August/ September 2013 |
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Upcoming Seminar
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Our annual McGladrey Monitor Survey Results Seminar is being held Sept 5 in Evansville and Sept 6 in Louisville. Please follow the link below for more information.
Visit our Website!
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Subscribe
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Manufacturing and Wholesale Distributors
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Is today's business environment presenting unique opportunities and issues for your manufacturing operation? How are you addressing the push from your customers for continuous quality improvement? Are you having difficulty finding and retaining quality employees? Add to these issues declining profit margins and strained resources due to rapid growth and you have major challenges facing you day in and day out.
At Harding, Shymanski & Company, P.S.C. we have a dedicated team ready to assist you with those unique challenges and issues facing your industry.
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Recruiting and Compensation for Manufacturers
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McGladrey has recently rolled out a new Focus on Success program to present findings from the Manufacturing & Distribution Monitor surveys. The program offers solutions and best practices from surveys, industry specialists, experience with clients, and discussions at nationwide Executive Summits. The program is intended to serve as a resource for those companies interested in continuous improvement, with recruiting and compensation being two covered areas.
According to the Manufacturing Distribution Monitor surveys, while a majority of manufacturers and distributors expect to increase employment, more than 40 percent of them are having difficulty finding qualified talent to fill open positions. Companies are using a variety of methods to combat this skills gap. Some have developed internal programs to stimulate better effectiveness among current employees and new hires. Other companies develop their relationships with local universities, vocational, and technical schools to actively seek out the brightest candidates for internship and other programs. Many other successful strategies exist to recruit talented employees, but the recurring element is that recruiting companies need to take a very active role in seeking out those employees that best fit their requirements
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While recruiting the right candidates is essential for a growing company's success, companies must carefully balance growth strategies with the rising costs associated with recruiting, motivating, and retaining highly qualified executive and employee talent. Middle-market companies tend to align compensation with performance, whereas larger organizations tend to emulate what companies like themselves are doing.
Since smaller companies are working with limited resources, they must get creative. Many smaller companies are finding ways of reallocating resources from total reward investment plans to high-performing employees. In effect, these companies are shifting compensation from areas which benefit the entire group of employees (for example, employer-paid healthcare premiums) to those that focus on compensating high performers (such as incentive packages for those employees that meet certain goals). These strategies allow companies to encourage higher performance in employees while keeping overall costs in check. Companies at every level need to find a compensation strategy that both rewards performance and is sustainable with today's rising costs.
For more information on the program visit http://mcgladrey.com/Manufacturing-and-Distribution/Focus-on-Success or contact Brant Kennedy, CPA, at (812) 491-1425, bkennedy@hsccpa.com.
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Medical Loss Ratio Rebates
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The Affordable Care Act, commonly known as health care reform, requires that health insurers spend a percentage of each premium dollar received to pay claims, clinical services or activities that improve quality care. This percentage is known as the minimum Medical Loss Ratio (MLR). The MLR provision is intended to ensure that members are getting the most value for their health care dollars. This provision is only applicable to fully-insured health plans.
If the health insurer fails to meet the MLR requirement, the insurer is required by law to issue rebates to employer groups and members. If a company receives a rebate check, their insurance carrier did not meet the minimum MLR (80% for small groups and 85% for large groups). The rebates being issued by August 1, 2013 are based on premiums insurers received in calendar year 2012.
Under the ERISA fiduciary rules, if any portion of the rebate is considered to be a plan asset, the proceeds must be used for the exclusive benefit of participants and beneficiaries. Generally, the portion of the rebate attributable to participant (employee) contributions will be considered plan assets and therefore must be used for the benefit of the plan participants. The portion of the rebate must be applied for the benefit of participants within three months or it must be held in trust.
For ERISA plans, the employee portion of the rebate is not required to be applied exactly in proportion to the premium activities of participants. There is some latitude in the permissible methods of distribution:
- Rebates can be used for the benefit of current versus former participants;
- Rebates can be used to reduce future premiums;
- Rebates can be used to enhance benefits for participants; or
- Rebates can be distributed to participants in cash.
If an employer contributed 100% of the premiums related to a fully-insured group health plan, then the employer can retain 100% of the rebate related to the plan. However, because the premium was tax deductible as a business expense, then the rebate would be taxable as business income.
Based on IRS guidance for distribution of the rebates, rebates may either be distributed to employees that participated in a group health plan both in the year employees paid premiums being rebated (2012) and the year rebates are being paid (2013); or they may be paid to all employees participating in the plan during 2013, regardless of whether they participated during 2012. If the cost of tracking former participants is unreasonably high, employers do not have to provide rebates to them.
To learn more about the medical loss ratio rebates including the potential tax consequences of these rebates to the employer and employee and acceptable methods for calculating the employee rebates, please cotact Mike Vogel, at mvogel@hsccpa.com or Michele Graham, mgraham@hsccpa.com.
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Kentucky Limited Liability Entity Tax
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Recently some of our clients have received tax notices from the Kentucky Department of Revenue for adjustments related to the Limited Liability Entity Tax (LLET) calculations. The Kentucky Department of Revenue (DOR) has been taking a more aggressive stance on the definition of Cost of Goods Sold (COGS) as it relates to the computation of the LLET. The DOR is disallowing the inclusion of certain items in COGS or denying the COGS deduction altogether. The DOR does not view their recent compliance efforts to be reflective of a change in legal interpretation or policy although they have certainly placed greater emphasis on reviewing compliance with the LLET statutes and regulations.
This activity by the DOR has resulted in taxpayers receiving tax notices and assessments of additional tax, interest, penalties and amnesty fees for years 2008 - 2011. This causes taxpayers to incur additional time and effort in reviewing their COGS deductions, contacting the DOR to attempt to resolve any differences of opinion regarding disallowed deductions and, for pass-through entities, amending shareholder/partner individual income tax returns to claim additional LLET credits to offset the impact of the additional LLET assessments.
We wanted to make you aware of the recent actions by DOR as many taxpayers have or will be receiving notices. We are available to assist in any way and have recent experience in assisting our clients with this issue.
Please contact Aaron Wilzbacher at 812-491-1322, awilzbacher@hsccpa.com or John Rittichier at 502-882-8484, jrittichier@hsccpa.com for more information.
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Kentucky Offers Employee Training Assistance
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In its efforts to keep Kentucky's business and industry competitive in the global economy, the Bluegrass State Skills Corporation (BSSC) provides assistance to Kentucky businesses who provide training programs. The BSSC administers and funds training efforts through training agreements for Grant-in-Aid and Skills Training Investment Credit projects approved by the BSSC Board of Directors. The purpose of both programs is to improve and promote employment opportunities for the residents of Kentucky through training grants with business and industry. Both programs require that companies submit applications to the BSSC Board of Directors for approval.
The Grant-in-Aid program provides up to 50% reimbursement of eligible costs to companies for approved training activities. Depending on the number of employees, maximum funding from the program may be anywhere from $25,000 to $50,000.
Alternatively, the Skills Training Investment Credit provides tax credits to companies for specific training activities. The maximum tax credit for individual companies is the lesser of $100,000 or the company's number of full-time Kentucky resident employees times $500. Only one approved application may be received per biennium, and a total of $2.5 million in tax credits are available for each state fiscal year. In order to be eligible for the tax credit, companies must have engaged in certain qualifying business activities for not less than 3 years prior to submission of their application.
For more information on these Kentucky training programs visit www.thinkkentucky.com or contact John Rittichier, CPA, at (502) 882-8484, jrittichier@hsccpa.com.
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Obama Administration Delays Key Affordable Care Act Insurance Mandate
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The mandate requiring companies that employ 50 or more workers to offer coverage or face fines has been delayed until 2015. The Treasury Department and the White House say the delay comes in response to concerns about the complexity of the new requirements and the need for more time for businesses to implement them effectively. The decision effectively means that penalties that would have been assessed against non-compliant businesses, originally set to kick in for 2014, will be delayed until 2015.
Below is a summary of the items delayed to January 2015:
- Offer minimum essential coverage to 95% of full-time employees.
- Offer minimum value (60%) coverage to full-time employees.
- Offer affordable (9.5% of income or less) single coverage to full-time employees
- Consider employees who average 30 or more hours per week full-time for purposes of their health plan.
- Count variable employees' hours to determine whether they average 30 or more hours work per week.
While the employer mandate is being delayed, the individual mandate, which requires individuals to obtain health insurance, remains on schedule for 2014. The administration still plans to open up a new marketplace for government-related insurance plans on October 1, to take effect January 1. The subsidies are also expected to stay in place. The delay of the employer mandate, though, raises questions about whether more elements of the law might be delayed in the coming months.
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Disclaimer
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The information contained in this email is for general guidance on matters of interest only. The publication does not, and is not intended to provide legal, tax or accounting advice.
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Harding, Shymanski & Company, P.S.C. provides accounting, tax, and consulting services to our clients from offices in Evansville, Indiana, and Louisville, Kentucky.
Call us today! (800) 880-7800
www.hsccpa.com
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