BIZGrowth Strategies: Ideas to Help Grow Your Business (Spring 2014)
I S S U E 5 9 • S P R I N G 2 01 4
IDEAS TO HELP GROW YOUR BUSINESS
the Road to
Do Your Nonprofit’s
Venture into Commercial Territory?
Health Plan in 2015
Still a Favorite!
In This Issue…
Management & Performance
The Impact of Dropping
Your Health Plan in 2015
Tax & Accounting......................5
Do Your Nonprofit’s Retail Activities
Venture into Commercial Territory?
Health Plan in 2015
Is Your Wellness Program
Navigating the Road to Retirement
SlideShare…Still a Favorite!
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CBIZ in the News
The Wall Street Journal
Tax tips for small business owners
s employers consider whether or not to drop their health plan
in 2015, a broad, comprehensive financial impact analysis
is required. In addition to calculating the cost of the “No
Coverage” Shared Responsibility penalty, employers must factor in the
nondeductibility of the penalty, increases in cash compensation and
possible reductions in productivity. This article provides a brief overview
of these components and explains how to run the math.
$2,000 “No Coverage” Shared Responsibility Penalty
Generally, the “no coverage” penalty could be assessed if minimum
essential coverage (MEC) is not offered to at least 95% of the employer’s employees working 30 or more hours per week. For the 2015
plan year only, employers employing between 50 and 99 employees are
exempt from the risk of penalty as long as certain conditions are met.
For employers employing 100 or more employees, 95% is replaced with
70%. If a penalty is assessed and assuming it applies for the entire
year, it is calculated by multiplying the number of full-time employees
less 80 for 2015 and less 30 thereafter by $2,000. Importantly, the
“inadequate or unaffordable” shared responsibility penalty may still be
imposed if a full-time employee qualifies for premium assistance when
purchasing coverage through the marketplace.
Cash Compensation Considerations
Your current contribution towards the cost of your group health plan
is part of your employees’ total compensation package. As such, the
question of whether or not an employer should continue to provide health
benefits cannot be considered in isolation. For example, it’s likely that your
employees will expect you to increase other forms of compensation to
make up for any lost benefit. There is flexibility (and complexity!) in the approach you take; salaries may be increased, variable pay programs could
be introduced, new benefits may be offered, greater portions of benefit
contributions may be covered or any combination of these.
If your strategy in dropping your health plan includes increasing
direct compensation, these questions should be asked:
Medical debt will persist despite
Will you increase salaries across the board or only for a select
group of employees?
January 23, 2014
January 15, 2014
4 money resolutions to make now
December 30, 2013
For complete articles:
2 | BIZGROWTH STRATEGIES – SPRING 2014
You may choose to limit increases to critical jobs or high-performing
staff members. This approach can be less costly and yield improved
results by retaining the most valued employees. However, discretionary
increases can lead to questions of fairness, which in turn could lead to
compensation discrimination allegations. The best way to safeguard the
organization is to ensure clear and thorough documentation is in place
to justify salary increases.
(Continued on page 3)
Salary increases may also need to be addressed
on a case-by-case basis to ensure individuals are
optimizing the options available to them. For example,
raising an employee’s pay could result in a reduction
or elimination of health care premium subsidies,
leaving the employee worse off. Given that employers
lack the information and time necessary to perform
a cost-benefit analysis for every potential salary
increase, the onus will be on employees to examine
and communicate their particular circumstances.
Not only will many employees find this process
burdensome, but misinterpretation of regulations or
income calculations can quickly lead to mistakes and
frustration among workers.
2. you currently provide more benefits
compensation for an employee with family
coverage, will you increase those employees’
salaries more than you will for those with single
While employers regularly contribute a greater
dollar value to family coverage than single coverage,
employees may find it less acceptable to differentiate
salary increases based on household structures. As
with any deviation from across-the-board increases, it
is imperative that a documented policy be established
and applied consistently.
While your current employer contribution towards
premium is provided to your employees tax free,
that is not true of W-2 compensation. Thus, what
will you pay in additional payroll taxes to make
It is important to balance and control the costs of
increased employee wages and increased payroll taxes.
In addition, employees’ pay increases may be taxed
(depending on whether funds are taken as regular
wages or applied toward non-taxable benefits), which
could result in reduced take-home pay.
How will dropping your health plan impact the
initial salary offers you make for new employees?
In the near term, most employers will not drop their
health benefits. Therefore, it may become more difficult
to recruit talent without other meaningful compensation
elements. If you find new hire salaries are rising at
a faster pace than salaries of the general employee
population, compression issues are probable in the
Even if you currently offer several health plan
choices, the time employees spend at work evaluating
those choices and enrolling in your plan is likely
limited. This efficiency results from:
• your clear communication of the plan choices;
• the employee’s comfort in knowing that you evalu
ated and recommended these plans; and
• your streamlined enrollment process.
Conversely, the exchanges will offer about five plan
designs from multiple carriers. Off-exchange, additional
plan designs will be available, complicating employees’
choices. While guidance in making plan elections will
be available via “navigators” and sometimes through
brokers, it is likely your employees will spend more
time at work on the evaluation of their health plan options than they have in the past.
Additionally, company HR professionals often assist employees with the resolution of health insurance
questions and claim issues. If you drop your health
plan, this assistance will end and employees will be
on their own to navigate questions and issues that
arise. Another financial consideration, therefore, is
whether dropping your health plan will impact overall
employee productivity. Specifically, how much time will
an employee spend during work hours researching plan
options, enrolling in plans and solving administrative
Calculate the total cost of dropping your health plan.
Adjusting for any enhancements needed to eliminate the “no coverage” and “inadequate/unaffordable”
ACA penalties, project the total cost of your 2015
health plan. Next, solve for your total cost net employee payroll reductions and for any tax reductions.
(Continued on page 4)
DISCLAIMER: This publication is distributed with the understanding that CBIZ is not rendering legal, accounting, or other professional
advice. To the extent anything herein could be construed as tax advice, such advice is not intended to be used and cannot be used
to avoid penalties under the Internal Revenue Code, or to promote, market, or recommend to another person any tax-related matter.
This information is general in nature and may be affected by changes in law or in the interpretation of such laws. The reader is
advised to contact a professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in
connection with the use of this information and assumes no obligation to inform the reader of any changes in laws or other factors
that could affect the information contained herein.
BIZGROWTH STRATEGIES – SPRING 2014 | 3
Management Performance (Continued from page 3)
A: Annual health premiums
B: nnual employee payroll
reductions for the health plan
C: educed payroll taxes via payroll
reductions through your Section
D: orporate Tax benefit for your
contribution to the health plan
(A-B multiplied by your marginal
A-B-C-D = Your Total Net Cost:
Next, calculate the total cost of dropping your
to Drop Your
E: f applicable, the $2,000 “no
coverage” per employee penalty
F: he increase in your cash
G: he resulting increase in your
payroll tax because of this
H: stimate the cost of any reduced
Project these costs out five years. Assume the
annual “no coverage” penalty will increase 10% annually. Make appropriate projections to all components.
Compare your five-year projected totals and finalize
If you proceed with dropping your health plan, an
effective employee communication strategy should
describe the following:
• why you are making this change
• how this decision will impact employees and their
• what resources employees have from their home
state and the federal government in evaluating and
purchasing health benefits
• how this change impacts your Total Compensation
As you evaluate whether or not to drop your plan in
2015, answering the questions detailed in this article
will help ensure that your resulting decision is in the
organization’s best interest and will help prepare you
for any transition.
E+F+G+H = Total Cost to Drop
Compare these 2015 totals.
4 | BIZGROWTH STRATEGIES – SPRING 2014
PRIYA J. KAPILA
CBIZ Human Capital Services • St. Louis, MO
314.995.5558 • firstname.lastname@example.org
CBIZ Benefits Insurance Services
443.259.3240 • email@example.com
Portions reprinted with permissions from iWorkwell: Health Care Reform –
What’s the Impact of Dropping Your Plan in 2015? (Part II)
Do Your Nonprofit’s Retail Activities
Venture into Commercial Territory?
haritable 501(c)(3) organizations receive taxexempt status because their missions are to
benefit society, and the majority of their revenue
goes toward achieving their tax-exempt purpose. Yet,
many such organizations also operate retail ventures
such as a museum gift shop or a hospital-run thrift
shop. Organizations should be aware that doing so has
pitfalls from a tax perspective.
While nonprofit organizations may receive an unlimited amount of income that is “substantially related to the
pursuit of its exempt purpose” (generally not subject to
income tax), charities that regularly engage in business
activities unrelated to their exempt functions may be
subject to tax on the net income from these activities. If
this unrelated business activity becomes “substantial,”
the charity risks losing its exempt status. Therefore, it
is vital that the organization not only demonstrate that
its income-generating business activity is an appropriate
method of achieving the organization’s exempt purposes
but also show that there is no substantial non-exempt
How much Unrelated Business Taxable Income
(UBTI) can a nonprofit receive without jeopardizing
its tax-exempt status?
The IRS may consider proceeds from nonprofits’ retail ventures UBTI if the income is considered a “trade
or business,” is regularly carried on and is not substantially related to the nonprofit’s exempt purpose.
must be established before sales of the items can be
considered substantially related within the meaning of
section 513(a) of the Code.
For nonprofits, exclusions to UBTI include income
substantially generated by unpaid volunteers; retail
income donated to the nonprofit; dividend, interest and
royalty income and gains from sale of property; and
retail income from real property (provided the property
is not debt financed).
In general, when the IRS determines whether UBTI
is substantial it considers the reasonableness of the
commercial venture’s pricing, the extent of the commercial venture and the size and extent of the commercial
venture relative to the size of the exempt function it is
said to serve.
Because the IRS does not provide iron-clad
guidelines for organizations to follow regarding UBTI,
organizations instead must use their own judgment to
interpret IRS rulings made in cases similar to their own.
Proceed with caution.
Expanding into new activities is a great way to grow
your nonprofit organization, support its mission and
take advantage of new opportunities. Proceed cautiously, however, because although commercial-like activities
can help generate after-tax income, straying too far
into commercial territory can cause revocation of your
IRS regulations provide that a trade or business
is “related” to an organization’s exempt purposes only
where the conduct of the business activities has a
causal relationship to the achievement of exempt purposes and the activity from which the gross income is
derived contributes importantly to the accomplishment
of those purposes.
A connection between the items sold in a gift shop
and accomplishing the organization’s exempt purpose
CBIZ MHM, LLC • Boston, MA
617.761.0729 • firstname.lastname@example.org
BIZGROWTH STRATEGIES – SPRING 2014 | 5
Is Your Wellness
mplementing a workplace wellness program offers
employers an excellent opportunity to improve
the health, productivity and overall morale of
employees and to reduce future health care costs. The
question all employers must answer is “How does our
organization ensure our wellness program is compliant
with the Affordable Care Act (ACA)?”
In order to answer that question it is important
to know that the ACA divides wellness programs into
two types: Participatory and Health-Contingent. An
employer’s main focus when introducing either type of
program must be avoiding discrimination and providing
goals that are obtainable for all employees.
Participatory Wellness Program
The participatory program is pretty straightforward
and centered solely on employee participation,
not a specific outcome. An example is offering
reimbursement for the employee’s cost of a monthly
gym membership. If introducing a participatory
program, there should never be a reward or incentive
for something outcome based. Also, be sure the
health incentives set forth are possible for any
employee to complete regardless of health status;
for example, completing a health risk assessment or
going to one’s annual preventive care appointment.
Regardless of the results from the assessment or
the biometric numbers obtained at a preventive care
appointment, the employee would be rewarded simply
because he or she completed the task.
Health-Contingent Wellness Program
Health-contingent programs can be a bit tricky
when looked at from a discrimination viewpoint as they
require the employee to meet a specific goal (e.g.,
stopping tobacco use) in order to obtain a reward.
These programs can be broken out further into “Activity
Only” or “Outcome Based”.
“Activity Only” rewards the employee for
accomplishing a certain activity (e.g., walking 30
minutes a day, three days a week), but does not
depend on numerical goals like weight loss, BMI or
blood pressure. Conversely, “Outcome Based” does
not reward an employee for simply participating in an
activity but rather requires achieving or maintaining a
specific health goal, such as obtaining a BMI of 28 or
less. Thus, the model of reward based on outcomes
6 | BIZGROWTH STRATEGIES – SPRING 2014
can lend itself to discrimination issues, especially if
an employee cannot reasonably accomplish a goal due
to conditions such as health status or safety issues.
Therefore, it is always necessary to offer alternative
means of accomplishing a specific goal or task and
make sure the reward is the same as that being
offered to other employees.
Lastly, the ACA specifies the 2014 maximum
permissible reward for health-contingent wellness
programs to be 30% of the cost of the employee-only
health coverage. This means annual rewards, whether
health care premium subsidies or tangible items,
cannot exceed this amount.
In summary, wellness programs are an effective
way for an organization to improve many facets of
employee health and wellbeing, as well as to exert
some control over future health care costs. Just be
cognizant to design a program that is compliant with
CBIZ Benefits Insurance Services • San Jose, CA
408.794.3583 • Susanne.Harris@CBIZ.com
Expanding Your Personal Wealth
Navigating the Road to Retirement
ne of today’s hot topics in wealth management
is retirement. To have a realistic opportunity
to maintain your lifestyle during retirement,
you must be concerned about saving now. Thankfully,
guidance from retirement planning experts is available
to help you set goals and navigate toward healthy
A basic question to ask in setting retirement goals
is “how much money will I need?” Industry experts
suggest that, generally, you should expect to replace
70 to 85% of the income from your last working year.
Social Security benefits typically replace only 30 to
40% of your pre-retirement income. In most cases, the
difference, known as the “income gap,” will need to be
covered by the annual income generated through your
retirement savings. Use the Rule of 25 which suggests
that multiplying your income gap by 25 will estimate
the total amount of assets you will need to seal the
gap. For example, if an individual has an income need
of $50,000 and estimated Social Security benefits of
$15,000 annually, she has an income gap of $35,000.
Multiplying this gap by 25, the resulting $875,000
represents the amount she will have to amass by
retirement age in order to reach her goal.
So, what are some things to do now in order to
help generate this future income? Make sure you
are taking full advantage of any employer matching
program. Also, establishing a Traditional or Roth IRA
is a great way to save up to an additional $5,000 per
year. This amount is increased to $6,000 per year
for those 50 years old and older. Some annuities
guarantee a certain return for life, which is a good way
to protect yourself against the risk of exhausting your
resources during retirement. As a first step, review
your budget to see if a total contribution of 10 to
15% of your annual income to your retirement savings
is possible. This is the percentage that retirement
industry experts recommend.
When you invest the money you save, two of your
most important considerations should be your asset
allocation and time horizon. Historically, a portfolio that
is diversified among multiple asset classes (stocks
and bonds, international and domestic) has shown to
lower risk and increase returns. Also, an investment
time horizon of 10 years and longer is considered long
term and risk friendly. This is because you can take full
advantage of the power of compounding when there
are gains in the markets. Even if the markets were to
fall, there is still time to try to recoup the losses and
continue to grow the assets.
When financial experts advise young people to
start saving for retirement and to invest aggressively,
they are emphasizing that time is on their side. As you
approach your desired retirement age, you should taper
your exposure to the stock market and decrease overall
volatility in your portfolio. Target date funds take care
of risk management and diversification automatically.
Once you choose the plan that represents the year
closest to your desired retirement target, the fund will
automatically adjust the risk based on the time horizon
left until your retirement. If you would rather invest
outside of target date funds, mimicking the allocation
of the applicable target date fund will help you taper
the risk in your portfolio as you approach retirement.
Sufficient awareness and active planning are
paramount in successfully achieving your retirement
goals. Seeking the guidance of a retirement planning
expert will help you determine the best strategy for
your lifestyle and time horizon.
CBIZ Retirement Plan Services
216.520.6622 • email@example.com
Still a Favorite!
very day it seems as if a new social media site is
created. These new social tools prompt improvements and changes to the other, more classic
and original social sites. One favorite social media tool,
which has continued to compete with the industry leaders, is SlideShare (www.slideshare.net).
SlideShare is a public sharing site that allows businesses and individuals to upload presentations, whitepapers, brochures and videos to share with the world.
By doing so, you can expand your sphere of influence,
increase brand awareness, share ideas and possibly
generate leads. At the bottom of each resource there
are easy share buttons linked to Facebook, Twitter and
LinkedIn. SlideShare content spreads virally through
social networks like these, as well as through blogs.
(Continued on page 8)
BIZGROWTH STRATEGIES – SPRING 2014 | 7