W I N T E R 2 0 15 RISK MANAGEMENT | EMPLOYEE BENEFITS | P R I VAT E C L I E N T SERVICES | C O N S U LT I N G SERVICES Wisdom at Work. 22 EMPLOYEE BENEFITS RISK MANAGEMENT 6 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 8 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 24 Expansion to the Pacific Northwest Defined Benefits Division 26 10 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 38 46 48 Wellness Activities Group Practices What We Preach 52 SilverStone Group Hat Contest People & Community 2 S I LV E R L I N K | W IN T ER 2015 S I L V E R S T O N E G R O U P. C O M 54 3 SPOTLIGHT | 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. S I LV E R L I N K | W IN T ER 2015 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 4 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 5 RISK MANAGEMENT | 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 6 S I LV E R L I N K | W IN T ER 2015 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 | 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] 8 S I LV E R L I N K | W IN T ER 2015 S I L V E R S T O N E G R O U P. C O M 9 RISK MANAGEMENT | 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 10 S I LV E R L I N K | W IN T ER 2015 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 11 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 ` 12 | S I LV E R L I N K | W IN T ER 2015 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 13 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. 14 S I LV E R L I N K | W IN T ER 2015 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. 15 • 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. 16 • 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 | W IN T ER 2015 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 | W IN T ER 2015 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 | W IN T ER 2015 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. 22 S I LV E R L I N K | W IN T ER 2015 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 24 S I LV E R L I N K | W IN T ER 2015 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 | W IN T ER 2015 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 28 S I LV E R L I N K | W IN T ER 2015 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 30 S I LV E R L I N K | W IN T ER 2015 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] 31 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 S I LV E R L I N K | W IN T ER 2015 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 32 $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. 34 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] S I LV E R L I N K | W IN T ER 2015 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 S I LV E R L I N K | W IN T ER 2015 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 | 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 S I LV E R L I N K | W IN T ER 2015 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. S I LV E R L I N K | W IN T ER 2015 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] 41 C O N S U LT I N G S E R V I C E S | H U M A N C A P I TA L People Business We’re in the by Merle Riepe, PhD & Adrian Bento 42 S I LV E R L I N K | W IN T ER 2015 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 44 S I LV E R L I N K | W IN T ER 2015 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 45 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.” | W IN T ER 2015 | 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 46 | 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.” 47 INTERNAL HAPPENINGS | 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 48 S I LV E R L I N K | W IN T ER 2015 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! 50 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. S I LV E R L I N K | W IN T ER 2015 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. 51 INTERNAL HAPPENINGS | 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! 58 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 | W IN T ER 2015 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). 52 62 S I L V E R S T O N E G R O U P. C O M 29 58 Participants Reduced BMI 53 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 o o o o o o o o o 54 S I LV E R L I N K | W IN T ER 2015 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 55 EST. 1945
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