Tuesday, November 15, 2005

Free Subscription to Small Business Digest       11/05 Issue Contents Dental Insurance Is A Preferred Benefit For Many Small Firm Employees Among the most requested benefits by employees of small and mid-sized businesses is subsidized dental insurance.  One out of every two employees rate dental insurance as an important employee benefit.1 Given the escalating cost of dental procedures and the desire for many cosmetic procedures, many dental plans are out of the reach of most employees.  At the same time, escalating health care costs make it difficult for employers to consider providing more than basic medical coverage. Given the growth in consumer-driven healthcare (CDH) within today’s workplace as a funding mechanism to control employer costs, an innovative, cost-effective dental insurance plan is one of the most sought after supplemental benefits. For businesses competing for top talent, it is also a valuable recruiting tool. MetLife recently began offering a new hybrid Voluntary Dental Benefit Plans whose primary audience is smaller employers (10-500 employees).  This program is hailed by recruiting specialists as a valuable tool to enable them to compete with their larger competitors when it comes to offering dental care benefits. “To be competitive, employers need a breadth of benefits offerings to attract and retain talented employees,” explains Alan Vogel, vice president, MetLife Dental Product Management. “A voluntary dental benefit plan allows employers to address employee oral health care needs without negatively affecting their benefits budgets.” The dental plan, as developed by MetLife, is designed to be predominantly or even fully funded by employees. According to Vogel, one critical issue to make this new model successful is the need for flexible plan designs to satisfy employees’ price points. Adds Vogel, these plan designs should not only consider generally accepted standards of dental care but also an individual’s risk factors and medical necessity. Plans that are not based upon generally accepted standards of care shift additional costs to the employee and can also place the dentist in an awkward position when the care is provided. Highlights of the MetLife Voluntary Dental Benefit Plans include: Ability to choose any dentist in or out-of-network (including access to MetLife’s more than 80,000 participating dentist locations. Negotiated fees generally accepted by participating dentists ranging from 10% to 35% below community average charges. These negotiated fees apply to covered and non-covered services under any plan, even when the annual maximum is exceeded. Flexible plan designs that maximize employee choice and value. Educational tools and learning aids to make enrollment and employee communications easier. Customized enrollment forms are also available. Through MetLink®, MetLife's Web-based benefit administration tool, employers can easily access employee benefits, eligibility, billing, claims and reporting for MetLife coverages. MyBenefits, an award-winning benefits portal for employees, is also a resource. Vogel also points to consumer driven health approaches (CDH) to help employers manage their dental benefits costs and provide employees with more flexibility in obtaining oral health services. By using the CDH approach for managing dental coverage employees add their own dollars to the employer’s contribution to help achieve their coverage expense needs, he adds”. “The key to this approach is educating employees to their better understand their individual needs so they can help fund the dental services to the most practical level. This involves two aspects of education.  One is risk for disease and the other is necessary and appropriate care based upon research,”  Vogel said. Further, Vogel pointed out that the CDH plans  allow the employee at “high” risk for dental disease to receive more than two exams/cleanings in a year (the typical coverage standard). Limitations on traditional dental benefit plans are effectively removed because the employee can fund additional costs for these services that are not routinely covered, patient choice is increased and is more customizable based on need. Vogel emphasized again that patient education is critical to make these better choices. “In order to fully understand proper treatment approaches, patients must learn about their disease risks and the right care strategies to control or lessen those risks,” says Vogel, adding that MetLife is the largest commercial dental administrator in the U.S..  Each year, it administers dental benefits for over 20 million participants at thousands of companies and organizations of all sizes. Like other parts of consumer directed healthcare, adds Vogel, “Easy access to education allows patients to make better choices about their dental care, and reduces the use of services that may add little value.” In MetLife’s case, the company’s Dental Advisory Council (DAC) has over the years developed educational programs for both providers and patients. “The idea of educating all involved parties has been part of MetLife’s long-standing approach to dental benefits,” Vogel says. “Education and appropriate design should be integral parts of all dental benefit plans, not just those considered ‘consumer driven.’ However, the funding mechanism of an appropriately designed and executed voluntary dental benefit plan represents a real option for employers. It is another way that the talent acquisition and retention playing field is being leveled among employers, as well as providing a higher level of dental care for employees.” To learn more, download MetLife’s free report The Role of Consumer-Driven Models in Dental at whymetlife.com/dental. 1 2004 MetLife Employee Benefits Trend Study 11:24:14 AM    comment []

Free Subscription to Small Business Digest       11/05 Issue Contents Benefits Administration Outsourcing Has Advantages, Drawbacks For Firms With the growing trend towards outsourcing pre-tax benefits administration by even smaller companies, it is possible to make costly mistakes. Companies use outsourcing to reduce costs by harnessing specialized providers who apply tested applications that a generalist might not be aware of or could miss.  The results often have a positive impact on the bottom-line.  However, there are times when poorly conceived outsourcing programs, particularly in the HR area, can result in added costs rather than significant savings. Mistakes made by HR directors when outsourcing administration of pre-tax benefits like "flex" plans, Health Savings Accounts and Qualified Transportation Expense (QTE) accounts can cost companies hundreds of thousands of dollars each year. Needlessly. "Pre-tax benefits can pay for themselves—if done right," said Tom Guiler, vice president of Benefit Resource Inc. "But HR directors, in an attempt to save money, often outsource to low-cost administrators. Common cost-saving techniques used by some administrators actually end up lowering tax savings for employers, ultimately increasing per-employee costs. Full-service plans, on the other hand, can increase tax savings for employers, offset administrative costs, and even produce a surplus." According to Guiler, Maximizing employee participation is the key. Employers reduce payroll taxes, specifically FICA payments, on contributions employees make to pre-tax accounts. "The industry average for employee participation in 'flex'-type accounts hovers at around 15 to 20 percent annually," Guiler says. "By providing the right mix of services, employee participation can be increased to 25 to 30 percent, the average achieved by Benefit Resource. The difference represents significant tax savings for employers." Guiler uses as an example, the average employee, setting aside $950 a year for tax-free medical expenses, saves as much as $380. If a company has 100 such employees, it will save $7,268 in FICA expenses. Or, the average employee, setting aside $4,500 a year for tax-free day care expenses, saves as much as $1,800. If a company has 100 such employees, it will save $34,425 in FICA expenses. HR directors should consider the following in outsourcing these and other functions: Customized plan design Educational programs Convenient debit card access to pre-tax accounts Secure, online employee statements and account management Full-service support that relieves HR staff of the burden of individual problem solving Streamlined employer administration-no more than the simple exchange of electronic files, requiring minutes each month Accounting and compliance support Switching health care insurance carriers from year to year—common among cost-conscious employers—requires HR staff and employees to adapt to new procedures. HR directors can avoid such costly disruptions by outsourcing pre-tax benefits to a specialist. 11:22:13 AM    comment []

Free Subscription to Small Business Digest       11/05 Issue Contents Financing Options For Small Firms Require Creativity Entrepreneurs who need financing to buy a flagging business or to start a venture in an unglamorous geographic area don’t have many places to turn. If you are a Stanford professor with a few biotechnology patents and a garage in Palo Alto, the venture capital boys break the Olympic 100-meter dash record in a rush to your door. But if you want to buy a failing metals distributor in Youngstown, Ohio you are about as likely to find financing as you are buried treasure. In the past, some risky maybe slightly unappealing ventures might have gone to a Small Business Investment Company (SBIC) for an equity investment from its Participating Securities (PS) program. But the Small Business Administration (SBA), which funds the PS program, wants to snuff out the PS program, which has cost the federal government about $2.7 billion since the technology boom of the late 1990s went bust. That is a problem, since the PS program is supposed to be self-supporting. The SBA sells debentures to institutional investors and others and gives those funds to SBICs to invest in marginal start-ups or failing businesses purchased by new owners. The SBA pays the debenture owners interest. The SBICs repay the SBA when their equity investments pay off. The problem is those equity investments have mostly gone south, not north. So the SBA has stopped selling debentures and the 198 SBICs in the PS program—and potential entrepreneurs in places like Waco, TX, Newton, North Dakota and Greenfield, Iowa—are now out of luck, unless… Legislative Changes Sought Rep. Don Manzullo(R-IL), chairman of the House Small Business Committee, rides to the rescue. He is trying to restructure the PS program via the SBIC Participating Debenture Act of 2005 (H.R. 3429) he has introduced. It would convert the Participating Securities program into a Participating Debentures (PD) program. SBICs would have to repay the SBA after five years regardless of whether the SBIC (or the companies it funds) are profitable; repayments would have to come out of SBIC net receipts. Also, the SBA’s share of the profits in a Participating Debenture SBIC would be greatly increased compared to SBA’s share in the PS program.  Jaime A. Guzman-Fournier, associate administrator for investment at the SBA, has some serious concerns about the viability of the Manzullo approach. “SBA is concerned that although the SBICs are liable for interest payments, that their ability to make these payments is still largely dependent on the success of the fund,” he explains. “Five years of deferred interest on millions of dollars is a large sum of money. If SBICs are unable to make their significant interest payments at year five, the SBA will be required to make the payments on their behalf, as well as instituting liquidation procedures to purchase the trust certificate. SBA may ultimately be the party making the interest payments for the first five years.” In a report he wrote in July, Colin Blaydon, director of the Center for Private Equity and Entrepreneurship and Dean Emeritus at the Tuck School of Business at Dartmouth College, reported that “an equity gap exists by stage, by geography, and across industry sectors… the SBIC participating securities program does fill some of the gaps.” 11:20:46 AM    comment []

Free Subscription to Small Business Digest       11/05 Issue Contents   Simpler Rules, Regulations Reported By HR Leaders Over the past three years, in annual surveys by this publication, managers responsible for the HR functions report a growing trend to simplify the rules and regulations by many governmental bodies within the US, according to survey respondents. On the federal level, this trend is particularly noticeable while on a state-by-state basis, there seems a similar trend but on a more regional basis. This attitude is being particularly felt in the areas of Equal Opportunity regulations, pension and benefits management, as well as corporate governance. An example of the last is the postponement of Sarbannes-Oxley requirements for at least 12 months for small, public companies. The internal-controls rule, required under the 2002 Sarbanes-Oxley law, has been criticized by corporations and business groups as costly and burdensome. More than two out of three respondents, (68%) said federal and state regulators are more apt to listen to their views in 2005 than in previous years.  A majority of these respondents, (56%) said this attitude was particularly noted when it came to issues directly related to HR functional activities. In many other cases, the regulations are being clarified and focused, resulting in more definitive guidelines clarifying many congressional mandates.  The most recent annual survey found that 52% of those responding said regulations concerning hiring and firing, particularly of so-called protected classes have been greatly simplified. The same survey found just 11% of respondents reporting that rules have gotten more onerous or murkier. Disability Rules Clarified As part of a larger federal program to simplify rules and regulations, this trend is becoming particularly evident in the application of the Americans with Disabilities Act.  As judges have clarified the law’s provisions, so too have federal regulators.  The result has been, according to 63% of those responding, that workplace provisions are now clearer, and, according to 51% or respondents, less onerous. Federal Support While many observers believe the Small Business Administration (SBA) focuses only on the very smallest companies, the agency has made a determined effort to reach out to its constituents in a variety of ways. The SBA’s Office of Entrepreneurial Development has six main networks through which services are provided.  These include Small Business Development Centers, SCORE, Women’s Business Centers, Small Business Training Network, Native American Affairs and Business Initiatives.  There are more than 1,100 Small Business Development Centers and 389 SCORE chapter offices throughout the United States. Training Funds Available More importantly, funds to help smaller companies are being made more easily accessible.  Almost half, (49%) said they felt training funds are more readily available from both federal and state programs. Such programs are made possible through some funding by the federal government who gives grants to its resource partners.  Doreen Blanc, Ph.D., works as client project manager for the Community College Workforce Consortium in New Jersey.  She is involved with producing training programs for small business employees.  Her programs are run through New Jersey’s community colleges, which Jim O’Connor, director of e-small business for the Small Business Administration’s Office of Entrepreneurial Development, is typical.  He pointed out that many state’s programs are tied to state colleges and universities. Blanc said the rules in her state are that employees either be trained during working hours or be paid overtime and that there must be 10 participants per training class.  For businesses with fewer than 10 employees, a consortium can be formed with others.  The biggest drawback for employers is doing the training during working hours. “We train at the company site to reduce any travel time,” Blanc said. “But for some companies, the release of workers, especially in a manufacturing environment – which is the segment that this program was originally designed for – is tough.” She said some of the most popular courses are Microsoft Suites, project management, team building, English as a second language and presentation skills.  Blanc said that courses are modeled on corporate training classes and are limited to a total of eight hours, though most are four to six hours.  Courses are tailored to meet the company’s needs as much as possible. Customized Courses “We…customize the course content around the industry the company is in and offer the course at the level of the employees – beginning to advanced,” she said.  “If a company has enough employees, they can choose many sections of any course as long as they have 10 employees per course.” And such training programs aren’t all the government is doing to help small businesses with human resources.  said Cecelia Brock, Ph.D., a volunteer business counselor for SCORE’s San Diego Chapter 140.  In California, a law was passed to make it possible for small businesses to obtain insurance at reasonable rates and for employees with pre-existing conditions to be covered after a reasonable wait period. “Prior to this bill being passed, it was very difficult for small businesses to obtain medical insurance at affordable costs,” she said.  “AB 1672 enables small businesses, professional groups and associations with employees between two and 50 to receive affordable health care options.” Health Savings Accounts Another cost effective option for small business owners is Health Savings Accounts.  Employers chose a less expensive high deductible health plan then offer employees an HAS account in which to save tax-free money for medical expenses not covered by their health plan. According to Brock, other legislation that is helping to mandate employee programs includes the Family Medical Leave Act, the American with Disabilities Act, Affirmative Action Plans, Equal Employment Opportunity, Health Insurance Portability and Accountability Act, Employee Retirement Income Security Act and the Fair Labor Standards Act.  Not too mention the many laws within each state. “There are so many state and federal laws in place that require employers to operate with integrity, clarity and compassionate ways,” Brock said. “These programs are all monitored by various governmental agencies, often with penalties attached if companies do not comply.” To find out more about resources for small businesses, O’Connor recommended starting at www.sba.gov.  He said the online training calendar allows users to view training programs being offered within their state.  Plus, the site and its partners include a plethora of free information relevant to small business owners and employees. O’Connor said the SBA has quite a bit of information on its Web site, www.sba.gov, to help small businesses and their employees.  It also has various resource partners throughout the country to help with training and other needs of the small business. “We work through those partners closely,” O’Connor said.  “We train or counsel about a million…small businesses each year.” 12 Million Visitors Not to mention the Web site’s annual 12 million visitors who access technical assistance.  And a lot of it is free.  O’Connor said all the information online through the SBA as well as partner sites, www.business.gov and www.sbdcnet.utsa.edu, is at no charge.  Some of the training programs offered by resource partners do require a fee. According to Brock, the San Diego chapter of SCORE is one of the top chapters in the United States in the number of clients who are counseled and the number of workshops and programs offered to small businesses.  She said programs provide technical assistance at a low cost.  Topics range from starting a business to writing a business plan to marketing to managing finances. “All of these programs are well attended and our ratings from participants are high,” Brock said.  “In addition to those programs, SCORE’s Web site offers free business resources for people starting up their business.” Such programs are made possible through some funding by the federal government who gives grants to its resource partners.  11:17:11 AM    comment []

Free Subscription to Small Business Digest       11/05 Issue Contents   New Techniques For Employer-Based Health Care Offerings Appearing Employers are developing new techniques for improving health care benefits while reducing costs. Among the most popular according to recent reports and surveys are: Including wellness programs as covered procedures Utilizing in-house medical and advisory staffs to improve worker health Implementing CDHP offerings that reward employees for reducing usage Providing incentives and facilities for physical training. For a more detailed look at what is happening in this arena,  you can turn to the Corporate Research Group HSA Data Pak and Action Guide.  It is a comprehensive compilation of facts, strategies and hands-on implementation actions for Health Plans and Employers, covering everything you need to know about HSAs/HRAs! The report incorporates the latest market data and key findings and presentations from a recent multi-industry national conference on “Rolling Out HSAs for Health Plans and Employers”. For more information, visit: www.worldrg.com/reports 11:14:47 AM    comment []

Free Subscription to Small Business Digest       11/05 Issue Contents   Survey Shows Pessimism, Employment Slowdown In Small Businesses' Outlook, Plans   A strong indication that small business managers are not as confident about the their current and future prospects, hiring efforts to date and plans in this year’s annual survey are clearly less bullish than previous annual soundings. As the accompanying chart clearly shows, hiring plans are stagnant to bearish with a significant nine point negative swing on the vital question --- replacing workers who leave in the current year as well as hiring plans for 2006. “This year’s results (of 3,300 respondents) point to a slow down in economic activity from the small business sector, always a bell weather of the economy as a whole,” said JoAnn Laing, President of Information Strategies, Inc., corporate parent of this newsletter. Many more managers said they were currently only replacing workers who left (16.4%) versus year ago figures of just 3.3.  More ominously, 12.7% of all respondents said they were not replacing employees who left versus just 3% who were contracting in 2004. The survey conducted in late September and October, indicates hiring plans for 2006 in general have taken on a very conservative tinge with just 21.8% of all managers saying they intend to increase staff versus last year’s 31%.  Equally as revealing, this year’s survey numbers compare with the seven-year average of 30% reporting they intended to add staff.  This is the first time in the seven-year-old survey that the question has shown such a marked change in hiring activity. What are your hiring plans for current and next year?    2006  2005 Change I am replacing only employees who leave 16.4% 3.3% 13.0% I am not am replacing employees who leave 12.7% 3.0% 9.8% I am adding to total employees 21.8% 31.0% -9.2% I intend to outsource more to foreign providers 3.6% 4.1% -0.4% I am still unsure what I will do 51.6% 60.3% -8.7% I plan to increase total employee count 3.9% 10.9% -7.0% I plan to decrease total employee count 10.9% 3.0% 8.0% I plan to maintain current employee levels 34.5% 25.8% 8.7% Other (please specify) 49.4% 39.7% 14.2% Averaging more than 3,300 respondents, this newsletter’s annual surveys have proven prescient in predicting small firm behavior in the coming year.  In another area, when asked if their sector was doing better or worse than last year, there was a marked change in perception by respondents. This Year Last Year Better Than Previous Year 55.6% 70.8% Worse Than Previous Year 44.4% 29.2% Moreover, the percentage of managers who are not sure about their future plans shrunk to just over half (51.6%) versus last year’s 60.3%.  “The swing to those who were already formulating plans for 2006 and their negative implications is another cause for concern,” said Laing. “Our follow-up interviews indicates a pessimistic view of the economy as revealed also in the questions asked about their personal and professional outlook of respondents.” What is your personal and professional outlook? This year Lat year Change Better professionally 40.0% 45.2% -5.2% Worse professionally 18.2% 19.5% -1.3% About the same professionally 25.5% 18.4% 7.1% Better for me personally 34.5% 44.1% -9.6% Worse for me personally 20.0% 16.2% 3.8% About the same personally 27.3% 19.9% 7.4% Equally as informative, plan usage of foreign outsourcing is also significantly down 10 points from last year, the first time the question was asked on the survey. More survey results may be found at www.2sbdigest.com. 11:10:40 AM    comment []

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