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Monthly Archives

August 2013

IS THERE AN ASO IN YOUR COMPANY’S BENEFIT FUTURE?

By Employment Resources

More and more employers are using Administrative Services Only (ASO) plans for such health benefit as Dental Insurance.

Under an ASO, the employer self-insures the benefits it pays, but uses an outside firm (such as an insurance company or third-party administrator) to process claims and pay providers, based on a fee per person. This approach reduces costs significantly by eliminating the risk charge and premium taxes associated with fully insured benefits.

What’s more, an ASO offers more flexibility than conventional dental plans; you can customize your plan, because it’s a self-insured contract outside the jurisdiction of state insurance regulators.

The downside: unlike Health insurance, which has lifetime maximums, dental plans are limited to an annual maximum payment, usually $1,000. In the first few years that a small business or group offers Dental insurance, claim payments are usually high before they settle down to the point that few group members will hit the maximum. This is the time to look into an ASO.

Many insurance companies will write ASOs only for businesses with 100 or more workers However, our agency’s Employee Benefits specialist shave developed relationships with carriers that will offer coverage for ASOs for groups as small as 25 members. If you have at least 25 employees in your Dental insurance plan and have been insured for three to five years, you should be a perfect candidate for an ASO.

For more information, please feel free to get in touch with us at any time.

DOMA RULING COMPLICATES BENEFITS ADMINISTRATION

By Employment Resources

The recent Supreme Court decision (Windsor v. U.S.) legalizing more than 1,000 federal spousal benefits for same-sex couples will have a major impact on the administration of pensions and health plans for employers throughout the nation.

For example, the high court’s ruling overturning the benefits provisions of the Defense of Marriage Act (DOMA) means that surviving same-sex spouses under a defined-benefits retirement plan will now be entitled to receive survivor annuity payments. The decision’s expanded definition of “marriage” will require companies that offer self-funded health benefits for married spouses to extend this coverage to same-sex couples.

The sheer number of benefits under DOMA, together with variations among laws and regulations on the state level – especially in the 38 states that don’t recognize same-sex marriage – will make implementing the Windsor decision a challenge for businesses that offer spousal benefits to their workers.

To deal with this changing situation, we’d recommend that you:

  1. Have your attorney(s) review the benefits that you’re providing to employees’ spouses for compliance with the new requirements; ask for guidance from federal and state regulators.
  2. Implement the administration of new same-sex benefits (for example, amending your payroll procedures to update the federal income tax treatment of qualified benefits programs for spouses) as soon as possible – certainly by the end of this calendar year or the plan year.
  3. Provide complete documentation of the revisions to your plans.
  4. Before you communicate these changes to your employees, do your homework and be prepared to answer their questions.

As Employee Benefits specialists, we can help guide you through this process – just give us a call.

POLLUTION LIABILITY: THE CPL SOLUTION

By Construction Insurance Bulletin

Air, water, and soil pollution pose a serious financial threat for contractors. One small misstep can require thousands – or even millions – to clean up.

Consider these scenarios:

  • Remodeling a school kicks up dust.
  • Using construction materials generates fumes that pollute the air.
  • Hitting an underground storage tank leads to the release of liquid pollutants.
  • Spraying to remove a bees’ nest from a work area releases insecticides.
  • Tying into a sewer line improperly causes sewage to back up.

Your Comprehensive General Liability (CGL) policy provides severely limited protection against these types of pollution claims. Not to worry! Contractors Pollution Liability (CPL) insurance can protect you. (These policies are sometimes written together with Contractors Professional Liability coverage – see the previous article).

CPL covers Bodily Injury and Property Damage – whether by settlement or verdict – as well as the expenses of investigating, defending, or settling claims. Most policies also cover the costs of removing or neutralizing pollutants and restoring the damaged property.

CPL policies usually include a “hammer clause” that works like this: if the contractor chooses to fight a claim, rather than settle it, the insurance company’s liability for damages and claims expenses is limited to what it would have had to pay if the contractor had approved the settlement. As you can imagine, most contractors choose to settle when their insurer recommends this approach.

As with Contractors Professional Liability coverage, CPL policies are usually written on a case-by-case basis, with the size of the policy depending on your situation (for example coverage might be worldwide or limited to the U.S). Our agency would be happy to work with you, and the quality insurance companies we represent, to tailor a program suited for your needs. Feel free to get in touch with us at any time.

DEMAND FOR CONTRACTORS PROFESSIONAL LIABILITY RISES

By Construction Insurance Bulletin

New approaches to building projects, as well as new techniques, are leading to increased demand for Professional Liability insurance for contractors.

A few years ago, people would shake their heads at the idea of this coverage, asking how contractors could be held liable for professional risk when they don’t provide professional services.

However, there has been a blurring of the once-sharp lines between contractors and architects and designers, as more and more contractors are being drawn into the design process. Under the traditional “design-bid-build” method, a project would be designed, bids put out, and the project built. However, the spread of the “design-build” concept – which decreases the amount of time, and the cost, of the project involved – has meant that medium sized and large contractors often take the design responsibilities in-house, and even subcontract them to design firms.

These contractors’ biggest exposure is for claims filed against them for project delays and cost overruns. However, traditional General Liability insurance offers coverage only for Bodily Injury and Property Damage, and does not cover financial or economic losses. Contractors Professional Liability insurance fills this gap.

Because these policies are relatively recent, only a limited number of insurance companies offer them. These companies haven’t paid enough claims for underwriters to establish the underwriting history and set standard rates – which means that policies are usually negotiated on a case-by-case basis. The amount of insurance can be up to $50 million; if a contractor needs more capacity, coverage can be added through excess layers.

If your firm is (or might be) taking on project design responsibilities, a comprehensive Contractors Professional Liability policy can help protect your pocketbook – and provide peace of mind. To learn more, just give us a call.

RESIDENTIAL HOME LEAK CLAIMS FLOODING COURTS.

By Construction Insurance Bulletin

In the residential-construction industry, plaintiffs’ attorneys keep coming up with new creative ideas for class-action lawsuits – a shift from litigation by individual homeowners to more inclusive claims, such as the Chinese drywall class-action suit settled last year for $80 million.

More and more of these Construction Defect claims by developers and builders, often filed in plaintiff-friendly jurisdictions such as Southern California, allege potential water damage from faulty pipe fittings and minor leakages in homes. For example, Karen Rice, vice president of construction claims at XL Group North America’s Los Angeles office, says that although fewer homes have been built in this region during the past several years, XL hasn’t seen a reduction in residential water leak litigation so far. She adds that plaintiffs are filing leakage suits within an average of three to five years, rather than six or seven years, “probably because of the [ailing] economy.”

According to Rice, “these are pinhole, minute leaks, causing some water damage; there really isn’t any water damage that we can tell.” Thomas Varney, risk-consulting manager in the Americas for Allianz, points out that such leaks often occur because a worker failed to tighten, cap, or complete a connection to the plumbing or sprinkler system properly – often in an area that’s not visible, or on a higher floor that might have a significant amount of water.

The best way to help protect your business against these types of claims is to set, and enforce, comprehensive and effective safety practices, guidelines, and criteria in the workplace.

Our Construction insurance specialists would be happy to review your safety program. Feel free to get in touch with us at any time.

CONSTRUCTION SAFETY: THE POWER OF ‘THANKS’

By Construction Insurance Bulletin

In the construction world, we’re often quick to reprimand our workers about safety violations. Such phrases as “Hey, put your helmet on!”, “Seriously, do you really think this is a good idea?” and “Get off that ladder now!” come to mind. All too seldom, do we say, “Thanks. You’re doing a great job in keeping the site safe!”

As you walk your work sites or wander the shop, it’s important to search out potential hazards and people who are not following what’s expected. However, don’t forget to recognize and acknowledge the workers who are doing their jobs right. When you recognize the power of thanking those who do well, their peers pay attention. That’s the reason why merit badges work.

Whether you’re a supervisor, foreman, or project manager, your job is to encourage safe behavior by motivating – not threatening – your workers as often as possible. Showing gratitude goes a long way in forming your crew and your friends. Take the time, and you’ll soon be surrounded by people who want to work for you. When you recognize this, you will understand the power of thanks.

Without trust, there’s little chance of success in any business – including yours. Your role is to help your workers stay out of trouble and eliminate acts and conditions on the job that can harm them. Whenever possible, it’s better to work with them, rather than acting as an obstacle.

Help your construction crews understand the hazards of the work they do and how to get them corrected. Establish a level of trust, and say “Thanks!” more often than “Stop!”

Remember, you catch more flies with honey than vinegar.

THE IMPORTANCE OF TESTING EMPLOYEES

By Your Employee Matters

Here’s a fact: Half of all employees test better than the other half! My question is, which half do you have?

Testing job applicants and employees is one of the favorite topics in my CEO and HR workshops. Because most companies don’t do appropriate testing, those that do enjoy a significant advantage. I like to begin the subject with a story. Years ago, as I was quitting my litigation practice, a legal secretary (we’ll call Sue) came into my office and wanted to sue the firm she had been working for. The fact that a law firm could be sued by one of its employees came as no surprise. Lawyers get sued by their employees more than just about anyone else – and we rely on lawyers’ advice so we don’t get sued! A little Catch-22 in the system, you might say.

To keep the story short, it turns out this legal secretary had a steady job at neighboring law firm, working for a partner for 15 years. At the same time, a litigation partner at another firm lost his legal secretary with only last-minute notice. He put the word out on the grapevine that he was looking for a replacement, and that’s where Sue met up with him. After meeting for a pleasant lunch, the attorney figured that she had 15 years of experience doing the very job he was hiring for, she seemed pleasant enough – and so he hired her on the spot. To Sue’s surprise, almost immediately after coming to work, he started expressing his disappointment with her productivity. This went on for three months until he fired her without any offer of severance. Sue was a single mom with two kids to raise on her own and no job; that’s what prompted her to walk into my office.

I asked her if she and the attorney discussed any performance benchmarks or requirements at their one meeting. They had not. Understand this: a legal secretary types about half of the day; and half of them type above average and half below average (this holds true for programmers and retail sales clerks as well). Personally, I’ve never hired a legal secretary who typed less than 100 words per minute. When I asked Sue how fast she typed, she told me approximately 80 words per minute. She found out by testing herself years ago. None of her employers had ever tested her. I then tracked down the previous legal secretary; according to a test she took, she typed approximately 100 words per minute. Therein lies the moral to this story – the woman in my office was a failure on the first day of her employment and nobody knew about that fact!

This begs the question, “how many people walk into your company a failure on the first day and no one knows about it?” It makes no difference who you’re hiring , including rocket scientists, What’s the range of skill sets at your company? Without testing, you’re only guessing.

Let’s take this idea one step further. According to both Dr. Edwards Deming and Peter Drucker (perhaps the two greatest management gurus of all time), nine out of ten people want to do a good job every day – and their inability to do so is generally due to a system failure rather than a lack of motivation. Let me give you an example of how this plays out: at about the same time Sue walked into my office, I was consulting with a law firm that was having turnover problems. With the economy growing at the time, the larger firms were simply throwing more money at these employees. Although this was unrelated to my assignment, it dawned on me to ask them a basic question: “Have you tested all of your legal secretaries?” Turns out they had not – so that’s exactly what we did. We tested them not only on their typing, but also on the substantive and procedural knowledge that their job required.

Here’s what we learned: In most law firms, the attorneys get no management training and generally there are two attorneys to each secretary. Let’s assume that two of those attorneys manage intuitively above average and another two happen to manage below average. Now let’s say there’s a legal secretary who types 80 wpm for an above-average manager. The other secretary types 100 wpm for a below-average manager. Who do you think is viewed as the better secretary at the end of the day? When I ask this at workshops, most people respond “the one who types 80 wpm for a good manager.” This secretary gets the better performance evaluation and the raise – which makes absolutely no sense.

You can, and should, test for every essential skillset. For example, a few years ago I helped a real estate investment firm hire a CFO. Because they were Good to Great fans and wanted to have a great company, they decided to have a great CFO. When it came to testing, we decided to address the three essential skillset categories: substantive knowledge of accounting (GAAP), QuickBooks, and finally, Excel (because they used it for their real estate deals). So I contacted SHL (who I’ll talk about in a bit) and we set up tests for qualified job applicants. These tests cost us between $17 and $30 each. Because we wanted a CFO in the top 10% of skillsets, we decided that they would have to test in the top 20% of all three categories. It took us months to find that CFO, and in the meantime we used Account Temps. That’s the type of testing discipline you must go through if you want to have great employees.

For the past ten years, I’ve recommended only one company to do skill testing because I believe that it’s the best. When I first met them they were known as BrainBench. They were then acquired by PreVisor, and finally by the largest testing company in the world, SHL. Our contact is Jason Finney (jason.finney@shl.com). He is awesome and is surrounded by a great team. You can contact Jason to set up tests for your job applicants and existing employees. Not only will this help you to hire better, it will also help explain a lot of what’s going on with performance and what training you need to improve it.

Here’s what SHL users have said about testing: http://www.shl.com/us/results/client-results/. If you think this sounds like an endorsement of SHL, you’re right. So use them!

If you’d like a certificate for a free test from SHL, contact Jason directly and he’ll get it to you. If you’re an HR That Works Member, watch the one-hour webinar I did with Ken Lahti, one of the testing experts at SHL.

I also think it’s important to use skill tests when you hire consultants. How do you really know if they’re any good without testing them? For example, when we built HR That Works on a SharePoint platform, how did I know if our project manager was an expert or not? Yes, we were using a Microsoft Certified Partner, but that didn’t mean that the individual project manager was at the top of his game. Fortunately, he took a SharePoint test and scored very high, thus justifying my faith in his skills. Don’t trust the skillsets of employees, applicants, or third parties blindly – test for them!

As a final note, the skill testing I’m talking about is separate from character assessment. Fact is, you can’t fail your personality, so they don’t call them personality tests. However, it’s true that people can have failing personalities– and these are the people to make sure you don’t hire!

WEED AND WORK

By Your Employee Matters

In 2012, voters in Colorado and Washington legalized recreational marijuana use for those 21 and older. Voters in Oregon, a state which allows medical marijuana use, rejected recreational use in 2012.

States that currently allow medical marijuana use include Arizona, California, Colorado, Massachusetts, Montana, and Washington. Rest assured, more are on the way.

The question is how do these statutes affect employers? The Colorado law states that “nothing in this section is intended to require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale or growing of marijuana in the work place or to affect the ability of employers have policies restricting the use of marijuana by employees,” The Washington statute does not mention using marijuana in the employment setting.

Of course, federal law prohibits marijuana use, whether medicinal or recreational. Additionally, the Department of Transportation does not accept medical marijuana as an alternative medical explanation. Every decision on this issue agrees that private-sector employers can discipline, terminate, or not hire employees who test positive for marijuana even if properly used under state law. However, Connecticut’s law specifically bans employers from acting against workers who use medical marijuana off-duty. It will be interesting to see how this law is interpreted. For example, if somebody smoked a ton of weed one evening, and they come to work fuzzyheaded, would an employer have the right to test them? Or suppose they smoked on the way to work or during a break?

HR That Works members should check their state laws in the BNA State Law Summaries.