ATTRACT & RETAIN EMPLOYEES — Strive to be a "Best" Company
 S.
HAYES MACARTHUR
DIRECTOR, HUMAN RESOURCES & HUMAN RESOURCES CONSULTING GROUP
A few months ago I was invited to
speak on the topic of career choices
for business majors at a local
university. When delivering this
presentation I often reflect on my
own career decisions. Nearly six
months before my graduation I
went to the library to research over
30 local companies. I wanted to
work for the best company possible, so I classified my top choices into
a "Best" category based on reputation in the community, stability of the
industry, commitment to employees and room for growth and
advancement. I produced approximately 15 letters on my early model
word processor and mailed each "A" company a personalized note and
resume. A few interviews and a few rejection letters later I landed my
first job.
Today, although some students may research companies, many students
post their resumes on Internet based "job boards" and wait for
prospective employers to contact them. Few collegiate job seekers will
actually pick up five different newspapers and spend Sunday afternoon
browsing through all of the job opportunity advertisements. Fewer still
will go to the library or review a full prospectus to identify their own
"best" companies. Job seekers with a few years of experience will go
onto Internet job boards such as Monster.com and Hotjobs.com and
plug in key words to see what jobs might be available. Within five
minutes and with a few clicks these individuals can send out a cookie
cutter letter and resume to 20 companies. These job boards even allow
job seekers to set up search agents so that they will be
contacted every time a particular position is posted.
Others can post their resume on one of the job boards
and let technology do the work.
I recently spoke with a job seeker who had posted his
resume on the Internet. I was amazed to learn that he
had been contacted by 28 other companies and/or
headhunters in the three days following the posting of
his resume. Another job seeker admitted that he
contacted a headhunter when he decided that he wanted
a new job. The headhunter wrote his cover letter,
drafted his resume and then arranged four interviews
for the following day. When I inquired how he would
evaluate the different opportunities, he said that he
would choose the "best" company based on his own set
of important criteria, just as I had for my first job.
Technology and the growing number of recruiting
services have definitely changed both the way
candidates learn of new job opportunities and the way
that employers locate candidates. Years ago it would
have been taboo to leave your employer in fewer than
seven years, but today it is acceptable to change jobs
every two to three years. Both employers and
employees are less loyal and the information to assist
an individual to learn of a new opportunity is only a
few keystrokes away or already knocking on your front
door. Earlier this week, I received a junk e-mail that
promised to "Give you the ammunition to negotiate
your biggest raise ever." Another e-mail outlined "25
executive positions in your city." Last week I received
a phone call from a headhunter promising a senior level auditing job.
He did not even bother to ask if I was an accountant.
Every prospective employer must strive to be a best company and one
that offers the best jobs. It is just as important to be a company whose
employees would like to continue working for. I have found that
individuals evaluating new jobs use similar criteria to evaluate their
current employer as well. Companies that want to be a place whre
employees want to work should pay particular attention to:
advancement opportunity, work & life balance, inclusion in decisions,
management effectiveness, communication and job satisfaction.
Companies can offer Advancement Opportunity
by creating formal career paths that outline three to five year
growth supported by a learning environment. Management must be clear
about job expectations for both prospective employees and current
employees, and performance and progress must be formally monitored.
Work & Life Balance practices vary
from industry to industry and company to company, and can be as
simple as creating fair time off practices and rules. A manager
who leads by example and solicits employees for suggestions will
have employees that are more loyal. Enabling employees to have some
control over when, where and how they perform their jobs, for example,
could be the difference between an employee who is happy and one
who is looking for a new job.
The best companies to work for have practices that prove all employees
are valued and able to participate in decision-making. Inclusion
practices could be as simple as having an employee suggestion box
or maybe an employee suggestion committee. Employees who contribute
to the decision making process are much more likely to support those
decisions.
Management Effectiveness is important
to both attracting and retaining employees. Both prospective and
current employees want to work for managers that set clear expectations
and objectives and those who know how to deliver feedback. With
daily newspaper headlines highlighting corporate fraud and illegal
activities, companies that promote corporate integrity throughout
management will be where people want to work.
In addition to Communicating company
goals, news, etc. employers should show how their employees' jobs
connect with company goals. Employees who understand how their individual
roles contribute to the bottom line are generally more committed
to both those goals and the overall company mission. Communication
is much more than giving employees information; listening to employees'
suggestions and giving feedback is an important part of the relationship.
Job Satisfaction is not only dependent
upon competitive compensation and benefits; it is also contingent
upon less monetary aspects of employment. Employees who are given
challenging work, assuming they have been provided with the adequate
tools and training, will
be more satisfied than those who have
been assigned routine and mundane tasks.
Perhaps the most important aspect of job
satisfaction, not to mention the cheapest,
is recognition given for an individual's
contributions. Unfortunately, too many
employers fail to adequately recognize
employees for their efforts.
Employers who want to be recognized as
the best places to work need to implement
and maintain best practices. Best
practices such as the ones mentioned
above are not expensive to implement and
maintain. In fact, many are simply
common sense management principals
that require zero or little monetary
investment. Both existing employees and
prospective employees will certainly
recognize organizations that are
committed to being a best place to work. |
HEALTH SAVINGS ACCOUNTS — A Win-Win Situation for Employer
and Employees
 ALLYSON
J. MILBROD CPA
SENIOR TAX MANAGER
As healthcare costs increase,
employers are looking for
ways to cut costs and
employees are becoming dissatisfied with
diminishing health insurance benefits. The
newly enacted Health Savings Accounts
provisions (HSAs) may be able to strike a
balance.
What is an HSA in a Nutshell?
HSAs were introduced as part of the Medicare
Prescription Drug, Improvement, and Modernization Act
of 2003, effective January 1, 2004. An HSA works very
much like an IRA, except you use the money you
contribute to pay healthcare costs. To qualify, participants
must enroll in a relatively inexpensive, high-deductible
health insurance plan. Once qualified, a tax-deductible
savings account can be opened to cover current and future
medical expenses. The money deposited in the savings
account, as well as the earnings on it, are tax-deferred.
You may withdraw the money as needed, tax-free, to
cover qualified medical expenses. Unused balances in
HSAs roll over from year to year.
Setting Up the HSA & Making Contributions
Before establishing the HSA, the employer must have a high-deductible
health insurance policy (HDHP) that qualifies to be partnered with
the account. A HDHP is a health plan that:
- has an annual deductible
which is not less than
- $ 1,000 for self-only coverage and
- $ 2,000 for family coverage (the minimum is $ 1,000 for individuals
and $2,000 for families) and
- the sum of the annual deductible
and other annual out-of-pocket expenses required to be paid under
the plan for covered benefits does not exceed:
- $5,000 for self-only
coverage, and
- $10,200 for family coverage.
This creates a savings opportunity for employers since health insurance
plans with higher deductibles typically cost less.
The employee then sets up an HSA account, similar to an IRA, and
makes his or her tax-deductible contributions. This relieves the employer
of its fiduciary responsibilities - again creating a cost saving opportunity.
The employee, the employer, or a combination of the two can fund
contributions to an HSA. The amount that can be contributed each year
is:
- the lesser of the annual deductible of the plan, or $2,650 for self-only
coverage; and
- the lesser of the annual deductible or $5,250 for family coverage.
Withdrawals from the HSA
As the employee incurs qualified
medical expenses, he or she will withdraw money from the account.
There is no "use it or lose it" requirement, which in turn, makes
the HSA desirable. The employee can continue to build a tax deferred
balance in the HSA account and it can be used as a retirement vehicle.
When the HSA was first introduced, it was restrictive as to the types
of medical expenses that would qualify for expenditures. In recent
months, the Internal Revenue Service has issued a number of notices
that have liberalized the types of expenses that will qualify. A complete
list of qualified medical expenses can be found in IRS Publication
502.
Tax-free distributions from the HSA can be made to pay for qualified
expenses of:
- the person covered by the HDHP
- the spouse of the individual
(even if not covered by the HDHP), and
- any dependent of the individual (even if not covered by the HDHP)
If distributions are not used for
qualified medical expenses,
- any amount will be included as income,
- and be subject to a 10% penalty
(unless the individual is over age
65 or disabled)
Death of Owner
Upon the death of an owner, the
HSA works similarly to an IRA. If the spouse is named as the beneficiary,
the spouse will become the owner and the HSA will continue. If anyone
other than the spouse is named as the beneficiary, the HSA will terminate
and the unused balance of the account will be taxable to the beneficiary.
HSAs can provide a cost saving alternative to both employer and employees.
There are advantages and disadvantages for both the employer and employee;
however, the advantages seem to outweigh the disadvantages. HSAs are
relatively new, but expected to grow in popularity in the coming years.
| Employer |
| Advantages |
Disadvantages |
High deductible
insurance cost is
less than traditional
health insurance.
Provides flexibility to
employees.
No fiduciary
responsibilities since
ERISA does not apply.
Can provide a match
through a cafeteria
plan similar to a
401(k)plan. |
Must contribute same
amount to all
employees who
participate. |
|
|
| Employee |
| Advantages |
Disadvantages |
Provides flexibility.
No "use it or lose" it
provisions.
Provides a lower cost
option for health
insurance.
Provides another
mechanism to defer
funds in a retirement
account. |
Limitation to types of
expenses.
Fiduciary responsibility
on employee. |
|
|
NET UNREALIZED APPRECIATION
 DANIEL J. GIBSON CPA, EA
Director
Special rules apply when a retirement plan's lump-sum distribution (LSD) is
composed in whole or in part of securities
of the employer corporation. Under these
rules, employees are not taxed on the net
unrealized appreciation (NUA) when the
securities are distributed directly to the
participant. NUA is defined as the excess
of the aggregate Fair Market Value (FMV)
of the securities on the distribution date
over the aggregate cost or other basis of
such securities to the plan.
If the securities are received directly by the
participant, the NUA portion is not taxable.
The amount that is included in income is
the FMV of the securities less the NUA
(normally, as ordinary income to the
employee if not rolled-over and subject to
the 10% penalty).
When employer securities are sold after
distribution, any gain realized is long-term
capital gain to the extent attributable to
NUA not taxed at the time of the LSD.
Any gain in excess of NUA is long- or
short-term capital gain depending on how
long the taxpayer holds the securities after
the LSD.
Rolling over part of an LSD does not
impact the favorable tax treatment allowed
for the NUA of employer stock retained by
the taxpayer. Thus, a taxpayer who
receives an LSD consisting of both cash
and appreciated employer stock can roll
over all or part of the cash portion to an
IRA and retain the appreciated employer
stock outside of the IRA without affecting
the favorable tax treatment allowed for the
NUA in the stock. However, the FMV
less the NUA would be subject to ordinary
tax rates and potential 10% penalty for
early distribution.
Example:
Sally leaves her job in 2002 and receives
an LSD from her employer's 401(k) plan
when she is age 50. The distribution
consists of $200,000 of cash and $100,000
worth of employer stock. The original cost
basis of the distributed stock is $10,000.
Thus, there is $90,000 of NUA attributable
to the stock ($100,000 - $10,000). If Sally
rolls over the $200,000 of cash into an
IRA and keeps the stock, she will pay
income tax plus the 10% early distribution
penalty tax on only the $10,000 of stock
basis. She then can continue to defer tax
on the $90,000 of NUA on the stock. The
tax cost would be $10,000 times 35% plus
$10,000 times 10% or $4,500.
When Sally sells the stock, the $90,000 of
gain will be taxed as long-term capital
gains. The capital gains tax would be
$90,000 times 15% or $13,500.
Compare this to the tax at ordinary rates
that could be as high as $90,000 times
35% or $31,500. Thus, by not rolling
over appreciated stock into an IRA,
Sally can save as much as $18,000 in
tax for a cost of $4,500. Who won't
sign up for that?
Variation: Instead of keeping the stock,
assume Sally rolls over the entire $300,000 LSD into an IRA in 2002.
She will pay no income or early distribution penalty tax now, but
will not be able to use the long-term capital gain tax rates on any
subsequent distributions from the IRA. This is because the $90,000
of NUA loses its long-term capital gain status and is taxed at ordinary
income tax rates when distributed from the IRA. Thus, by not rolling
over the appreciated stock into an IRA, Sally pays a relatively small
amount of income tax and penalty tax now in exchange for receiving
favorable longterm capital gain treatment in the future.
If you are
eligible to receive an LSD from a plan consisting of appreciated employer
stock, it probably makes sense to "run the numbers" and plan the distribution
with a tax or financial planning specialist.
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NEW PARTNERS
Amper, Politziner & Mattia is pleased to announce new Partners,
John Pennett, Kenneth Hirsch and Bruce Gomberg to the firm.
|
John Pennett CPA John Pennett CPA is an Audit Partner in Amper’s Edison office. He has more than 19 years of
public accounting experience serving public and private life sciences, technology,
manufacturing/distribution and professional service providers companies. He is a graduate of
Rutgers University and previously worked as audit partner for an international accounting and
consulting firm. |
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Kenneth A. Hirsch CPA Kenneth A. Hirsch CPA is an Audit Partner at Amper. Ken has over 30 years of audit experience in
diversified industries, including manufacturing, distribution, retailing, wholesale and import
organizations. He has exceptional expertise in the apparel and textile industries and works with
clients in multiple markets throughout the United States, Europe and Asia. He has provided clientconsulting
support on structuring and the assimilations of acquired businesses and financial
consulting both in the public and private sector. Ken received his Bachelor of Science Degree in
Accounting from Lehigh University. |
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Bruce Gomberg CPA, MBA Bruce Gomberg CPA, MBA is a Partner in the Accounting & Auditing Department in the New
York office of Amper. Bruce provides "hands on," practical business, advisory, consulting, auditing
and accounting services to middle-market clients in diverse industries, including: real estate,
wholesale, retail, apparel and textile, home furnishing, manufacturing and service industries. He has
been closely involved in corporate acquisitions, dissolutions and corporate finance transactions and
has extensive experience in providing due diligence services to venture capital firms and banks.
Bruce graduated with a Bachelor of Science degree from Brooklyn College and a Masters in
Business Administration from Pace University. |
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