Lane 3

$14,762 Each

They call this bailout a “troubled asset relief program” or TARP. Don’t you cover things up with a TARP? Financial prowess has only been eclipsed by marketing genius.

They’ve said the bailout will cost $700,000,000,000. But, you can’t say they have been exactly accurate in estimating the true cost for projects like this before. So for giggles let’s inflate it by 1.5 to $1,050,000,000,000. There are 138,000,000 tax payers in the U.S. Half of those pay about 97% of all Federal income tax. To be in the top 50% of tax payers you have to be making $31,987 or more in adjusted gross income. So applying a bit of math I estimate the bailout liability to be $14,762 for each of these tax payers.

The median home price is $212,400. At $14,762 of bailout per tax payer, you and 13 of your friends can be thanked for assuming the liability for someone else’s home.

I’ve heard that Treasury is going to collect all this bad debt, wait for the market to rebound, and then (hopefully) sell at a profit. Therefore all of this would be cost neutral to tax payers. Call me skeptical, but isn’t this coming from the same people who allowed the problem to get to this point?

Once they have our money will turning off the spigot be a priority? Somehow I think not. My gut says we are being played.

Honoring Lt. Daniel Luckett

Peachtree Corners Neighbors

Please join in honoring Lt. Daniel Luckett, a 2002 Norcross High School graduate who was severely injured serving our country in Iraq, during pre-game ceremonies this Friday, September 12th at 7 pm at the NHS stadium.

LT DANIEL S. LUCKETT
101ST AIRBORNE DIVISION
1-502ND INFANTRY REGIMENT

Daniel grew up in the Norcross cluster of schools attending Peachtree Elementary, Pinckneyville Middle School, and graduated from Norcross High School in 2002. He participated in community and church sport leagues playing baseball, basketball, and football. He attended Norcross First Baptist Church with his family. He was a member of the Norcross High School Football program for all four years of high school.

Looking to enjoy SEC football games and college life in general Daniel entered Auburn University following in his parents’ footsteps to the loveliest village on the plains. As a freshman, Daniel joined the Army ROTC program and earned a position on the Ranger Challenge Team, a position he held his entire career in the ROTC program. During his sophomore year he joined the Alabama National Guard taking a semester off to complete Infantry Boot Camp at Fort Benning graduating December 15, 2004. Upon his return to campus as a junior, Daniel continued as a cadet in the Army ROTC program. The summer after his junior year Daniel attended Leadership School at Fort Lewis followed by Airborne School earning his wings at Fort Benning. He led the ROTC program as its executive Officer fall semester of his senior year. During spring semester he trained the junior cadets in preparation for their completion of Leadership School at Fort Lewis. He was commissioned as a Second Lieutenant in the Army and graduated from Auburn University December 15, 2006.

Lt. Luckett was deployed to Iraq October 16, 2007. He was assigned to Delta Company as the Fire Support Officer and Intel Cell OIC, where he excelled before being assigned as a Combat Platoon Leader in Alpha Company.

Daniel’s vehicle was struck by an IED on May 11, 2008 only a few weeks after taking charge of his platoon in Alpha Company. The blast from the IED took Daniel’s left foot and the toes of his right foot off. The injuries to his feet were dealt with immediately as his platoon began procedure for a medical helicopter evacuation. His own calmness in the situation gave his platoon the ability to care for him in the manner they were trained to do. The photographer that captured the thumbs-up gesture was not noticeable to the soldiers in a mission to save one of their own. It was a gesture that typified Daniel to all who know him. The gesture portrayed confidence in the midst of a horrifying situation. It offered strength and exemplifies the attitude of an American soldier.

Fire the Developer!

In my last post I asked the question of what expenditures I should eliminate in order to pay for higher taxes under an Obama presidency.

Many readers were actually surprised that a small business owner would expect his tax costs to increase though Obama has said, and said, and said, and said, and said some more that he would raise taxes.

A well-respected techie who is a huge Obama supporter DM’ed me: “interesting post, I don’t know your bracket, but the cuts work pretty much across the board. Obama specifically mentioned startup.” Cuts? Across the board? Mentioned startup? Dude, Obama has explicitly told us that he will increase taxes on the biz owner who buys your ninja dev skills. I’d throw my hands up in the air but then couldn’t type!

One reader made the point that though taxes will increase they would do so slowly and therefore the small business owner won’t feel the impact of those higher costs. Using the same logic one shouldn’t mind being raped as long as the act is gentle.

A somewhat loquacious commenter thought my tax planning needs improvement – pay myself dividend income instead of payroll income. Smart by half. With dividends the business owner gets slapped once on the corporate return and then again on his personal return. The employer still pays its half of FICA. The reader’s logic is further eroded as Obama promises to increase the dividend tax rate from 15% to 20%. On top of that capital gains taxes will go from 15% to 25%. There is no escape!

One person contended that Obama’s free health care for small businesses will offset the higher taxes – problem solved! My thoughts on national healthcare. If you think healthcare is expensive now, wait until it is free.

The bottom line

In the end only Lance Weatherby gave an answer: fire the developer. His advice is sound, rooted in years of business experience – stick to my core business of helping companies with their employee benefits; the one that has proven to earn a paycheck. He suggests that I should abandon my glorious vision of becoming a high-powered dot com success and close down my start-up.

I’m not necessarily smart enough to take Lance’s advice (Andrew Lunde can relax for now), but know that I have to keep that arrow in my quiver.

Why I’ll vote for McCain

I never really meant for this to be a political blog, but work with me on this. I love entrepreneurs, start-ups and the Atlanta community. I’ve founded three companies; an insurance agency that makes money, and two software ventures that don’t (yet).

To pay for the additional tens of thousands of tax dollars I will owe under an Obama presidency which of the following changes should I make?

Reduce my take-home pay.

Reduce time with my family / work harder to satisfy additional tax burden.

Hire only one new employee this next year, not the two as planned.

Eliminate the discretionary sponsorships I make to groups such as TAG, TiE, Startup Lounge / Riot / Weekend, etc.

Shut down my second software venture and not pay the programmer the $40,000 or so I had budgeted.

There are a number of other reasons I like McCain over Obama, but what I have outlined above is a true representation of how an Obama presidency will negatively impact the Atlanta start up community.

I do not mind paying my fair share of taxes (and I do), but my definition of “fair” differs greatly from Obama’s. And, a capitalist market delivers prosperity more efficiently than does government. As the saying goes, “When have you every gotten a job from a poor person?”

What do you think? Any options I have not considered?

PEOs – Convenience Store Insurance

Would you buy all your groceries at the local convenience store? Of course not! So why buy your benefits from a Professional Employee Organization (PEO)? Convenience comes at a price.

In a nutshell, a PEO, sometimes called a “staff leasing company,” will put your employees on its payroll and provide them with employee benefits and workers compensation coverage. It also provides you with payroll administration and a human resources help desk service. In turn you pay your insurance premiums and an administration fee (typically a percentage of payroll).

A PEO’s sales pitch is pretty enticing to an uneducated small employer: (i) Get access to large company benefits, HR expertise, and reduce your liability as a plan sponsor. (ii) Avoid the hassles of administering a benefit plan. (iii) By combining your few employees with the PEO’s larger group you have access to lower insurance premiums and less volatile renewal increases. But, the devil is in the details.

Several weeks ago we had the opportunity to compare one of our client’s benefit package against the quote of a PEO – and we kicked butt! The PEO came in promising this eleven employee group $17,000 in annual savings. But we noticed an inconsistency in its proposal. In its spreadsheet the PEO quoted $18,800 in annual administrative fees, but when you did the math using the rate outlined in the quote those costs came to $57,200. And, the medical insurance we provide is far superior to that quoted by the PEO. So, in the end, when you made an apples-to-apples comparison the PEO had $102,200 in total annual costs (or $140,600 if you used the higher $57,200 fee) against our program for $86,400.

One component of the PEO sales pitch is that it will reduce your liability as a plan sponsor. To a degree this may be true, but probably not to the extent you may expect. You still have a number of responsibilities. For example, if Fred quits work and you fail to notify the PEO for several months then the PEO may rightly balk at providing COBRA benefits, thus leaving you with an uninsured liability to pay the person’s medical bills for the next eighteen months. In a similar manner, if you do not pass out the benefits booklet you may be on the hook for certain unpaid claims. Many responsibilities you have as an employer are still present under a PEO. The PEO’s contract will spell out your responsibilities – and will typically include a hold harmless agreement as well.

So after all of this what is my recommendation? Let the free market work! Get quotes from Administaff, ADP TotalSource, Oasis, Adams Keegan (I find it funny that this one seems to avoid at all costs the PEO / staff leasing label. Come on, be proud of who you are!) or some other PEO and from an ethical insurance broker that knows how to compare a staff leasing product to a traditional benefits package. Pretty quickly you will see the value of keeping your benefits in-house.

Several years ago we moved a 65 employee neonatology practice from one of the aforementioned PEOs and in doing so saved the employer over $190,000 in annual costs. We moved payroll to a national payroll administration company, workers compensation to a stand-alone policy, and kept the employer’s medical with Aetna (the same carrier and benefit design they had through through the PEO).

If you do not have the time or expertise to administer your payroll through QuickBooks or a similar program then consider using ADP, Paychex, or your accountant/bookkeeper for that task. Find a competent insurance broker to handle your employee benefits and your property and casualty coverages.

An Atlanta start-up may be tempted to turn to a PEO in order to minimize time spent on payroll, employee benefits and HR issues. But doing so will be expensive compared to the in-house alternative. Convenience has its price!

Lucas Group – A Consumer-Driven Health Care Case Study

We just wrapped up open enrollment meetings for Lucas Group, an Atlanta-based executive search firm. Effectively informing four hundred employees who are spread throughout the United States of their employee benefit plan choices is a daunting task, but one that went extremely well.

The highlight of this year’s benefit offering was the addition of a Health Reimbursement Arrangement (HRA) to Lucas’ existing medical plan choices (High Deductible Health Plan / Health Savings Account (HDHP/HSA or HSA), HMO and Point-of-Service plans).

Strategic planning

Six months ago we began the planning process that culminated in the employee meetings last week. Kelly Stewart, Lucas’ new Director of Human Resources, had arrived with some fresh ideas and had been given a directive to explore instituting a “wellness program.” Kelly handed me an advertisement boasting 26% premium savings for installing a wellness plan.

Common sense dictates that if you quit smoking or lose 50 pounds today (both great things) the result will not be a near term reduction in claims costs (and therefore a reduction in premium costs). So, in my opinion, installing a “wellness plan” has been a smokescreen used by other employers to reduce company-paid benefits. And, reducing benefits was certainly not Lucas Group’s goal. We did, however, want a program that would reward healthy lifestyles. Enter consumer-driven health care.

Consumer-driven health care

With a consumer-driven health care plan there is that a fund of money available to an employee to spend on medical expenses; the idea being that the employee will be a better, more informed consumer given it is his or her own money on the line. HRAs and HDHP / HSAs both fit in this category. Here is a brief summary of the differences:

Contribution schedule adjustments

So why would an employee sign up for a plan with higher patient costs (deductibles and coinsurance)? Simple! Because the premium rate for that plan was lower than the alternatives. For this policy year, Lucas Group pays 100% of employee premiums and 60% of dependent premiums for the HRA plan and a slightly lower percentage for the HSA product. That is strong!

Here is a quick comparison of the group’s HMO plan vs its HRA plan for an employee with relatively low claims:

As you can see, a person with a low claims history has a wonderful opportunity to save money under the HRA plan. And, employees who may have higher claims cost still have access to an excellent suite of traditional health plans.

Open enrollment process

In years past, employees would have to fill out hard copy forms and submit them to HR for processing. The burden of this fell directly on the capable shoulders of Lisa Stewart, the HR consultant at Lucas Group. This year we decided to take advantage of an on-line enrollment tool offered by the medical insurer. While there was considerable more work involved on the front end the result has been fantastic. Here are the steps we went through:

• Obtained a data dump from the insurer and created an individualized benefits statement for each employee showing their current election. This was e-mailed to each employee a couple days before the open enrollment meetings along with a summary of our open enrollment presentation.
• Held a series of conference calls with the entire employee population to explain the differences between each medical plan choice, the employee premium cost, etc. A great question and answer session followed each presentation.
• Provided the employees with instructions on how to log into the insurers computer system and make their benefit elections.
• Once the deadline for employees to enroll is reached then the insurer will upload the enrollment data file into its system thus avoiding the work Lucas’ HR department had done in past years.
• Our office will get another data dump from the insurer and prepare an individualized benefits statement for each employee as a confirmation of their elections for this new policy year. These will be e-mailed to each employee in the coming weeks.

Open enrollment results

Last year only 11% of Lucas’ employee population was covered by a consumer driven health care plan. Given the commitment to such plans – both in terms of employee education and employer premium contribution – we were pleased to see that 23% of the population enrolled in consumer driven health care plan for 2008 – 2009.

We added eighteen new employees to medical insurance – that is eighteen more associates who value the Lucas Group’s efforts to retain their services.

Finally, we had about a 100% increase in enrollment in the voluntary life insurance program. This is directly attributable to the ease of the on-line enrollment process.

Conclusion

Consumer-driven health care plans are not for every employer – and are certainly not appropriate for every plan participant. They are, however, one more tool that can be used to build a responsive benefits package that will attract and retain employees. Re-evaluating the employer contribution schedule is an integral part of installing these products. And, finally, effectively communicating to employees their plan choices goes a long way in having employees better appreciate the value of the benefits offered by the employer.

Sanjay Parekh & Start-Up Riot

Sanjay Parekh is a Force of Good within the start-up community. Singlehandedly he organized Start-Up Riot; giving 55 ventures the opportunity to make their pitch for advice, talent, or dollars. On top of all that we heard from Drew Curtis, creator of Fark.com. Closing question by Dave Wright: Would you sell for the right price? Drew’s answer: Hell yeah!

Start-Up Riot was a great opportunity for me to meet in person a number of folks I’ve only followed on-line: Keith McGreggor, exercise freak Rob Kischuk, and Wei Yang. I enjoyed catching up with Todd Merrill, Duncan Freeman, and fellow gun nut Michael Mealling.

A number of our clients were at the event. Jungle Disk both presented and sponsored. My office just started using their services to back up our systems. Dave Wright and his crew come highly recommended.

Another client, Servinity, had a great presentation. Having worked in the restaurant industry early in my life I can appreciate how Servinity’s technology will make things easier for managers and employees.

I wasn’t able to see all the presentations as my day job got in the way. I missed seeing Josh Watts (Blue Violin) and several others. I also missed the after party, but am sure that there were some good photos to be had there. The ones I took are posted in the Photo Gallery. Congratulations again to Sanjay for a job well done!

Red Rockets – Norcross Champions!

This past Saturday the Red Rockets beat the Pink Pussycats (18 – 14) in order to win the Norcross Youth Baseball Softball Association Pee Wee Championship. It was a hard fought season in which the girls learned a lot about team work, sportsmanship and the game of softball. Coaches Jack Camarda and Gary Robinson did a fantastic job to encourage the players to reach their personal best.

We were blessed with a great group of parents who had the right attitude about kids’ sports. And, as the season progressed you could see the level of play improve. At first most outs were made at first base and the games were high scoring. But towards the end the girls were catching pop flies and making double plays. We had a great line-up with the younger girls consistently getting on base and a solid core of heavy-hitters to get them all home.

2008 will go down as a memorable year for Norcross softball. Congratulations to Sarah and the rest of the team! Go Red Rockets!

P.S. – Find pictures posted in the Photo Gallery (right click, save image as).

James Harris @ Serenbe

This past Sunday we packed the kids up and headed to Serenbe in Palmetto, Georgia. It is a pretty interesting little community nestled amongst the yellow pines south of Atlanta. My friend, James Harris, of Elemental Interactive fame owns a quaint general store there.

When I found James he was leading a group of customers through a honey tasting session. I was particularly interested in a pecan honey – he had taken some pecans grown on his family farm and soaked them in organic honey for about a month. Good stuff!

James’ store, Harris & Clark, has a great selection of tasty food, sundries, and things you will remember from your childhood (pixie sticks come to mind).

The Serenbe community includes a 25 acre farm, riding stables, and an inn that caters to business meetings, weddings and other celebrations.

There are several great restaurants to consider and numerous shops and art galleries to look through (you know the kids will appreciate these times later in life). If you really catch the Serenbe bug you can buy a cottage, town home or one of the live/work loft sites.

I’d highly recommend that you take the short drive to Serenbe. Lots of slow food, quaint shops, and friendly people. It’s great departure from the hectic life we seem to lead in Atlanta…

Is your benefits broker clueless?

I am constantly amazed at the lack of detailed benefits knowledge exhibited by many of our competitors. Hiring a competent insurance broker makes good business sense. A well-informed broker will be able to guide you and your HR department through the maze of benefits regulations and insurance company policies and procedures.

Have some fun and give your broker the following quiz. Judge the timeliness and accuracy of his or her response.

1. An employer just hired an employee whose wife is pregnant. For the twelve months prior to being hired, the employee and spouse were uninsured. Will the pregnancy be considered a pre-existing condition under the group’s medical plan?
2. An employer with more than 20 full-time employees has a medical policy subject to the laws of Georgia. A 61 year old employee terminates employment because of a health condition. For how long must the employer allow him to stay on the group plan?
3. A fully insured welfare benefit plan had over 100 participants at the beginning of the plan year. What are the plan sponsor’s ERISA reporting and disclosure requirements? Is compliance the obligation of the broker or employer?
4. In the preceding calendar year, an employer had sixteen full-time employees and eight part-time employees. Only twelve of the full-time employees are covered by medical insurance. None of the part-timers are covered. For the current calendar year is this group subject to COBRA?
5. An employer with a fully insured medical policy written in Georgia hires an employee with a history of cancer. This individual was uninsured for 70 days prior to joining the employer. When is the earliest this employee can incur a cancer related claim and have it covered? Does the answer change if the plan is not subject to Georgia law?
6. If Joe terminates employment April 16th and coverage ends April 30th, by what date must he have elected COBRA? If he elects COBRA on May 22nd, by what date must all back premiums be paid?
7. An employee returns to his previous employer after having been deployed in the U.S. military. Can the employer make the employee satisfy the health plan’s 90 day waiting period?
8. A Georgia corporation which is subject to COBRA has several employees in Texas. What is the maximum duration of continuation coverage for Georgia employees? Texas employees?

I hope this helps you evaluate the quality of your benefits broker. Shoot me an e-mail (amcrae@angusmcrae.com) or give me a ring (770-300-0001) if you would like the answers…