With the answers below in mind, see who should form a captive.

The 10 Questions

Do I need tax deferral and conversion strategies?
Underlying the captive transaction is the ability to defer the recognition of income and then convert ordinary income into a capital gain when the captive is liquidated or sold.  It’s not unheard of to lower annual taxes due by $250,000/year with a captive program

Have I started an asset protection or estate plan?
A captive insurance plan is often part of a larger asset protection or estate plan.  If you haven’t begun either of these, you should, and then fit the captive into one or the other.  If you have started either (or both), the captive can still play an integral part in both.

Has there been a problem with one of my existing property and casualty insurance plans…
that is, have I had a difficult time getting a claim paid, or have I have a hard time reaching my agent, or have I found the service to be lacking?  If you’ve had a problem with a policy or with your current insurance provider, forming your own insurance company would solve those problems.

Do my current policies cover all my risks?
Are there upper limits on my coverage that I would like to raise?  Even if you have an insurance policy, it’s likely that there are big gaps.  For example – do your current policies have cyber risk coverage?  This is a fairly common exemption.  Or, how much insurance do you really have for big areas of risk?  These are critical questions you need to ask when thinking about a captive program.

Am I able to actually negotiate the coverage terms with my current insurance carrier, or, do they hand me a policy to sign?
Writing your own insurance contract is a tremendous advantage, as it allows you to add the policy provisions you want.

Have I seen my insurance prices increase?
Captives can provide stable pricing – meaning when the market for a particular line of insurance increases, a captive’s may not, depending on the experience of the parent company.

Am I willing to add another set of corporate responsibilities to my schedule?
Remember – you’re starting another business.  That means you now have additional corporate responsibilities to undertake – more reports to read, another set of corporate meetings to hold, etc..  Are you willing to engage in this?

Am I comfortable placing money into a business enterprise for an extended period of time?
All captives require original capital and surplus to pay claims. These payments come from the insured.  In addition, the captive can’t do anything to jeopardize its financial position.  So, after placing capital into the captive, you have to leave it there.  Are you financially able to do this?

Am I committed to lowering the cost of my risk?
Central to the idea of forming a captive insurance company is the understanding that the insured is going into the insurance business.  As such, are you ready to undertake risk minimization strategies?  For example, if your captive underwrites a cyber risk policy, are you willing to purchase anti-hacking services from third party venders?

Am I committed to a long-term business plan?
That is, am I willing to see this through for at least 3-5 years?  Captives require a long-term commitment; you can’t simply start one and then end it a year later.  At minimum, you need to commit to a 3-5 year time period to get the full benefit of a captive.

If you’ve answered each of these questions and think joining a captive would be a smart move for you and your business, contact one of our Captive Specialists at Warren G. Bender Co.  – 916-380-5300

Overview

Heat and humidity can cause several different types of heat-related illnesses such as heat cramps, heat exhaustion and heat stroke. Knowing the signs and symptoms of each type of heat-related illness will help to keep you safe on the job. Normally, the body has ways of keeping itself cool by allowing heat to escape through the skin and evaporating sweat (perspiration). However, if the body does not cool down properly or does not cool down enough, a person may suffer a heat-related illness. Anyone is susceptible to a heat-related illness, but the very young and elderly are at the greatest risk. Beyond that, heat-related illnesses can become serious or even deadly if unattended.

Types of Heat-Related Emergencies

These are three types of heat-related emergencies: Heat Cramps are muscular pains and spasms caused by heavy exertion. This is generally the result of a loss of water and salt through sweating. Heat Exhaustion is caused by fluid loss and decreased blood flow to your vital organs. This condition can produce flu-like symptoms. Heat Stroke is the most serious heat-related emergency and occurs when the body’s internal cooling system has failed. This is a life-threatening condition requiring immediate and aggressive action. The chart on the following page provides information about the various signs and symptoms of the three main types of heat-related illnesses.

The Heat Index

The heat index is a method that combines air temperature and relative humidity to determine an apparent temperature or in other words, how hot it actually feels outside. The human body normally cools itself through perspiration (or sweating), when the water in sweat evaporates and carries heat away from the body. However, when the relative humidity is high, the evaporation rate of the water is reduced. This means that heat is removed from the body at a lower rate, causing it to retain more heat than it would in dry air. The heat index is important to know especially when doing physical work outdoors, as higher combinations of heat and humidity can make the body more susceptible to heat-related illnesses.

Preventing Heat-Related Emergencies

Know the signs and symptoms of the various types of heat-related illnesses. Take time to monitor yourself and be aware of your co-workers. If working outdoors, avoid long periods of direct sunlight. Use cooling fans to keep air circulating around your body. This helps aid your natural cooling process. Wear lightweight, light-colored and loose-fitting clothes when working in warm and humid environments. Drink primarily non-caffeinated fluids. Caffeine actually works against you because it is a diuretic and will cause you to lose more fluids than you are ingesting. Drinking water or other electrolyte products are best. Never wait until you feel thirsty to start hydrating – you are well on your way to becoming dehydrated when you feel thirsty. It is critical to your overall health to stay properly hydrated, especially when working in hot and humid environments.

BACKGROUND

OSHA has recently received a number of reports of temporary workers suffering fatal injuries during their first days on the job. In some cases, employee deaths were caused by the employer’s failure to provide safety training or adequately address the hazards present. In other situations, workers were not protected from serious workplace hazards due to lack of personal protective equipment when working with hazardous chemicals and lack of lockout/tagout protections, as well as other problems.
Due to the number of temporary workers and the recent high profile fatal incidents, OSHA is increasing enforcement, outreach and training to protect temporary workers from workplace hazards. This increased focus on temporary workers will mean additional scrutiny for employers that are undergoing inspections or investigations.

TEMPORARY WORKERS

A temporary worker is broadly defined as an individual who receives his or her wages from a temporary agency or works under a structure similar to the relationship between a host employer and a staffing agency, regardless of whether the job he or she is performing is temporary.

HEIGHTENED SCRUTINY FOR EMPLOYERS

Employers have a duty to provide necessary safety and health training to all workers regarding workplace hazards. To ensure that employers are meeting their responsibilities, CSHOs will review during inspections and investigations whether any employees are temporary workers and whether those workers are exposed to any violative conditions. CSHOs will also assess whether the temporary workers have received required training in both a language and vocabulary they understand.

If the CSHO encounters temporary workers during the course of an inspection, the following information should be documented:
•    The name of the agency that provided the temporary workers to the host employer;
•    The agency’s location; and
•    The extent to which the temporary workers are supervised on a day-to-day basis, either by the host employer or the staffing agency.

CSHOs will use a new code to report employers that place their temporary workers in a vulnerable position by exposing them to workplace hazards in violation of existing safety standards. This specific code will assist OSHA in identifying and assisting temporary workers.

1.    For buildings below the base flood elevation, Congress has instructed the Federal Emergency Management Agency (FEMA) to stop giving premium discounts, even if these properties were up to code when they were built. If this applies to your property, you’ll likely see a spike in your premiums.

2.    Subsidized insurance rates will be phased out, meaning there will no longer be subsidized rates for newly purchased property, property where NFIP coverage was deliberately allowed to lapse, and properties receiving an offer of mitigation assistance following a major disaster, or in connection with a repetitive property loss.

In January, NFIP premiums increased across the board due to these changes.

If you were affected by Hurricane Sandy or any other storm, understanding these provisions in the Biggert-Waters Act is important as you make decisions about how to rebuild or repair your home. FEMA may require a higher level of elevation for built-up properties going forward, and it’s encouraging property owners to consider flood insurance costs when making decisions about how high to rebuild.

For more information about the Biggert-Waters Flood Insurance Act, contact Warren G. Bender Co today.

Industry experts speculate that the ACA will have the greatest direct impact on medical malpractice liability insurance and workers’ compensation coverages—but whether the changes will result in higher or lower rates is still an ongoing debate.

In theory, as more people gain access to health care, the number of medical malpractice liability lawsuits could decrease because patients will be able to receive earlier treatment for medical problems, leading to better health outcomes.

Similarly, as more workers have access to health care, workers’ compensation (WC) rates may also decrease.

Alternatively, some analysts express concerns that the influx of newly covered patients could exacerbate existing staffing shortages and stretch doctors and nurses too thin. This could result in a higher frequency of medical errors and potentially increase the amount of time workers must wait to receive treatment—ultimately leading to higher rates.

Drivers are four times as likely to crash when using a cell phone, even when the device is hands-free. In fact, more than 1.6 million car crashes are caused by cell phone use every year. Driver distractions, such as cell phone use, are a leading factor in fatal and serious injury crashes, and that’s why the National Safety Council has designated April as Distracted Driving Awareness Month.

It is often assumed that the brain can handle two tasks at once, but it is simply not true. Our brains process one task at a time. Driving while distracted forces the brain to constantly shift focus from one task to another. A distraction of even a few seconds can be the difference between a tragedy and a near miss.

Make a concerted effort to put the cell phone away when you are on the road this month and encourage your loved ones to do the same. Doing so will help make the road a safer place for everyone.

It was over 500 years ago when ship owners in London met in a Lloyd’s coffee shop to write down their names and value of their cargo. These were the first private agreements to share risks associated with shipping fleets. By the 1800’s, New England textile manufacturers formed a group to share risks due to high fire insurance rates, and in the early 1900’s, the Episcopal Church formed the Church Insurance Company to cover risks associated with member churches.

By the 1960s, there were approximately 100 captive insurance companies, with Bermuda and the Cayman Islands emerging as global financial centers. By the end of the 80s, approximately 1000 captives were operating, nearly all formed and domiciled outside the U.S.

Over the last 30 years, there has been significant growth in the captive market. Today, there are over 5,000 captives worldwide (according to A.M. Best) and while Bermuda and the  Cayman Islands have historically been the most popular domiciles for captive formations, Vermont is the leading U.S. domicile, with over 30 other U.S. states creating their own captive domicile.

Today, there are numerous Group Captive arrangements (a Group Captive is owned by multiple, non-related, like minded organizations, and is designed to insure the risks of these different entities) available for midsize companies to consider.
As a long term strategy to managing your insurance program, there are a number of things to consider and here are just a few of those questions to ask yourself:
-Do I feel our company is overpaying for its insurance?
-Does our company consistently have control of its claims and reserves?
-Is our Safety and Risk Management Program best in class?
-Would I consider some risk for a significant reward?

For most, the long term reduction in their insurance costs was the primary motivator when entering into a captive. While cost of insurance was paramount, companies choose to enter into, and have remained in, a captive because of all of the benefits, including long term control of their insurance program.

If you would like to learn more about captives and to see if a captive is right for your company, contact Bender Alternative Solutions.

-Create a zero-tolerance workplace bullying policy, and enforce it
-Create awareness about bullying with employee training and campaigns
-Train managers on how to effectively respond to bullying complaints
Warren G. Bender Co has a variety of materials, including sample policies and posters, to educate employees on workplace bullying.

A large part of the confusion, however, is surrounding what has not yet been implemented.  For example, the individual and group health insurance mandates are regularly being discussed by employers, who know that they’ll be taking effect in 2014.  Companies of various sizes are still trying to get their head around what they will be required to do.  Most have heard of the mandate to insure their employees or pay the tax (The Pay or Play Mandate), however, many are unsure of whether this mandate applies to their company or not.

Let us bring some clarity:  First of all, if you have less than 50 employees (part time and full time combined), you will not be required to offer coverage to your employees or pay the taxes/fines associated with not offering coverage.  If you have 50 or more full time employees (those who work 30 or more hours per week), you will be required to offer coverage or pay the taxes/fines. Of course if you do offer a plan, you’ll be required to offer the essential benefits (defined by the government) and not require employees to pay more than 9 ½% of their income in order to avoid the $3,000 fine (per employee who successfully applies for subsidies).

This leaves all of the employers who employ less than 50 full time employees but more than 50 total employees.  That is when you have to become familiar with the phrase “Full Time Equivalent”.  For example, an employer who has 100 employees, with 60 part time employees (who average 20 hours per week) and 40 full time employees will be required to comply based on having over 50 employees (when counting both full time and full time equivalent employees – the hours of the part time employees are aggregated to determine full time equivalent employees).  However, when the taxes/fines are assessed, they are calculated based on the number of full time employees.  So, an employer with 20 full time employees and 250 part time employees may be required to comply, but there isn’t a tax/fine to enforce them to have a plan (due to the fact that the government doesn’t charge for the first 30 full time employees).  If you will be required to “Pay or Play” and don’t know how to calculate your potential penalty, Warren G. Bender Co. can you help you with this.

When it comes to the individual (your employee), only those with special exemption status (such as a religious exemption) will be able to escape the mandate to have coverage or pay the penalty.  The penalties established by the government are as follows:

-In 2014, 1% of the household income or $95, whichever is greater
-In 2015, 2% of the household income or $325, whichever is greater
-In 2016, 1% of the household income or $695, whichever is greater
-2017 and subsequent… it goes up from there.

Know that individuals who have incomes that qualify for the subsidies will be able to reduce their overall expense on a sliding scale basis (the more they make the less they’ll be eligible for in subsidies).  As it stands now, a family of 4 can be eligible for subsidies, even if they make $90,000 a year (it is based on eligibility up to 400% of the federal poverty level).  To access the subsidies, they’ll be required to complete the 21 page exchange application through Covered California.  The enrollment period for the exchange, in 2014, will be between October and March.  If an individual misses that enrollment period, they will be forced to wait until 2015 unless they have an eligible qualifying event.  Since medical underwriting will be removed as of 1/1/2014, prepare for individual rates to look worse than the group rates (after all, if you are an insurance company and you can provide a rate for a group of individuals or just one, you are going to have a better spread of risk with the group when you are unable to underwrite the individual).

With all the “mandating” going on, we’ll keep you posted with more changes as they come.  Keep checking in to the Bender Benefits Blog as we cover many more important topics.