Nic Lubbers, Author at GMS

I receive this question very often, especially at the beginning of each year. The IRS requires any company with a 401(k) plan to conduct annual compliance testing.

The testing is conducted after the plan’s year-end. For most plans, this is 12/31.

Why is plan nondiscrimination testing important?

According to Transamerica Retirement Services, “Nondiscrimination testing mandates were added to the rules governing 401(k) plans to ensure that these plans are not designed to economically benefit only highly-paid personnel, but are fair for all employees. Not meeting these mandates, or failing to correct any failed year-end compliance test, could mean substantial penalties and possibly even disqualification of the plan’s tax-exempt status.”

Simply put, 401(k) testing is required to make sure all employees benefit from the plan equally, regardless of their income level. When plans aren’t tested or fail the test, or when plan problems aren’t corrected, the company can be penalized.

How does 401(k) testing work?

401(k) testing involves examining the benefits received by all employees. For the purposes of these tests, employees are grouped into three categories:
- Key Employee – anyone with at least a 5% ownership stake in the company (either last year and/or current year) or a direct relative (spouse, parent, or child) of someone with a 5% ownership stake.
- Highly Compensated Employee (HCE) – for 2013 testing, anyone who has made $115,000 in 2012.
- Non-Highly Compensated Employee (NHCE) – anyone that doesn’t fall into the other two categories.
*Please note that all Key Employees are also considered Highly-Compensated Employees, but not all Highly-Compensated are considered Key Employees.

What do the tests entail?

These two tests are probably the ones that effect employers the most.
This test takes the average deferral rate of the HCE and compares it to the average deferral rate of the NHCE. The HCE can only contribute so much more than the NHCE.

If you are a HCE and contribute more than the maximum allowed, then you could be subject to a refund or the company might have to make contributions into the NHCE accounts.
This test is a little different, in that it is always conducted for the upcoming year. The numbers used are from 12/31/12 to determine if you are Top-Heavy for 2013.

Key Employees cannot control more than 60% of the entire plan’s assets. If they do, the company will have to make up to a maximum of a 3% non-elective contribution to any eligible employee of the company—even those who aren’t participating in the plan.

How do I make sure I’m abiding by the rules?

You need to make sure you are getting the proper guidance from your retirement provider. You also need to take ownership of your plan. Additional Plan Data forms are extremely important, because things change from year to year. It’s important to have the most up-to-date information so that your retirement provider can correctly conduct your testing.

GMS, as a PEO company, is able to offer clients our 401(k) plan. We assist with administering the testing. Instead of just handing you the results, we will go over them and provide advice. Every company is in a different situation.

Are you getting the right guidance on your 401(k) plan?

“Numbers and Finance,” © 2011 Ken Teegardin, used under a Creative Commons Attribution-Share Alike 2.0 Generic License.
My two older boys, ages 9 and 10, are playing ‘kid pitch’ baseball this year. Believe it or not, when I asked them what position they wanted to play, they both said “Dad, I want to be the pitcher”.

Then we asked each player on the team what position they wanted to play and each and every player said “Pitcher”. On paper this is not strange, as this is the most glorified position in baseball. After all, they make the most money, get the most publicity (when they are good), and seem to have the biggest fan base.

The other coaches and I talked to our 13-man roster about how important every position is on the team and how every position contributes to the overall goal. We teach them that they all have to play together to win.

This conversation made me think of a business and all the “players” within a company. I bet if you asked most employees, “If I could give you a new position, what would it be?”, a popular responses would be, “I want to be the manager, the president, or the owner.”

I am not downplaying the pitcher, the manager, the president, or the owner positions, as they are still important. But isn’t the baseball team just like a company, where that every position is important?
- Without Risk Managers – workers gets hurt and worker’s comp rates go through the roof.
- Without Payroll Employees – we have anarchy because no one gets paid.
- Without Tax Administrators – the IRS is knocking at the door (actually they don’t even knock, they just enter.)
- Without Sales People – there are no new customers.
- Without Benefits Administrators – no one has healthcare, 401K’s, or vision and dental insurance.
- Without Wellness Coordinators – people miss out on learning to improve their health choices.
- Without Human Resource Employees – you have a disheveled mess.
You get my point? Every business needs:
- Right, center, and left fielders
- Catchers and pitchers
- First, second, and third basemen
- Shortstops
- Teammates on the bench ready to play
- Fans
- Beloved mascots
- Coaches
- Umpires
No team is successful without all of these positions working together towards a unified goal. Isn’t the same true in business? Whenever everyone works together—bringing their special talents and experiences with them—games are won, and businesses grow.

“Trend Following Little League Team,” © 2012 Michael Covel, used under Creative Commons Attribution-Share Alike 2.0 Generic License.
If your employee injures a co-worker or customer while on the job, your company might be on the line.

Employers can face negligent hiring charges if a hiring decision results in an employee injuring or harming any person they come in contact with through the job. Not only can negligent hiring result in exorbitant financial costs, but it can also damage the organization’s reputation.

According to Clint Robison, a partner at Hinshaw & Culbertson, employers lose negligent hiring cases 75% of the time, and the average settlement of such claims is $1 million.

Negligent Hiring

There are many elements needed to form the basis of a legal action for negligent hiring or retention. They include:
- Existence of an employment relationship.
- Employee’s incompetence.
- Employer’s actual or constructive knowledge of such incompetence.
- Employee’s act or omission causing plaintiff’s injuries.
- Employer’s negligence in hiring or retaining the employee as the proximate cause of plaintiff’s injury.
Duty of Care and Foreseeability

The key standards assessed by the courts in a negligent hiring claim are duty of care and foreseeability.

Duty of Care

For the employer, there is “the requirement to act toward employees and the public with reasonable watchfulness, attention, caution, and prudence as dictated by the circumstances. If an employer’s actions do not meet this standard of care, then the acts could be considered negligent, and any damages resulting may be claimed in a lawsuit for negligence”.

The courts commonly assess two things when determining an employer’s duty of care:
1. Does the employer owe a duty of care?
2. How much care does the employer owe?
Employers are expected to take reasonable care .The level of care depends on the nature of the job and the severity of the risk to third parties.

Foreseeability

An act is reasonably foreseeable if the employer knew or should have known that the employee had a propensity to engage in similar criminal, wrongful, or dangerous conduct.

Negligent Hiring Cases: Employer Found Guilty

There are vast amounts of negligent hiring cases in which the employer was found guilty.
- A vacuum cleaner manufacturer was found liable for $45,000 because one of its distributors hired a door-to-door salesperson with a criminal record who raped a female customer in her home. (McLean v. Kirby Co.)
Compliance with the EEOC

Employers should demonstrate due diligence and the duty of care by performing background checks on potential employees. Criminal background checks can be used as tools for employers to determine foreseeability with regard to employment decisions.

However, the Creative Commons Attribution 2.0 Generic license.
The Affordable Care Act is in full swing.

“Now what?”

I think I’ve heard that question from business owners a million times in the past few weeks.

The Patient Protection and Affordable Care Act(PPACA or “Obamacare,” as it’s commonly known) means big changes for small businesses.

Recently, Governor Kasich decided that, despite his initial opposition to the Affordable Care Act, he is going to accept the expansion of Medicaid allowed under that law. He reasons that this will extend insurance to 366,000 uninsured Ohioans while forcing the federal government to pick up the cost— rather than small businesses in Ohio picking up the tab.

It’s true that this will open the spigot for $1.4 billion of federal funds to flood the Ohio program. But does anyone really believe this will not impact residents and businesses in our state?

Potential Benefits

A recent article in Crain’s Cleveland Business — “Expansion of Medicaid could help employers” (subscriber’s ink) — reports that the Greater Cleveland Partnership has thrown its considerable support behind this. They believe that this will allow small businesses to shift low-wage workers to Medicaid, effectively lowering the cost of their healthcare plans. It was this very idea that made government-backed health insurance appealing to many small business owners.

The benefits of the Medicaid provision in the Affordable Care Act are:
- The federal government will pick up the full cost of this expansion for the first three years, followed by 95% of the cost and eventually 90%.
- It will allow low-income employees to opt out of an employer-sponsored plan to go to a “no-cost” (to them) Medicaid plan.
- Employers would then be off the hook for any kind of penalties associated with a lack of insurance coverage.
Governor Kasich has stated that if the government doesn’t follow through on their promise, he will back out of the plan.

Questions Remain

In that same article, despite its initial support of the expansion, the Ohio Chamber of Commerce says it still has “serious concerns” about the long-term financial stability of the program.

Is anyone else confused?

Everyone seems to be hedging their bets, and at this point there are more questions than answers.

It boils down to this: eight months after the Supreme Court upheld the healthcare overhaul law, small businesses in Ohio and across the country are no less certain about how all of this impacts them and their companies.

This uncertainty, coupled with a challenging economy, means small business owners still have to assess their options in an uncertain market. They may not have the luxury of having a Benefits Department to advise on what’s right for them. That’s why more and more small businesses are turning to outside help for their employee benefits administration. More companies are relying on PEO companies to navigate these murky waters.

What do you think about the Medicaid expansion? Tell us about it below!

“Providence Seaside Hospital in Seaside, Oregon.” ©2010 M.O. Stevens, used under a GNU Free Documentation license.
We’ve all been affected by cancer.

Each year, 12.7 million people will learn they have cancer. Cancer impacts all of our lives; our friends’ lives, our families’ lives.

What if there was something you could personally do to help?

Help Prevent Cancer

The American Cancer Society is seeking participants for a study called the Cancer Prevention Study-3 (CPS-3). The CPS-3 study is looking to enroll adults between 30 and 65 years old who have never been diagnosed with cancer. The study won’t take up too much of your time, but will make a huge difference in cancer research.

Together we can stop cancer.

I am a member of the board of the Northeast Ohio Chapter of the American Cancer Society.
If my mom only knew.

When I was younger, my parents would encourage (mandate) that I help them in the family garden out back. However, that really cut into my wiffle ball playing/tree-climbing/insect-torturing summertime. I came up with every excuse in the book to get out of it. I was told it was good exercise and that the vegetables we grew were healthier and better for me than anything we bought at the grocery store. I didn’t care. I was a kid. I hated vegetables.

Now we appear to have come full circle. Not only are gardens making appearances in the suburbs, they’re also starting to dot cityscapes and in a surprising twist, corporate campuses.

Four years ago, GMS built ten “garden blocks.” Any employee who wanted to take part in gardening was assigned to one of five teams. Each team could grow anything they wanted to in the garden (provided it was legal.) GMS would provide the soil and the water, and Mother Nature would provide the sunlight. The rest was up to the team members. Anything we grew, we could keep.

Needless to say, most of us didn’t have a whole lot of gardening experience. But we learned. We worked together, and each year, the garden got better.

And special things happened along the way.

Team members who worked in different departments got to know each other outside of work. We worked together to strategize what vegetables would give us the best yield and what could we do with those vegetables. We got to work out in the sunshine, and we started eating a little better.

Turns out, we were ahead of the trend. A recent article on workforce.com reports that more and more companies are creating gardens as opportunities for team-building, morale-shifting, and overall wellness promotion.

A few weeks ago, I wrote about the importance of a good wellness program for employers looking to keep their healthcare costs low. At-work gardening may not be the end-all, but it’s an inexpensive way to start.

You can grow more than vegetables. You can cultivate teamwork.
I got a call last week from a client who has only been with us for a few months. He started back in July of 2012 and just received his first few invoices from the new year. He was pretty upset that his state unemployment tax had gone up substantially compared to November and December. Being in the payroll business for about 20 years, and with this being about the tenth of these calls I’ve taken in January, I knew where this conversation was going to lead.

The first question I ask is “Did you know about the State Unemployment Tax Authority (SUTA) wage cap?” In Ohio, the employer is only charged SUTA tax on the first $9,000 in earnings for each employee.

In his case, all of his employees had earned that much by September. Except for his one new hire in October, his employees had already capped out and met the wage limit. In November and December he was only paying tax on one employee. In January, everyone starts from ground zero and is taxed until they reach that $9,000 limit again.

The second thing we discussed was the number of claims he had back in 2010 and 2011. Yes…those claims stick with you for eternity. It’s like your bank account: once you write that check, the money is gone.

I reviewed the list of claims from JP, our claims administrator. 2010 was a bad year for our client, as it was for almost everyone, and he had to lay off four employees. Our client told me that he brought them back to work after about eight months. But by then, then the damage was already done. He had just under $20,000 charged to his unemployment account. His unemployment rate went up in 2010 from 3.2% to 7% in 2013.

Out client also mentioned something that really bothered me. He said that someone filed a claim, but he didn’t have time to fight it, so he let it go through. That was in 2011, and that claim had hit his account for $4000, and was still coming out. Because you only have 21 days to appeal a claim, he was out of luck.

Now that he’s with GMS, he doesn’t have to worry about this. We take care of managing the claim from start to finish, with a minimal amount of his time.

Do you know what your rate is? Do you know why it’s 3% or 8%? Do you know what your cost will be in 2013? Have you heard about the proposed federal legislation changed for 2014?

Check back on our blog for a follow-up post on these topics, and share your thoughts in the comments below.

“Finding Company Tax ID,” © 2010 Calita Kabir, used under the Creative Commons Attribution-ShareAlike 2.0 Generic license.
I got a call last week from a client who has only been with us for a few months. He started back in July of 2012 and just received his first few invoices from the new year. He was pretty upset that his state unemployment tax had gone up substantially compared to November and December. Being in the payroll business for about 20 years, and with this being about the tenth of these calls I’ve taken in January, I knew where this conversation was going to lead.

The first question I ask is “Did you know about the State Unemployment Tax Authority (SUTA) wage cap?” In Ohio, the employer is only charged SUTA tax on the first $9,000 in earnings for each employee.

In his case, all of his employees had earned that much by September. Except for his one new hire in October, his employees had already capped out and met the wage limit. In November and December he was only paying tax on one employee. In January, everyone starts from ground zero and is taxed until they reach that $9,000 limit again.

The second thing we discussed was the number of claims he had back in 2010 and 2011. Yes…those claims stick with you for eternity. It’s like your bank account: once you write that check, the money is gone.

I reviewed the list of claims from JP, our claims administrator. 2010 was a bad year for our client, as it was for almost everyone, and he had to lay off four employees. Our client told me that he brought them back to work after about eight months. But by then, then the damage was already done. He had just under $20,000 charged to his unemployment account. His unemployment rate went up in 2010 from 3.2% to 7% in 2013.

Out client also mentioned something that really bothered me. He said that someone filed a claim, but he didn’t have time to fight it, so he let it go through. That was in 2011, and that claim had hit his account for $4000, and was still coming out. Because you only have 21 days to appeal a claim, he was out of luck.

Now that he’s with GMS, he doesn’t have to worry about this. We take care of managing the claim from start to finish, with a minimal amount of his time.

Do you know what your rate is? Do you know why it’s 3% or 8%? Do you know what your cost will be in 2013? Have you heard about the proposed federal legislation changed for 2014?

Check back on our blog for a follow-up post on these topics, and share your thoughts in the comments below.

“Finding Company Tax ID,” © 2010 Calita Kabir, used under the Creative Commons Attribution-ShareAlike 2.0 Generic license.
Do any of these sound familiar?
- Losing good employees to competitors.
- A cranky work environment.
- Excessive workplace injuries.
- Out-of-control healthcare costs.
- Ridiculously high unemployment insurance costs.
If you’ve been dealing with any of these issues, no doubt you’ve come to the conclusion that HR is more than just a luxury enjoyed at big corporations. HR is a necessity for small and medium-sized businesses, too.

It’s possible that you have HR problems. What are you going to do?

HR Outsourcing

You’ve heard about HR outsourcing, but maybe you don’t know what it entails or how to learn more about it. How can you tell if it is right for your company?

You’ve heard about Professional Employer Organizations (PEO). But maybe it sounds a little shaky since you don’t know of anyone who’s using a PEO. How popular are PEOs?

You might be surprised.

The HR outsourcing industry has grown from $61 billion in 2002 to $103 billion in 2007 and is projected to grow to $162 billion in 2015. The largest chunk of that is the PEO industry.

Professional Employer Organizations (PEO)

PEOs work with small businesses to help reduce time and cost when it comes to the things that an HR department would do at a large company. If you walked into a large corporation with thousands of employees and asked to see their HR department, what do you think you would see? The department would include a payroll department, a benefits department, a risk management department and actual HR manager or department. You might even find a wellness department to work hand-in-hand with the benefits department.

These huge companies have tons of money to throw at problems and lots of high-priced attorneys to get them out of trouble. Yet they still keep all of these departments active. They know how important HR can be.

Big corporations realize they need HR departments. It’s even more crucial that small businesses understand that they should have access to these essential HR services.

Specializing in Small Business HR

Not all small businesses have the means or the resources to keep all of these HR departments in-house, and that’s when they should begin looking at outsourcing their HR.

A small business is already probably outsourcing their payroll, their benefits and their Worker’s Comp administration to different companies. All of those departments need to be able to share information with each other. If you can have one vendor do all of that for you, allowing you to focus on growing your business, wouldn’t you? What if you could do that while saving money as well? What if in addition to saving money, you could also offload a lot of your tax and employee liability in the process? Can you see why this industry is growing?

What about compliancy issues? In the last five years, have you seen an increase or a decrease in the amount of regulations imposed on your business? What about the Affordable Care Act? Do you need to be compliant? If not now, will you someday? What does that mean to you? Do you know who to turn to find out?

There are tons of HR questions that small businesses have, and PEOs—like GMS—have the answers. Ask us anything.

***

“Footbridge to Canary Wharf,” © 2008 Stephen McKay, used under Creative Commons Attribution-Share Alike 2.0 Generic License.
Once you’ve hired your employees, it’s important to keep them happy on the team. In addition to the cost benefits of employment continuity, there are also morale and productivity benefits.

Now that you’ve got great workers, how do you keep them?
- Train your managers.
  Much of the time, employees do not leave organizations—they leave managers. You may have excellent managers that can perform many functions of the job, but if you don’t have a manager in place that knows how to effectively manage, motivate and treat employees fairly, you will face employee dissatisfaction and turnover.
- Offer extrinsic and intrinsic rewards.
  Yes, you need to make sure that pay, benefits and bonuses are equitable within your geographic area and industry (extrinsic reward). But when employees are motivated only by financial incentives, they tend to focus more on the financial reward than doing good work. Employees don’t stay just for the pay. They also need to know that their work makes a positive difference to the goals of the company, their managers, customers and fellow employees (intrinsic reward).
- Consider company culture during the hiring process.
  A candidate may possess all the skills necessary to perform the job, but if they are not a good fit with your company culture and fellow employees, they are not a good fit for the company. Hiring them anyway will result in increased turnover.
- Promote from within.
  When employees are given the opportunity to create a career path within their company, they are motivated to stay. However, if good, qualified employees are passed over for promotions or desired lateral moves, they will leave and go to a company that will recognize and reward their efforts.
- Use satisfaction surveys and foster engagement.
  Ask your employees what’s important to them, what’s working and what’s not. Yes, in some instances you may open for the door for negative feedback, but the majority of employees will appreciate that you care what they think. After all, they are performing the job every day and can give you the best feedback and offer great suggestions for improvements or changes.
- Give frequent feedback.
  Don’t wait until review time to give feedback. Your employees want to know how they are doing and how they can improve their performance. Don’t be negative. Give clear examples and specific tactics they can use to improve their performance. Set goals together. Engage your employees by asking what they can do to resolve any performance issues. Don’t forget to give positive feedback to those who are doing a good job. Nobody wants to hear about their performance from their manager only when it is negative.
- Encourage executive conversations.
  Employees want to hear from executive level management about what’s happening in the company—the good and the bad. Did you have a really good year? Let your employees know and thank them for their part in it that success. Take time to share your goals for the future of your company with your employees. Help them to have a clear understanding of their role in meeting these goals. If there are major changes in your organization, your employees need to hear that from you. Changes can often cause fear and stress. You need to address these changes and alleviate your employees’ concerns.
- Recognize employee successes.
  Appreciation is a fundamental human need. This is one of the most important factors in employee motivation and retention. Employees need to feel connected to their organization and know that their work matters. Recognition does not have to be complicated. If an employee is consistently doing a great job or excelling on a particular project, let them know. Send an e-mail, write a letter. Even a high five and “great job!” from you can mean a lot. Be specific when you express your recognition. This can be especially influential when it comes from top management.
- Offer autonomy.
  Employees want to have direction from their manager, but they also value a certain degree of autonomy in their jobs. Employees need a clear job description, and their manger must clearly express what their expectations are from an employee for their overall performance and day to day responsibilities. With this clarity, an employee can direct their work flow and performance without being micromanaged. The employee can take ownership of their role and responsibility for their own performance.
- Facilitate teamwork.
  People spend a large majority of their time at work and with their fellow employees. It is important to build strong, functional, well-led teams. Successful teams communicate, are respectful of other team members, and are focused and committed to their organization and to achieving goals. Good teamwork facilitates positive relationships with fellow coworkers. It helps bond them together as they work to achieve common goals—an important factor in retaining employees.
***

Your employees are the backbone of your company. If your employees are happy, it will show in their performance—and it will be one the most important factors in retaining your customers and increasing the overall profitability of your organization.

***

Check out Part I of this series: Employee Retention: What Does Employee Turnover Cost?

***

“Happy Coffee,” © 2012 Jim Wolffman, used under a Creative Commons Attribution 2.0 Generic license.

Why is plan nondiscrimination testing important?

How does 401(k) testing work?

What do the tests entail?

How do I make sure I’m abiding by the rules?

Negligent Hiring

Duty of Care and Foreseeability

Duty of Care

Foreseeability

Negligent Hiring Cases: Employer Found Guilty

Compliance with the EEOC

Potential Benefits

Questions Remain

Help Prevent Cancer

HR Outsourcing

Professional Employer Organizations (PEO)

Specializing in Small Business HR

Now that you’ve got great workers, how do you keep them?