Thursday, September 29, 2011

Commercial Insurance Services

Review Your Business Interruption Coverage So You Can Stay in Business


 
Business interruption insurance is like disability insurance for a business. Disability insurance covers some of a person's lost income when she is sick and unable to work. Business interruption insurance covers a business's lost income when a fire, explosion, or some other peril causes it to shut down temporarily. A shutdown after a disaster may have more severe consequences for a business than the damage to the property itself. Therefore, it is vital that business owners know whether they need to update their coverage.
 
There are two reasons why reviewing business interruption coverage regularly is important:
  • Economic conditions can change. When the economy is down, it is likely that a business's sales will either drop or flatten. Continuing expenses, such as utilities, mortgage payments, and payments on other loans, may not necessarily decrease; in fact, some may increase, particularly if there is a spike in energy prices. Conversely, a rapidly growing economy or one with high inflation may quickly drive anticipated sales much higher than what the owners expected when they bought the insurance.
  • Regardless of the overall economy, businesses change. They introduce new products or services, expand into new markets, acquire new properties or other businesses, and invest in technologies that increase their productivity. All of these changes affect expected income and may change a business's coverage needs.
When a business owner reviews her business interruption coverage, there are several factors to consider:
  • Is the market for the business's services expanding or shrinking? Cell phones, at one time seen as a luxury, over time came to be seen as a virtual necessity; millions of buyers entered the market. This increased sales for retailers and service providers.
  • Has the business launched new products or services? In the year 2000, Apple, Inc. was solely a computer manufacturer. The next year, it introduced the iPod; later in the decade, it introduced the iPhone. These two products now account for a large share of the company's sales.
  • If the business has coverage for income from dependent properties, how have those properties changed? For example, the business may depend on one major supplier for parts. If that supplier used to have two warehouses but has closed one of them, a fire that shuts down the remaining warehouse will have a significant impact on the business's income.
  • Are competitors entering or leaving the market? A business that has increased competition will be under pressure to resume operations as quickly as possible to discourage customers from permanently going elsewhere. The business will want to pay whatever is necessary to minimize the shut down.
  • Has the business's peak season changed? Suppose a company that provides payroll and benefits administration services decides to start offering tax preparation services to its clients. Much of the tax work and its associated revenue occur during the first quarter of the year. A loss that shuts down the business in March will have a much larger impact than it would have before the firm got into the tax business.
  • Have building codes changed in the business's location? State and local governments are increasingly adopting "green" building codes that require environmentally-friendly construction materials and practices. Meeting these standards may lengthen the rebuilding period and lead to a longer suspension of business.
  • What is happening to the business's costs? If labor or material costs are rising and the business must raise prices to cover the increases, sales volume may decrease and affect the amount of business interruption coverage needed.
Taking the time to review coverage and the firm's financial statements with a professional insurance agent will pay dividends after a loss. Proper business interruption coverage may make the difference between a business re-opening or closing forever after disaster strikes.

Wednesday, September 28, 2011

Financial Services News

“Dividends Stocks Posed to Rally”


Food for thought, in this volatile market there are opportunities for growth in dividend paying stocks.  In the daily blog from Mike Boyle from Advisors Asset Management, Inc., (AAM) dated September 21st, 2011 he stated it best….

“We have been discussing for quite some time, both in our writings and speaking engagements, that we thought the U.S. equity markets were attractive based on current valuations and earnings growth (both current and projected), and that is still the case. The S&P 500’s current P/E (price to earnings) ratio sits at 13.15, which is well below its long-term average. Its year-over-year actual earnings growth sits at 16.24%, which is well above its long-term average, and its year-over-year earnings are projected to grow by 17.96%. In addition, the S&P 500’s current yield of 2.17% is now above the 1.92% yield of the U.S. 10-year obligation which we believe is going to embolden a lot of income-focused investors to begin to up their equity exposure.

It should also be noted that the S&P 500’s yield of 2.17% understates the opportunity as the index includes stocks that don’t currently pay a dividend. If we take an equal-weighted look at only the dividend paying securities in the index, we see the average yield is 2.53%. In addition, there are 134 members (26.8%) in the index currently yielding over 3% and 57 members (11.4%) in the index currently yielding over 4%. Whenever we discuss stocks with attractive yields we usually hear a few grumblings that these securities are accidental high yielders or value traps. That is the case with some of them and that is why investors need to do their homework when picking dividend stocks (or any investment for that matter). However, we do show there are currently over 30 stocks in the S&P 500 that not only are yielding over 3%, but have also grown their dividend at least 10% year-over-year as well as their earnings 10% year-over-year. Thus there are many stocks offering the potential for quality growth as well as an attractive income stream.

Add it all up and we think the trifecta of valuation, growth and dividend yield make U.S. stocks very attractive for long-term investors. Dividends have historically provided a large portion of the total return of the equities market and over the last twenty years (8/31/91 – 8/31/11) that portion has been 42%.”

For more information, please visit on Mike Boyle’s blog.

G.R. Reid Consulting Services, LLC and AAM  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc.and American Portfolios Advisors Inc.
Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.

Life, Disability & Long Term Care Insurance Services

Disability Insurance: 
Owning Your Own Policy

: : 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 

Managing Director, Long Term Disability Benefits
631.923.1595 ext. 340  
G.R. Reid Consulting Services, LLC

 
Disability insurance is a vital need for every American household. As consumers we
have many expenses, such as mortgage payments, lifestyle costs, or education funds; which are all funded through income. 

The average person’s most valuable asset is not their jewelry, their car, or even their home –  it is their ability to work and produce income. The question must be posed:  
How would my family and my lifestyle suffer if I was unable to generate an income?


The truth of the matter is that when Americans spend extended time on long term
disability leave from work, every aspect of their life becomes susceptible to lose. Without
having an income to pay monthly bills or to make mortgage payments, a person may stand to
lose all that he or she has acquired throughout their lives. Therefore, purchasing Disability
Insurance is one of the most responsible life decisions a person can make.
 
Individual Disability Policies Benefits
You may be asking yourself, "Why do I need to buy a disability policy? My job offers me
disability coverage through my employment.”
This could be the case, however, there are
important differences between disability coverage offered by employers and owning your own
individual policy.
 
A. Portability
An individual policy is portable, meaning that if you switch companies, your
profession, or you decide to relocate; an individual policy will follow you to your
new job or your new life in a different city. A disability policy provided by an
employer will not. This is a problem that professionals often encounter when going
into private practice. After years of having group coverage through an employer, now
they must purchase their own policy and pay higher premiums or be denied entirely
because they are now older and, statistically speaking, most likely less healthy. By
purchasing an individual policy at a young age, this can be totally avoided.
 
B. Various Funding Mechanisms
Individual Disability Policies have many different riders and additional coverages that
are attractive to both seasoned employees and young people just entering the work
force. Disability policies may cover (i) student loan payments, (ii) overhead business
expense costs (iii) retirement protection- by replacing retirement contributions made
by you and your employer, and may provide (iv) Own Occupation Coverage, allowing
certain classes of professions to continue receiving benefits after they return
to work, if by returning to work they are forced to switch professions or job titles.


As always our G.R. Reid Consulting Service Life, Disability, and Long Term Care
Insurance team is available to assist you with any questions, to set an appointment please call us at 631-923-1595. 

1* Not practicing for Guardian or any subsidiaries or affiliates thereof.

Tuesday, September 6, 2011

Accounting & Tax News

:: Jason Saladino, CPA, Partner
631.425.1800 ext. 309
G.R. Reid Associates, LLP

Tax Relief for Victims of Hurricane Irene in New York:
Victims of Hurricane Irene that began on Aug. 26, 2011 in parts of New York may qualify for tax relief from the Internal Revenue Service.


The President has declared the following counties a federal disaster area: Albany, Delaware, Dutchess, Essex, Greene, Nassau, Rensselaer, Schenectady, Schoharie, Ulster and Westchester. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 26, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 26, and on or before Sept. 12, as long as the deposits are made by Sept. 12, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area
The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers
Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief
Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 26 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 26 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 26 and on or before Sept. 12 provided the taxpayer makes these deposits by Sept. 12.

Casualty Losses
Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year's return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year's return should put the Disaster Designation "New York/Hurricane Irene" at the top of the form so that the IRS can expedite the processing of the refund.
 
Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Thursday, September 1, 2011

Commercial Insurance Services

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


Five Questions to Determine Your Business Interruption Exposure

The losses resulting from businesses in the area having to shut down for extended periods of time as a result of Tropical Storm Irene are likely to be huge.

For many organizations, the loss of income coupled with continuing expenses after a fire or natural disaster can be even more devastating than the damage itself. To increase the chances that a loss will not shut operations down permanently, organizations must accurately asses their exposures by asking some questions:

• What is the most the organization could lose from a shutdown?
Commercial property insurance policies define "loss of income" as the sum of the expected pre-tax profit or loss and necessary continuing expenses. For example, if the expected profit is $300,000 and necessary continuing expenses are $100,000, the potential loss of income is $400,000. To calculate their exposure to business interruption losses, organizations should refer to their balance sheets, profit and loss statements and cash flow statements. Insurance companies also have worksheets available to assist with the calculation.

• How much insurance should be carried?
Once the organization knows the dollar amount of its exposure, it must decide how much business interruption insurance to buy. The key considerations are the length of time the insurance is likely to apply and the coinsurance percentage the organization must meet. Coverage usually begins 72 hours following the damage to the property and ends when business resumes at another location or when the building should be repaired with reasonable speed, whichever occurs first. If the organization decided that the coverage period would be around six months, it could buy an amount of insurance that would satisfy a 50 percent coinsurance requirement. If the interruption would last longer, higher coinsurance percentage and limits would be necessary.

• How long will it take business to return to normal?
Even after operations resume, it may be some time before revenue returns to normal levels. Customers who had gone elsewhere during the shutdown may be slow to return. The standard insurance policy extends coverage for 30 days after operations resume, but some businesses may need more time than that, especially if their businesses are seasonal. For example, an oceanside restaurant in New Jersey that makes most of its profits during the summer will need additional coverage even if it can re-open in November.

• How much of the normal payroll expense will continue during the shutdown?
The organization will need the continuing services of some employees while it attempts to re-open, but other employees may not be necessary. For example, accounting staff will be needed to pay mandatory expenses such as property taxes and collect receivables earned before the shutdown. Employees who stock shelves will not be needed if there are no shelves to stock.

• Does the business depend on other businesses for revenue?
A business can suffer a loss even if its own building is untouched. A loss that shuts down a key customer or supplier or damage to nearby property that causes authorities to close off access to the street can devastate a business's bottom line (this happened to many businesses affected by 9/11.) Special insurance coverage is available to protect against this possibility.

Business Interruption Insurance covers direct damage to your property. Enhancements to Business Interruption Coverage include Communication and Transmission Interruption Coverage which will cover off-premises power or communications failure including overhead transmission lines. This is an important safeguard to consider for hurricanes and natural disasters. A professional insurance agent can help a business owner answer these questions and identify insurance companies that can meet coverage needs. With some effort and planning before a loss happens, an organization can emerge from a shut down and return to profitability.

Human Resource Services News

 
 
Classifying Independent Contractors and Student Interns

Often times, employers misclassify independent contractors and student interns. The Fair Labors Standards Act breaks down how to classify whether or not a person working you is an independent contractor, or student intern, or none of these. 

Independent Contractors:
The U.S. Supreme Court has indicated that there is no single rule or test for determining whether an individual is an independent contractor or an employee of an organization for the purposes of FLSA, but it is the total activity or situation that controls this determination. Below are factors that have been considered significant in coming up with a determination.

1) The extent to which the services rendered are an integral part of the principal's business.
2) The permanency of the relationship.
3) The amount of the alleged contractor's investment in facilities and equipment.
4) The nature and degree of control by the principal.
5) The alleged contractor's opportunities for profit and loss.
6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7) The degree of independent business organization and operation.

Factors such as the time or mode of pay, where the work is being performed, the absence of a formal employment agreement, or whether an alleged independent contractor is licensed by state or local government, do not have bearing on determining the employment relationship. If an independent contractor does not meet the criteria above and it is determined that the employment relationship does not qualify the individual as an independent contractor, the employee must be paid according to the Fair Labor Standards Act. If an independent contractor is misclassified and should be paid according to the FLSA and is not, the employer may be subject to paying taxes. Lastly, there are more specific classifications that some employers must look into, like if it is an individual working as a farmer, or an electrical contractor, or if an individual is volunteering their time.

Student Interns:
When classifying an individual as a student intern, there are six criteria that must be applied,

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If an employer structures the internship program around a classroom or academic setting, or provides the intern with skills that can be used in multiple employment settings, the individual will be viewed as receiving training. If an employer benefits from the interns’ work such as performing productive work such as filing, or assisting customers, then the individual may qualify for minimum wage and overtime pay as per the FLSA standards. Additionally, internships should be for a fixed amount of time established ahead of time. Unpaid internships should not be used as a trial period before hiring the employee or it will fall under the FLSA standards of employment.

It is important to consider these criteria for determining whether or not an individual is considered an independent contractor or a student intern to ensure that all FLSA standards are being followed. For additional information on independent contractor or student internships, www.dol.gov can be visited.