Financial Services News

G.R. Reid Consulting Services, LLC
 

How Can I Benefit from Tax-Advantaged Investments?

For many people, tax-advantaged investing is an excellent way to reduce their taxes. And while many of the traditional tax-advantaged strategies have been eliminated, there are still alternatives left that can help you reduce your taxes. Some are described below.

Real Estate Partnerships
Two of the most common types of real estate partnerships are low-income housing and historic rehabilitation. The federal government grants tax credits to those who construct or rehabilitate low-income housing or who invest in the rehabilitation or preservation of historic structures.

Participating in a real estate partnership has many advantages. These partnerships may provide opportunities for tax-advantaged income and long-term capital appreciation. The tax credits generated by these partnerships can be used to offset your income tax liability on a dollar-for-dollar basis. This can make them much more valuable than tax deductions, which help reduce your taxable income, not the tax you pay. These credits are subject to certain limitations, and the rehabilitation tax credit begins to phase out for taxpayers with adjusted gross income (AGI) greater than $200,000 ($100,000 if married filing separately) and is completely phased out when AGI reaches $250,000 ($125,000 if married filing separately).

Oil and Gas Partnerships
Energy partnerships can provide shelter through tax deductions taken at the partnership level. These include deductions for intangible drilling costs, depreciation, and depletion.

The deductions may be limited; check with a tax advisor to see whether you could benefit from oil and gas partnerships.

Suitability
There are risks associated with investing in partnerships. Key among these is that they are long-term investments with an indefinite holding period with no, or very limited, liquidity. There is typically no current market for the units/shares, and a future market may or may not be available. If a market becomes available, it may result in a deep discount from the original price. At redemption, the investor may receive back less than the original investment. The investment sponsor is responsible for carrying out the business plan, and thus the success or failure of the venture is dependent on the investment sponsor. There are no assurances that the stated investment objectives will be reached. This type of investment is considered speculative. You want to ensure that the investment is not disproportionate in relation to your overall portfolio and that it is consistent with your investment objectives and overall financial situation. In order to invest, you will need to meet specific income and net worth suitability standards, which vary by state.

These standards, along with the risks and other information concerning the partnership, are set forth in the prospectus which can be obtained from your financial professional. Please consider the investment objectives, risks, charges, and expenses carefully before investing. Be sure to read the prospectus carefully before deciding whether to invest.
  
The alternative minimum tax is another concern. Make sure to consult a tax advisor to evaluate your exposure to the AMT. As long as they are suitable for your situation, these tax-advantaged investing strategies can be one way to help reduce your income tax liability. A financial professional can help you determine whether such investments would be an appropriate strategy for you.


The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor.

The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011.  This material may not be reproduced without permission.

Personal Insurance Services

: : Neal B. Patel, Managing Director,
Personal Insurance Services | G.R. Reid Agency, LLC
631.923.1595 ext. 303

Until You Know It's Protected, Keep Your Boat on Dry Land

Americans love the sense of freedom and adventure that comes from boating. But boating can have a dark side, too. According to the U.S. Coast Guard, there were 4,730 boating accidents that involved 736 deaths in 2009. The price tag of these recreational boating accidents is high: about $36 million dollars per year.  And these figures are probably only the tip of the iceberg since the Coast Guard believes that more than 80 percent of all boating accidents go unreported.

Given this level of risk for accidents, it would make sense that boat owners would look for a way to protect themselves, but that doesn't seem to be the case. A study conducted by Progressive Insurance revealed that nearly one third of U.S. boat owners don't own a separate watercraft policy. That's probably because boat owners assume that their craft is covered by their personal auto policy or their homeowner's policy. This is a mistake that can cost them big time.

The standard auto policy covers the boat trailer for liability with the option to add coverage for physical damage. The boat itself, however, is not covered for liability or damage.

Some homeowner's policies offer coverage for physical damage for boats, but only for smaller vessels. The typical homeowner's policy contains a special property limit of $1,500 on watercraft, which doesn't begin to equal the dollar value of most boats. In addition, the covered perils specific to the boat are also greatly restricted. There is also liability coverage available for boats under the majority of homeowner's policies, but once again, it is only applicable to smaller watercraft. The only exception is a boat with an outboard motor. That means that any type of boat you own that is powered by an inboard or inboard-outboard motor is excluded from liability coverage under the homeowner's policy.

Because most boat owners are unaware how large a property and liability loss they expose themselves to without proper insurance, the Institutional Risk Management Institute (IRMI) has created a list of loss scenarios that demonstrate the need for specialized boat owners coverage:

• Your cruiser collides with a speedboat whose operator fails to yield the right of way, causing extensive damage to your boat. The owner of the speedboat does not have any insurance coverage.
• An expensive fishing boat you just purchased is stolen from your home.
• Your 27-foot-long sailboat is damaged by a hailstorm and high winds while docked at the marina.
• Your sport fishing boat is struck by lightning, incapacitating its electrical system.
• Your daughter's friend is water skiing behind your boat and  falls into the lake, injuring herself, due to the excessive speed of the boat.
• You negligently cause another boat to overturn to avoid a collision.
• Your outboard motor explodes, seriously injuring your next-door neighbor.

These scenarios illustrate the need to factor insurance costs into the equation when buying a boat.  If you fail to insure your boat properly, your boat loan may become the smallest of your financial worries.

Human Resource Services News

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

Poster Display Regulations

As Human Resources professionals, we all know that each office is required to have posters hung in conspicuous areas displaying information regarding certain laws, but we do not always know which to display and where. The most common posters that should be hung include: 
 
 
 
•  “Employee Rights Under the Fair Labor Standards Act” Revised July 2009 describing FLSA and minimum wage
•    “Job Safety and Health: It’s the Law” Revised 2006 describing OSHA Regulations
•     “Equal Employment Opportunity: It’s the Law” August 2008 version describing EEO compliance
•    “Employee Rights and Responsibilities Under the Family and Medical Leave Act” January 16, 2009 Version
 
Available to employers on the Department of Labor website is a questionnaire that determines the required postings. Some postings may be available in “all-in-one” versions that can limit the amount of postings that are hung. While some posters are available to employers online, such as the OSHA required posting, it is important to read the requirements that are necessary to hang the poster. For example, some posters that are printable must be done on certain size paper, must be done in color, or must be laminated. In addition, there may be requirements as to where they must be hung.
 
In addition, it is important to remember that laws and regulations may change often so it is necessary to keep up with websites regarding the posters to determine if a new one needs to be hung. Some requirements may also change over time, such as the need to hang posters in dual languages over time, or poster may simply be outdated. The Department of Labor website also indicates which version can be hung and what the most recent version is.
 
For a questionnaire on what posters your worksite should hang, or about compliance assistance material, please contact us.

Health Benefit Services News

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Consulting Services, LLC

When the Economy Improves, Will Your Best Employees Still Be with You?
Employee job dissatisfaction is running high these days, meaning that, as the economy recovers, they are more likely to seek new employment opportunities. This finding, from a MetLife survey, indicates employers would be well-advised to work now on strategies geared toward improving employee loyalty and retention down the road.

The MetLife survey, its 9th Annual Study of Employee Benefit Trends, reports that upwards of one in three employees hopes to be working elsewhere in the next 12 months. The specific percentage varies from 34% to 38%, depending on company size. Given this inclination to bolt from their current employers, it's not surprising to see that the percentage of employees who express a very strong sense of loyalty to their current employer has dipped below 50% (now 47%, compared with 59% in 2008). The percentage of employees who feel their company has a very strong sense of loyalty to them has dropped to 33% (from 41% in 2008). Employers, understandably focused on recession-related business issues, remain unaware of this change in employee perception. From 2008 to 2010, a consistent 57% say they have a very strong sense of loyalty to their employees, and half consistently say their employees have a very strong sense of loyalty to them.

Employers need to be aware of changing employee sentiment, and act now to avoid having to face significant retention issues when the economy improves. As the economy rebounds and business picks up, companies can least afford to lose staff, particularly top performers. Consider a few of the following steps that companies can be taking today to address this:

• Identify top performers and other employees who, for various reasons, you would hate to lose.
• Make whatever tweaks you can afford to the compensation packages of these employees.
• Employee loyalty isn't created by money alone. Nurture an "all for one and one for all" attitude, by providing access to owners and executives, fostering teamwork, and making corporate strategies and mission a shared vision to the extent possible.
• Look for non-monetary ways to compensate employees, like offering more flexible schedules where possible.
• Show employees that their company appreciates them, through individual and group recognition.
•  Make the workplace a place where employees want to be, by cultivating a positive, mutually supportive corporate culture.
• Invest in employee training, giving workers the opportunity to advance and your company better and more productive performers.

As the MetLife survey states, "A loyal and satisfied workforce is part of the foundation of business growth. Widening cracks in this foundation may force employers to pay a price in reduced retention and productivity when the job market improves." Avoid this potentially expensive price tag for your company tomorrow, by attending to issues of employee loyalty, satisfaction and morale today.

Commercial Insurance News

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

Is Your Business in The Right Insurance Class?
Every business owner who has ever received a bill for an insurance premium has wondered how the insurance company came up with the price, especially if the premium has gone up since the last renewal. While the insurance pricing mechanism can seem mysterious, and may involve a certain amount of discretion by underwriters, the starting point is always the same: The underwriter must answer the question, "What type of business is this?" That may appear to be a simple question, but it does not always have a simple answer. When the underwriter answers the question, they assign the business to one or more classifications; more than any other factor, these classifications determine how much premium the business will pay.


Classifying a business can be straightforward or it can be more art than science.
Most state workers' compensation insurance manuals contain roughly 700 classifications; the commercial general liability insurance manual has a little less than double that. Compare those numbers to the thousands of business types that exist today and the new ones that will exist five years from now, and you get a sense for why classifying a business can be tricky. In addition, while workers' compensation, general liability and property classification descriptions are similar in some cases, in many others they bear no resemblance to each other. The underwriter who knows they have correctly classified the business for one type of policy may find that classification to be of no help for the others. Though it may appear that determining the correct classification is only the underwriter's problem, it also has short- and long-term effects on the insurance buyer. The correct classification ensures that the buyer pays the appropriate rate and that all buyers in that classification receive fair treatment. If the classification is incorrect, the buyer will pay a rate that is either too high or too low for that type of operation. For example, compare two contractors -- one installs plumbing systems in commercial buildings, the other installs automatic sprinkler systems in them. If the plumber's work is faulty, a pipe may leak and cause water damage to furniture and equipment in one or more rooms. If the sprinkler contractor's work is faulty, the sprinklers may not work when a fire breaks out and the fire may destroy the entire building. The risk of a severe loss resulting from completed operations is much higher for the sprinkler contractor than it is for the plumber. If the underwriter classifies the sprinkler contractor as a plumber, the sprinkler contractor pays a much lower rate for completed operations coverage than it should. In the long term, loss experience will cause the rates for plumbers to increase. This is unfair to plumbers and to sprinkler contractors whose underwriters classified them properly.

Also, charging an inadequate premium may cause the business's experience modification to be higher than it should have been. The experience rating formula compares actual losses to the losses a typical business in that classification with that level of payroll or sales would have. If the classification is wrong, the formula will understate the level of expected losses, resulting in a higher debit or lower credit. The rating manual rules require that policies issued to businesses in some classifications carry specific endorsements (policy changes.) For example, the rules for restaurants require the company to attach an endorsement that changes the definition of the products-completed operations hazard. Use of the wrong classification can result in the wrong policy terms for the business.

A business owner should work closely with a professional insurance agent to ensure that insurance companies are using appropriate classifications. While the wrong classification may appear to save the business money in the short run, it may prove to be costly in the long run.