Cyber Liability

Safeguarding data is an increasingly complex challenge for large and small businesses alike. Technology reaches throughout business operations, and the volume of electronically stored data grows exponentially. While these trends allow businesses to work more productively, they also result in a greater vulnerability to cyber security threats.

More than 40 states now have some level of data privacy and security breach notification laws on the books. Typically these laws require a business that has suffered a breach to notify all customers who have possibly been affected and may require credit monitoring services. The monetary and reputational costs for notification and credit monitoring are significant.

The inadvertent release of private data can take on many forms, including:

  • Lost or stolen laptop containing customer names and social security numbers
  • Cyber criminals who hack into your server to steal information
  • Disgruntled former employees looking to vandalize stored data
  • Private information mistakenly emailed to an incorrect address
  • The Ponemon Institute and Symantec have jointly developed a Data Breach Risk Calculator that is an effective tool for evaluating your business exposure to a Cyber Risk loss. Cyber Risk Insurance is available through numerous carriers, with the typical product offering:
  • First Party coverage: responds to notification expenses, credit monitoring, remediation expenses, extortion and theft
  • Third Party coverage: responds to regulatory defense and litigation from affected individuals

Insurance is not a substitute for sound policies and procedures regarding the handling of private data, but a Cyber Risk policy can help deal with the regulatory, monetary and reputational costs of a data breach. Let us know if you have additional questions regarding these exposures. Additional information can be found at the following websites:

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

Certificates of Insurance

Commerce would ground to a halt if it weren’t for Certificates of Insurance (COI). It’s a bold statement but true. Without this document providing that an entity has insurance coverage, banks wouldn’t fund construction projects, homeowners wouldn’t remodel, goods wouldn’t be shipped and cars wouldn’t be financed. These are just a few of the nightmare scenarios that would occur if one weren’t able to provide proof of insurance.

COIs provide proof to a third party (not the named insured) of the existence of and amount of insurance issued to the named insured by their insurance carrier(s). These are most commonly requested when required by a contract between two parties; such as an owner/contractor or bank/borrower.

COIs address those types of coverage that a third party would be most interested in knowing about concerning the named insured:

  • Commercial General Liability
  • Automobile Liability
  • Workers Compensation
  • Umbrella/Excess Liability

Third parties are often interested in proof of coverage specific to a transaction and that protect the third party’s interest in that transaction, such as proof of Homeowners Insurance for a mortgagor, proof of Builders Risk insurance to a project lender, or proof of cargo insurance to a bank financing an international transaction. Additional information provided by COIs include:

  • A “Remarks” section for more specific data (e.g. Description of Operations/Locations/Vehicles)
  • Insurance contract dates of coverage
  • Names of insurance carriers providing coverage
  • Limits of liability of each policy
  • Provision for notification of policy cancellation to the third party in the event the policy is to be cancelled before the expiration date shown

For more information concerning Certificates of Insurance, please call Mike Regan at Regan Cleary Insurance.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business . We are members of the National Association of Surety Bond Producers (NASBP), the professional organization for agents that also specialize in surety bonding. Give us a call today at 617-723-0700.

Disability Insurance

According to a recent survey, 4 in 10 American workers live paycheck to paycheck. This means that an unexpected illness or injury that takes an employee off the job for more than a few days can have devastating consequences for those who depend on their wages to survive. Disability insurance – sometimes called disability income insurance – helps protect workers’ incomes against the possibility of loss of work from illness or injury.

What it Covers

In a nutshell, disability insurance helps replace a portion of a worker’s income if that worker loses his or her income due to an injury or illness. Typically, disability insurance policies will replace between 50% and 65% of a worker’s income – a percentage low enough that most people would prefer to return to the workforce as soon as possible, but high enough that most workers could keep a roof over their heads, the lights on in their homes, and some food on the table for themselves and their families until they recover. Broadly speaking, there are two kinds of disability insurance policies:

Short-term disability – for events that disrupt income for less than 90 days
Long-term disability – covering benefits for a longer period of time

  • Advantages of Group Coverage
  • Group disability coverage has advantages for both the employer and the workforce. Advantages to the employer include:
  • Reduced costs compared to offering individually underwritten policies to everyone
  • Increased employee loyalty – especially after someone in the workforce has a claim and word gets out that these valuable benefits kicked in
  • Tax deductible premiums
  • Easy, streamlined administration
  • List billing

Advantages of group disability insurance to the worker include:

  • Affordability – the employer subsidy makes it possible for workers to get coverage they would be unable to get on their own
  • Pre-existing conditions that would make it impossible for employees to get coverage as individuals may be waived in a group plan
  • Streamlined application process with no medical exam required
  • No prior year tax returns or income verification are required; employer reports income information to the disability insurance carrier

In addition, some policies are portable. If the employee leaves the company, he can sometimes keep the policy, though he loses the employer subsidy. Portability is an important feature, because disability insurance can be difficult to qualify for on the individual market.

Disadvantages of Group Disability Insurance

All coverages have both advantages and disadvantages. Some of the disadvantages include:

  • Less flexibility – managers and supervisors may have different needs and risk profiles compared to rank and file employees
  • Less coverage – some workers may be able to get more robust plans on the individual market than carriers offer via group plans
  • Benefits are taxable to the recipient
  • More restrictive definitions – with disability insurance policies, the definition of the word “disability” in the contract itself is of paramount importance. For example some policies, known as “Own Occupation” policies, pay benefits if you cannot work in your own profession. Other policies will not pay benefits if the worker can work in any occupation.
  • All things being equal, “Own Occupation” policies are preferable – but they tend to have higher premiums, and are less prevalent in the group disability insurance market.

Taxation of Disability Insurance

Group term premiums are generally deductible to the business as a business expense, just like any other wage expense. The value of the premiums, however, is not usually taxable as income to the worker. Disability insurance benefits may or may not be taxable, depending on the circumstances. Generally, if the recipient didn’t pay taxes on the premiums, then the benefits are taxable as ordinary income. This is true for most employer-paid group health insurance plans. If the employee paid part of the premiums, then a similar percentage of benefits will be tax-free.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

DOL Compliance Audits

In the last several months, many of our clients with Service Contract Act (SCA) contracts have been audited by DOL Investigators from the Wage and Hour Division. These auditors are part of the expanded enforcement that occurred as a result of the American Recovery & Reinvestment Act.

They usually begin with auditing employee and contractor records, before moving on to personal interviews with employees. They are looking for Contract Work Hours and Safety Standards Act irregularities as well as FLSA and Service Contract Act violations. It is critical that companies pay the minimum wage rates and fringe benefits as listed in their respective wage determinations. In addition, record keeping should be up to date and verify the aforementioned, including your health and welfare reconciliations.

It is important to remember that employee wages and fringe benefits should not be combined. This is especially true when fringe benefits are paid in cash. Your records should verify the wages and fringe benefits are distinct, in the event an investigator asks for them.

Surprising as it may seem, some contractors are not aware they have a SCA contract until an audit takes place. At that point, fines are assessed and payments of back wages become due. In some instances, the Contracting Officer can ask to withhold funds that were destined for payments to the contractor, if there is a potential risk of default.

The best remedy to handle these audits is to have your appropriate personnel properly trained in the fundamentals of the SCA and how to handle DOL audits. In many cases we can assist a contractor with these audits, but it is imperative that we have good facts to build a prima facie case.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe benefit obligations and provides your employees with valuable benefits.

An Invaluable App

A recent article in the Boston Globe, entitled “Boston’s Brightest Pick their Top Apps”, peaked our curiosity. While we all have read countless articles and downloaded oodles of apps, there might be one more you should consider. It’s called MyHome

After reading that Joseph Murphy, the state’s Commissioner of Insurance recommended the app, we not only downloaded it but began using it. We found it to be one of the best and easiest ways to take inventory of household possessions. It even includes a preparedness section with various insurance tips.

MyHome is great for determining how much insurance you really need and cataloging your possessions in the event you need to file a claim. If you’re like us, you don’t think about taking a picture of your washing machine or jotting down the serial number until something happens and your homeowner’s insurance company is looking for the information. With MyHome, you simply walk through your home and enter names, purchase dates, prices, and serial numbers of your most valuable possessions.

Developed for the National Association of Insurance Commissioners (NAIC), the software links to your smartphone camera so you can easily attach a snapshot of each item. Once your list is complete, you can email or export the list to a safe location on the internet.

Cataloguing the contents of your home can be tedious and time consuming. It always seems to be on the list of things to do next week, though next week never seems to come. While no one wants to think about filing a claim, especially those that aren’t prepared, you can get prepared and organized with the help of MyHome Best of all, it’s free and easy to use.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines departement will work with you to evaluate your insurance needs, identify exposures and create a customized insurance portfolio. Give us a call today at 617-723-0700.

Tax Filing Deadline

As the countdown to April 15 continues, it’s likely that you’re knee-deep in receipts, canceled checks, brokerage statements and other financial records that your tax advisor will need to prepare your individual income tax return. Having organized records — and knowing when to keep or discard them — can ease the pain of tax season.

Managing Your Tax Records

Maintaining accurate and up-to-date financial records is critical to determining your tax liability. Carefully review your records at least once a year and discard what’s no longer necessary or relevant. Here are some guidelines for managing specific records:

Tax-related documents. Keep tax-related documents, such as receipts that support your deductions, for at least three years after you file your original return. Why? Because the IRS typically has three years from the date you file — including extensions — to audit you. (If you omit more than 25% of the amount of your gross income stated in your tax return, the statute of limitations can extend to six years.)

There’s no time limit if you fail to file a return (or file a fraudulent return). So permanently keep a copy of tax returns for a longer period of time (10 years or more) as evidence that you filed.

Save W-2 forms until you start receiving Social Security benefits to serve as a record of your work history and earnings. Your annual statement from Social Security will show your earnings history per their records.

Property records. Hold on to closing documents from a property sale or purchase, as well as receipts from home improvements or from money you invested in the property, for at least six years. If you’ve owned your home or other real estate for longer than that time, keep your tax return and records relating to any improvements dating from when you purchased the property so you can document your adjusted basis in it.

Investment account statements. Keep investment statements until you receive your year-end statement and confirm that it reflects your transactions for the year. Save trade confirmations that show the purchase and sale of mutual funds and stocks for three years after you report the capital gain or loss on your tax return.

Checking account and credit card statements. If your checking and credit card statements include deductible expenses, retain them for a minimum of three years after you file.

Utility bills. Keep these documents for a minimum of three years if you need them to support a home office or rental property deduction.

Pay stubs. Retain these until you’ve reconciled the totals with your Form W-2.

Organizing and Storing Records Safely

The IRS requires you to maintain the fundamental accounting records needed to file and support an acceptable tax return, including documents that reconcile differences between your accounting records and your return, to avoid penalties. This would apply to your individual tax return if you have a sole proprietorship or a single member LLC reported on Schedule C.

Are you able to easily locate all of your important financial records? Create a record keeping system that organizes important documents so that you can readily access them.

Maintain copies of these records at home, and keep the originals in a safe deposit box or other secure place in another location. You also may store records electronically so long as your computer storage system meets IRS security and retrieval standards.

Getting a Jump on Next Tax Season

April 15 may be only weeks away, but it’s never too late to begin organizing your financial records. Doing so will help you stand up to IRS scrutiny, ward off costly penalties and alleviate some tax-related stress.

At Cleary, we are committed to a holistic approach of protecting and preserving our clients’ financial assets. Give us a call today at 617-723-0700 and let us know how we can help you.