Biz Growth Strategies Winter 2013

I S SUE 5 4 • W IN T E R 2013

BIZGROWTHS T R A T E G I E S

MERGERS & ACQUISITIONS: A MATTER OF ATTRACTION

ARE SEVERANCE PAYMENTS NOT SUBJECT TO FICA?

I D E A S T O H E L P G R O W Y O U R B U S I N E S S

CONSIDER THE FULL PACKAGE:THE IMPORTANCE OF BENEFITS

COMMITTING TO YOUR

EMPLOYEES’ WELLNESS

BUILDING CREDIBILITY WITH

SOCIAL MEDIA

RETIREMENT CHECK-UP FOR THE NEW YEAR

our businessis growing yours

Full

In This Issue…

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To register for our online version, visit cbiz.com/invitation.asp.

You can also call us at 1-800-ASK-CBIZ (1-800-275-2249).

@cbz CBIZ BIZ Tips Videos

Human Resources ......................2Consider the Full Package: The Importance of Benefits in Total Compensation

Employee Benefits ......................4Committing to Wellness

Expanding Your Personal Wealth ... 5Retirement Check-Up for the New Year

Marketing ..................................5How to Build Credibility Using Social Media

Mergers & Acquisitions ..............6It’s Really Just a Matter of Attraction

Tax & Accounting .......................7Court of Appeals Agrees that Severance Payments Are Not Subject to FICA

CBIZ in the News

For complete articles: cbiz.com/in_the_news.asp

NPRWhy dividends, capital gains are big part of fiscal cliff talksNovember 29, 2012

US News & World ReportThe myth of the permanent working classOctober 30, 2012

CNBC.comWhat disruptors need to attract capitalOctober 18, 2012

Human Resources

The Importance of Benefits in Total Compensation

Package: Consider the

2 | BIZGROWTH STRATEGIES – WINTER 2013 CBIZ, INC.

Given the relative dominance of cash compensation, compensation professionals occasionally neglect to consider the other key component in the total compensation package – benefits. Yet,

benefits are critically linked to compensation in providing total rewards to employees due to the significant ways in which benefits impact employers’ costs as well as employees’ perceived value of total compensation.

With employee benefits typically equal to 20 to 40 percent of payroll expenses, they are a prominent part of total compensation. As a result, benefits can offset or amplify cash compensation issues. For example, total compensation analyses for public sector clients often show that employees’ salaries are below median salaries in relevant labor markets. However, a review of benefits reveals that public sector employees frequently receive above average benefits. This is largely attributable to richer retirement plans and a greater portion of employer-paid, health-related benefits premiums. In this case, the sum of below market salaries and above market benefits is relatively in line with the competitive total compensation level. An illustration indicative of the market comparisons regularly observed in the public and private sectors appears on the adjacent page. (For simplicity’s sake, variable cash pay has been ignored so that salary plus benefits equals total compensation.)

The example scenarios above show employers’ ability to balance salaries and benefits to achieve overall competitiveness. Conversely, there are also cases where deviations from market can be compounded by the inclusion of benefits in the analysis. In peak recession years, for instance, some organizations froze salaries, reduced their share of health insurance premium payments and suspended retirement plan contributions; thus, both salary and benefits (and, thereby, total compensation) fell behind market levels.

Employers must first determine their total compensation philosophy and that of each component in order to effectively communicate the value of the total compensation package. That is, how does the

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.

Average Salary(Actual as a % of Market)

Average Benefits(Actual as a % of Market)

Average Total Compensation(Actual as a % of Market)

Public Sector Organization

88% 123% 100%

Private Sector Organization

105% 92% 100%

PRIYA J. KAPILACBIZ Human Capital Services • St. Louis, MO314.995.5558 • [email protected]

organization want to position itself against competitors? How should salaries, variable/incentive pay and benefits (both tangible and intangible) compare to other organizations? After such philosophies are established, an organization can utilize total rewards statements as well as salary increase, incentive plan and benefits program updates to explain its compensation goals and the efforts taken to align each employee’s total compensation package with these goals.

CBIZ, INC. BIZGROWTH STRATEGIES – WINTER 2013 | 3

There have been an increasing number of articles, news stories, presentations, webinars and the like on the benefits of having an employer-

sponsored health and wellness program. The case studies have been reviewed and the ROIs have been proven: an employer-sponsored health and wellness program has the ability to positively impact an organization’s bottom line.

The most important element of a successful wellness plan is to understand that wellness is a major, economic business strategy – one that requires a high level of organizational commitment and change. Like all corporate strategies, the wellness plan needs to align with the organization’s values and goals.

The following are strategies to ensure organizational commitment and wellness program success:

Conduct key interviews to determine organizational readiness. Interview employees from a good cross-section of the organization to ensure that all levels, departments and locations are represented. Ask key questions regarding current work conditions, attitudes, senior leadership support and the feasibility that health and wellness initiatives will be adapted and supported by all facets of the organization.

Develop a senior leadership business case. Management needs to understand how supporting employee health supports the business strategy, mission and vision. Gain the acceptance and approval of senior leaders so they are aware of the goals and initiatives of the wellness strategy and understand that they will be accountable for ensuring success. Develop mechanisms of accountability so leaders understand what is expected of them.

Provide coaching and develop a change management and communication plan. The organization needs to be prepared to make cultural and behavioral changes that support employee health and wellbeing. Employees often require coaching to help prepare for change, manage change and reinforce the change. Also, each employee needs to be aware of his/her responsibility to support a culture of health.

Prepare a senior leadership communication tool kit. Senior managers need to understand the best way to communicate with their employees regarding health and wellness initiatives. To ensure a clear, concise and consistent message, senior leaders should be

provided with quarterly communications and talking points that they can share with their teams.

Establish a wellness committee. An effective wellness committee can provide opportunities for both management and employee involvement in the development and promotion of the program. A well-formulated wellness committee serves many important functions, including developing and promoting the organization’s health and wellness brands and themes; creating a sense of employee ownership in the program; ensuring input from a broad range of company stakeholders and perspectives; providing a source of internal support and advocacy for the program; and helping to drive employee enthusiasm and participation.

Obtain operational commitment to the strategic wellness plan. It is important to ensure that the work environment, policies and procedures are in line with the company wellness mission. From looking at policies such as smoking, leave of absence and sick days to evaluating vending machine and meeting food service options to assessing on-site exercise opportunities like gyms, walking paths and stairwells, these items must be considered in determining operational support of the wellness objectives.

Develop an annual wellness budget. The organization needs to account for wellness activities, incentives and events that will incur costs. Having a pre-approved budget will ensure programs are funded and any incentive dollars are pre-approved. Communicating a wellness budget also shows organizational commitment to the wellness initiatives in anticipation that a return on the investment made will be achieved.

Employee Benefits

Committing to

WellnessWellness

JENNIFER GRAYCBIZ Benefits & Insurance Services, Inc. Dublin, OH • 614.793.2453 • [email protected]


The beginning of a new year is a good time to revisit your retirement planning strategies. To start, consider all of your

retirement savings, such as 401(k) and 403(b), and obtain the total amount you have saved thus far. A more sobering picture of your retirement readiness emerges when you take that total and execute a simple calculation: take 4% to 5% of the total savings and the result approximates the annual income your retirement funds will generate. Industry experts say that one should expect to yield about 85% of the income from one’s last working year. This number is a generalization; therefore, you should evaluate what you might want to do after retirement and also consider your spending habits.

After getting a snapshot of your retirement preparation, you may want to increase the rate at which you are saving. Be sure to take full advantage of any corporate matching program where the company will contribute a certain percentage of your own contribution to your retirement account for up to a certain portion of your pay. In addition, evaluate if your budget will allow a total contribution of 10% to 15% of your annual income for your 401(k). This is the percentage range suggested by many experts. For 2013 the IRS allows up to $17,500 per year per 401(k) account.

Also, establishing an IRA is a great way to save up to $5,000 per year (and $6,000 per year for those ages 50 and older) even if it is with after-tax dollars.

Annuities can be a good option to supplement your retirement income (after tax). 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.

Even if you are satisfied with your financial progress toward retirement, there are still a few maintenance issues to consider. Depending on how the markets

Have you Googled yourself recently? Are you happy with the results?

Whether you are trying to generate business, get a new job or expand your professional network, social media is one of the most

efficient tools to accomplish these goals. While almost anyone can build an online presence, the key is to build an effective profile across multiple social channels that showcases your true expertise.

Many people believe you have to spend a ton of money to have your website featured on the first page of search engine results, when in fact, you can do this for free. There are four key social media channels you can use to build credibility online and enhance search engine results, all at no cost:

1. LinkedIn: LinkedIn is purely a professional networking site. The first thing you should do is create an effective profile by following ten key steps. These steps can be viewed in the Summer 2011 issue located at cbiz.com/bizgrowthstrategies. Once you have built a dynamic profile you can begin to post status updates with articles and resources that showcase you as an expert in your field.

2. Twitter: No, Twitter isn’t all about following celebrities. As a business professional, you can use Twitter to share important, time-relevant news, updates, events, etc. Plus, search engines love Twitter! This is also a great avenue to reach out to media outlets. Tip: Everyone loves the kudos when you retweet one of their tweets. This is a great way to recognize others in your industry who are also sharing relevant content. Spend the time to build your Twitter profile, including carefully crafting your bio and using hashtags.

3. YouTube: What? There is more to YouTube than cute cat videos? Yes, YouTube is a great tool for you to showcase “how-to” or other informative videos that highlight you as a credible resource. Don’t worry about the fancy equipment or setup. Studies show that more natural, raw-looking videos have better traction. Another idea is to create a “behind the scenes” video of your business or career. YouTube

(Continued on page 8)

Marketing

How to Build Credibility Using

Social Media

(Continued on page 8)

Expanding Your Personal Wealth

for the New Year

Retirement


If you happened upon a sophomore class in college physics, you might catch the students being tested on the basic principles of physics, electronics and

magnetism. The magnetic state of an object refers to how that object reacts (degree of attraction) within a magnetic field.

If you timed things right, you might actually see the students with their right fist thrust in the air and their thumb extended (toward them). No, they aren’t hitching a ride; they’re using their hands as a visual representation of the direction a magnetic field rotates around the flow of an electrical current.

You’re wondering where I’m going with this?

In the field of M&A transactions, there is no right hand rule, but from time to time certain types of acquirers exhibit strong attractions (work with me – almost magnetic) to certain types of companies from an investment standpoint. The following are sectors attracting interest in the market today:

Health care-related businesses: Health care isn’t getting any cheaper. As of the last statistical year available (2008), health care spending represented over 15 percent of our Gross Domestic Product, which places us at the top of the list of nations. There is no doubt that our health care is excellent when compared to most nations, but any sector that represents such a substantial amount of a nation’s GDP is bound to be fertile ground for innovative and growing companies.

With a substantial number of Baby Boomers nearing retirement age, acquirers have trained a keen eye on companies that will help serve the health care needs of this aging segment of the population.

Software companies: Darlings of the deal community, companies with few employees or assets other than intellectual property are always attractive. A number of small software companies with minimal revenue recently have sold for substantial multiples.

Bolting a new software application onto a large customer base allows for revenue expansion that simply isn’t available in many other fields. Further, the area of intellectual property surrounding a lot of new applications has become an area of focus for acquirers in recent years. The value of intellectual property can’t be underestimated, as evidenced by the infringement case won by Apple Incorporated in its suit against Samsung Group.

Homeland security-related companies: Any sector where the government

is able to throw around mass quantities of money in the name

of protecting the homeland draws a lot of attention from potential acquirers. Companies that develop technologies to help ensure national security will continue to draw substantial attraction from the investment community.

Energy sector companies: The investment

community is a little schizophrenic when it comes

to energy plays. On one hand, they like energy companies as

they realize that conventional energy is derived from dwindling resources.

On the other hand, they are concerned about the cyclical nature of the commodities consumed by conventional energy sector companies and the wild swings in resource values driven by Wall Street speculators. When it comes to renewable energy, again, there is a lot of initial interest, but also a fair degree of concern over businesses whose profitability is often predicated by the existence of government support. What the government giveth, the government can also take away.

Mergers & Acquisitions

It’s Really Just a

Matter of Attraction

LUKE SAGE is registered with CBIZ Financial Solutions, Inc. member FINRA, SIPC and Registered Investment Adviser.858.795.2088 • [email protected]


In the field of M&A transactions, certain types of acquirers exhibit strong

attractions (almost magnetic) to certain types of companies from an

investment standpoint.

The Sixth Circuit Court of Appeals has affirmed a district court decision that severance payments made to employees pursuant to an involuntary

separation from employment due to a reduction in workforce are not subject to FICA taxes. Employers that have been forced to downsize their workforce in the current economy should consider filing protective refund claims to recover these taxes. As the IRS likely will appeal the decision to the Supreme Court, employers should continue to subject severance payments to FICA taxes (and subsequently file protective refund claims) until the issue is ultimately resolved.

The Sixth Circuit’s decision in U.S. v. Quality Stores, Inc., CA-6, 2012-2 USTC ¶50,551 (Sept. 7, 2012) reinforces the district court’s conclusion that supplemental unemployment compensation benefits (SUBs) are merely treated as if they were wages for income tax withholding purposes under IRC Section 3402(o) and are not actually wages, and thus, are not subject to FICA taxes. In reaching its conclusion, the Court looked to the legislative history of §3402(o), as well as to its very title – “Extension of withholding to certain payments other than wages.”

Resolution of this issue is far from complete. The Sixth Circuit’s opinion is in direct contrast to the Federal Circuit Court of Appeals’ decision in CSX Corp. v. U.S., 518 F.2d 318 (Fed. Cir. 2008). The IRS has also issued several rulings wherein only certain types of SUBs were exempt from FICA taxation, such as those that are conditional on the employee’s receipt of unemployment compensation benefits. Given the large amount of taxes at stake, the IRS likely will file an appeal of this decision to the U.S. Supreme Court

which, if the case is accepted, will drag out the issue’s ultimate resolution for a number of years.

In the meantime, employers that paid FICA taxes on severance payments due to a reduction in workforce should file protective refund claims before the three-year statute of limitations expires on those tax liabilities. Therefore, if an employer paid FICA on qualifying severance payments to employees in 2009, the employer generally has until April 15, 2013 to file a refund claim.

The claims must be filed using Form 941-X or 945-X to correct errors previously made on the Form 941 (Employer’s Federal Quarterly Tax Return) or Form 945 (Employer’s Federal Annual Tax Return). To file for both the employer and employee portions of the FICA you must certify that you reimbursed your employee or secured his consent to allow the claim for refund or, after reasonable efforts, have been unable to do so.

The IRS will not grant any refund claims until the issue has been resolved, but filing the refund claim within the statute of limitations will protect your rights to the refund should the issue ultimately be decided in the taxpayer’s favor. The potential refunds, which would include interest on the taxes paid, could be significant.

To determine whether you qualify for this refund opportunity or for assistance with filing the necessary claims for refund, contact the author or your local CBIZ MHM tax professional.

Tax & Accounting

Court of Appeals Agreesthat Severance Payments Are

Not Subject

FICAto

MARC MINKERCBIZ MHM, LLC • New York, NY212.790.5826 • [email protected]


also makes it very easy for you to embed videos directly into your website, blog or other social channels.

4. SlideShare: SlideShare is a public sharing site that allows you to upload presentations, whitepapers, brochures and videos to “share” with the world. By doing so, you can expand your sphere of influence. With detailed analytics, you can track how many people have viewed or downloaded your documents. There is even a built-in lead system that will collect contact details for those who would like more information about your services.

Take the time to develop effective profiles for each of these four sites. Be strategic with the keywords that you use on each site, as this will help improve your rankings. Finally, remember to periodically monitor your search engine rankings to be better informed about what the online world says about you.

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Expanding Your Personal Wealth(Continued from page 5)

Marketing(Continued from page 5)

move, the percentages of your asset allocation will shift and may no longer reflect your initial goals. Your investment goals also may have changed over time. Whatever the case, it is crucial to rebalance your portfolio regularly so that it

reflects your initial or most up-to-date target allocation. Some retirement plan vendors offer automatic rebalancing features where participants may set their accounts to be periodically evaluated and rebalanced. Finally, remember to revisit and update the beneficiary of your retirement funds, following any important changes in your life.

Sufficient cognizance and active planning are paramount in successfully achieving your retirement goals. The beginning of a new year is a great time to keep these objectives in check among other ambitions you might have for 2013.

JUNG EUN OHCBIZ Retirement Plan Services • Cleveland, OH216.520.6622 • [email protected]

AMANDA MARKOSCBIZ, Inc. • San Diego, CA858.795.2253 • [email protected]


Business

Biz Growth Strategies Winter 2013