Florida Workers’ Compensation Rates Will Decrease Again in 2016

Good News! I am pleased to advise that the Florida Office of Insurance Regulation (OIR) has approved an overall decrease of 4.7% to workers’ compensation rates for new and renewal workers’ compensation policies issued in Florida on or after January 1, 2016. This is the second consecutive rate decrease in Florida.

The 4.7% decrease is an average over all workers’ compensation class codes. Individual class codes may decrease more or less than this amount. The average rate change for the five major industry groups are as follows:

INDUSTRY GROUP
AVERAGE DECREASE
Manufacturing
-7.5%
Contracting
-1.8%
Office & Clerical
-7.8%
Goods & Services
-4.4%
Miscellaneous
-4.6%

Please note: Although NCCI proposed a reduction in the Expense Constant (flat per-policy fee that is charged for every policy), OIR did not approve this change, so the Expense Constant will stay at $200. In addition to the class codes rate changes, OIR has approved an increase in the annual payroll amount used to determine premium for partners and sole proprietors. This amount is increasing by $800, from $43,000 to $43,800.

If you have any questions about your specific coverage or class codes, or anything else for that matter, please contact your Morris & Reynolds Underwriter or Agent and we will be happy to help you. As always, for the honor of providing your protection, thank you.

Maximizing Open Enrollment for Employees

Open enrollment can be an overwhelming time for both employers and employees. Employees are given the opportunity to re-evaluate their current benefits and make changes for the coming year, while employers must choose a benefits package that balances cost and value and facilitate the enrollment process. Due to a variety of factors, benefit offerings are changing, placing new demands on employees and employers during open enrollment. To make the enrollment process as smooth as possible, it is important that employers educate and communicate with their employees effectively.

The Open Enrollment Process
As employer-sponsored benefits transition to more voluntary, employee-paid or employee-subsidized offerings, employees must assume more control in making smart decisions. Accordingly, employers should provide benefit information in an easy-to-understand format that provides employees with essential information, along with additional resources to help them make decisions.

Here is a typical open enrollment process:

  • Notification – Employers send out an organization-wide announcement alerting employees that open enrollment will begin shortly.
  • Receipt of Information – Employers distribute information about benefit plans, selection information and the appropriate forms to their workers. Employees may also receive personal information based on their elections from the previous year.
    • Employers may direct their employees to the company website, invite them to attend HR seminars, offer a benefit fair with the insurance company or offer access to interactive decision-making tools.
  • Making Decisions – Employees research their various benefits options and discuss with family to determine which benefits they will elect for the coming year.
  • Enrollment – Employees select their benefits.

To make the open enrollment process as smooth as possible, it is important that employers educate and communicate to their employees effectively. Maximize open enrollment with these strategies.

Open Enrollment Strategies
The following suggestions, based partially on an employee survey conducted by MetLife®, can improve the open enrollment process for both employers and their employees:

  • Establish solid communication between the HR department and employees. To do so effectively, conduct meetings and seminars and offer calculators, intranet education information and benefit fairs. If your organization is smaller, conduct one-on-one meetings with employees to determine exactly the type of information they need.
  • Survey your employee population to determine their priorities—product importance, preferred method of communication, etc. By doing so, employers can identify exactly what their employees want, and workers feel their needs have been heard by decision-makers.
  • Customize benefits and information resources to the life stages of your employees. For instance, if you have a large older population, feature more retiree benefits and long-term care insurance. It is also wise to communicate with your employees in the same way that they communicate on a regular basis. For example, if messages are received via postings in a common area, consider placing benefit information in that area as well.
    • By customizing your benefits to your population, you can increase employee satisfaction without increasing your spending.
    • Employees have an easier time selecting the benefits that are best suited for them and their families.
  • Provide easy-to-understand tools. This will lessen employee confusion and the feeling of being overwhelmed while trying to make tough decisions.
  • Consider offering new benefits, even if they are voluntary, such as dental insurance, vision insurance or benefits for prescription drugs. Employees tend to make more changes when they receive new options.
    • Even if employees must pay 100 percent for such voluntary options, they can still be attractive offerings. Since the benefits are negotiated by the employer, employees typically receive a group rate, which is significantly lower than purchasing them individually.
  • Offer a second, off-cycle enrollment period when new benefits are featured. This can be a time for employees to focus on voluntary benefits and other offerings that are not traditional. These benefits are typically overshadowed by health insurance and retirement options, so a second off-cycle enrollment is a great time for employees to focus on their other needs.
  • Make plan information as simple as possible, while also being interactive. Employees should be able to understand their offerings to make more knowledgeable decisions.
  • Maintain all Summary Plan Descriptions on your website, rather than directing employees to the insurance carrier site for information. This provides easy access to information and makes the company appear more in control of the information.

Overall, a successful and effective open enrollment process can have a dramatic impact on the relationship between employers and their employees. By catering to their needs and wants, employers will ultimately make the experience more enjoyable and worthwhile for their workers. As a result, they will feel more secure in their benefits decisions throughout the plan year.

Cyber Attacks: A Growing Business Interruption Threat

When you think about what usually causes a business interruption, natural disasters such as fires, earthquakes and floods probably come to mind first. These events can physically damage your property and equipment, making your workspace unusable for a time. The damages from Hurricane Katrina and Superstorm Sandy are great examples of how a natural disaster can put a halt to a business’ day-to-day operations. Many of those affected businesses remain closed to this day.

While natural disasters are still the main reason for an interruption, another cause is quickly moving up the ranks: cyber attacks. As businesses continue to rely on computers and digital storage of essential data, cyber attacks will continue to be a potential exposure. Read on to learn how a cyber attack could lead to a business interruption and what you can do to mitigate the risk.

How can a cyber attack cause a business interruption?
Hackers, thieves and other unauthorized individuals have become adept at exploiting weaknesses in a business’ computer system, whether through traditional hacking methods or social engineering. There are several types of attacks that could completely cripple your ability to perform normal business activities, including:

  • Malicious code that renders your website unusable
  • Distributed denial of service (DDoS) attacks that make your website inaccessible to employees and customers alike
  • Viruses, worms or other code that deletes critical information on a business’ hard drives and other hardware

It is quite easy to see how any of these events might leave your company scrambling to do business. Unfortunately, many smaller businesses don’t have the manpower available to detect the problem and work on fixing it, which only increases the length of an interruption.

Third-party interruptions can have a major effect on your business
You can still be affected even if it isn’t your business that experiences a cyber attack. Imagine what would happen if one of your vendors suffered an attack, resulting in a complete shutdown of its warehouse or website. Unfortunately, attacks on third parties are often out of your control. Such an event could have a profound effect on how much business you are able to do, and that would trickle down to your customers, who may rely on your products or services.

Ways to prevent a cyber attack from causing a business interruption
A common saying in the cyber security world is, “It’s not if you’ll be a victim of a data breach, but when.” While 100 percent protection is impossible, you can help lower your chance of business interruption due to a cyber attack by following these tips:

  • Create a formal, documented risk management plan that addresses the scope, roles, responsibilities, compliance criteria and methodology for performing cyber risk assessments. This plan should include a characterization of all systems used at the organization based on their functions, the data they store and process, and their importance to the organization.
  • Make sure all firewalls and routers are secure and kept up to date.
  • Implement a cyber security policy that educates employees about the dangers of computer intrusions and how to prevent them. Morris & Reynolds Insurance can help you draft a cyber security policy specifically tailored to your company.
  • Download and install software updates for your operating systems and applications as they become available.
  • Implement a strict password policy and have employees change system passwords every 90 days.
  • Limit employee access to company data and information, and limit authority to install software.
  • Make sure you are covered by a cyber liability insurance policy.

How can cyber liability coverage help?
Most traditional commercial general liability (CGL) policies will not cover business interruption losses due to a cyber event. Luckily, cyber liability coverage can fill that void.

Should your business be unable to perform normal business operations, a cyber liability policy can help pay for expenses related to an interruption. The coverage pays for:

  • Lost income due to the event
  • Profits that would have been earned had the event not occurred
  • Operating expenses, such as utilities, that must be paid even though business temporarily ceased
  • Rented or leased equipment

Cyber liability coverage also helps protect your business from the following events:

  • Data breaches, including costs for customer notification, some legal costs and credit monitoring for those affected
  • Damages to third-party systems, if, for example, an infected email from your servers crashes the system of a customer or vendor
  • Data or code loss due to a natural disaster or malicious activity. Physical destruction of equipment is covered under a different policy.
  • Cyber extortion, including ransomware, which is malicious code installed into a computer on your network that prevents you from accessing it until a ransom is paid

Even though business interruptions due to cyber attacks are relatively uncommon, being unprepared for one could prohibit you from doing business as usual. Contact Morris & Reynolds Insurance today to find out how we can help you avoid a business interruption.

New Trade Act Quietly Increases ACA Reporting Penalties

bulletinThe Monday before the fourth of July, President Obama signed into law the Trade Preferences Extension Act of 2015, which contained several tax provisions in addition to the trade measures that were the focus of the bill. Among the tax provisions were changes that increase the penalties associated with failure to file or furnish correct “information returns and payee statements,” which include standard information returns, such as Forms W-2 and 1099, as well as the new reporting forms required by the Affordable Care Act (ACA). The following table summarizes the responsible parties and forms applicable to the ACA’s reporting requirements.

table1

ACA reporting became mandatory for responsible entities starting in 2015. The first returns and statements will be provided in early 2016 reflecting the 2015 calendar year. Entities completing the employee statement (the 1095-B or 1095-C, as applicable) must provide one copy to employees and one to the IRS as part of the information return. Thus, a failure that relates to both the information return and employee statement may result in double penalties. For example, failure to send one copy of Form 1095-C to the employee and one copy to the IRS is considered two failures, which may trigger a $500 penalty. The IRS has stated that it does not intend to impose accuracy-related penalties on employers who complete the 2015 filings timely, as long as the employer was acting in good faith.

The table below reflects the current and revised penalty structure.

table2

Filing Extensions
Employers should be able to obtain automatic extensions of time to file the ACA returns with the IRS; however, extensions of time to provide the employee statement (e.g., 1095-B or 1095-C) are more limited. It is our understanding that the IRS intends to revise form 8809—the existing extension form for W-2s and 1099s—to include the ACA forms as eligible for extension. Entities filing form 8809 before the returns are due are granted an automatic 30-day extension. An additional 30-day extension may be requested by submitting a second Form 8809 before the end of the first extension period. Requests for an additional extension of time to file information returns are not automatically granted. Generally, requests for additional time are granted only where it is shown that extenuating circumstances prevented filing by the date granted by the first request.

Extensions for Employee Statements Limited
Employers that require additional time to prepare the employee statements may request an extension of up to 30 days from the original due date (January 31) by submitting a letter to the IRS that contains certain information. There is not an automatic approval process for these types of extensions. The IRS is expected to release further information on the extension process for employee statements.
In the meantime, employers should work closely with their insurance broker and other trusted advisers when determining how their organization will address these new requirements.

More Information
Stay tuned to www.morrisandreynolds.com for the latest news affecting your insurance needs, and stay in close contact to your professional agents and underwriters here at Morris & Reynolds Insurance. We will do our very best to guide you in the right direction, keep you informed and assist you for many years to come.

About The Authors. This alert was prepared for Morris & Reynolds Insurance by Peter Marathas and Stacy Barrow. Mr. Marathas and Mr. Barrow are nationally recognized experts on the Affordable Care Act. Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm. They can be reached at pmarathas@marbarlaw.com or sbarrow@marbarlaw.com.

Using Life Insurance to Fund a Buy-Sell Agreement

A chief concern among business owners is what will happen upon the death of one of the owners: how will it affect the business, the other owners and the heirs of the deceased owner? Surviving owners want to ensure the continuity of ownership and not risk having a large share of ownership fall into the hands of potentially inexperienced heirs of the deceased. In addition, they want to protect themselves and the company financially. On a personal level, owners want to also ensure that their family is financially secure and compensated fairly in the event something happens to them.

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What is a Buy-Sell Agreement?
A buy-sell agreement can address all of these concerns. It is a contract among business owners that, upon the death of one of the owners, requires the remaining owners or the company itself to purchase the deceased’s interest in the company according to the agreed upon terms of the contract. In addition, the deceased’s heirs are required to comply by selling their inherited interest at the previously agreed-upon price.

The best way to fund a buy-sell agreement is through life insurance. This ensures that funds are immediately available when a death occurs; plus, death benefit proceeds are generally income tax free. In addition, the funds used to buy the deceased’s share are purchased for pennies on the dollar.

Advantages of a Life Insurance Funded Buy-Sell Agreement

  • Establishes a valuation of a deceased owner’s interest in the business for estate tax purposes.
  • Establishes a mutually agreeable price and terms to reduce potential future litigation or friction.
  • Helps facilitate a smooth transition of management.
  • Ensures that the family of the deceased receives cash instead of unmarketable stock.
  • Protects the company’s liquidity needs at a potentially vulnerable time.

Types of Buy-Sell Life Insurance Plans
Cross Purchase Plans

  • Each owner purchases a life insurance policy on the other owners and is a named beneficiary of the policy.
  • Upon the death of an owner, each surviving owner receives the life insurance proceeds income tax-free and uses the proceeds to purchase the deceased’s business interest.
  • Heirs of the deceased receive an agreed-upon payment for their inherited business interest.

Entity Plans

  • The company purchases life insurance policies on each owner, naming itself as sole beneficiary.
  • Upon the death of an owner, the company receives the life insurance proceeds and uses said proceeds to purchase the deceased’s business interest.
  • Heirs of the deceased receive an agreed-upon payment for their inherited business interest.

Morris & Reynolds Insurance understands the complexities of buy-sell insurance policies and we are here to help you protect your business, your assets and your family. Contact us today at 305.238.1000 or visit our website: www.morrisandreynolds.com for more information.