1. finance
2. personal finance
3. insurance

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RISK MANAGEMENT
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EMPLOYEE BENEFITS
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P R I VAT E C L I E N T SERVICES
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C O N S U LT I N G SERVICES
Wisdom at Work.
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EMPLOYEE BENEFITS
RISK MANAGEMENT
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COVER SPOTLIGHT
70 Anniversary
th
SilverStone Group 4
Outsourcing Helps Companies with
FMLA Rules
Group Benefits Division
C O N S U LT I N G S E R V I C E S
Who’s Footing the Bill? | Understanding
Improvements & Betterments Coverage
Property & Casualty Division
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Revised Reporting Requirements | How
Will OSHA Respond?
Claims & Safety Division
Four Words | Shared Responsibility
Reporting Requirements
Group Benefits Division
We’re in the People Business
Human Capital Division 42
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Expansion to the Pacific Northwest
Defined Benefits Division
26
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How Long Will I Live?
A New Direction for D&O Coverage
Professional Risk Services Industry 13
Post-Retirement Division 28
Retirement Plans for Key Executives
Make It Your Business | Identifying
Organizational Risk
Executive Benefits Division 32
Property & Casualty Division
P R I VAT E C L I E N T S E R V I C E S
Road Map to Wellness
Transportation Industry 17
Environmental Industry 20
Standing Out From the Rest
Term Life Insurance | Anything but a
Commodity
Family Wealth Management Division
Transporting Hazardous Substances | Understanding Pollution-Related Liability Coverage
INTERNAL HAPPENINGS
People & Community 35
Personal Lines Division Birdies 4 Charity
People & Community Home Renovation Reality
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46
48
Wellness Activities Group
Practices What We Preach 52
SilverStone Group Hat Contest
People & Community 2
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S I L V E R S T O N E G R O U P. C O M 54
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SPOTLIGHT
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FROM THE COVER
On behalf of each of our more than 200
Associates, current and those who have
retired, I want to thank every client of our
Firm throughout our 70 years.
Celebrating 70 Years
This year, we are proudly celebrating our 70th anniversary. My
father, H.H. “Red” Nelson, founded the base company in 1945
along with my mother Ruth. They worked side by side through
those start-up years. World War II was winding down and the
Allies were clearly going to win. Hundreds of thousands of soldiers
were returning home, which triggered a complete restructuring of
the manufacturing industry and, most importantly, the rebuilding of
families. My father saw an opportunity in insurance as the United
States returned to prosperity. One of my first memories is of my
father going door to door selling individual polio policies for a
$3 commission while my mother, brother and I waited in the car.
After returning home from college and a tour
in the U.S. Navy, I joined the Firm in 1965. Carl
Mammel started Billig-Mammel-Olsen &
Associates in 1967. Over the course of decades,
our two firms continued to grow and were
merged in 1990, operating under separate
division names. In 2001, we rebranded the many
different parts of the Firm under one name –
SilverStone Group.
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S I L V E R S T O N E G R O U P. C O M Since our 60th anniversary, we have seen many changes and I
am sure we will continue to see many more over the next decade.
We have witnessed a partial recovery from an economy that
fell into a serious recession, sweeping
changes in healthcare legislation and a
large increase in federal oversight and
regulations. We strive to keep our clients
armed with the best possible information
to make decisions, as well as the best
products to backstop those informed
decisions.
NNIVERSARY
1945 -2015
The Firm’s underlying theme (which was started by my father
and Carl Mammel and is now continued by my son) has been
our absolute commitment to recruiting and retaining the
finest technical people in their respective fields. We provide
our Associates with educational and professional growth
opportunities, as well as ownership possibilities. We have
also remained committed to our role as an independent
advisor, keeping our clients’ interests first at all times. Today,
our Associates include six Juris Doctorates, four Philosophiae
Doctors, four Members of the American Academy of Actuaries,
four Enrolled Actuaries, eight Chartered Life Underwriters, three
Certified Public Accountants, sixteen Accredited Advisors of
Insurance, six Certified Employee Benefit Specialists, thirteen
Certified Insurance Counselors, seven Chartered Property
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Casualty Underwriters, two Senior Professionals in Human
Services, eight Chartered Financial Consultants, sixteen Health
Insurance Associates, five Registered Health Underwriters,
three Registered Employee Benefits Consultants, a Managed
Healthcare Professional, a Qualified Pension Administrator and
eighteen Master’s Degrees. An impressive collection of people,
all dedicated to serving you.
On behalf of each of our more than 200
Associates, current and retired, I want to
thank every client of our Firm throughout our 70 years. If it were
not for you, we would not be celebrating this milestone. We value
the trust you place in us each and every day, and we pledge to
keep and reaffirm that trust. I would like to wish you all good
health and prosperity in your lives and endeavors.
Here’s to 70 more!
John P. Nelson
| Chairman
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RISK MANAGEMENT
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P R O P E R T Y & C A S U A LT Y
Make It Your Business
IDENTIFYING
Organizational Risk
Owning your own business
can be an exciting challenge.
The stakes are often high,
but the rewards can be great.
When managed strategically,
companies have the potential
to develop into profitable
businesses that experience
continued growth and success.
This can translate into comfortable and secure futures for the
owners and the employees. However, it is important for business
owners to have a clear, in-depth understanding of the risks tied to
their businesses. A thorough risk assessment can help business
owners identify vulnerabilities and protect their companies from
financial downfalls resulting from unprotected liabilities. Is your
company protected from the wide variety of risks and exposures
that exist in today’s business environment? If you can’t respond
with a confident “yes,” then you need to keep reading.
Evaluating and rating a company’s proficiency in each area can
provide a roadmap for continuous safety improvement. The
process is designed to measure current practices against bestcase practices in the industry. The ultimate goal is to identify
areas of opportunity and provide businesses with a multi-year
risk management plan for implementation. The evaluation should
maintain focus on safety and effective communication to capture
new and evolving risks in lieu of relying on practices that have been
in place for many years without evaluation for applicability.
What’s the Risk?
Additional Advantages
A comprehensive risk assessment can help pinpoint exposures and
provide business owners with the information needed to protect
their companies from significant loss. Whether your business
has just opened its doors or you have been operating for the last
30 years, it is important to perform current risk assessments to
determine the biggest threats facing the company. As the business
world evolves and more technological advancements are achieved,
the list of potential exposures continues to grow and becomes
more complicated. A risk assessment can be a beneficial exercise
to help business owners modify their insurance coverages and
safety practices to appropriately adjust to a constantly changing
risk atmosphere.
Risk assessments can also be a key step in understanding and
preparing to lower insurance costs by gaining confidence to
increase deductibles or captive insurance programs. In addition,
it can provide excellent documentation for negotiating with your
insurance carrier in the standard market. Insurance underwriters
have responsibilities similar to commercial loan officers. They
are responsible for analyzing risk as they prepare to commit their
organization’s assets. Loan officers document their files with
detailed financial information to substantiate loans and to defend
their decisions should a loan go bad. The same is true of insurance
underwriters. When a large loss occurs, underwriters may be
asked to justify their pricing of the insurance. Comprehensive risk
assessments can provide underwriters the needed documentation
for their files that will give them confidence to provide more
aggressive insurance pricing and a “defense” if they are called
to account for their pricing decisions when a major loss occurs.
It is important for business owners to ensure that their investments
in safety and risk management are getting the underwriting credit
they deserve.
Simply defined, a risk assessment is a process of evaluating
operational and physical risk factors that can lead to injury or
physical loss. Common areas of evaluation include:
• Safety policy statements
• Substance abuse
• Accident investigation
• Claims management
• Emergency response
• Regulatory compliance
• Contractual liability
• Motor vehicles
•Ergonomics
• Other industry-specific areas
by John Sutton, AAI &
Amy DeJong, ACI, ARM, CWCS, AIS
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Don’t Wait – Act Now!
If you have not recently conducted a risk assessment for
your company, we urge you to consider doing so – it could
be the difference between success and failure. Completing
comprehensive, annual assessments with a reputable risk manager
can provide peace of mind knowing that you have identified
the various exposures that could threaten the longevity of your
company, and that confidence is priceless. For more information
about risk assessments and how to protect your business, contact
the risk management professionals at SilverStone Group.
Contact John Sutton | [email protected] or
Amy DeJong | [email protected]
S I L V E R S T O N E G R O U P. C O M 7
RISK MANAGEMENT
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P R O P E R T Y & C A S U A LT Y
by Chuck Eckert, CIC, AIC
Who’s Footing the Bill?
UNDERSTANDING IMPROVEMENTS &
BETTERMENTS COVERAGE
New floors. Fresh wall coverings. Updated fixtures. When renting
a commercial property, business owners might make a number of
significant changes to create a space that meets their professional
needs. In the insurance world, this is referred to as “betterments
and improvements.” But what happens when a rental property is
damaged following a storm, fire or other catastrophic event and
such property is destroyed? Landlords and tenants are often left
wondering (and arguing over) who is responsible for paying for that
type of loss. Prior to renting a commercial space, the landlord and
tenant should clearly identify the contractual responsibilities of
each party in order to avoid losses and undue expenses.
Defining Responsibility
Betterments and improvements are considered any permanent
additions, alterations or fixtures that are attached to a property.
Unless otherwise stated in the lease agreement, these permanent
changes and additions become property of the landlord. Therefore,
if a tenant decides to add a fireplace at the front entry to create a
warm ambiance for clients while they wait, they cannot reasonably
expect to take the fireplace with them upon termination of the
lease. However, a cloud of confusion exists over who is financially
responsible for the property while the tenant occupies the rental.
This responsibility can (and should) be defined by the
lease agreement.
The lease agreement, however, is not the only instrument
used to help define financial responsibility for betterments and
improvements. In the event such property is damaged, not only
are the terms of the lease considered, but so are the landlord
and tenant’s insurance policies. Sometimes the language is
conflicting from one policy to another, or the policies might conflict
with the rights and responsibilities defined by the lease. All of
these variables can push responsibility from one party to another,
ultimately creating an uncertain and sometimes volatile situation
for landlords and tenants.
Policy vs. Policy
Personal Property The definition of “personal property” in both
the tenant and the landlord’s policies will typically address the
scope of coverage for betterments and improvements. This can
play an important role in determining financial responsibility. In
some instances, a tenant’s policy may provide that personal
property includes improvements and betterments. However, if the
lease states that such property belongs solely to the landlord, the
tenant might not be able to prove ownership of such property, in
which case the insurer could decline coverage for a loss. On the
other hand, the landlord might also have an insurance policy in
which personal property includes improvements and betterments,
but that might be further defined to only include property that
is occupied by the landlord. In this instance, the insurer might
deny the claim even if the lease between the landlord and the
tenant stipulates that the landlord owns the improvements and
betterments. Think the confusion stops there? Think again.
Other Insurance Provisions It is not uncommon for property
policies to contain “other insurance” provisions. While the language
often varies, this provision typically requires other applicable
insurance policies to respond first in the event of a loss. Therefore,
the policy containing this provision would only respond if the other
insurance policy was insufficient to cover the entire loss. However,
it is possible that both policies may contain this provision. When
this happens, the legal authorities in each jurisdiction will resolve
the competing provisions and determine the responsible party. In
some states, insurers are required to share the cost of replacing/
repairing the damaged property.
Pay Attention to the Fine Print
Numerous caveats can be layered into leases and insurance
policies, often creating a significant gray area when it comes
to determining financial responsibility following a loss. Landlords
and tenants should closely examine their property policies with
their respective insurers, and all lease agreements should be
reviewed by legal counsel. Performing the proper due diligence
prior to signing a commercial rental agreement can eliminate
unnecessary confusion and help both parties enjoy a mutually
beneficial arrangement long into the future.
Contact Chuck Eckert | [email protected]
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S I L V E R S T O N E G R O U P. C O M 9
RISK MANAGEMENT
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CLAIMS & SAFETY
Revised Reporting Requirements
How Will OSHA Respond?
by Joe Freeman, ARM, CSP
If your job involves workplace safety or risk management,
chances are you have heard about the January 1, 2015 changes
to the Occupational and Safety Health Administration's (OSHA)
incident reporting requirements. Until now, certain incidents had
to be reported to OSHA within eight hours, including the death
of an employee from a work-related accident or the inpatient
hospitalization of three or more employees as a result of a workrelated accident. As of January 1, 2015, employers within OSHA
jurisdiction must still report work-related fatalities within eight
hours; however, work-related inpatient hospitalizations of even a
single employee, as well as amputations or the loss of an eye must
now be reported within 24 hours. While these changes have been
in the works for some time and are fairly straightforward, it is still
unclear how OSHA will respond to the expanded number of reports
resulting from the modified requirements. Given this degree of
uncertainty, it is critical for employers to understand the changes
and adjust their response and reporting practices accordingly.
How Will OSHA Respond?
It’s fairly safe to assume that revisions to OSHA’s Field Operations
Manual are being considered based on these reporting changes.
Because OSHA offices will be fielding an increased number of
incident reports, officials will likely need additional clarification
to determine if a physical inspection is warranted versus a verbal
or written confirmation from the employer of hazard abatement.
When a fatality or catastrophic injury has occurred (a catastrophe
is defined as the hospitalization of three or more employees
resulting from an accident or an illness caused by a workplace
hazard1), it would be safe to expect an OSHA visit. OSHA not only
has an obligation to verify that a hazard has been sufficiently
abated, but it also needs to collect as much information regarding
the circumstances of the incident as possible. OSHA’s expected
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S I L V E R S T O N E G R O U P. C O M response to reports of an inpatient hospitalization of a single
employee, amputations or loss-of-eye injuries is not quite as clear
but will likely be based on the seriousness of the incident and the
existence, or perceived existence, of any ongoing hazards or of any
imminent danger to employees.
At the time of this writing, any proposed changes to OSHA’s Field
Operations Manual or to enforcement instructions in any other
format have not been released. Therefore, for the time being, the
criteria within the existing manual will be used to steer OSHA
compliance officers in their response under the new reporting
requirements. Clues as to how OSHA will handle enforcement or
the likelihood of an inspection following a reportable incident can
be gleaned from the language within the manual.
The OSHA Field Operations Manual serves as a reference for
identifying the responsibilities associated with the majority of
OSHA inspections. Employers who are subject to OSHA inspections
should become familiar with this document. The current manual, in
part, provides guidance for OSHA directors or designees to follow
when prioritizing inspections following any report of an imminent
danger, catastrophe, fatality or amputation, and for evaluating
other referrals and complaints. For OSHA’s enforcement purposes,
reports received under the new reporting requirements of inpatient
hospitalizations, amputations or loss-of-eye injuries will likely be
viewed as a referral. The existing manual lists the criteria used to
evaluate the need for an inspection. The inspection trigger that
is consistent throughout this list is when OSHA has a reason to
believe that a hazard or imminent danger continues to exist.
For the purposes of OSHA’s Field Operations Manual, imminent
danger is defined as a condition or practice within a place of
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employment where danger exists that could reasonably cause
death or serious physical harm before it can be eliminated through
enforcement procedures. There are two conditions that must be
met in order for OSHA to consider a hazard an imminent danger:
1) death or serious harm must be threatened; and 2) it must be
reasonably likely that a serious accident could occur immediately,
or if not immediately, then before abatement would otherwise be
implemented. If a work environment is considered to be actively
creating an imminent danger, it is given first inspection priority,
requiring an immediate response from OSHA.
How Should Employers Respond?
If an employer has a work-related inpatient hospitalization,
amputation or loss-of-eye incident, the employer has 24 hours
to report the incident to OSHA. This can be viewed as a 24-hour
window of opportunity to identify and abate any hazards
associated with the incident and to take thorough steps to prevent
a recurrence. This voluntary abatement taken within the reporting
window is not done with the intention of hiding the circumstances
of the incident from OSHA; rather, it is done to immediately protect
employees from the hazard, to identify and permanently eliminate
the hazard and to demonstrate a focus on employee safety and
good faith efforts to maintain a safe workplace.
Following any significant incident, steps should be taken to
immediately separate employees from the hazard. Working within
the 24-hour time frame, employers should begin to investigate
the circumstances of the incident and permanently safeguard
any hazards identified as soon as possible. If an immediate fix is
possible, employers are strongly encouraged to do so. Immediate
abatement actions that are possible within 24 hours might
include separating employees from the hazard, adjustments to
or installation of missing machine guarding, making the use of
safety glasses, goggles or other protective equipment mandatory,
or simply reviewing and updating safety policies based on the
investigation and training employees on any changes.
If permanent hazard abatement isn’t possible within the 24-hour
reporting window, a short-term means for keeping employees
safe (as well as a timeline for a permanent solution) should be
developed so that any abatement activities or timelines can
be shared with OSHA at the time the incident report is made.
Abatement actions completed after an incident report has
been submitted to OSHA and prior to an inspection or any other
follow-up communication from OSHA should be shared with the
area field office evaluating the incident. Again, the goal is to not
only address existing hazards as quickly and as thoroughly as
possible, but also to provide OSHA the assurance that an active
plan is in place to eliminate the hazard and that an inspection on
OSHA’s part would be unnecessary.
RISK MANAGEMENT
PROFESSIONAL RISK SERVICES INDUSTRY
More to Come
While it remains to be seen exactly how enforcement will play
out under OSHA’s new incident reporting requirements, any
efforts toward voluntary abatement following an incident
should help to reduce the likelihood of an inspection or will,
at a minimum, be noted and taken into consideration by the
compliance officer at the time of inspection. Stay tuned for
additional updates as more information on enforcement
activities under these expanded reporting requirements
becomes available.
1
OSHA’s Field Operations Manual (FOM). Effective date of Aril 22, 2011. Accessed on December 16,
2014 at www.osha.gov/OshDoc/Directive_pdf/CPL_02-00-150.pdf
Contact Joe Freeman | [email protected]
A New Direction
for D&O Coverage
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S I L V E R S T O N E G R O U P. C O M by John Marshall, AAI, CIC, CRM
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If you were to search Google for the definition of directors and
officers (D&O) liability insurance, one of the first definitions you
might find is from Wikipedia:
Liability insurance payable to the directors and officers of a
company, or to the organization(s) itself, as indemnification
(reimbursement) for losses or advancement of defense costs
in the event an insured suffers such a loss as a result of a legal
action brought for alleged wrongful acts in their capacity as
directors and officers.
Much like the resources we use for finding information have
changed from encyclopedias to Wikipedia, so will the data
analytics, regulation and new competition that define D&O liability.
Decades ago, this coverage became a stand-alone product to cover
risks that a standard commercial general liability carrier typically
did not want to insure, especially on an occurrence basis. Since
that time, the product has grown to include a broader definition
of insured, coverage for employment practices liability (where the
majority of exposures and claims occur) and, more recently, limited
regulatory exposures as a result of the many laws affecting the
private and not-for-profit sectors. But also hidden in the details
of these policies are trends that are restricting coverage, so it is
important to understand what is driving those trends. The fact is
insurance companies typically prefer to cover accidents, not known
events that could have been prevented.
The fact is that insurance
companies typically want
to cover accidents, not
known events that could
have been prevented.
Make More, Pay Less
As business practices have evolved over time, insurance companies
are less interested in insuring “management” risks that can be
prevented through compliance, training, procedures or building risk
identification into the decision-making processes. Just like a credit
record is used to price auto insurance, underwriters are trying to
underwrite the culture of an organization to avoid risk ignorance.
Therefore, companies that have good employment practices and
ethical cultures and are able to attract and retain quality employees
are not only more productive and profitable, but they typically
benefit from lower pricing and better coverage in this space.
More data continues to emerge that proves that better business
practices, when treated as a long-term objective, can lead to lower
insurance costs and overall risk. SilverStone Group’s benchmarking
data comparing similar clients also supports this point when looking
at the cost of D&O insurance. Due to the growing complexity of
this coverage, it is important to stop and consider the following
questions: 1) What trends can companies expect to see regarding
supply and demand of coverage in 2015?; 2) What do these policies
cover/not cover that may not be apparent to everyone?; and 3) Are
there new and/or non-insurance ways to address this risk that have
not been discussed?
What’s Trending
For several decades now, D&O liability insurance has evolved to
meet the changing exposures and needs of the business world.
While many choose to focus on the marketplace for publicly traded
companies, less attention is typically paid to the private and nonprofit sectors that don’t need full access to the estimated billion
dollars in market capacity. Each time an industry is targeted for
failed business practices (failure to protect information), or when a
financial crisis or adverse loss trends occur that affect the liability
of management, policies of this nature can expand or restrict based
on underwriting appetite. So what trends are affecting the typical
non-publicly traded companies that might still be operating in an
increasingly regulated environment?
Organizations operating in states that are typically less litigious
(such as Nebraska, South Dakota and Iowa) have benefited for
decades by having less dramatic changes in pricing versus states
like California, and according to national experts, broader coverage
has always been available as a result.
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For 2015, the marketplace continues to be a buyer’s market, with
new insurance companies (including units of Berkshire Hathaway)
entering the market. In general, this has created a “soft” market
cycle for some industries depending on the risk profile and a loss
history which is driving down premiums. Despite many insurance
companies experiencing record losses since 2009, this continues to
be a profitable business when handled correctly. The drawback of
too much competition, however, is that the true cost of risk related
to this exposure, purely looking at the parts that are financed by
insurance companies, can be distorted by an oversupply of carriers
trying to meet diminishing demand. For example, carriers who
have been in the marketplace and have now developed exposure
and experience are still trying to raise premiums 5% to 10% per
industry for 2015, but supply and demand can sometimes eliminate
potentially needed premium increases for longer-term stability.
It is also important to look
at trends in policy language.
Another somewhat hidden trend over the last decade is that
minimum retentions and deductibles have increased, and for some
industries the hikes reached levels that are not within the risk
appetite of the insured for self-insurance. In fact, pricing increases
since 2009 would have been much more dramatic had many
carriers not increased retentions and further limited the types of
exposures they were willing to insure. This has been especially
true for employment practices liability coverage that applies to
termination, discrimination and harassment claims. It is important
to understand that “insure” means coverage for legal defense
costs, settlement costs or both depending on the policy. The
portion of coverage that is now the responsibility of the insured
before insurance coverage applies is often higher than the average
defense costs for claims such as wrongful termination, causing
insureds to realize that defense expenses likely won’t be paid by
insurance. As we continue to learn more about business practices
that help mitigate these exposures, insurance carriers want their
insureds to pay for the primary losses to eliminate any morale
hazard that might otherwise exist.
S I L V E R S T O N E G R O U P. C O M It is also important to look at trends in policy language. For
industries that face increasing regulation, standards of care or just
a change in competition, stakeholders should understand D&O
policy language to set realistic coverage expectations. With the
benefit of the maturation of language and understanding how
courts will interpret coverage over many decades, there are clear
ways to identify which risks can be insured. However, it is more
important to understand what types of exposures are being limited
as far as coverage is concerned so that internal resources and risk
controls can focus on prevention.
Below are some trends identified by our policy experts that affect
D&O coverage, with a few industry-specific trends:
• Carriers are reducing or eliminating prior Health Insurance
Portability and Accountability Act (HIPAA) violations coverage
due to fears that government enforcement will cause
deterioration of underwriting results.
• Dedicated coverage for board officers (known as “side A”
coverage) is being automatically added to protect individual
board members through defense coverage if coverage limits
are depleted due to severity, frequency of claims or litigation.
• Coverage known as “regulatory claim” coverage continues
to exist, but retentions have caused only catastrophic/limited
coverage to exist. Senior management should be made
aware of the lack of true coverage for failure to comply with
laws and regulations.
• Most statistics analyzing claims data still show low
percentages attributable to fines and penalties when looking
at total costs of covered claims that involve regulations. This
means that government enforcement is still limited (at least
for Midwest clients) and most costs are going toward legal/
defense activities. This trend more likely identifies the fact that
only defense costs are typically paid, with fines/penalties and
forms of restitution being excluded.
• Absolute limitations for cyber risk continue to strengthen in
an effort to force the healthcare industry to seek separate or
stand-alone policies.
• Cyber risk insurance, when purchased separately, has added
some generous regulatory coverage for exposures like privacy
rules, but much like trends identified in this article, that product
line will mature and likely reduce coverage and increase
deductibles over time.
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• As industries like healthcare consolidate or partner to limit
provider networks, anti-trust defense coverages are being
watched and limited, including the addition of coinsurance
provisions to share the cost of the coverage with the insured,
even if only for defense costs. While this risk is typically
thought of on a larger scale and in urban areas, many rural
areas should take note of activities that could limit competition
and access to care.
• Some organizations that carry D&O coverage have been
caught off guard because they did not realize that failure to get
proper insurance or legal and accounting advice is not covered.
A simple and forced solution should be that organizations seek
assistance from licensed professionals to outsource liability for
insurance, legal, investment and accounting exposures since
those industries carry errors and omissions (E&O) insurance for
failure to provide proper advice.
• Triggering of defense coverage for criminal activities (i.e.,
concealment or fraud) through management liability policies
continues to be limited as policy forms evolve and ultimate
guilt becomes an uninsured exposure. This has also been true
of general liability policies for many years.
• The recent renewal of the Terrorism Risk Insurance Act should
continue to maintain a healthy market for risks identified as
terrorism acts by the Federal Government. Close attention
should be paid to coverage for non-certified terrorism acts
in the event management is blamed after the fact.
• E&O risks for professional advice being provided by employees
needs to be monitored, especially if being provided to outside/
third parties. These activities would need separate coverage
not contemplated by traditional D&O coverage.
• Organizations considering the management of captive
insurance companies, self-insurance or managed care
organizations should realize special E&O coverage would be
needed. These activities continue to be limited or excluded
by traditional management liability coverage.
• Activities such as wellness education, clinical guideline
development and other quality assurance initiatives may
have limited coverage if they cause a malpractice event in
a healthcare setting. However, D&O policies seek to limit
coverage for these activities as a trend and this could expand
to other industries.
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• In general, coverage for failure to comply with applicable laws,
regulations and standards defined by your industry and the
subsequent financial consequences are going to go away as
they become viewed less as accidents and more as business
errors (preventable) when they occur.
The current trends demonstrate that the insurance industry is
growing less interested in insuring mistakes and poor management
decisions that could have been prevented or that are now well
known. Whether to comply with existing laws or prepare for new
regulations that are still being interpreted, carriers are either
limiting coverage or raising retentions to a point where companies
are going to be forced to self-insure these exposures over time.
Thus, if insurance is going to be increasingly unavailable as a
vehicle to finance management liability, what should companies
do? Given the significant impact employees can have on a
company’s risk level, human capital experts are developing ideas
and solutions for companies to hedge various risks. Companies
can begin to operate as though they are self-insured by developing
best practices over time to mitigate some of the exposures
previously mentioned. With greater data availability, companies
can now quantify and more easily make the case for spending more
resources in the short term to pave the way toward a lower total
cost of risk over the long term.
Time to Review
RISK MANAGEMENT
|
T R A N S P O R TAT I O N I N D U S T RY
by Pete Hanley,
CIC, CRM
ro
ad
map to
A good first step in what ultimately should become an ongoing (at
least annual) process is to simply review what your D&O policy
does not cover (or where deductibles and retentions are significant),
and then conduct an audit of those identified uninsured risks. If
you haven’t reviewed this coverage recently, now would be a good
time to identify trends, educate stakeholders and consider other
methods for identification and prevention of poor management
decisions. For more information on this dynamic topic, contact the
Professional Risk Services Team or the Human Capital Consulting
experts at SilverStone Group.
Contact John Marshall | [email protected]
S I LV E R L I N K
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S I L V E R S T O N E G R O U P. C O M 17
Since 2010, the Federal Government has taken significant steps
to make roads safer for motor carriers and for the public with the
Compliance, Safety and Accountability (CSA) initiative. The CSA
was established to help the transportation industry adapt to a
changing environment, maximize its resources and improve safety
performance by leveraging data and technology.
This effort has led to substantial changes in commercial driver’s
license standards and driver qualification. Due to this increased
focus on the individuals who are operating commercial motor
vehicles, the transportation industry is beginning to place a greater
emphasis on driver wellness. While it may be difficult to create
wellness programs that truck drivers will embrace, the rewards
are worth the challenge. Motor carrier companies can certainly
benefit from a decrease in healthcare and workers’ compensation
costs, improved safety records and greater control over insurance
premiums. However, truck drivers face a unique set of challenges
when it comes to on-the-job wellness. Given the nature of their
work, there is a shortage of healthy food options and they often
encounter ergonomically unfriendly workspaces and experience
extreme fatigue. Nevertheless, these obstacles should not be a
deterrent for investing in a wellness program, but rather a set of
challenges that need to be considered to achieve success.
Revving Up Your Wellness Program
The first step trucking companies should take when designing
a wellness program is to ask drivers what type of wellness
information interests them. Driver input should help guide the
content of the program. While it can be difficult to get face time
with drivers who are on the road for weeks at a time, it is critical
to make these discussions a priority. Without this feedback,
trucking companies are more likely to develop programs that fail
to capture the interest of their drivers.
18
In addition to driver feedback, it is important to factor in typical
driver schedules. Long-haul drivers are allowed to work up to 70
hours in an eight-day period. Once they start the day, they have to
stop driving within 14 hours. During that period, they are allowed
to drive a maximum of 11 hours, so there could be up to three
hours of non-drive time that could be used to improve drivers’
health. Drivers should be provided with suggestions on stretching,
exercise and healthy eating options that can be incorporated
into their schedules and routes. For example, drivers could be
encouraged to walk or run laps around their trucks when parked
at a truck stop (32 laps around a big rig is equivalent to one mile1).
Drivers could also be encouraged to implement a stretching
program that can be done within their trucks. Stretching is
important to back safety and can help with the long hours
spent in a cab. Additionally, some truck stops have incorporated
workout rooms or offer maps suggesting nearby places for a walk.
A thorough wellness program should provide drivers with a list of
opportunities and suggestions so they are equipped to make the
healthiest decisions while on the road.
In addition to exercise and healthy eating habits, wellness
programs should implement screenings and preventive measures
to help identify health issues that are common among professional
drivers, such as extreme fatigue, sleep apnea, high blood pressure,
diabetes, depression, loneliness and anxiety. Smoking is also
a major health concern among truck drivers. Companies can
provide tips to stop smoking and implement a program to reward
non-smokers and incent active smokers to quit. Identifying health
problems early and incorporating corrective behavior can lessen
the severity or onset of these conditions, placing healthier (and
therefore safer) drivers out on the road.
S I LV E R L I N K
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Get the Word Out
Top-Down Commitment
Good communication is a pillar for any successful wellness
program. Drivers should be encouraged to advocate for one another
and communicate messages to other drivers. Creating a space for
drivers to share information with one another (such as which truck
stops offer nice walking trails or healthy food options) is a great
way to motivate drivers and provide them with the information
they need to make healthier choices. This can be done through
social networking sites, e-mail chains or other wellness portals.
Some companies have even established “wingman” programs that
encourage drivers to check up on one another.
For management to demonstrate its commitment to building a
healthier workforce, it is important to lead by example. Executives
who participate in wellness programs can inspire others to
follow suit. Furthermore, management will be better connected
to the program and more apt to identify flaws or inefficiencies
that can be corrected. Dedicating company time and resources
to the development of a successful wellness program not only
helps create a healthier workforce, but it demonstrates a sincere
commitment to the wellbeing of employees and can lead to
increased job satisfaction and smaller turnover – a win-win for
both employer and employee.
In addition to exercise and
healthy eating habits, wellness
programs should implement
screenings and preventive
measures to help identify
health issues that are common
among professional drivers,
such as extreme fatigue,
sleep apnea, high blood
pressure, diabetes, depression,
loneliness and anxiety.
S I L V E R S T O N E G R O U P. C O M Working Toward Wellness
When creating a wellness program, remember that there
isn’t a “cookie cutter” approach. This is especially true for the
trucking industry. Thoughtful consideration must be given to the
workforce and its varied working conditions before tailoring a
program that caters to the inconsistent schedules and nomadic
lifestyles of professional drivers. While taking this methodical
approach can have a positive impact on healthcare and workers’
compensation costs, it more importantly promotes the health and
wellness of drivers and can lead to safer roadways for everyone
behind the wheel.
1
E llin, Abby. “A Hard Turn: Better Health on the Highway.” The New York Times. November 21, 2011.
Accessed on December 4, 2014 at http://www.nytimes.com/2011/11/22/health/a-hard-turn-truckdrivers-try-steering-from-bad-diets.html?pagewanted=all&_r=0
Additional information for this article was accessed at: http://www.truckinginfo.com/article/
story/2013/04/7-tips-to-create-a-driver-wellness-program-that-works.aspx
Contact Pete Hanley | [email protected]
19
Transporting Hazardous Substances
RISK MANAGEMENT
|
EN V IRO N M EN TA L I N D US T RY
UNDERSTANDING
POLLUTION-RELATED
LIABILITY COVERAGE
by Andrew Fereday, AAI, AIS, CLCS, AINS
Long-haul truck drivers take on an
enormous amount of responsibility
when transporting goods from one
place to another.
Once they start their engines and step on the gas, every move
they make has the potential to result in serious harm to people
and property. For big rigs transporting hazardous substances,
there is an added concern for environmental risks. This concern
is so significant, in fact, that legislation has been enacted
that requires motor carriers to add a special endorsement to
their insurance policies known as MCS-90. This endorsement
guarantees that insurance policies will respond following truckingrelated pollution events. However, this mandated response has
falsely led many motor carriers to believe that they are fully
covered against pollution exposures. It’s time to clear the air and
understand how the MCS-90 endorsement really works.
20
According to the Law
The Fact of the Matter
Now That You Know
In 1980, Congress enacted the Motor Carrier Act (MCA) as a
way to deregulate the trucking industry and allow for more
flexibility with pricing and service arrangements. The MCA also
established minimum limits of liability insurance coverage that
certain motor carriers must have. In addition to covering claims
for bodily injury and property damage, the coverage must also
respond to environmental restoration. However, standard policies
for motor carriers are usually inadequate to meet these financial
obligations and fail to provide coverage for the accidental release
of some pollutants. As a result, the MCA further stipulates that
motor carriers must have the MCS-90 endorsement attached to
their policies. MCS-90 obligates insurance companies to pay for
a motor carrier’s public liability, which includes restitution for the
loss, damage or destruction of natural resources following the
accidental release of any substance being transported. This also
includes removal costs and any expenses related to minimizing
the damage to human health and the environment. Despite the
financial assurance provided by this endorsement, it does not
mean truckers are off the hook.
MCS-90 is frequently described as pollution coverage, which
often leads motor carriers to believe they are fully covered for
pollution events when this endorsement is attached to their
policies. In reality, MCS-90 does not expand pollution coverage.
While the endorsement does require insurance companies to pay
for environmental restoration claims, it also requires insureds to
reimburse insurance companies if they lack the proper coverage for
a given incident. Pollution events are excluded from most standard
insurance policies; therefore, motor carriers should carefully
evaluate their policies and determine if additional coverage is
needed based on the types of goods and materials they haul. Motor
carriers can request a special pollution liability endorsement for
their policies which can broaden their coverage to include the
release of transported pollutants. This additional coverage not
only helps motor carriers comply with MCA requirements, but it
also eliminates the possibility that they will have to reimburse the
insurance company for applicable losses.
It is critical for all motor carriers to understand that MCS-90 is not
a guarantee of coverage and that they can be held accountable
for the full cost of a cleanup and any remediation efforts following
a pollution event. Because such events typically come with very
high price tags, many insurance companies are not willing to offer
special coverage endorsements. SilverStone Group’s Environmental
Risk Services Team has the technical expertise and the industry
knowledge to help motor carriers obtain the right pollution liability
coverage based on their specific risks. Don’t drive off a financial
cliff – contact one of our specialists today for more information
about environmental liability solutions.
S I LV E R L I N K
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S I L V E R S T O N E G R O U P. C O M Contact Andrew Fereday | [email protected]
21
EMPLOYEE BENEFITS
|
Over the last several years, employers have grown increasingly focused on
GROUP BENEFITS
healthcare reform, and many are worried about employer-sponsored health
plans and how they will evolve under the law.
The business community remains particularly concerned about
the potential financial impact of healthcare reform and what it
might mean for their bottom lines. However, this isn’t the first
time business owners have been rattled by extensive changes
brought on by healthcare-related legislation. Nearly 22 years
ago, lawmakers made a historic move by enacting the Family
Medical Leave Act (FMLA). This law ensures that employees
can take unpaid leave for specified family and medical reasons
with continuation of group health insurance coverage. Just as
we are experiencing with healthcare reform today, the business
community was anxious about the FMLA’s impact at the time it
was passed. In fact, the law was flatly disliked by some due to a
fear of lost productivity and jobs. But that initial anxiety has faded,
and most individuals and companies now view the FMLA as a
positive benefit for workers in the United States.
Why Outsourcing?
Helps Companies with FMLA Rules
by Jeff Jorth
Part of the FMLA’s success can be attributed to the outsourcing
of its functions to ensure that the law is successfully implemented.
Outsourcing is a growing trend among human resource (HR)
departments, with more than 20% of employers using outside
firms to administer their plans and another 34% who are interested
in outsourcing their FMLA programs.1 The growing interest in
outsourcing is partly due to the complexity of the FMLA and the
difficulty with its administration, as well as the challenges it
presents for employers who often have policies that differ from
what the law specifically addresses or requires.
For example, nearly 4 out of 10 employers incorporate more
family relationships than those the FMLA actually includes
(e.g., same-sex partners), and more than 70% are unable to track
historical work hours for their exempt employees.2 Without
the knowledge and guidance of an expert, companies that
self-administer the FMLA can find themselves in both legal and
financial trouble. Failure to comply with the FMLA rules can lead
to costly litigation or regulatory penalties and administrative
proceedings. Employers who violate FMLA provisions may
be ordered to pay fines and reinstate terminated employees.
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S I LV E R L I N K
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S I L V E R S T O N E G R O U P. C O M Employees can pursue private action for damages such as lost
wages, employment benefits and other monetary losses. To add
to that, employers who violate FMLA provisions face a longer
statute of limitations for FMLA-related claims.
Legal consequences are not the only motivating factors for
outsourcing FMLA functions. The law creates considerably
more work for HR departments. It is a big challenge for busy
HR departments to stay current on evolving regulations and to
track intermittent employee leave. Furthermore, because HR
departments aren’t familiar with the fine points of the law, they
might be inclined to grant leave too often in an overly cautious
effort to be compliant, which can significantly cost companies
in lost productivity and resources over the long run.
The Growing Need for Outsourcing
Since its inception, the FMLA has been used by workers in the
United States more than 100 million times.3 HR departments
continue to navigate the evolving rules and regulations to remain
compliant, and this effort will only be compounded with the
progression of healthcare reform. As more Americans access
benefits under healthcare reform, employers won’t be able to
afford non-compliance. Outsourcing these duties not only takes
the pressure off HR departments, but it helps organizations
operate within the law and provide fair treatment to their
employees. If your organization is interested in evaluating
available outsourcing options, the Group Benefits Team at
SilverStone Group is ready to help.
1
D
aft, Kevin. “Outsourcing FMLA Administration.” Benefitspro website. October 11, 2013. Accessed
on December 11, 2014 at http://www.benefitspro.com/2013/10/11/outsourcing-fmla-administration
2
“ The Mechanics of Absence Management: Effectively Administering Absences and the FMLA.” Aon
Hewitt. 2011. Accessed on December 11, 2014 at http://www.aon.com/attachments/human-capitalconsulting/AbsenceManagement_2011_Mechanics.pdf
3
W
oo, Nicole. “When Will the U.S. Catch Up to the Rest of the World on Paid Family Leave?” The Hill
website. August 8, 2014. Accessed on December 11, 2014 at http://thehill.com/blogs/pundits-blog/
labor/214492-when-will-the-us-catch-up-to-the-rest-of-the-world-on-paid-family
Contact Jeff Jorth | [email protected]
23
EMPLOYEE BENEFITS
|
If you are an employer, you should be thinking about these four
words: Shared Responsibility Reporting Requirements. They
might be causing you to wonder how you will identify eligible
employees who have been offered your employer-sponsored
healthcare coverage and whether it meets the standard for
minimum essential coverage. Or you might be concerned about
the difference between “hours worked” and “service hours” as
defined by the Internal Revenue Service (IRS). In accordance
with the Affordable Care Act (ACA), it will be the employer’s
responsibility to generate the required forms to report to the IRS
in January 2016. However, these reporting requirements might
be too much to handle with your current staff and workload.
If so, you may want to consider enlisting some help.
GROUP BENEFITS
Time to Report
Shared
Responsibility
Reporting
Requirements
The list of reporting requirements can seem lengthy and complex.
In an effort to remain compliant under the ACA, some employers
are opting to utilize an outside resource to facilitate items such as:
• 9.5% affordability reports
• Automated 30-hour rule calculations
• Service hours modeling for variable-hour / seasonal employees
• Administrator alerts for eligibility status changes
• Integrated status change and enrollment experience
• Online access to all documents for employees / administrators
• Configurable plan rules and auditing tools to ensure compliance
with waiting period restrictions, auto-enrollment and waive
coverage reporting
Finding a dependable resource to manage these tasks can not only
relieve a lot of stress, but it can give employers peace of mind
knowing that they are meeting their reporting obligations.
Consider More Resources to Achieve ACA Requirements
by Robyn Larson, CEBS, HIA
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S I LV E R L I N K
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The list of reporting requirements
can seem lengthy and complex.
Tools of the Trade
In order to effectively meet the reporting requirements, employers
should have access to robust tools that are designed to assist with
reporting requirements. The right tools can turn a complicated
process into one that is understandable and efficient. A good
reporting tool will assist with a number of requirements, such as:
• Employer-Sponsored Health Coverage (W-2 Box 12)
• Section 6055 IRS Return/Individual Mandate Reporting
• Section 6056 IRS Return/Employer Mandate Reporting
• Forms 1094-B/C and/or 1095-B/C
• PCORI Fee
• Transitional Reinsurance Fee
Problem Solved
Keeping track and following through with the various ACA
reporting requirements can be time consuming and stressful.
Investing in some outside assistance can free employers up
to focus on managing and growing their business. That is why
SilverStone Group developed BenefitsQue – an online tool that
can help you decipher the ACA shared responsibility reporting
requirements. For more information on BenefitsQue and how it
can help you meet the upcoming requirements, contact one of our
Group Benefits Consultants.
Contact Robyn Larson | [email protected]
Keep Employees Informed
With employers having so much going on, employee notifications
might get pushed to the back burner. However, it is increasingly
important to keep employees informed as the ACA continues to
unfold. When searching for the right service to assist with your
shared responsibility reporting requirements, it is important to find
one that also provides the following:
• Health Insurance Marketplace Notice
• Summary of Benefits and Coverage (SBC)
• Section 6055 statement of minimum essential coverage
• Section 6056 statement of affordable coverage
• Online portal for variable-hour and seasonal employees
S I L V E R S T O N E G R O U P. C O M 25
EMPLOYEE BENFITS
|
DEFINED BENEFITS
by Denny Monaghan, FSA, EA, MAAA
26
In our 2014 Spring/Summer issue of SilverLink, we announced
the merger of Heintzberger Actuaries (headquartered in Portland,
Oregon) and SilverStone Group (headquartered in Omaha,
Nebraska). The Portland office is currently operating under the
name SilverStone Heintzberger Group and will transition to
SilverStone Group later this year, consistent with our other offices.
This partnership has equipped our Portland office with additional
resources so they can continue to provide expert consulting
services to our clients and be in a position to introduce more
value-added services. These extra resources include additional
qualified actuaries and improved systems, as well as more
specialized and sophisticated administrative services. In addition
to our defined benefit and post-retirement medical plan services,
our Portland office also has access to the other core service areas
of SilverStone Group, including 401(k) plan services, human capital
consulting, executive benefit services, health and welfare plan
consulting and risk management solutions. As we continue to
welcome the Portland Associates to our SilverStone Group family,
we would like to provide our readers with a little more background
and forward-looking information about our new colleagues
operating in the Pacific Northwest, while also highlighting the new
resources available to their clients.
S I LV E R L I N K
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Merger Sought
Continuity of Service
Heintzberger Actuaries and SilverStone Group merged, in part,
because both parties share the philosophy of providing high quality
consulting services while working collaboratively with their clients
to ensure the efficient management of their retirement plans. Ed
Heintzberger, former owner of Heintzberger Actuaries, made the
decision to retire from day-to-day operations of the business. Ed’s
desire to sell the business and SilverStone Group’s desire to expand
to the Pacific Northwest was an ideal starting point from which
the merger could occur. From the onset, this affiliation proved to
be mutually beneficial. In addition to adding the Portland office’s
expertise to SilverStone Group’s actuarial practice, SilverStone
Group, in turn, has been able to share the expertise of several
experienced actuaries and provide access to a variety of resources
cutting across multiple lines of business. These resources include
state-of-the-art actuarial technology and in-depth commentaries
and analysis of federal pension laws and Internal Revenue Service
(IRS)/Department of Labor (DOL) guidance on pension plans.
Access to this type of analysis is of particular value, as it reduces
the amount of time required to understand and correctly implement
the new requirements published by the IRS and/or the DOL.
Aside from the name change to SilverStone Heintzberger Group, our
Portland Associates and the clients they serve have experienced
very few operational changes as a result of the merger. The way in
which Heintzberger Actuaries approached the delivery of actuarial
services to its clients aligned perfectly with SilverStone Group’s
practices, which has made for a remarkably smooth transition.
Other than Ed’s retirement, all of the Associates from Heintzberger
Actuaries remain and continue to work for their clients in the
same capacity as they did prior to the merger. Ed continues to be
available to our team and is an active contributor as he transitions
his consulting services to SilverStone Heintzberger Group. We are
excited about our expanded capabilities in Portland, and we look
forward to providing exceptional service as our business continues
to grow.
S I L V E R S T O N E G R O U P. C O M Contact Denny Monaghan | [email protected]
27
EMPLOYEE BENEFITS
|
People often wonder how long they will live. While this is typically a passing curiosity for
most, it's an actuary's job to answer this question through the use of mortality tables that
are periodically updated with new census data. In October 2014, a special committee of the
Society of Actuaries (the Committee) formally published a new set of tables called the RP-2014
Mortality Table and MP-2014 Mortality Improvement Scale. This new information is the result of
considerable data collection and analysis from 120 pension plans in the United States, covering
10.5 million life years of exposure and more than 220,000 deaths. The new tables represent
private pension plan experience (plans that are subject to the IRS funding rules of the Pension
Protection Act of 2006 [PPA]). However, the tables can benefit more than just private plans. The
Committee believes that plan sponsors and their actuaries should consider the RP-2014 tables
as suitable mortality benchmarks for public pension plans. The tables may also be useful to
value other post-employment benefit (OPEB) plan obligations such as subsidized retiree medical
coverage. This updated information can help plan sponsors structure their post-retirement
benefit plans to thrive now and into the future.
POST- RETIREMENT BENEFITS
How L ong
Will I Live?
The Findings
The Committee found that there have been considerable longevity increases over all sectors
since the last complete set of mortality tables were completed in 2000 – the RP-2000 table
and the Mortality Improvement Scale AA – and therefore, a new set of tables needed to be
issued. For a typical pension plan, liabilities may increase 5% to 10%. Variances will occur
depending on the following factors:
• The census demographics There is greater improvement among females and the older
population.
• The type of plan There will be a much smaller impact on plans whose benefits are
directly measured in a lump sum, such as cash balance plans.
• The table that was previously in use Private pension plans are generally required to
use prescribed IRS tables to determine funding requirements and minimum lump sum
distributions. Alternative tables may be used if they are approved by the IRS. Tables
applied for financial reporting of liabilities are not prescribed, but it is common to use the
same tables as those used for funding requirements. Public pension plans are generally
not required to use a prescribed table for funding, lump sums or financial reporting, but
may apply the same IRS tables as private plans.
Sorting Through the Data
by Renee Nolte, ASA, MAAA
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S I L V E R S T O N E G R O U P. C O M The new data has been organized into tables for each gender where significant differences in
mortality are apparent and are broken down in the following ways:
• Employee Tables (ages 18 through 80)
–– Total
–– Blue Collar/White Collar
–– Bottom Quartile/Top Quartile (based on salary); not previously offered in the RP-2000
• Healthy Retirees and Beneficiaries (ages 50 through 120)
–– Total
–– Blue Collar/White Collar
–– Bottom Quartile/Top Quartile (based on benefit amount)
• Disabled Retiree Table (ages 18 through 120)
29
For completeness, the Committee also developed gender-specific
juvenile tables covering ages 0 through 17.
The Main Change
While the RP-2014 table is static and based on age, the MP-2014
table is a projection scale that reflects future expectations about
continuation of past trends in mortality improvement. The MP-2014
table is generational, meaning there is no annual update needed
since all anticipated benefit improvements are included. It is more
complex than Scale AA, which has been used in partnership
with RP-2000. Scale AA is a one-dimensional scale with a single
perpetual improvement rate applied at each age. Scale MP-2014
is a two-dimensional scale, showing improvement not only at each
age, but also showing variances in improvement based on the
calendar year. This considers the expectation that there is a higher
mortality rate for a 65-year-old today compared to a 65-year-old
10 years or 40 years from now. The Committee’s study revealed
that, historically, baby boomers have a lower level of mortality
improvement than the “silent generation” (those born between
1925 and 1942).
Longevity of a 65-Year-Old
95
92.2
90.1
Age
88.9
86.7
80
86.1
75
84.3
For private pension plans, the mortality tables applied in measuring
liabilities for funding purposes and for calculating minimum lump
sum distributions are prescribed by the IRS. Currently, versions
of the RP-2000 with a Scale AA projection are the basis for these
calculations. A version of the new RP-2014 is expected to be
adopted sometime after 2015. Because the new tables project
increased longevity, funding liability will also increase, and
depending on a plan’s status before the change, this could
lead to:
• An increase in minimum required contributions
• Benefit restrictions
• Required quarterly contributions
• An increase in potential for at-risk status
Male Age 65
Lump sum distribution calculations apply the same mortality
assumptions as the funding liability calculations, except the table
blends the mortality rates together at each age for gender, working
classification and employee/retiree results. Unlike the RP-2000,
the RP-2014 does not include a table that combines the experience
of employees and retirees. The IRS will need to determine the
appropriate table to apply. Once a new table is prescribed, lump
sum distributions will become more expensive.
Pension Benefit Guaranty Corporation
Premiums
70
65
Funding Liability
Lump Sum Distributions
90
85
Looking at a retiree who is age 65 in 2015, one can see that the
chart above shows a longevity increase of more than two years
when applying the new table with generational improvement
compared to the RP-2000 table with a Scale AA projection. Based
on the new table, the longevity of a 65-year-old today compared to
a 65-year-old 40 years from now (in 2055) is expected to increase
by more than three years. Note: This example does not consider
working classification differences or benefit amount differences.
Female Age 65
RP-2014 with MP-2014 - Age 65 in 2055
RP-2014 with MP-2014 - Age 65 in 2015
The Pension Benefit Guaranty Corporation (PBGC) sets assumptions
used for calculating the PBGC unfunded vested benefit. Historically,
the same mortality table as the one used for the funding liability
has been prescribed. Adopting the new table will potentially lead
to an increase in variable rate premiums for single-employer private
pension plans.
RP-2000 with Scale AA - Age 65 in 2015
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Financial Statements
Expected mortality is a key assumption in the measurement of
pension and OBEB obligations for financial statement purposes.
While the mortality table is not prescribed, auditors and actuaries
will evaluate how clients meet the “best estimate” requirement
of the Generally Accepted Accounting Principles (GAAP) and the
International Financial Reporting Standards (IFRS). Plan sponsors
will need to consider the new tables in relation to their own plan
experience, future expectations and all relevant information
available at the measurement date. Adopting the new tables will
generate an increase in the benefit obligation and a decrease in the
funding status. Under GAAP accounting, the change is reflected
in Other Comprehensive Income unless companies have adopted
an immediate recognition in earnings approach. If the amount
added to Accumulated Other Comprehensive Income is greater
than the corridor (10% of the greater portion of the Pension Benefit
Obligation or the assets), the excess is amortized as a component
of Net Periodic Pension Cost. Under IFRS, the increase is reflected
as a measurement adjustment recorded in Other Comprehensive
Income and not amortized in future periods.
The duration of the obligation will increase with the lower mortality
rates. The longer duration may generate a higher discount rate to
partially offset the lower mortality rates. The amortization period
may increase as well since it is also duration driven.
Employers offering subsidized retiree medical plans, especially
those without subsidy caps, could experience significant liability
increases for the plan when indexed medical benefits extend longer
into retirement.
Plan Sponsors – How Should You
Respond?
Plan sponsors might be wondering how to effectively respond
to the new data to ensure their benefit plans continue to be
strategically managed. The following pointers might help plan
sponsors in this effort:
• Consider funding more than the minimum required
contributions now to diffuse the increase when the IRS
prescribes the new tables later.
• Consider offering a window of time where eligible vested
terminated participants may elect a lump sum distribution
of their benefits. There is a strong likelihood that the pension
expense will increase before the increase in the funding
S I L V E R S T O N E G R O U P. C O M requirement and lump sum calculations. If so, lump sum
values will become 5% to 10% less than the accounting
liabilities through at least 2015, thus creating a strategic
settlement opportunity.
• Insurance companies offering annuities have their own set of
mortality tables that already reflect the new lower mortality;
therefore, an annuity pricing advantage does not currently
exist. If the tables are applied in financial reporting, the spread
between the benefit obligation and the annuity premium will
narrow, resulting in a lesser impact to earnings if a settlement
occurs through an annuity purchase. Premiums that were 10%
to 15% above the benefit obligation will now be in the range of
5% to 10% above.
• For financial reporting, an actuary, on behalf of the plan
sponsor, may be able to demonstrate that the new tables are
not appropriate for the population. For example, if the plan
death rate is higher than the new tables, it may make sense
to assume the prior table or to consider adopting the blue
collar table, if the industry is appropriate. Larger plans with
meaningful data would be able to support any evidence of
deviations from the new mortality data.
• The longer duration of the liability and the decrease in the
funded status may compel an adjustment in the investment
strategy and/or asset allocation for plan assets that are set
on a “glide path” that is dependent on these measurements.
Longer Life, Bigger Challenges
With reductions in nicotine use and cardiovascular disease, as
well as advancements in prevention, healthcare technology and
medicine, people are living longer – and we expect that trend to
continue. While this is certainly good news, it has deepened the
challenge for defined benefit plans that must fund the increased
longevity. The new tables reflect a more accurate depiction of the
value of a plan, which should lead to fewer surprises and better
strategic decisions. Plan sponsors should discuss the new mortality
tables and the possible impact on their plans with their actuaries
and auditors.
Information for this article was based on the following sources: 1.) “RP-2014 Mortality Tables Report.”
Society of Actuaries. October 2014, 2.) “Mortality Improvement Scale MP-2014 Report.” Society of
Actuaries. October 2014.
Contact Renee Nolte | [email protected]
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EMPLOYEE BENEFITS
|
Looking to retain, attract and reward key executives and
other select employees? Employers may want to consider
adopting a nonqualified retirement plan.
EXECUTIVE BENEFITS
Nonqualified plans allow for more flexibility than qualified plans
because they are not required to meet most of the Employee
Retirement Income Security Act (ERISA) requirements. They are
also not limited by the tax rules that are imposed on tax-favored or
qualified plans. The trade-off for these benefits is that nonqualified
plans do not receive some of the tax benefits and creditor protection
rights associated with qualified plans. Regardless of this downside,
the limitations of a qualified plan may not allow employers to
accomplish their strategic goals of rewarding and retaining top talent.
for KEY Executives
by Donna Zach, ChFC
There are three types of nonqualified plans employers typically
utilize: Executive Deferred Compensation Plans (EDCPs),
Supplemental Executive Retirement Plans (SERPs) and 162
Bonus Plans. In our Winter 2014 SilverLink edition, we provided
an in-depth review of 162 Bonus Plans with the article, “What’s
the 411? Section 162 Bonus Plans.” Now we’d like to take this
opportunity to explain how EDCPs and SERPs can be used by
employers to reward and retain their key executives.
Executive Deferred Compensation Plan
(EDCP)
As the name implies, EDCPs allow executives to defer compensation.
When executives defer compensation in a 401(k) plan, they are
limited by the IRC Section 402(g)(1). An EDCP enables executives to
defer a much larger percentage of their compensation than allowed
within a 401(k) plan. If an executive wants to defer 20% or 30% of
compensation, an EDCP can be structured to provide this flexibility.
The overall objective of an EDCP is to provide executives with an
additional avenue for retirement savings. Executives can decide how
much to defer and may use salary, bonus or other compensation. An
added benefit of an EDCP is that executives will not pay income
tax (but they will pay Social Security and Medicare taxes) on the
deferral or the earnings until payout. Likewise, the employer does
not receive a tax deduction on the deferral until payout. To illustrate
the tax savings, let’s compare the deferral of compensation into an
EDCP versus a personal investment. Assume an executive is 45 years
old and defers/invests $20,000 per year for seven years, earns 6%
interest and is in the 40% tax bracket. At retirement, the executive
would have an additional $70,592 by deferring into the EDCP. Based
on the previously mentioned assumptions, the following chart shows
the two account balances at retirement age 65. This chart further
illustrates the impact of being able to defer taxes until retirement.
Net Income - Age 65
$250,000
$150,000
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S I L V E R S T O N E G R O U P. C O M $151,169
$100,000
$50,000
0
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$221,762
$200,000
Personal
Investment
Deferred
Compensation
Plan
33
An EDCP can also be utilized as a golden handcuff for retaining
top talent. The plan may be structured to include a company
discretionary contribution with a vesting schedule. The company
typically determines the specific parameters for the contribution
and, assuming the parameters are met, the company makes an
annual discretionary contribution that vests in the future.
Advantages of an EDCP
• An EDCP can be provided to select employees in addition to
an existing 401(k) plan as there are no deferral limits on the
nonqualified plan.
• Elective deferrals can be complemented by an employer match
to mirror a 401(k) plan.
• The employer is free to choose which employees will
be participants without violating any non-discrimination
requirements, as long as the plan is limited to management
and highly compensated employees.
• Deferrals reduce the employee’s current taxable income, and
the full amounts grow tax-deferred until benefits are received.
• Internal Revenue Service (IRS), ERISA and other governmental
requirements (including reporting and disclosure, fiduciary
responsibilities and funding requirements) are reduced
and simplified.
Supplemental Executive Retirement Plan
(SERP)
A SERP is an executive retirement plan in which a company agrees
to provide a supplemental retirement benefit to the executive at
retirement. This promised benefit creates a deferred compensation
liability that the employer will account for annually. The executive
pays Social Security and Medicare taxes on the benefit as it vests.
Income taxes are paid on the benefit when paid to the executive
at retirement.
Unlike an EDCP, the benefits are supported solely by the employer
in a SERP. The plan design options can vary from providing a
specific percentage of final income at retirement or an annual
company contribution, or the plan might target a flat dollar amount
at retirement. The flexibility in plan design makes this an appealing
option for employers.
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Advantages of a SERP
P R I VAT E C L I E N T S E R V I C E S
• The employer is free to choose which employees will
be participants without violating any non-discrimination
requirement as long as the plan is limited to management and
highly compensated employees.
• Almost any vesting schedule can be used, and the plan can be
constructed so employees will forfeit benefits under specific
circumstances such as misconduct, resignation to work for a
competitor or termination of employment before retirement,
thus creating a powerful employee retention device.
|
F A M I LY W E A LT H M A N A G E M E N T
Other Considerations
Although nonqualified plans offer employers a great opportunity to
provide top executives with additional benefits and incentives to
remain with the company, the following points should be carefully
considered before implementing one of these plans:
• Employers must comply with Internal Revenue Code Section
409A (enacted in 2004), which regulates many aspects of
nonqualified plans.
• Because of their pass-through tax structure, S corporations
and partnerships may find nonqualified plans, especially SERPs,
useful for key employees who are not significant shareholders.
• Additional restrictions exist when non-qualified plans are used
in tax-exempt or governmental organizations.
by Jeff Sharp, JD, MBA, CFP®, CPWA®, ChFC, CLU
Strengthen Your Benefits
In today’s competitive job market, nonqualified benefit plans can
give employers a competitive edge when it comes to attracting,
retaining and rewarding key employees. When designed properly,
nonqualified plans can serve as an effective vehicle to please
executives while achieving employer goals. For more information
about EDCPs and SERPs or to learn how nonqualified plans can
help your company, contact the Executive Benefits Team at
SilverStone Group.
Under ERISA, if a nonqualified plan is unfunded and maintained by an employer for the purposes
of providing deferred compensation for a “select group of management of highly compensated
employees,” the plan is exempt from all provisions of ERISA, except for the reporting and disclosure
requirements and ERISA’s administrative and enforcement provisions. The reporting and disclosure
requirements can be satisfied by filing a simple one-time statement about the arrangement with the
Department of Labor (DOL) and providing the plan document upon request.
Contact Donna Zach | [email protected]
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S I L V E R S T O N E G R O U P. C O M 35
Buying term insurance is not the commodity purchase one
might think. There are many outlets for term insurance
including online and toll-free purveyors, but the end result
for buyers differs greatly!
Depending on the need and the objective, purchasers of term
insurance products should carefully evaluate which kind of term
insurance they buy. There are many different kinds of term life
insurance policies and it is important to consider all of the factors
prior to any transaction.
Level-Premium Payment Structure
Most term insurance placed today comes in 10-, 15-, 20- and
30-year level premium arrangements. The objective for the
insurance will determine which duration makes the most sense
for the buyer. For example, if term insurance is purchased to
satisfy terms of a short-term loan, then the shortest level-premium
duration will likely result in the lowest cost. In the case of a need
for life insurance to fund a stock buyback agreement, the levelpremium duration is a function of how long the obligation
to purchase a decedent’s stock continues/ends.
Conversion to Permanent Cash Value Life
Insurance (without proof of good health)
We often see term insurance purchased as an interim step
leading toward the eventual purchase of permanent cash value
life insurance. The term insurance is frequently acquired while the
insured is healthy as a way to lock in his or her insurability. In so
doing, if the health of the insured deteriorates after the purchase,
the insurance company is still contractually obligated (depending
on the term policy provisions) to allow the change from term to
permanent at the same risk class and requires no physical exams
or proof of good health. There are a few scenarios that require
further explanation and evaluation.
• Individual Term to Individual Permanent
Some carriers permit conversion only during the first five years
the policy is in place, even though the level-premium payment
duration extends as long as 20 years. Others permit you to
convert, but only up to a certain age (i.e., 5 years or age 65,
whichever comes first). If the purchaser wants to
36
be able to convert to permanent insurance during the entire
level premium period of the term, carriers typically require that
you pay a slightly higher level-premium so that the policy can
be converted during the entire level-premium period (i.e., all 10,
15, 20 or 30 years).
• Individual Term to Survivorship (Second-to-Die) Permanent
In this case, insurance companies are all over the map. We
see clients use this strategy from time to time as an interim
step toward the eventual purchase of survivorship insurance
needed to finance estate taxes. Term insurance is used
initially to keep cash flow to a minimum until it is later freed
up to be used toward the higher premiums associated with
the survivorship insurance.
A recent case involved a husband and wife who needed $10
million of survivorship death benefit to finance estate taxes.
However, they wanted to first purchase term insurance that
could be converted to survivorship insurance after they sold
an appreciated asset. We surveyed the market and found that
some carriers would permit two individual $5 million term
policies on the husband and wife to be converted to a single
$10 million survivorship contract. Other carriers required $10
million of term on each insured in order to convert to $10 million
of survivorship, which would have raised the cost of the term
insurance in the interim since we would have to double the term
death benefit ($10 million on each rather than $5 million on each).
• Conversion Policy Type and Issue Class
Some term policies can be converted to any permanent policy
offered by the insurance company and available to the public
at the time of conversion (best case). Others allow you to
convert only to a narrow set of policies with less attractive
interest rates, mortality charges and policy expenses (worst
case). Even if you can convert to any permanent policy
available at the time of conversion, some carriers restrict the
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issue class to a Standard risk class (as opposed to Preferred or
Super Preferred that may have been obtained on the original
term insurance acquired).
Carrier Ratings
It is important to evaluate the financial strength of the insurance
company. The saying, “You get what you pay for” can certainly be
true in the insurance industry. Sometimes poorly rated companies
offer the lowest cost in order to attract purchaser dollars. If costs
are equal, we encourage purchasers to select the company with
the higher financial ratings. This is important while the term
insurance is in force, but even more important if the plan is to
eventually convert the term insurance to permanent insurance
with the same insurance company. We believe it is essential to
check with a variety of rating agencies about a potential company,
including A.M. Best, Standard & Poors, Weiss, Fitch and Moody's,
among others.
Medical Underwriting and Risk Class
Individuals looking to purchase term insurance are often blinded
by the touted low cost for the term insurance, only to later find out
there’s only a very small chance they’ll get the advertised cost. It is
not uncommon for TV ads and internet pitches to promote a lowcost term option, but this “deal” typically assumes that every buyer
is a Super Preferred risk, which is simply not the reality.
Obtaining the best risk class partly depends on how an individual’s
medical records and finances are positioned with the insurance
company. Equally important is whether or not the insurance
company is aware that a potential buyer has submitted medical
records to multiple other companies. It is interesting how much
more competitive insurance companies become when they realize
they’re not the only company a buyer is considering. For particularly
larger term insurance purchases, we believe buyers should submit
informally to multiple carriers, get their best tentative offers,
decide which company and product is best and then, and only then,
apply for the coverage. Again, factors beyond cost need
to be considered depending on the overall objectives of the buyer.
Help is Here
Term insurance is not a commodity. Policy provisions differ
significantly. Buyers need to work with an insurance professional
who is experienced in placing term insurance in the context of the
overall planning objectives of the buyer. SilverStone Group is an
independent firm with access to multiple companies. This enables
us to provide buyers with a robust set of offers and products to
consider. If you are in the market for a new policy, contact one of
our advisors to visit about your life insurance needs.
Contact Jeff Sharp | [email protected]
Obtaining the best risk class
partly depends on how an
individual’s medical records
and finances are positioned
with the insurance company.
This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intended to replace the
advice of a qualified attorney, tax advisor or plan provider.
S I L V E R S T O N E G R O U P. C O M 37
P R I VAT E C L I E N T S E R V I C E S
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Planning a major renovation to a home entails much more than blueprints and
PERSONAL LINES
paint colors. The design and construction process involves many components
and tough decisions, and amidst this chaos, homeowners often forget to
consider the potential risks associated with their renovation projects.
Unreliable contractors, worksite injuries, property loss, lawsuits,
family safety and unhappy neighbors are just a few of the many
headaches a homeowner can encounter when revitalizing
their home. However, these “headaches” can become very
serious problems if homeowners fail to perform the proper
due diligence prior to the start of any work. If renovation
plans aren’t discussed with an insurance agent, there could be
significant gaps or limited coverage in the homeowners policy,
and what started out as an exciting project for the home could
quickly turn into an expensive nightmare.
Did You Know?
Unreliable contractors will often
HOME
by Pam McCawley, AAI, CPIA, AINS
earned a bad reputation and simply
open another under a new name.
RENOVATION
38
close down a business that has
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What Are Your Plans?
One of the biggest mistakes a homeowner can make is
selecting an inferior general contractor. All remodels are not the
same, and neither are contractors and their areas of expertise.
When interviewing contractors, their industry knowledge
should match the job.
S I L V E R S T O N E G R O U P. C O M Renovation projects can be broken down into the following
five categories:
• New, ground-up construction
• Remodel – modifying interior finishes/replacement of
interior fixtures, cabinets, flooring
• Remodel of Minor Structures – modifying interior finishes
and minor changes to exterior (doors, windows/exterior
painting), including all non-structural changes (HVAC,
plumbing, electrical)
• Restoration/Major Restructuring – repairing/replacing/
removing load-bearing walls, adding additional stories,
adding staircases or elevators
• New Addition to Existing Building – addition of space
(excluding additional stories) with remodel/renovation
for tie-in purposes only and interior remodel
After properly identifying the renovation project, homeowners
can then begin the process of finding contractors who
specialize in that particular type of construction.
Choosing a Home Renovation Contractor
Selecting a home renovation contractor should never be as
simple as a quick Internet search. Homeowners should adopt
a rigorous process to select a contractor. A poor choice could
result in faulty workmanship, cost overruns, job abandonment,
unpaid subcontractors, work injuries, theft, home destruction
and more.
39
The following checklist can help homeowners find and vet
potential candidates:
Finding Contractors
o Ask friends or neighbors who have had similar work done
for recommendations on contractors to use.
o Ask advisors – real estate agents, financial planners,
accountants, attorneys and insurance agents – about
contractors who have done quality work for other clients.
o If a reputable architect has already been retained, ask for
contractor recommendations.
o Consider using the growing list of web-based services that
feature client reviews of local contractors.
Do Your Homework!
If a contractor lacks the proper
insurance and a worker gets injured
during a home renovation project,
the homeowner may be held legally
responsible for the injured worker’s
medical bills! It is important for
homeowners to know if a potential
contractor is licensed and has the
appropriate insurance and permits
to avoid costly and unexpected bills.
40
Vetting Contractors
o Check with the Better Business Bureau and state licensing
agencies to get basic information about the contractor, such
as the length of time in business and complaint track record.
o Ask banks and trade vendors to verify the contractor’s line of
credit and/or working capital to pay for equipment, supplies
and labor.
o Talk to past clients about their experiences with the contractor
and, when practical, visit their homes to inspect the work.
o Ask the contractor who the best subcontractors are, then call
the subcontractors and ask them who the best contractors are.
o Consider the advantages and disadvantages of competitively
bid, fixed-price arrangements versus cost-plus arrangements.
The latter can reveal potential problems sooner and improve
cost-versus-quality decision making.
o Meet the actual employees who will be on your job and ask
how long they have been with the construction company.
o Complete background screenings on the contractor,
subcontractors and their crews before making any
final decisions.
o Make sure the contract outlines the responsibilities of all
parties and the scope of their work, in addition to the materials
that will be used and their respective costs. Consider having
someone familiar with construction oversee the budget in
addition to the contractor or project superintendent.
Finding a reputable contractor who can perform quality work is
not only important to the integrity of a person’s home, but it also
helps to avoid the potential insurance and/or legal problems that
can arise when questionable work is performed by an uninsured,
unlicensed contractor.
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DANGEROUS BEHAVIORS. Homeowners may be tempted to supervise
work – a big mistake. By putting the workers under their direction, they inadvertently create a
line of responsibility for accidents that may occur and put themselves at great risk. Homeowners
should stick to setting goals for the project and signing off on acceptable work.
HOMEOWNERS may also be tempted to help out by giving workers access to
equipment – a ladder, a rope, an axe. By doing so, they expose themselves to lawsuits claiming
faulty equipment. Contractors and workers should always supply everything they need to
complete the job.
What’s Next?
Once a reliable contractor has been hired, it’s time for homeowners
to meet with their insurance agent to discuss the specifics of the
renovation. The homeowners policy may need to be adjusted to
cover any supplies that are being stored within the home during the
project, and, if needed, extended liability coverage can be added
during the renovation period. Homeowners should keep their agent
informed about the progress of the renovation in the event that
plans change and a different level of coverage is needed.
When it’s finally time to give the renovation the green light,
worksite safety for the family, crew and home should be a top
concern. During construction, homeowners should keep valuables
out of sight and preferably offsite. They should also make sure that
all flammable liquids and rags in the construction area are stored
in approved containers and that ABC-rated fire extinguishers are
strategically placed throughout the home. If available, security
systems should also be activated – even if the home is vacant
during the renovation.
S I L V E R S T O N E G R O U P. C O M Upon completion of the renovation, homeowners should contact
their agent once again to appropriately adjust coverage to reflect
the changes to the home. For a major renovation, the insurance
carrier might send an appraiser to re-evaluate the cost to rebuild
the home based on the alterations.
Worth the Work
The “to do” list prior to starting a renovation can be intimidating,
let alone the project itself. But this shouldn’t discourage people
from adding value to their homes. There are many dependable
contractors with proven track records who can make this
experience a positive one. If you are considering a home renovation,
contact your insurance agent for advice. They can provide you with
tips and guidance while making sure that your home – one of your
most valued possessions – is protected.
Contact Pam McCawley | [email protected]
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C O N S U LT I N G S E R V I C E S
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H U M A N C A P I TA L
People Business
We’re in the
by Merle Riepe, PhD & Adrian Bento
42
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S I L V E R S T O N E G R O U P. C O M 43
In the sports and entertainment industry, there is a tremendous financial impact as a
result of hiring top talent like LeBron James or George Clooney. Although the same
significant financial impact also occurs in the corporate world, recruiting leaders have
almost universally failed to focus on generating that revenue impact.
~ Dr. John Sullivan, Human Resources Thought-Leader & Advisor
Even though the above vignette focuses on the undoubted benefits
of hiring the right people, that action, in itself, represents only
one small facet of the complexity of maximizing the contribution
employees make to a business. The coach who hired LeBron James
or the director who procured George Clooney’s services will not
simply rely on their innate abilities. They will seek to provide the
resources, both soft and hard, which will increase these individual’s
inherent talents. We advise business leaders to approach talent
management with a similar strategy.
Externally, the implications for a business can be devastating.
Poor talent can lead to client dissatisfaction, reputational risk
and decreased sales. Furthermore, recent evidence generated by
SilverStone Group links poor hires to a higher frequency of workers’
compensation claims, as well as a greater severity of claims (i.e.,
a larger dollar amount per incident) compared to top performers.
Despite the multitude of academic and popular literature touting
the competitive advantages of hiring top performers, most
businesses have not changed their hiring methods to better
identify these desirable candidates. Companies that monitor the
performance differential between the top and average hires have
found at least a double-digit disparity in productivity, with some as
large as a triple-digit performance gap.1
The vast majority of employers, particularly start-ups, downplay
the importance of their first hires. In our conversations with
entrepreneurs, one common theme appears from their critiques
of their first years in business: they would have waited to ensure
they were making a “great” hire instead of just a “good” hire.
As companies grow, high performers tend to hire other high
performers. Conversely, average performers tend to hire lower
performers (or, at best, average performers) because they often
feel threatened by high performers. Given pressure and time, this
talent management approach ultimately fails and hampers the
growth of the business.
As the economy strengthens and the prospective employee pool
dries up, businesses will be tempted to default to hiring “warm
bodies” to fill vacancies. This bad habit leads to significant risks
beyond reduced corporate performance. Companies that do not
execute proper hiring practices often experience higher turnover,
active disengagement and gaps in leadership due to a weakened
talent pipeline. In some cases, poor hiring practices lead to the
careless use of technology and related cyber breaches and/or
misappropriation of property.
Pre-employment tests can be used to evaluate potential hires.
There are many tests available – from the rudimentary, off-theshelf products, to more sophisticated, customized products.
Sadly, employers often ignore the contributions these tools
add and fail to use them, or they opt for the cheapest test and
ignore the sage old warning, “buyer beware.” Our experience,
both internally and externally, has shown that a robust preemployment test can significantly enhance the results of the
employee selection process.
Good Hires Make for Good Business
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Motivation for Success
While hiring top performers can increase company performance,
there is still a need to ensure employees are motivated and stay at
the top of their game. Studies have found a dramatic divergence
between the performance levels of individuals who are deemed
engaged and those who are considered unengaged, not to mention
the exponential drain caused by those who are actively disengaged.
If the performance gap between the various engagement levels
of employees is not enough to raise concerns, it is important to
also consider that disengaged employees contribute to increased
safety problems, higher turnover, greater absenteeism and a higher
number of defective customer products. All of these things add
unnecessary constraints and distractions that detract from the
smooth and profitable running of a business.
Unfortunately, very few businesses are able to determine the
respective levels of engagement or the percentage of employees
who can be grouped into each bracket. There are, however, a
number of methods available that can help a business measure
their employees’ overall disposition toward the organization. As
with the pre-employment screening tools that were mentioned
above, it is essential to use the services of a reputable provider in
order to obtain an accurate measurement of employee engagement
and, more importantly, know what to do with the recommendations
provided by employees.
Notwithstanding our opening comments on the need to hire top
performers, it is unlikely that a business will have the opportunity
to completely replace all their “B” players, at least in the shortterm. And while the following comments are most pertinent to
the aforementioned “B” players, they are also highly relevant
to the top performers. That is, the need to provide the resources
and the environment that allows all individuals to maximize their
full potential.
One of the common distinctions among the majority of long-term,
flourishing businesses is their employees’ recognition that they
work in an environment that allows them to grow and succeed.
These environments allow “B” players to work on skills and gain
knowledge that will enhance their contributions to the business
and bind them to the organization over the long-term.
S I L V E R S T O N E G R O U P. C O M Making good hiring decisions
and developing talent both
require commitment from
leadership and a human
resources team with the
knowledge, experience and
tools to achieve these goals.
Hard Work Can Pay Off
Making good hiring decisions and developing talent both require
commitment from leadership and a human resources team with
the knowledge, experience and tools to achieve these goals.
Many managers of successful organizations have reached the
conclusion that their employees are their best asset and will
ultimately determine their level of success. The concepts presented
above focus on increasing employee productivity; however, as a
significant by-product, they also have the added benefit of serving
as risk management tools. The combined impact of increased
productivity and reduced risk can be interpreted as bringing a
significant enhancement to the overall performance of a business
organization. For more information about employee assessment
tools or engagement strategies, contact SilverStone Group’s
Human Capital Consulting Team.
1
S ullivan, Dr. John. “Show Me the Money – the Top 10 Revenue Impacts of a Great Hiring Process”
July 30, 2012. Accessed on January 7, 2015 at http://drjohnsullivan.com/s6-articles/show-me-themoney-the-top-10-revenue-impacts-of-a-great-hiring-process/
Contact Merle Riepe | [email protected] or
Adrian Bento | [email protected] or
visit www.engagementforward.com
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INTERNAL HAPPENINGS
|
PEOPLE & COMMUNIT Y
SilverStone Group
Standing Out
From the Rest
CARA KIRSCH
Recent Recognition
Under the guidance of the third generation of the Nelson family,
SilverStone Group has created a team of over 200 highly trained
professionals with backgrounds in law, actuarial science, insurance
underwriting, accounting, financial services and human resource
consulting, just to name a few. SilverStone Group is pleased to
announce a Firm award and a new hire.
“In Everything We Do,
Our People Make the Difference.”
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GROUP BENEFITS
Cara Kirsch Joins Our Group
Benefits Division
SilverStone Group was recognized as the 2014 Champion of
Children and Community at Children’s Square U.S.A.’s annual
awards banquet. The award honored SilverStone Group for its
support of community involvement and its concern for children
and families. SilverStone Group’s culture encourages Associates
to impact the lives of others and make a difference in the world
by sharing their time, talent and resources where they are
needed most.
SilverStone Group is pleased to announce the addition of
Cara Kirsch as Vice President in the Group Health and Welfare
division. Cara brings 16 years of expertise to her new role
at SilverStone Group, having previously worked in sales and
account management, business development, client relationship
development and project management. Cara will focus on
building relationships with clients and prospects, as well as new
business development.
Children’s Square U.S.A. has been near and dear to SilverStone
Group from the moment founder, H.H. “Red” Nelson, first learned
of the organization and became a regular volunteer.
Cara previously served as Director of Large and National Account
Sales for Blue Cross Blue Shield of Nebraska.
Since 1983, the Jason Awards are given annually to recognize
individuals, couples, organizations and businesses that exemplify
the mission of Children’s Square U.S.A. and demonstrate the
qualities and characteristics they believe young people need most
to help them succeed. Seventy awards have been presented
since the program’s inception.
S I LV E R L I N K
VICE PRESIDENT
SilverStone Group Honored with
Jason Award
– J O H N P. N E L S O N
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S I L V E R S T O N E G R O U P. C O M “Cara’s past experience with two of the largest insurance carriers
in our market enables her to bring important industry knowledge
to our current and future clients,” explained Grant Matthies,
SilverStone Group Principal. “We are very excited to have Cara
as part of the SilverStone Group team.”
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INTERNAL HAPPENINGS
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PEOPLE & COMMUNIT Y
SilverStone Group
Birdies 4 Charity
with Roberto Castro
Roberto Castro Plays for Iowa &
Nebraska Charities
SilverStone Group and Roberto and Katie Castro have joined forces
again to benefit three regional philanthropies: Big Brothers Big
Sisters of the Midlands, Boys & Girls Clubs of the Midlands and
TeamMates. Last year, the partnership raised over $32,000 for
Camp Twin Lakes.
SilverStone Group has been sponsoring Mr. Castro, the former
Georgia Tech All-American, since he earned his PGA Tour card.
For every birdie and eagle that Castro makes during the 2015
season on the PGA Tour, the company will donate $100 and $200,
respectively. The charities will divide the proceeds at the end of
the season. Birdies 4 Charity will be keeping a running total at
www.birdies4charity.com and you can follow the action at
@Birdies4Kids on Twitter and “liking” Birdies 4 Charity on Facebook.
Birdies 4 Charity
@Birdies4Kids
www.birdies4charity.com
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Big Brothers Big Sisters of the Midlands
TeamMates
Changing perspectives. Changing lives. For more than 55 years, Big
Brothers Big Sisters of the Midlands has operated under the belief
that inherent in every child is the ability to succeed and thrive in
life. As part of the nation’s largest donor and volunteer supported
mentoring network, Big Brothers Big Sisters of the Midlands makes
meaningful, monitored matches between adult volunteers (“Bigs”)
and children (“Littles”), ages 7 through 18, in the Omaha/Council
Bluffs community. We develop positive relationships that have a
direct and lasting effect on the lives of young people. Visit
www.bbbs.org for more information.
Tom and Nancy Osborne founded the TeamMates Mentoring
Program in 1991 in an effort to provide support and encouragement
to school-age youth. The goal of the program is to see youth
graduate from high school and pursue post-secondary education.
To reach this goal, youth meet one hour per week with a caring
adult who serves as a mentor. Mentors are volunteers from the
community who have dedicated themselves to making a difference
in the life of a young person. Mentors give youth a sense of hope,
purpose and vision. The TeamMates Mentoring Program currently
provides a mentor for over 7,000 youth across Nebraska and Iowa.
For more information, visit www.teammates.org
Boys & Girls Clubs of the Midlands
Boys & Girls Clubs of the Midlands provides programs that create
happy and healthy children today, while building a foundation of
success for tomorrow – impact for a better future. This begins
with the imperative to provide a safe environment that keeps
kids engaged, active and happy in the hours after school, during
vacation periods and throughout the summer months. Research
shows that during periods of idleness and boredom, kids are
vulnerable to peer pressure, violence and other risky activities.
The risks are even higher for children from disadvantaged
circumstances. BGCM minimizes those risks by engaging young
people in activities with positive adult role models and peers,
enabling them to learn powerful life skills. Visit www.bgca.org
for additional information.
S I L V E R S T O N E G R O U P. C O M 49
RISK MANAGEMENT
S I LV E R S T O N E G R O U P
EMPLOYEE BENEFITS
Bob Lembke, Jill Aldredge & Debi Dodson
Brett Sesker, Tom Von Riesen, Brad Rueb,
Tony Sorrentino, Barb Hoffman, Kevin
Novak & Gordon Keator
Shelli Hulsing
Just a quick thank you for spending time with our group last
Thursday to review important considerations for our project's
insurance coverage. The group had some good input and
questions and this has stimulated more conversation internally
over the past few days.
Thanks again. As always, your partnership in our success is
greatly appreciated.
I want to take some time and share with you our experience
with business partners we work with from SilverStone Group.
Before I do that, I would like to say that I did share with some
of my team members that I was going to do this and they
wanted to echo what I am sharing with you.
Thank you for all your work during open enrollment. Karen is
knocking it out of the park working on this stuff and I know
a lot of it is due to your help as she navigates her first year.
I just wanted you to know that I am aware of how much time
you are spending helping us and that I appreciate it a great deal.
First of all, I want to tell you about the excellent customer
service we receive from Brett Sesker and his team (Brad Rueb,
Tony Sorrentino and Barb Hoffman). Brett is always available to
help walk us through everything from renewals and premium
modeling to possible plan exceptions. I can call or e-mail him
at about any hour of the day and he will always get back to
me with an answer or a time he will be available to discuss
my issue. I always find it hard to believe his team is able to offer
everyone the same level of service we receive to all their clients,
but I am sure they find a way. They are a great team to work
with and a true business partner!
EMPLOYEE BENEFITS
PERSONAL LINES
Tanya Mulder
Pam McCawley
One of our company benefits is the Allstate Cancer policy, which
I never thought I would have to use, but recently did. I asked for
Tanya's help, as she has always assisted me with my accident
claims, and once again she was there for me. She has been one
of the most helpful, most courteous and personable people I
have had the pleasure to work with. She doesn’t have to ask
how I am doing or send her best that my surgery goes well
and my recovery quick, but she did. She goes that extra mile to
show she cares and I’m not just another policy holder. She even
followed up on my recent claim when I had not heard anything
and got the matter resolved the next day. Tanya is truly amazing
and a great asset to your company.
Pam, I wanted to let you know how much I appreciate our
friendship and business partnership with you. In April of 2011,
I contacted you about possibly switching my insurance coverage
to SilverStone Group. We had been with another agency since
1986, the year we got married. I can honestly say, I didn’t have
much contact or confidence with them. I never felt they were
looking out for my best interest.
M A R K E T I N G & C O M M U N I C AT I O N S
Carrie Kucirek
I wanted to comment on the great job Carrie did for us on
really short notice for a PowerPoint presentation for a client
last week!! She saved us!
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When I contacted you, I distinctly remember you telling me that
if I was looking for the cheapest price, I probably wasn’t going
to find it with SilverStone Group, because you weren’t in the
business of selling just “any policy,” but would give me an honest
evaluation of what we “needed” for insurance coverage and then
we would decide if we could afford it. Yes, our premiums were
higher, but at the end of the day we’re thankful we now have the
coverage we “NEEDED.” Thank you!!!!
I also wanted to tell you about the work we did this year with
Tom Von Riesen and his team (Kevin Novak and Gordon Keator).
Early in 2014 I questioned the makeup of our Executive Benefit
Plan. I wanted to really analyze the three components we offer
and ask the question, "Is it attracting and retaining key talent?"
Tom and his team helped us analyze what we are offering, in
many different ways, showed us a competitive alternative and
helped us really discover the vision and mission of our Executive
Benefit Plan. He is now helping communicate this vision and
why this is such an important part of the executive’s benefit and
retirement package during our enrollment presentations that
start tomorrow. We did a walkthrough this morning and we are
really looking forward to kicking these off. Tom and his team did
a lot of work on this and I am sure our executives will appreciate
the message.
As you are very aware of our son’s recent accident situation,
it is safe to say that by increasing our liability umbrella from
a $1 million to $5 million limit, it has given us true “peace
of mind.” Unfortunately, accidents do happen.
We are a company built on strong relationships with our clients
and I can see from working with Brett and Tom’s team that the
SilverStone Group also sees this as a very important key value
to being successful!
Pam, thank you again so much for your service, expertise and
guidance in providing us with the policy we needed.
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S I L V E R S T O N E G R O U P. C O M RISK MANAGEMENT
Megan Ross & Jenny McLaughlin
Please know what excellent service I have received from
SilverStone Group, in particular Megan Ross and Jenny
McLaughlin. It is not often someone does what they say
they are going to do and get back to you in a timely manner.
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INTERNAL HAPPENINGS
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WELLNESS ACTIVITIES GROUP
SilverStone Group’s
WAG
Practices What We Preach
Meet Our 2015 Wellness Activities Group (WAG) Committee
SilverFit 2014 Wellness Report
After one full year of WAG working with Layered Health on our
SilverFit program, we have some exciting numbers to report! One
of the things that really stood out was the constant trend toward
improvement throughout the entire year. With every month that
went by, more individuals decided to commit to making a change
and the results showed. WAG has enjoyed watching so many
people achieve success. There's always more work to do, but
the overall performance across the group in 2014 is something
everyone can be proud of.
MOST ACTIVE DAY
OF THE WORK WEEK
FRIDAY
7,161 STEPS
182 PARTICIPANTS
That‘s circling around Earth 10 times!
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Left to Right, Standing: Adrienne Geer (Personal Lines), Jackie Schulte (Information Technology), Mark Matthes (Corporate
Services), Michelle Miller (Marketing & Communications), Ashley Thomalla (Human Capital Consulting) & Jessie Odorisio
(Qualified Plan Investments).
S I LV E R L I N K
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62 Participants Lost Weight
29 Participants Lost 5lbs or More
Left to Right, Seated: Lyndsay Schaben (Real Estate Industry), Angela Lefler (In-Home Care Industry), Annamae Lindsley (Personal
Lines), Jana Flaxbeard (Small Group Benefits) & Lindsay Hansen (Executive Benefits).
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S I L V E R S T O N E G R O U P. C O M 29
58 Participants Reduced BMI
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Where on earth
have you taken
your SilverStone
Group hat?
Don't have a hat?
Visit with your Account Manager.
To see where our hats have been,
visit our website at
www.silverstonegroup.com/about-us/
silverstone-group-hats.html
Associate Contest Winning Photo
by Julie Schram
Colosseum Amphitheatre in Rome, Italy
Visit our website for
additional photos of this trip!
When you’re out traveling the land,
keep your SSGI cap in hand.
From the vast mountain peaks
to the busy urban streets,
Snap a photo of yourself at a famous site,
and our Associates you will excite.
Send your snapshots by e-mail
and the best photos will prevail;
Remember to show our logo
or else the photo is a no-go.
We’ll post the best pictures online,
so let your creativity shine!
Please submit photos to
[email protected]
ASSOCIATE CONTEST
From the desert to Italy, our Associates
are taking their #BOOM hats with them!
Mary Hinman
Scottsale, AZ
SilverLink Committee
Linda Askew
Virginia Collins
Barb Dale
Bill Fox
Michelle Miller | Design &
Layout
Lizanne Stene
Dana Votava
S I L V E R S T O N E G R O U P. C O M o
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S I LV E R L I N K
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Editorial Board
o
o
o
Rachel Bussey | Lead Editor
Lauren Fleharty
Emily Hansen
Carrie Kucirek
Kelly McGough
Breanna Warren
Securities offered through M Holdings Securities, Inc., a Registered
Broker/Dealer, Member FINRA/SIPC. Investment advisory services
offered through SilverStone Asset Management. SilverStone Asset
Management and SilverStone Group are independently owned
and are not under common ownership with M Holdings Securities,
Inc. This material is not intended to present an opinion on legal
or tax matters. Please consult with your attorney or tax advisor,
as applicable.
The SilverLink is published by SilverStone Group Incorporated.
©Copyright 2015, All Rights Reserved
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EST. 1945