department of Labor. Before a worker can be classified as an independent contractor they must satisfy the following three specific criteria. First the worker must be free from control and direction in performing the job, both under his or her contract and in fact. Also, the service they provide must be performed outside the usual course of business which the service is performed” and lastly the worker has to be customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue. If your organization has employees classified as Independent Contractors that do not meet those standard you should audit their files and reclassify them accordingly.

Off the Clock
As an employer you are required to maintain accurate records of the hours your employees work, including straight time, minimum wage and overtime. It is important to remember that at no time can you force your hourly, non-exempt employees to work or even allow them to work for hours that are not logged and compensated. Employees who are forced or “encouraged” to work off the clock are being shortchanged when their employer does not pay them their due overtime. Federal Law and New York State law do not permit overtime wages violations and an organization can be heavily fined for doing so.

Spread of Hours


Employers who have employees who work split shifts need to be aware of the New York State regulation for “Spread of Hours.” Failure to pay “spread of hours” in the appropriate circumstances can be a costly error for employers.  New York’s Labor Law requires the following:
“On each day in which the spread of hours exceeds 10, an employee shall receive one hour’s pay at the basic minimum wage rate before allowances...” This means if a server worked a double, a morning shift from 9:00am to 12:00pm and then an evening shift from 6:00 pm to 9:30pm - that server would be entitled to 7.5 hours of pay that day.  That would cover the 6.5 hours for the hours worked, plus 1 hour extra pay because the “spread of hours” exceeded ten hours in that work day. Unfortunately, this extra hour of pay is sometimes overlooked in payroll calculations, and can be a costly violation for employers given that the statute of limitations under New York’s Labor Law is 6 years

Compliance
Recordkeeping is crucial. Be sure to review and modify all Labor Law 195 Notices and monitor the Department of Labor Website for forms endorsed by the DOL. Wage statement should also be reviewed for compliance. Have your organization conduct a wage/hour audit to help protect against common claims. Areas to consider include: Minimum Wage Compliance, Notice Obligations, Misclassified Independent Contractors, Off-the-Clock and Spread of Hours.

Accounting & Tax News

Key Changes Affect the Self-Employed's Health Insurance Deduction for 2010
:: G.R. Reid Associates, LLP
Certified Public Accountants
www.grrcpas.com

Self-employed taxpayers be aware that on your 2010 return there are a number of key changes, almost all positive, that affect the self-employed's health insurance deduction. This article surveys what's new for this key deduction on the 2010 return.

Background
A self-employed individual (or a partner or a more-than-2%-shareholder of an S corporation) can deduct as a business expense 100% of the amount paid during the tax year for medical insurance. No deduction is allowed to the extent the deduction exceeds the individual's earned income as defined (Wages or net earnings from self-employment) derived from the trade or business for which the plan providing the coverage is established. For purposes of applying the earned income limit to the deduction of a more-than-2% S corporation shareholder, that shareholder's wages from the S corporation are treated as his earned income.

Changes to Keep in Mind
The following changes affect the self-employed's health insurance deduction for the 2010 year:

•    The self-employed individual's health insurance deduction is also allowed in calculating net earnings from self-employment for purposes of the self employment tax for tax years beginning in 2010. As amended by the 2010 Small Business Act, Net earnings from self-employment are generally an individual's trade or business income, less the deductions permitted by the Code that are attributable to that trade or business, plus the individual's distributive share of partnership income or loss. For tax years beginning before 2010, a self-employed individual's health insurance costs, although deductible for income tax purposes, weren't deductible in determining net earnings from self-employment. Thus, business owners couldn't deduct the cost of health insurance for themselves and their family members for purposes of calculating their self-employment tax. This new deduction under the 2010 Small Business Act only applies for one year: it doesn't apply for tax years beginning before Jan. 1, 2010, or after Dec. 31, 2010.

•    IRS has changed its position and concluded that Medicare B premiums are deductible as a self-employed health insurance expense. Medicare B is supplemental medical insurance. Premiums that a taxpayer pays for Medicare B are a deductible medical expense under; thus, a taxpayer who applies for it at age 65 or after he becomes disabled can include the monthly premiums he pays in his medical expenses. In the past, IRS had argued that Medicare Part B premiums didn't qualify for a deduction because they weren't paid under a health insurance plan established by the taxpayer under a trade or business; rather Medicare Part B was a federal program available only to those who qualify under the statute.

•    The self-employed health insurance deduction, effective Mar. 30, 2010, is available for any child of the taxpayer who has not attained age 27 as of the end of the year, as amended by the Health Care and Education Reconciliation Act The expanded definition of children for whom the self-employed deduction for health insurance premiums may be claimed also applies to more-than-2% S corporation shareholders entitled to claim the deduction. Under the Reconciliation Act, a self-employed taxpayer may claim a deduction for health insurance premiums paid for a child who is under age 27 as of the end of the tax year, whether or not the child is the taxpayer's dependent for tax purposes.  For example, an adult child who has not turned 27 years of age need not meet the dependency tests for a qualifying child under —and thus the deduction is available—regardless of (a) child support thresholds, (b) the child's place of abode, or (c) the child's tax filing status.

•    The limitation on a self-employed individual's deduction for health insurance premiums where there's an employer-subsidized health plan has been changed. as amended by the Reconciliation Act) Before Mar. 30, 2010, no individual who was eligible to participate in any subsidized health plan maintained by any employer of the individual or of the individual's spouse was entitled to the deduction. Under the Reconciliation Act, the deduction is also not available for any month in which the self-employed individual is eligible to participate in a subsidized health plan maintained by any employer of any dependent, or any child of the taxpayer who hasn't attained age 27 as of the end of the tax year.

Because this rule applies on a calendar-month basis, if a self-employed individual is eligible to participate in a subsidized plan that's maintained by an employer of the individual, his spouse, his dependent, or his under-age-27 child for, say, only one calendar month (e.g., December), the deduction is still available for premiums paid during the other months of the year. The eligibility test is applied separately to (1) plans that provide coverage for qualified long-term care services, or are qualified long-term care insurance contracts and (2) plans which don't include such coverage and aren't such contracts. Thus, an individual eligible for employer-subsidized health insurance may still be able to deduct long-term care insurance premiums, so long as he isn't eligible for employer-subsidized long-term care insurance.

Financial Services News

Is Now A Good Time To Be In Municipal Bonds?
Read Some Answers to this Classic Investment Question

www.grreidconsulting.com


This is one of the classic investment questions we hear regularly from municipal bond investors.  As Director of Financial Services I view the municipal market as a good sector for investment at this time. There are specific criteria we set for our client portfolios. My colleagues, money manager Tom Dalpiaz, AAM and Tracy Nolte have shared some views on the value they are presenting now. Dalpiaz recognizes the question as one that essentially deals with timing the interest rate cycle. From this perspective, “Is now a good time to be in municipal bonds?” translates into “Where do you think interest rates are headed?” If you judge that rates are high and are going to fall, then it is a good time. If you judge that rates are low and a rise is expected, then it’s a bad time. We believe this is a fairly simplistic view that misses much of the point of municipal bond investing by ignoring what real municipal bond investors need to achieve every day in every environment.

We understand that the temptation to time the markets is strong (“If I can get this right, boy will I score big!”), but we do not view timing as a workable long term strategy. We believe timing is very difficult to do correctly and consistently, if at all. In many ways, it is a game you can’t win. With 20/20 hindsight, there is always a better time to have invested. The decision to play it safe in cash is an investment decision in itself, complete with its own consequences. You may completely preserve the nominal amount of capital you have, but investing large amounts in cash virtually guarantees that no progress will be made on other objectives, such as the need to garner income, total return and beat inflation. In addition, we feel the longer an investor waits in cash (and the greater the amount), the more likely the decision to finally get invested will get infected by bad thinking. This is not a prescription for thoughtful investing.

In our opinion, a second – and more appropriate – way to answer the question, “Is now a good time to be in municipal bonds?” is to focus on the objectives that living, breathing investors have set for their municipal bond money. From this perspective, our classic question actually prompts a follow-up question, “What are you really trying to achieve with your municipal bond portfolio?” This follow-up recognizes that the goals of income, capital preservation and low volatility don’t get a chance to take a rest in difficult interest rate environments. By focusing on the bottom line of what investors need to achieve, this approach de-emphasizes the importance of getting the timing just right. We find that time is better spent on selecting an appropriate municipal bond portfolio manager, one with experience and a consistent philosophy and approach that will help get you through difficult investing environments. We believe the best way to answer the question, “Is now a good time to be in municipal bonds?” is to simply say, “If you have objectives that are best met by municipal bonds, it is more important to get started than to worry about the timing.” Put another way, if the municipal bond road is the right road for your clients to be on, then now is the time to select an experienced guide to get them on the road toward their municipal bond destination.

Investment Thought for the Day: 
“A balanced, well-constructed plan, coupled with the appropriate diligence and monitoring is more critical to long term investment success than whether or not a particular investment is implemented at precisely the correct time.”

This blog post is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please visit www.grreidconsulting.com for additional disclosure information.

Commercial Insurance News

: : Louis Santelli, CPCU, CIC
Managing Director

G.R. Reid Insurance Services, LLC

Is Your Business Being Overcharged For Workers’ Compensation Insurance?

No business can afford to pay more than necessary for Workers’ Compensation Insurance. Yet 50% of all companies are doing just that. There is more to Workers’ Compensation than an agent simply providing an insurance policy. We find over 50% of employers are being overcharged and do not realize it or know why. Our results-oriented Comprehensive Workers’ Compensation Program is targeted to improve your bottom line.
        Overcharges are rampant in the Workers’ Compensation system. It is easy to see why when you consider all of “the moving parts” – everything from premium audit errors, clerical errors, misclassifications, violations of mergers and acquisition rules to poor or no injury management programs and open claims. In addition there is the complexity of the process involving a host of players, from insurance company auditors, underwriters, claims adjusters, brokers and medical providers to state personnel. All-in-all there is a good chance that you are being overcharged without even knowing it.  
        The first area to be reviewed would be the dreaded premium audit. There are over 800 classifications in the New York manual. Has anyone, ever, gone over the codes that relate to your industry and found the code that best fits your organization. Or, do they rely on the insurance company to “properly” classify your business. Do you know if you have been given credit for the standard exception employees? Have you received credit for all items that are considered excluded from remuneration? Have you received all credits and discounts that you are entitled to? Has your agent or broker helped you prepare an audit package and have they helped train a member of your staff that is responsible for the audit? Lastly, are you aware that you are entitled to a “Three Year Look Back” on all audits? If you have been overcharged, you are entitled to recover those “overpaid” premiums.
        There are two parts to the experience modification review:
First, most employers assume their modification is correct, yet many times it is wrong; Second, the formula for the modification is so complex, few employers understand its impact on their premium costs. A single Workers’ Comp claim raises a mod for three years. It can drive up employers’ Workers’ Comp premiums to levels where they are not just paying 100% of claims costs, but 200% to 300% of claims costs! Insurance companies do not pay for employee injuries – employers do! Driving your mod down to its minimum is the most profitable way to slash your Workers’ Comp Costs. So, do you know what your minimum mod is? Figure a mod of 1.00 is a “C” on your mod Report Card, average. Above a 1.00 is a “D” or an “F.” Are you willing to settle for any of those?  Why are experience mods wrong? Rating bureaus use incorrect payrolls, or payrolls assigned to class codes with different expected losses. Costs for employee injuries are entered more than once. Claims that should have been subrogated were not pointed out to the State Agency. Credits are not applied properly. Other incorrect data is entered, such as insurance company expenses that should not be charged against your record. Lastly, claims that should have been closed or denied by the adjuster have not been handled correctly. Remember it costs you $3 in future premiums for every $1 the insurance company pays out.
     Finally, an injury management program is essential. Insurance companies do not pay for employee injuries, employers do! Workers Compensation is merely a financing mechanism so employers can spread the costs of employee injuries over a three to four year period. While creating and maintaining a safe work environment is essential to reducing injuries, it is simply not enough. An effective plan begins even before an employee is hired. We can evaluate hiring practices and employee relationships, injury reporting procedures, supervisor training, claims management, modified duty and return to work procedures, wellness initiatives and medical relationships as well as workplace safety. Our process can reduce lost workdays, promote employee morale and retention, increase productivity and improve profitability.
     If you are already taking care of all of the above, congratulations, you and your broker are doing a fabulous job protecting your employees and your bottom line. If you are not currently handling the above issues, we urge you to call us and let us help you protect your people and your profits.