Download

A New Way To Pay Long Term Care Insurance Premiums - Tax Free!

July 20, 2011

As of January 1, 2010, there is a new way to pay your long term care premiums with tax-free withdrawals from Non-Qualified Annuities. The Pension Protection Act went into effect 1/1/2010 and provides yet another incentive from the government to encourage citizens to protect themselves against the devastating effects of a long term care situation. Typical Funding Strategies For Long Term Care Insurance I have many clients who have used funds from a dedicated investment to fund their long term care insurance premiums. The logic is certainly there in using this strategy. We work our whole lives to accumulate our nest egg which serves two primary purposes. First and foremost we save our whole lives so that we can have money to support our lifestyle. For many, this means we use the money to supplement our income and for such things as home improvements, travel, and spoiling grandkids. In other words, we save money so that some day we have the money to use for whatever we would like to use it for. But secondly, we save for things we don't want to spend money on but may have to because of an unexpected emergency. So our nest egg also represents "security." Water heaters blow up, dental bills appear out of nowhere, and cars need repairs. The greatest threat to our security is a long term care situation. Suddenly, the emergency changes from thousands of dollars to hundreds of thousands of dollars. So instead of using the entire nest egg to protect ourselves, why not take a small amount of the interest or dividends that the investments generate to fund long term care insurance? Up until now, the use of this money has typically been subject to taxation, but for some, there is a new tax-free option available. Pension Protection Act And Tax-Free Withdrawals Since January 1, 2010, you can take withdrawals from non-qualified annuities tax-free to pay long term care insurance premiums. Keep in mind that non-qualified means that it is an annuity that is not in a retirement fund like a 401k, 403B, IRA, or 457 plan. These retirement plans are what is referred to as "qualified money." Non-qualified would be anything outside of these types of traditional retirement plans. This does open up some new funding options for many. Deferred non-qualified annuities would allow you to put an amount of money in at a guaranteed interest rate which will grow tax-deferred. You can then use a partial 1035 exchange to pay your long term care insurance premiums from the account values tax-free. For most, that would be the equivalent of saving 30% off your premiums if you're in a 30% tax bracket.

Stephen Elliott

Stephen Elliott is the #1 Long Term Care agent in the nation. He has more clients and more in-force premium than any other agent in the country. Steve is also a national speaker on long-term care issues and appeared on the cover of Senior Market Advisor Magazine when he was awarded Senior Market Advisor of the Year Finalist in 2006.

Life & Health

Understanding And Preventing Obesity In Our Kids

Dr. Nicholas Yphantides

July 16, 2011

Pillar One: Love And Accept Your Children As They Are You must affirm and confirm your children, no matter what their weight may be. This is not about conditional love or pressuring our kids to measure up to our own standards or preconceptions. Never be critical or hostile about your child’s weight or you will crush their tender spirits. Their physical appearance to you as a parent is of course not the issue. How they look should almost be irrelevant to you. Your desire is for them to live long, healthy, productive and fulfilling lives. This may seem like such common sense but as a practicing physician I have observed parents both in my office as well as out in the community who seem to forget at times the need our children have for our unconditional love and acceptance.Pillar Two: Remember That You Are The Parent! Your Child’s Health Is Your Responsibility Please allow me to put on my white lab coat for a moment and speak a little tough love. Listen, kids are your responsibility. You are your kid's mom, your kid's dad. Don't let Saturday morning cartoons have more influence over your children than you do. There is a tug of war going on today for your children's hearts and attention in various directions, and you have to step up to the plate and take the position of influence and privilege that you have as their parent. From supervising and ensuring the timely and consistent use of their medication to influencing the choices and quantity of the time they spend in front of a computer or television, having your appropriate influence as their parent is your responsibility. If you have excuses and rationalizations about your inability to provide them the loving supervision and direction they need as your children, what can you expect of them? This is not about imposing or manipulating your kids but rather lovingly and wisely being in a position and taking the required steps to positively influence their behavior and choices. Pillar Three: Fill The Fridge And Cupboards With The Right Stuff Kids have a way of eating what's inside the refrigerator and the cupboards. What are you filling your shopping carts with? Treats wrapped in plastic? Aluminum cans filled with sugary sodas? Cartons of artery-clogging fat and sugar packed ice cream? Frozen pizzas? I'm not suggesting that you have to shop at a health food store or fill the fridge with brussels sprouts and tofu but having a wide assortment of healthy food available is a must. Just recently it was announced that Mickey Mouse, SpongeBob and the Tasmanian Devil are coming to a produce aisle near you. These and other characters will soon be found on fruit and vegetable packaging across the country as farmers arrange deals with entertainment companies that are eager to cultivate positive images among health-conscious families like yours. These are exciting and long overdue moves in the right direction as society collectively is coming around to slowly realize the role and responsibility it has in this whole issue. Kids are born to snack so consider peeling and slicing various kinds of produce, thereby making a healthy snack readily available and convenient for them to eat. Consider making your home a no-soda zone. Kids are also just like adults in that food tastes better when they're hungry. Snacks should be snacks and not extra meals that are packed with calories. If they are not overfed on snacks, at meal times they are more likely to eat healthier and nutritious food. Pillar Four: Replace Fast-Food Forays With Home-Based Meals Considering the realities of our hectic modern day lives, I know this is a tough one. I'm not suggesting that you and your family abstain from fast food or eating out for the rest of your lives, but I am asking you to consider striking an appropriate balance. Many times ending up at a restaurant may be the outcome of inadequate parental planning or preparation. In our last minute tendencies, if time is short and the fridge is empty or you are too tired to cook, the fast food restaurant on the corner might feel like your only option. From strategic use of leftovers to ready-to-go food in the freezer to making food prep part of the collective daily family routine, somehow we need to find more time to sit down and eat healthy meals together at home. Asking your children to help out with meal preparation will give them an appreciation of different food and for the effort it takes to serve healthy and delicious meals. There are now some restaurants that are starting to promote healthy and affordable family style "home-cooked" meal options to go. Meals eaten together can actually promote family togetherness, foster communication and have a remarkable impact on children. Social research studies have even shown added benefit in that teenagers who eat with their parents regularly are less likely to do drugs or be depressed and are more likely to be motivated students. Pillar Five: Food Is Nutrition — Not An Incentive Program, A Form Of Punishment, A Reward For Doing Something Good Or A Way Of Showing Love This principle was one of the most important in terms of my own personal journey and healthy transformation. I used to eat food for all the wrong reasons. Food is fuel and while there is also an important cultural and lifestyle component to it, we should try to not use food for reasons other that what it's primarily intended for. Parents play a critical role in creating an environment where food is not used inappropriately. I know there is not a parent alive who hasn't "treated" their children with an ice cream cone as a treat or reward. But that should be the exception and not the daily routine for completing homework or the daily chores. As parents we need to ensure that we don't establish a tendency or behavioral habits in our children where they over rely on food to satisfy needs that go beyond the primary nutritional purpose of food. Food is nutrition. It is not a reward, a companion or a way to deal with our pain, loneliness or boredom, and parents have to be deliberate about both modeling and implementing that reality. Try to limit rewarding good behavior or punishing inappropriate behavior by using food as the tool. These are patterns of behavior that will last a lifetime. Pillar Six: Regular Physical Activity Is An Absolute Must The lack of physical activity is a significant contributor to children being overweight and out of shape. For as complex as this whole issue is, on the other hand it's really a very simple dilemma. Calories consumed need to balance the calories spent. When we consume more calories than we burn, we add extra weight in our body's fuel storage tank of fat. In order to lose extra weight we simply have to burn off more calories than we put into our bodies. While most of our attention to this point has been on strategies to control the calories consumed making sure that our children are burning the appropriate amount of energy is just as important. In the not too distant past, physical activity was a much more regular part of the typical child's life. Whether it was routine physical education classes at school or time spent playing outside after school and on the weekends, life has certainly changed. Our children are not nearly as active, and many schools have had to cut back on physical education and after school programs. There are also the realities that many urban neighborhoods are unsafe for walking or not conducive to the kinds of physical activity that so many of us participated in as a natural part of our lives in the "good-ole" days. Add to this equation the explosion of screen time that kids spend in front of televisions, computers and video games, and you have the recipe for our current physical inactivity disaster. Getting off the couch and helping our kids get exercise by making activity fun is an essential parental role. Setting limits on sedentary activities like screen time may be a painful but necessary intervention. I don't believe that the "one-size fits all" approach is appropriate, but most professionals strongly suggest that screen time be limited to less than 60 to 90 minutes a day. Making physical activity fun and giving it a positive spin is a critical part of getting kids to be active on a regular basis. Taking them to a gym and throwing them on a treadmill as they stare at a blank wall is unlikely to be a realistic and sustainable strategy. Finding ways of encouraging kids to play hard while doing fun things for at least 30 to 60 minutes a day would be wonderful and very beneficial. From making vacations physically active to walking rather than driving to getting a dog that will drag you around on a leash, there are many ways of creating the association between fun and physical exertion. Pillar Seven: You Have To Model It — "Do As I Say AND As I Do!" There is no room for us as parents to consistently say one thing and do another. Not only is our credibility on the line. but more importantly, how can we expect something from our kids that we are not willing to commit to ourselves? This is not to say that the perfection of a healthy parental lifestyle is required, but for the most part, we have to live by the principles that we are trying to instill into our kids. I can't tell you how many times I have seen parents dragging their kids in to see me and asking for help with modifying their child's behavior when I had to bite my tongue instead of asking the parent if they've looked in the mirror recently. Trust me, it's an issue that gets addressed but not in a way that undermines parental credibility and authority as I am tempted to do right then and there in the exam room. As a parent, I am eager for my child to experience the most that life has to offer. I am no longer depriving myself of healthy living by consuming an abundance of calories while I waste away on the couch. I am also eager to do everything I can to ensure my child will thrive, be vibrant and get the most out of life herself. I don't want to deprive her of having me around as long as possible, so in many ways my own personal journey now is one motivated by love. Part of my intent in working to maintain my health and fitness is to be all that I can be as her daddy. So while I demonstrate my love by the way I care for my own body, I also am eager to help provide her with an environment and upbringing that will help ensure her own healthy state of body, mind and spirit. While there are no guarantees and unexpected health issues can always occur, as a parent I want to do all I can to live life in a way that sets the right tone and example. I love being healthy and am eager to ensure that my child has that same opportunity. It's about walking the talk. In order for your children to be healthy, you have to have a healthy family. You have to be a healthy parent by setting a healthy example. You too can then proclaim with enthusiasm and integrity, "Do as I say, and as I do!"

Dr. Nicholas Yphantides

Dr. Nicholas Yphantides serves as the Consulting Chief Medical Officer for San Diego County and is the National Director for Health & Wellness with Axene Health Partners. He is a cancer survivor and is an advocate for those in his community who need it the most. For nine years, Dr. Nick served as Chief Medical Officer of one the largest network of Community Clinics in San Diego County.

Regulation & Public Policy

An Overview of Audits, Lawsuits, And Insurance Issues For Internal ESOP Trustees

It is a challenge for plan fiduciaries to understand and minimize their risk from the government regulators and from conflicts that could result in civil litigation. The appropriate starting point is understanding the different categories and types of conflict situations and what issues are typically in dispute.|

Kevin Long

July 16, 2011

There are two primary areas of concern for Employee Stock Ownership Plan (ESOP) fiduciaries:

Department of Labor (DOL) investigations and enforcement actions; and
Civil litigation

The Employee Retirement Income Security Act of 1974, as amended (ERISA) provides that each plan must have two types of fiduciaries. Each plan must have a trustee for the plan's assets and each plan must have an administrator. The administrator is often referred to as the plan administrator and may be the committee appointed by the company or may be the company itself if the employer hasn't appointed a committee or individual to serve this function. Some of our comments below provide some insight into who should be serving in these capacities and how they should comport themselves to minimize exposure in these areas. Department of Labor (DOL) Investigations And Enforcement Actions Contrary to a common misperception, the DOL does not "audit" retirement plans. The IRS audits plans. The DOL investigates plans. This distinction is important because a DOL investigation is the front line action for the DOL's regional offices of its Employee Benefits Security Administration (EBSA). The DOL's regional offices investigate plans to determine whether there are ERISA violations. In brief, the DOL:

Can compel compliance with the statute to cause ESOP fiduciaries to correct fiduciary breaches, prohibited transactions, or to improve their plan operations to prevent potential problems.
Does not unilaterally "impose" penalties for noncompliance, such as the IRS may impose taxes, penalties and interest for Internal Revenue Code violations.
Derives its ultimate enforcement ability from litigation it may bring to enforce ERISA provisions. In such actions, the DOL is represented by the Department of Justice Office of the Solicitor (Solicitor). After investigations have closed without a satisfactory result in the DOL's view, the Solicitor's regional office in the given DOL region will be called upon to represent the DOL in litigation.

Although litigation may be brought to enforce the provisions of ERISA, the DOL looks for or demands voluntary compliance in the overwhelming majority of situations. In fact, only a limited number of cases are referred to the Solicitor's office each year. However, the DOL may request assistance from the Solicitor's office where certain legal issues are involved in an investigation or where the Regional Director wishes to negotiate forcefully from a posture that suggests litigation may be imminent if the DOL does not achieve the results it seeks. Handling DOL Investigations All trustees and plan administrators should be aware that DOL investigations are not a certainty, but may result from either a complaint filed by a plan participant or as a result of DOL initiatives. If an investigation is opened involving your plan, it is important to understand the DOL's procedures and their "script" for conducting the investigation. The EBSA manual for handling investigations is available on-line via the DOL's website. Reviewing the manual will help fiduciaries understand the objectives and tenor of investigations as well as a sequence of steps that the investigators follow to complete their review and interact with plan representatives. Even though the uncertainty of an investigation can be maddening, it's important for fiduciaries to do what they can to manage the process and provide themselves a feeling of understanding, if not control, over the process. Being proactive and being prepared helps plan fiduciaries assume the posture that their performance is complete. The potential next steps in the investigation are then more understandable, if not predictable. We advise our clients to push as hard as they can to stay on top of the DOL's process and ensure that the investigation doesn't languish. "We're From The Government And We're Here To Help" Communications and correspondence with the DOL should be cordial and cooperative. A confrontational approach to an investigation does not facilitate the process. There are a handful of things that you should keep in mind, however:

Document Requests. Generally, what they want, they get. The DOL is entitled to get anything they want from plan fiduciaries or other related parties or service providers regarding the plan's operation. The DOL has the ability to issue a "desk subpoena" to compel the production of documents without seeking a subpoena from a court. It is one of only a few federal agencies with this type of authority. It is very difficult, if not impossible, to prevent documents from being produced. We recommend responding to the DOL's document request in a thorough, complete and organized fashion. Provide everything, if at all possible, all at once. Index, organize and retain duplicates of everything sent to the DOL to ensure that there are no issues of nondisclosure.
Fiduciary Communication. Keep in mind that there is generally no attorney/client privilege between an ERISA plan fiduciary and the fiduciary's attorney when a fiduciary is being advised on plan matters. As a result, all of your attorney correspondence can be obtained and must be produced for the DOL if it relates to plan advice. Advice your attorney may give the corporation or a nonfiduciary regarding plan matters may be protected. Also, advice given to a fiduciary by defense counsel may be privileged. Consult with your attorney as to what advice is provided to which party and for what purpose. It may be advisable for you either to have separate counsel or to have your counsel clearly demark their client's files and engagement agreements (including conflict of interest disclosures) to keep fiduciary representation and advice separate from corporate or plan sponsor advice.
Past Actions And Transactions. Review these with counsel carefully in preparation for your interview. Since the investigation will likely deal with transactions that have happened years ago, and may have involved other individuals at the corporation or predecessor trustees, your recollection of the facts and the motivations will be hazy and will require re-examination. It is always important to understand what is contained in the documents that you produce for the DOL, since it will likely be the subject of a fiduciary interview later. More on this below.
Trustee Minutes And Records. The law does not specifically require trustees to keep minutes of meetings; however, they are very useful and desirable. Trustees will typically adopt resolutions in connection with plan transactions or significant administrative decisions, but perhaps not on a regular year in and year out basis. Don't be surprised if you are asked for such documents in your interview and you are unable to produce them. This will not prevent the DOL, however, from asking what you did or what you intended in making decisions for the plan.

When The DOL Comes To Call — The Interview In almost every investigation, the DOL will interview the plan fiduciaries. Expect the interview, be prepared. Have all of the documents you produced for the DOL present in the interview in an organized and indexed fashion. The DOL will ask open-ended questions seeking a narrative from you. Make the DOL ask specific questions so you are sure what they are asking and what they are asking about. The purpose for this advice is not to hide anything from the investigator. Rather, it ensures that the interview stays on track and that your time and effort in the process are focused and potentially minimized. If necessary, refer to the documents in the interview to see what they provide so that your responses aren't based on vague recollections which might conflict with the documents and the written record of your prior decisions. Bear in mind that the DOL's objective is to protect the best interests of the participants and beneficiaries. This is your role as fiduciary to the plan as well. Therefore, it's best to keep in mind that you are on the same team as the DOL in this objective, even though you may not always agree with the details of their positions. We encourage you to have an attorney present during the interview. The EBSA manual specifically allows for a fiduciary's attorney to be present. However, the investigators are instructed to withdraw from the interview if the attorney attempts to take over or control the interview. DOL Voluntary Compliance Letter At the close of the investigation, the DOL will issue a "voluntary compliance (VC) letter." This VC letter contains the results of the investigation and the Regional Director's position and findings. There should be no surprises as to what the letter contains. The letter usually asserts one of three conclusions. It may assert that the investigation is closed and no further action is being taken. It might assert that the DOL believes:

You "may" have violated certain provisions of ERISA, but at this time, the DOL is taking no further action.
The VC letter might assert that the DOL is of the opinion that you "have" violated certain provisions of ERISA and that certain corrective actions are required.

You should strive in the investigation to not receive this last form of letter. If items are discovered in the investigation that are not to the DOL's liking, you should work with the DOL to ameliorate the issue. You may not see eye-to-eye 100% of the time with the investigator or the District Director, but all fiduciaries need to work out solutions that are in the best interests of participants. If such a letter is issued even after lengthy discussions, negotiations and attempts to resolve the issues, then you should engage counsel (if you haven't already!) to evaluate whether or not the DOL is likely to refer the matter to litigation. It may be possible to resolve the situation even after receiving this letter, but further steps shouldn't be taken without obtaining the advice of counsel. Often this letter is issued due to the fact that counsel has not been involved in the investigation and the fiduciaries have not understood the process or what the DOL's objectives and intentions were. There should never be any surprises about what is being issued in a letter from the DOL, and, therefore, you should use counsel, as necessary, in the process to avoid any allegations of breach of duty. Civil Litigation There are generally three types of civil litigation that may be brought against you as a plan fiduciary:

Benefits claims
Fiduciary breach claims
Retaliation claims

Benefits Claims These are the most common forms of confrontation with plan participants. Participants may file a claim with a plan administrator asserting an entitlement to benefits or requesting a clarification of their employee benefit status. DOL regulations require detailed benefit claim procedures to be stated in the plan documents and summary plan descriptions. In the event a claim is filed, the plan administrator should follow the plan's claim procedures to the letter. The plan participant will also be required to follow the procedures to the letter if he wishes to file a claim in court if the dispute is not resolved in his favor. It is possible to have a provision in the plan's benefit procedures requiring a plan participant to file a claim form in order to formally initiate and perfect his benefit claim. This helps avoid the issue of when and whether a participant has made a claim for benefits and when the time line for response and appeal begins and runs. Handling The Benefit Claim Plan administrators should provide claim forms and also should promptly respond to all document requests from the plan participant. If documents are not provided in a timely fashion (30 days), then penalties ultimately may be assessed against the plan administrator in the context of litigation. There is a list of participant available documents in the statute. This includes the plan document, summary plan description, annual report and any other instruments under which the plan is administered. You should seek advice from your counsel as to whether the ESOP's appraisal report is available upon request to the participant. This may vary depending upon the federal circuit in which the plan and employer are located. All responses to benefit claims should be in writing. The plan administrator should cite the time frame for its reply. If an extension of the response time is required, the plan administrator should notify the participant of the need for an extension of time. If the benefit is denied and the participant appeals, the plan administrator must engage in a "full and fair investigation" of the appeal. Ultimately, the plan administrator should issue a detailed written appeal decision which includes the relevant law and facts and terms of the plan under which the appeal is decided. Legal v. Administrative Decisions If the benefit claim ultimately proceeds to court, the court will view the plan administrator's decision differently depending upon whether it is a plan interpretation or a legal decision that the court is reviewing. Plan interpretations are viewed by the courts as presumptively correct, unless the plan administrator made an "arbitrary and capricious" decision to deny the benefit. This presumption applies, as long as the plan specifies that the administrator has the absolute discretion to interpret the plan. Benefit decisions that are legal decisions will be reviewed "de novo" by the courts. No presumption is given to the plan administrator's legal decisions. Finally, a modified level of deference is provided for plan administrators who are under a conflict of interest when they make the benefit decision. Note that some benefit claims will involve decisions of law and interpretive decisions. Be clear in your appeal decisions and consult with counsel regarding the basis for determination and the conclusions in the appeal. What Is An Abuse Of Discretion? A number of factors are taken into account by the courts in this regard. It is important for the plan administrator to demonstrate that there was a consistency with:

The terms of the plan
The past precedent of dealing with benefits for participants that are similarly situated
The applicable statutes and regulations

Overall, the thoroughness of the process that the plan administrator applies to the decision and the thoroughness and the detail of the appeal decision will be critical. It is also important that there is no evidence of bias or conflict of interest in the decision. Fiduciary Breach Claims Suits may be filed for fiduciary breaches by either a plan participant or the DOL. In these cases, there is no need for a plan participant to follow an administrative claims procedure prior to initiating litigation. However, as a practical matter, these types of claims are typically coupled with a benefit claim because a benefit denial will often be alleged to be a fiduciary breach. This is because a plan fiduciary is required to adhere to the terms of the plan document as a fundamental aspect of its duty of prudence. Historically these types of suits have required plan participants to sue on behalf of the entire plan, and not just to recover the benefits in their individual accounts. With the recent decision of the U.S. Supreme Court in LaRue, it is now possible for a participant to bring a suit, individually, to recover losses to his individual account. Retaliation Claims These claims are brought for interference with the exercise of the participant's rights under ERISA. These claims typically are coupled with a wrongful termination suit because the participant is alleging that the reason for termination was because he either raised a complaint regarding a fiduciary's behavior or regarding his rights under the plan or benefit entitlement. These claims are very similar to wrongful termination claims from the perspective of who carries the burden of proof and what facts will be looked at to determine whether the discharge was wrongful or was related to aspects of the participant's ERISA rights. Attorney's Fees The ability to recover attorney's fees in ERISA litigation is an important issue to plaintiffs, as well as fiduciaries, in defense. For plaintiffs, this is important as very few attorneys will take an ERISA case on a contingency basis because the damages sought are the participant's benefits in his account. There is no availability of punitive damages or other consequential damages. The federal courts apply a "five factor" test for determining whether to award attorney's fees. There is a presumption in favor of a prevailing plaintiff that he should be awarded his attorney's costs and fees. However, it is not necessary for a plaintiff to prevail on the merits to have his attorney's fees awarded. The federal courts do not want to discourage plan participants from asserting his rights under the statute. In contrast, there is a great hesitation by the courts to award fees for the defense, even if the defense is successful on the merits. Even though there is not a multitude of attorneys who spend a significant amount of time litigating benefit claims or fiduciary breach actions against retirement plans and ESOPs, those attorneys who take these cases typically understand the likelihood of being awarded attorney's fees, or not, in connection with a particular case. It is also possible for fees to be awarded on an interim basis as litigation progresses at critical points in the litigation. Indemnification Indemnification is the payment of a party's costs or damages by another party that assumes the responsibility by the terms of its contract or agreement. Plan fiduciaries are typically provided indemnification by the plan or by the employer under the terms of the plan document. The plan or the corporation may fund the indemnification by purchasing director's and officer's insurance (D&O), or fiduciary insurance. It also is possible to simply fund the indemnification out of corporate assets. Note that there generally is a limit on indemnification in ESOP cases where funding the indemnity would damage the stock price of the corporation sponsoring the ESOP. Also keep in mind that if fiduciary insurance is purchased by the plan out of plan assets, the law requires that the insurance coverage gives the insurance company recourse against the fiduciary to recover damages resulting from the breach. Therefore, it is advantageous to have the corporation purchase the insurance coverage since this is not a required term of an insurance contract under ERISA. Fiduciary insurance coverage and D&O policies should be carefully reviewed. Some D&O policies have gaps or "carve outs" that specifically exclude coverage for matters relating to an ERISA employee benefit plan. For these policies, a specific "rider" or additional policy must be purchased to provide the ERISA fiduciary coverage. This leads to the question of how much insurance coverage you should purchase to protect your plan fiduciaries. Also, when should you consider buying fiduciary coverage for your ESOP fiduciaries? Since coverage is typically most valued for covering the cost of the defense and not always for potential penalties resulting from the litigation, the amount of coverage may be a fraction of the ESOP's overall stock value. However, the more complex the plan or transaction, the greater the policy limit that is desirable. Note that some policies will not pay for the actual plan losses or benefits that are payable to the plan participant. An Ounce Of Prevention Is Worth ... Consider the following suggestions for proactive risk management:

Get It In Writing. Get any available answers to your technical questions or advice from your advisors in writing. Seek planning memos and written analyses of issues of fiduciary responsibility and liability for plan decisions and transaction decisions. Try to have your advisors and attorneys make clear: the unique situation, who bears the burden of the decisions, what the legal standards are for making the decisions, and what the process should be for reaching conclusions. Written guidance will help you better document the actions that you are taking.
Cross-Communications. Are your advisors, including your third party administrator (TPA), certified public account (CPA), corporate counsel, and ESOP counsel communicating with one another? In ESOP transactions and in ESOP planning situations, it is absolutely critical for all of your advisors to be in the loop on the advice being given. It must be clear which advisors are assuming responsibility for which issues. With specific acknowledgements among the advisors, a fiduciary client can help ensure that he is getting the right advice from the right professional. It is not unusual for a specific advisor to disclaim responsibility for advice as long as another advisor is reaching the conclusion and making the appropriate recommendations. Team communication will avoid gaps in your advice.
Documentation On Calculations. It is important, to have the particular advisor that is responsible for or controls the issue to provide the documentation for the rationale and conclusions that are being reached. The same is true for calculations that affect the administration of the plan. The CPA and the TPA should be in close communications so that the tax returns and the plan's administration agree and are completely accurate. Finally, if there are tax positions that are being taken which may affect your income tax return, be sure that your attorney and CPA are identifying who is the "preparer" for purposes of that issue on the return. It is possible for your attorney to be considered a return preparer if the attorney's advice is being relied upon for a reporting position on the return.

What To Do? It is a challenge for plan fiduciaries to understand and minimize their risk from the government regulators and from conflicts that could result in civil litigation. The appropriate starting point is understanding the different categories and types of conflict situations and what issues are typically in dispute. Most importantly, fiduciaries should ensure that their risks are insured and their process for reaching conclusions are well thought out, well advised, and well documented. It is impossible to always be completely prepared. An acceptable level of exposure exists in all these areas. We don't think that you should beware of these exposures. Rather, we advise that you be aware of what can be an important element of exposure in any of these areas in advance and be prepared.

Kevin Long

Kevin G. Long is certified as a Taxation Law Specialist by the California State Bar Board Of Legal Specialization — one of only some 300 tax specialists out of over 156,000 active California lawyers. His particular emphasis is on ESOPs and ESOP transaction planning and nonqualified and equity deferred compensation planning.

Life & Health

Long Term Care Insurance: Group plan vs Individual

Stephen Elliott

July 14, 2011

As long term care insurance gains more traction as a critical component of everyone’s retirement planning, more and more employers and associations are offering group long term care insurance to their employees and members. Unfortunately, most people just assume a group plan is better than an individual plan. This is rooted in the concept that the more people who subscribe to a benefit, the lower the premium should be for the group. Also, we tend to have somewhat of a blind allegiance that our employer is looking out for our best interests when they shop the market for an insurance product to offer their employees. So let's look at the differences in benefits and premiums between a group and individual plan. The People Who Benefit From Group Plans Are People In Bad Health First off, the idea that long term care insurance should be lower in premiums for a group is a fallacy. As Kiplinger's Finance states: “group plans have very limited underwriting, which means that healthy people end up paying the same price as less-healthy people. If you have medical conditions, this could be a wonderful deal. But, if you're healthy, you can do better with an individual policy that's tougher on medical issues.” Most group plans have what is referred to as "Modified Underwriting" which means that anyone within the group is guaranteed coverage if they can answer a few "knock-out" questions. The "knock-out" questions are questions designed to identify the worst of the worst in terms of medical conditions such as: have you been diagnosed or treated for Alzheimer's, Parkinson's, or are you HIV Positive. The group policies typically do not check medical records nor conduct personal telephone interviews. As the Kiplinger's Article also states: “most group plans do not offer special rates for people in particularly good health nor discounts for couples." With individual plans, there is always an additional 10% to 15% discount for people who would qualify for the "Preferred" rate and between a 20% to 30% discount for any couples who sign up together. Group Plans Do NOT Offer an Asset Guarantee Lastly, you will almost never see a "Partnership" plan in the group market. This has become the latest and greatest industry benefit that is available to most people who qualify for a plan on the individual marketplace. The Partnership is a partnership between the State of California and 5 Insurance companies. The State of California has decided to become very aggressive in encouraging people to take out Long Term Care Insurance plans. The idea of a Partnership plan is that you get a smaller policy which means a smaller premium and the State of California will provide you with an asset guarantee. It amounts to an entitlement the State of California provides to you whereby for every dollar of benefits paid by the insurance company, you are able to protect an equal amount of money from the spend-down requirements of Medicaid (MediCal in California). So in other words, if the long term care policy paid out $500,000 in benefits, then if the policy were to be exhausted, you would then be guaranteed to protect $500,000 from having to be spent down to qualify for MediCal. So if your estate is valued at a half million dollars, you would essentially be protecting your entire estate from having to be spent down to the typical $2,000 that MediCal requires one to spend down to in order to qualify for MediCal benefits. This program has been so successful in California that the Federal Government has created the National Partnership through the passage of the Deficit Reduction Act. So all states will now be offering Partnership plans. It is a clear message that both federal and state governments want to encourage people to take out Long Term Care Insurance plans. Keep in mind this asset guarantee is not available in over 99% of all group plans ever sold. In Conclusion So in conclusion, unless you are not healthy enough to qualify for an individual plan, group plans are never a better deal. With an individual plan you will receive more benefits at a lower cost, and you would be able to obtain a Partnership plan which would guarantee that a large portion of your assets will never have to be spent down due to long term care. And isn’t that the whole point of taking out this kind of protection? But, beware, group plans give you the illusion that they're cheaper. They do this by taking out inflation protection or giving you a very watered down version of it. Keep in mind that historically, over the last 30 years, the costs of nursing homes have increased an average of 5% per year compounded. Most group plans and certainly all Partnership plans have a built-in 5% compounded inflation protection. This means that your benefit will increase 5% every year you own the plan, but the premiums do not increase with the increase in benefits. So with an individual Partnership plan you will receive: Inflation protection, the Asset Guarantee, and a lower premium for the same benefits you would receive with a group plan.

Stephen Elliott

Commercial Lines

100 Percent Trouble: The Expensive Future of PD

Don Barthel

July 3, 2011

Got a case reserved for 60, 70, or 80 percent, but certain it won't hit 100% given the conservative nature of the AMA Guides and the 2005 PDRS? Think again! Review those reserves and prepare to go to battle ... without reliance on an AME and/or AVE! ¹ Apologies to Bob Dylan ² "4662. Any of the following permanent disabilities shall be conclusively presumed to be total in character: (a) Loss of both eyes or the sight thereof. (b) Loss of both hands or the use thereof. (c) An injury resulting in a practically total paralysis. (d) An injury to the brain resulting in incurable mental incapacity or insanity. In all other cases, permanent total disability shall be determined in accordance with the fact." ³ LeBoeuf v. WCAB (1983) 34 Cal. 3d 234 [193 Cal.Rptr. 547; 666 P.2d 989] held that where an injured worker is found to be less than totally disabled and the Bureau of Rehabilitation (Bureau) subsequently finds the worker not qualified for rehabilitation benefits, this finding constitutes "good cause" to reopen the permanent disability proceeding. ⁴ Even though the California Legislature largely rewrote LC §4660 and changed the very language of that statute that LeBoeuf relied on, nothing has changed!?!? ⁵ For further details on why the defense should avoid AMEs, see "The AME Trap (aka Why Agreed Medical Examiners Make Me Disagreeable" at http://www.bradfordbarthel.com/blog/V5N4/One-1.htm. ⁶ I simply have no good answer for this rhetorical question! ⁷ Some of these arguments including challenging the so-called expert's expertise (See Costa II) and citing LC 4621(a). ⁸ 4664(a) provides: "The employer shall only be liable for the percentage of permanent disability directly caused by the injury arising out of and occurring in the course of employment." ⁹ See Cal. Rules of Ct., rule 8.528(b)(3) and 8.1115(a).

Don Barthel

Donald Barthel is a founding partner of Bradford & Barthel, LLP, an industry leader in the aggressive defense of Workers' Compensation, Subrogation, and Employment, and Labor matters. His entire legal career has been dedicated to the defense of employers' rights in the arenas of labor law, employment law, and workers' compensation.

Commercial Lines

"Illegals’" Entitlement to Voucher/PD Increase - To Pay or Not to Pay?

Don Barthel

July 3, 2011

Applicable Labor Code provisions, regulations, and case law strongly support the proposition that — in cases where the injured worker (IW) is not legally entitled to work in the US — we can successfully defend against providing vouchers, and obtain the 15 percent PD decrease. However, as a prerequisite to such arguments, it is essential that we coordinate our efforts to ensure the requisite RTW or Mod/Alt Duty forms issue [See DWC-AD 10133.53 (Section 10133.53) and DWC-AD 10118 (Section 10118)] issue in timely fashion.

Don Barthel

Claims

The Total Cost of Your Insurance Program, Part 5

Our clients needs vary so greatly and our resources and capabilities also have their contrasts, so much of what can and will take place has to do with the needs of the individual customer and the capabilities of insurance partners they are connected to.|

Dirk Duchscherer

June 25, 2011

This is the fifth article in a five-part series on understanding the total cost of your insurance program. Preceding articles in this series can be found here: Part 1, Part 2, Part 3, Part 4. Conclusion It has been purported that carrier and broker Risk Control services are redundant, but I think now that we’ve taken you down the respective path, it is easy to see significant differences that are applied to reach the similar goals of loss reduction or loss elimination. Our clients needs vary so greatly and our resources and capabilities also have their contrasts, so much of what can and will take place has to do with the needs of the individual customer and the capabilities of insurance partners they are connected to. We hope that if you are a user of insurance services that you are a better informed user and consumer. If you are in the business we hope that we have expanded your horizons and giving you some things to think about that will help you do your job more effectively. Well-planned and executed Risk Control services provide added value to any insurance program, and when embraced by the client can ensure stable ongoing operations that can survive tumultuous times. What is the immediate outlook for both carrier & broker perspectives on the future of risk control services? And how risk control consultants can prepare themselves for future insurance industry developments and grow professionally is up to us to create and prepare for. Bibliography Batterson, L., Oldham, M., Sullivan, C., "The Triangle of Risk Control Services," American Society of Safety Engineer's Risk Control Symposium, C.N.A. Insurance Company, Chicago, IL, October 2008. Ekern, C.R., Consultative Brokerage: A Value Strategy, Cincinnati, OH: The National Underwriter Company, 2007. InterWest Insurance Services, Inc., Corporate Risk Control Department, Property and Casualty Risk Control Service Levels, Sacramento, CA, 2008. Schwantz, R., The Wedge How to Stop Selling and Start Winning, Cincinnati, OH: The National Underwriter Company, 2006. Related Articles The Total Cost Of Your Insurance Program, Part 1 The Total Cost Of Your Insurance Program, Part 2 The Total Cost Of Your Insurance Program, Part 3 The Total Cost Of Your Insurance Program, Part 4 Authors Dirk Duchsherer collaborated with Jim Newberry (CHST, Bsc Safety Management) in writing this article. Jim is the AVP and Risk Control Manager for Island Insurance Company, LLC in Honolulu, Hawaii.

Dirk Duchscherer

Dirk Duchscherer confers with CEOs, risk managers, production supervisors and facility directors to identify problems and suggest cost effective solutions. He reviews compliance with such agencies as CALOSHA, NFPA, ANSI, ASTM and DOT and provides clients with technical information on standards, codes and regulations.

Risk Management

The Total Cost of Your Insurance Program, Part 4

As an illustration of the principles discussed so far, we offer these service level guidelines which have been developed by InterWest Risk Control for both Property & Casualty and Workers' Compensation clients.|

Dirk Duchscherer

June 25, 2011

This is the fourth article in a five-part series on understanding the total cost of your insurance program. Preceding and subsequent articles in this series can be found here: Part 1, Part 2, Part 3, Part 5. As an illustration of the principles discussed so far, we offer these service level guidelines which have been developed by InterWest Risk Control for both Property & Casualty and Workers' Compensation clients: Property and Casualty Service Level Guidelines (not including Workers Compensation) Due to the significant variable revenue levels generated from either a mono-line or multiple lines of coverage (fire, inland/ocean marine, boiler/machinery, general liability, products liability and completed operations, auto liability, etc.) any client generating at least $10,000 in revenue would qualify for risk control service. Based on the above, for all Property & Casualty requests, please contact your InterWest Risk Control Consultant to determine your customers' needs and services and timelines including the following: Property Protection/Fire Prevention

Interpret and prioritize insurance company loss control recommendations.
Evaluate sprinkler system installations utilizing NFPA 13, 231, and 231C.
Assist clients with automatic sprinkler system and fire hydrant testing.
Analyze building valuations and construction class codes.
Site inspections and audits including: cooking equipment, spray painting, flammable liquids and chemical storage, indoor/outdoor pallet/tire storage, in-rack arrangement of stock.
Course of construction/builder’s risk accounts for fire prevention and security.

Boiler and Machinery Protection

Interpret and prioritize insurance company loss control recommendations.
Determine state operating permit criteria based on objects such as high/low pressure steam boilers, air tanks, LPG tanks, storage water heaters, etc.
Provide on-site consultation of machinery and equipment, unique business interruption exposures, and preventative maintenance and inspection activities and forms.

General and Public Liability

Interpret and prioritize insurance company loss control recommendations.
Provide on-site assistance for life safety concerns with risks such as educational institutions, restaurants, hotels and motels, shopping centers, office properties, and residential risks.
Evaluate public safety such as emergency exits and lighting, walking surfaces, ramps, stairways and steps, lighting, guardrails and handrails, maximum occupancy limits, and similar items.
Assist with complying with the Americans with Disabilities Act (ADA).
Analyze public injuries and illnesses to determine loss trending and corrective measures for preventing reoccurrences.
Attend and participate at supervisory and management-type training sessions to provide information on accident investigations and accident review board committees as well as follow through on any relevant loss prevention remedies arising from these sessions.
Evaluate playground equipment for parks and school risks.

Product Safety

Interpret and prioritize insurance company loss control recommendations.
Coordinate loss control activities between insurance companies and clients for loss prevention services.
Review existing quality assurance and control manuals relating to standards such as ANSI, ASME, CPSC, voluntary industry product safety guidelines, etc.
Provide on-site plant tour and analysis of manufactured products. Evaluate quality control measures, plant reviews, blueprints, and drawings.

Fleet Safety

Interpret and prioritize insurance company loss control recommendations.
Provide clients with technical information on DOT and CAL-OSHA regulations.
Specifically offer the following services for our clients:
- Audit fleet safety program including driver selection, vehicle inspection and maintenance, accident investigations, motor vehicle record check criteria, driver logs, etc.
- Perform on-site surveys of vehicles, inspection and maintenance activities, and premises.
- Complete vehicle observations and evaluations of straight trucks, cab-overs, private passenger automobiles, and tractor/trailer rigs for backing, lane changing, following distances, and speed of travel.
- Review driver qualification files with management to determine driver logs, Commercial Driver License, physical examination, written/road test certification, safety incentives and awards, and similar documents.
- Perform “ride-alongs” with company drivers to evaluate speed of travel, following distances, lane changes, backing, product control and security, and customer interfacing.
- Attend and participate at fleet safety meetings and accident review board committees on defensive driving topics, vehicle losses, and accidents, and safety incentive awards, etc.

Additional Services

Access to defensive driver training, property management, online risk management training on InfoSource Café (InterWest's extranet to provide clients with important resources to be better prepared for dealing with emergencies, to find answers for Cal-OSHA compliance issues, to improve their injury prevention efforts, to manage risks associated with property and products, and to maximize value of employee benefit programs)
Access to fleet safety videos including defensive driver (fee may apply)
Disaster response plan development and review.
Sexual harassment prevention training for managers/supervisors and employees.
HR consulting available (may be fee based).
Customized inspection/audit forms for buildings, equipment, vehicles and premises.
"Tailored" forms for accident investigation and training, including property, liability, and fleet.
Liquor Liability awareness training.
Assist in determining root causes of losses and accidents with internal and external claims departments.

Workers Compensation Service Level Guidelines ($4,000 - $20,000+ in Revenue) InterWest brokers can also use a Service Time Line Report (including above risk control service levels) once agreed upon between the customer to monitor activities from risk control, claims, accounting, etc. Here is a sample Service Time Line Report. Loss Control Service Level: Level I Total Revenue: $4,000 to 6,500 Description of Service Levels/Sample Services Contact will be informal, Access to all appropriate services via InfoSource Café, phone consultation and workers compensation safety survey/audit. Follow up on a consultative basis and electronic review of current safety plans and newly completed templates for accuracy and detail. They will be invited to participate in regional workshops and safety webinars. Loss Control Service Level: Level II Total Revenue: $6,501 to 12,500 Description of Service Levels/Sample Services One to two visits annually based on need; Contact will be formal and informal, will receive a formal safety/audit and review, receive written recommendations for priority based services, safety one-on-one training for supervisors, specific safety training based on need. Follow up on a consultative basis and electronic review of current safety plans and newly completed templates for accuracy and detail. They will be invited to participate in regional workshops and safety webinars. Loss control to provide recommendations for the written service timeline. Loss Control Service Level: Level III Total Revenue: $12,501 to 20,000 Description of Service Levels/Sample Services Two to four visits annually based on need; Contact will be formal and informal, will receive a formal safety/audit and review, receive written recommendations for priority based services, safety one-on-one training for supervisors, specific safety training based on need. A loss control representative will be available to sit in on claims reviews, follow up on a consultative basis and electronic review of current safety plans and newly completed templates for accuracy and detail. They will be invited to participate in regional workshops and safety webinars. Loss control to provide recommendations for the written service timeline. Loss Control Service Level: Level IV Total Revenue: $20,001 and Up Description of Service Levels/Sample Services Minimum four contacts with the client and service open based on need and structured service plan. Loss control representation will be available to sit in on claims reviews. Related Articles The Total Cost Of Your Insurance Program, Part 1 The Total Cost Of Your Insurance Program, Part 2 The Total Cost Of Your Insurance Program, Part 3 The Total Cost Of Your Insurance Program, Part 5 Authors Dirk Duchsherer collaborated with Jim Newberry (CHST, Bsc Safety Management) in writing this article. Jim is the AVP and Risk Control Manager for Island Insurance Company, LLC in Honolulu, Hawaii.

Dirk Duchscherer

Claims

The Total Cost of Your Insurance Program, Part 3

Now more than ever, customers need to understand their Total Cost of Risk (TCOR). In C.R. "Rob" Ekern’s book "Consultative Brokerage: A Value Strategy," the TCOR model states four crucial cost areas: Insurance Premiums, Loss Costs (direct and indirect), Administrative Costs, and Premium Taxes and Fees. By adopting the TCOR model, clients can measure the effectiveness of their entire safety and risk management programs and not just the premium costs. Research has shown for every $1 paid out in direct costs, an additional $1-4 of indirect loss costs are paid by the client.|

Dirk Duchscherer

June 25, 2011

This is the third article in a five-part series on understanding the total cost of your insurance program. Preceding and subsequent articles in this series can be found here: Part 1, Part 2, Part 4, Part 5. The Broker Risk Control Perspective So your insurance carrier’s risk control consultant and insurance broker are providing you with all the safety and loss control assistance they promised they would prior to renewal to help eliminate and minimize your alarming insurance costs. Therefore, why bother with the broker risk control services? Not so fast! Historically, carrier risk control services were driven by premium size, class of business, and/or loss frequency/severity — usually directed by the underwriting department. However, in today’s unstable and downsizing economy, all three entities — customer, insurer, and broker are all expected to do more with less. Now more than ever, customers need to understand their Total Cost of Risk (TCOR). In C.R. "Rob" Ekern’s book "Consultative Brokerage: A Value Strategy," the TCOR model states four crucial cost areas: Insurance Premiums, Loss Costs (direct and indirect), Administrative Costs, and Premium Taxes and Fees. By adopting the TCOR model, clients can measure the effectiveness of their entire safety and risk management programs and not just the premium costs. Research has shown for every $1 paid out in direct costs, an additional $1-4 of indirect loss costs are paid by the client. The Triangle of Risk Control Services presented during the American Society of Safety Engineers (ASSE's) Fall 2008 Risk Control Symposium outlined a typical "triangle" which illustrates the relationships between the client/risk manager-broker-carrier. Specifically, the broker risk control consultant's needs/role include:

New prospects/accounts
Customer retention and satisfaction
Long-term and healthy carrier partnerships
Assisting existing clients in lowering TCOR
Ongoing growth and knowledge to understand clients' exposures and needs

The key to a successful "triangle" for both the client/risk manager and carrier/broker is a long-term risk improvement plan including: regular site visits and assessments, historical loss analysis, understanding client "culture" and ability to change, and committed partnership with carrier and broker risk control staffs. In his book "The Wedge: How to Stop Selling and Start Winning" Author Randy Schwantz says (that to draw in new clients) you need to create a wedge between the incumbent broker and your prospect. Your goal is to get the existing broker fired! In other words, what can you do as the new broker that the incumbent is not doing for you to earn the new business? For a broker's current "book of business," Randy states that you need to protect your top 20 clients. One of your tools needs to include a Service Time Line Report (a "sample" is included later in this article). In 2008, InterWest Insurance Services adopted and implemented the Wedge sales platform for obtaining/retaining its prospects/clients company-wide. One of the key "wedge" components is InterWest's Risk Control Department. To help achieve InterWest's targeted middle market, accounts generating at least $10,000 for Property and Casualty (P & C) and between $4,000-$20,000+ for workers compensation (WC) annually in revenue qualify for risk control service. Related Articles The Total Cost Of Your Insurance Program, Part 1 The Total Cost Of Your Insurance Program, Part 2 The Total Cost Of Your Insurance Program, Part 4 The Total Cost Of Your Insurance Program, Part 5 Authors Dirk Duchsherer collaborated with Jim Newberry (CHST, Bsc Safety Management) in writing this article. Jim is the AVP and Risk Control Manager for Island Insurance Company, LLC in Honolulu, Hawaii.

Dirk Duchscherer

Claims

The Total Cost Of Your Insurance Program, Part 2

Liability exposures can exist anywhere in a business. So a comprehensive loss management program would include a process to identify and manage risks to the company and the public. Risk control can help the client identify and focus on the hidden, if not obvious, exposures that cause liability-related losses.|

Dirk Duchscherer

June 25, 2011

This is the second article in a five-part series on understanding the total cost of your insurance program. Preceding and subsequent articles in this series can be found here: Part 1, Part 3, Part 4, Part 5. Now that we know that "how a customer is treated" and "how they feel about it" may well easily compete with the product or service itself, let's move on to our next parameter — procedures. What we mean by procedures is what we do and how we go about it. As an example, let's look at things Risk Control can do regarding the area of General Liability and Property services. Liability exposures can exist anywhere in a business. So a comprehensive loss management program would include a process to identify and manage risks to the company and the public. Risk control can help the client identify and focus on the hidden, if not obvious, exposures that cause liability-related losses. General Liability Risk Control services of this nature might include but are not limited to the following:

Completed Operations Exposure Evaluations
Contractual Risk Transfer Program Evaluations
Construction General Liability Exposure Evaluations, including work zone safety, utility damage disruption prevention, water and fire damage prevention, dust control and construction defects prevention
Emergency Plan and Disaster Recovery Evaluations
Life Safety Evaluation based on the NFPA 101 Guidelines for Fire Life Safety Codes
Premises Liability Exposure Evaluations, including slip and fall prevention and negligent security
Products Liability Program Evaluations
Quality Control Program Evaluations
Workplace Violence Prevention Program Evaluations

Property Risk Control provides a full range of property conservation and loss prevention services to eliminate or minimize the frequency and extent of property losses. Risk Control can conduct on-site assessments of facilities to evaluate company exposure to loss from fire, windstorm, flood and earthquake and other covered perils. Specialists can also test and evaluate sprinkler systems, special extinguishing systems and water supplies. This can extend to a review of the human element programs that exist to assure they are up to date and functioning properly. Risk Control can analyze business interruption potential to identify potential bottlenecks, critical equipment, and interdependencies that might impact daily operations and revenue streams. When a new facility is added or an upgrade to existing facilities is to take place, Risk Control can develop protection specifications, as well as review building and fire protection plans so that the facility will be adequately arranged and protected upon completion. All of these efforts focus on helping the company maintain operations and avoid costly interruptions that can hurt the bottom line. Other areas of expertise include but are not limited to: Commercial Automobile/Fleet; Ergonomics, Industrial Hygiene, Workers' Compensation, Boiler and Machinery, Inland Marine in addition to industry specialties (e.g. petrochemical, construction, healthcare and chemical, etc.). There are a myriad of services that can be provided in and amongst all the coverages the insurance companies provide. Some insurance companies' risk control operations can be categorized into the type of services they specialize in, while others may try to be all things to everyone. Traditional categories include: training, technical, and industry specialists. This last category includes both carriers that cater to niche markets specializing in particular types of risks (e.g. not for profits, schools, heavy industry, municipalities — to name a few) or could just be large insurance companies that have the resources to help large companies deal with the complexities of, for example, project management and construction management or the risk analytics of projects that are unique or very high risk. This subject would not be complete without mentioning the insurance of special types of projects and high risk operations which involves risk sharing and self insurance. We also might call this “creative risk financing”. Insurance is in fact "risk financing" so the creative element only has the limitations of what an insured or client and an insurance element or vehicle respectively are willing to risk. Risk Control plays a big role in this equation because both large and high risks involve a sizable chunk of change if not managed creatively and, with a good balance of Risk Control, can beat the odds and save a lot of premium. Well-managed risks of this type can yield sizable savings. The final area that will be covered on the subject of carrier risk control is how work is coordinated. To this end, service levels are normally determined by a combination of premium size and hazard of risk/operations relative to coverage. Services are often time-controlled by underwriting since they are the managers of the account, but this authority will sometimes be transferred to a service team, with underwriting involvement. This is an interdisciplinary team made up of claims, audit, underwriting, loss control and they are charged with identifying the customer's service needs and developing an account strategy to meet those needs, ensuring that value is being provided to the customer and to the company. The underwriter or service team is responsible for clearly accounting for the cost of the services provided and assuring the costs to deliver the necessary level of service is included in the premium or taken into consideration in some fashion. Risk control services can be very diverse, varying considerably from company to company and were discussed above in some detail. In addition to the items above, services traditionally include: site surveys; risk assessment & risk analysis audits, specific safety audits, training based on line(s) of coverage, technical training, management/supervisor training; job site visits, legal/jurisdictional inspections of boilers and pressure vessels, safety materials such as pamphlets, brochures, video/reference libraries, web site access, etc.). They can also vary from high touch services which are service intensive to low touch which are economical to deliver. Related Articles The Total Cost Of Your Insurance Program, Part 1 The Total Cost Of Your Insurance Program, Part 3 The Total Cost Of Your Insurance Program, Part 4 The Total Cost Of Your Insurance Program, Part 5 Authors Dirk Duchsherer collaborated with Jim Newberry (CHST, Bsc Safety Management) in writing this article. Jim is the AVP and Risk Control Manager for Island Insurance Company, LLC in Honolulu, Hawaii.