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How’s Your Cyber Hygiene?

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Brett Findlay, Vice President, Business Risk Specialist 

Dennis Ast, Senior Account Executive, Cyber Risk Specialist

Recently, there have been multiple instances of cyber-attacks in the news – Colonial Pipeline, JBS, CNA Insurance, and Kaseya, to name a few – and yet, many attacks of this nature do not get reported.  It is important to remember regardless of the type of organization you own or work for, all are at risk of cybercrime.

This recent increase in cyber-attacks has had a dramatic impact on the cyber insurance marketplace. Gone are the days when cyber insurance could be quoted and bound with minimal information – cyber underwriters are now requiring a full application and ransomware supplemental, as well as the completion of a cyber assessment on new placements and renewals. Organizations that have developed good cyber hygiene and resiliency can obtain the best coverages and limits. Organizations that have poor controls in place are finding it more difficult to obtain proper coverages and limits and some are being declined by most, if not all, cyber carriers.

Cyber carriers are looking for businesses to have multi-factor authentication (MFA), endpoint detection and response (EDR), and backups, as well as securing all remote access. Developing and implementing a proper cybersecurity program can take many months. One cyber carrier, Coalition, has developed a cybersecurity checklist to assist businesses in protecting themselves from a cyber incident. Utilizing Coalition’s cybersecurity checklist will help businesses understand which controls cyber carriers are looking for, while also helping organizations protect themselves from a cyber-attack.

Below is a list of quick tips from Coalition to keep your business safe from cyber-attacks:

  1. Increase email security.
  2. Implement Multi-Factor Authentication (MFA).
  3. Maintain full data backups.
  4. Enable secure remote access.
  5. Update your software regularly.
  6. Use a password manager.
  7. Scan for malicious software.
  8. Encrypt your data.
  9. Set up a security awareness training program.
  10. Purchase cyber insurance.

Our experts would encourage you to take some time to review the current status of your cybersecurity program and find where improvements can be made. In doing so, you will not only refine your underwriting profile for cyber carriers, but you will also minimize the impact of a potential cyber event on your organization.

For more information please contact Dennis Ast, Senior Account Executive, Cyber Risk Specialist at (716) 572-2410 or DAst@OneGroup.com.

This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.

Please note coverage cannot be bound or a claim reported without written acknowledgment from a OneGroup Representative.

The Schoff Group of UBS: Ready to Partner with You

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By Elizabeth Landry

Just over an hour outside of Syracuse, in a nondescript office park nestled in a Rochester suburb, The Schoff Group of UBS Wealth management is celebrating.

It’s mid-January, and Forbes has just released their annual list of Best-In-State Wealth Management Teams to which they were named. Required disclosure, the Forbes rating is compiled by SHOOK Research and awarded annually in January, based on information from a 12 month period ending March of the prior year. Eligibility is based on quantitative factors and is not necessarily related to the quality of the investment advice.

After nearly three years of remote work, the team is finally back together in the office and ready for some celebratory cake.

For over thirty years, The Schoff Group has carved out a distinguished reputation in wealth management by serving high-net worth families, corporate stock plans and not-for-profit organizations. Founded by Managing Director and namesake Bill Schoff, and led with Senior Vice President Katie Titus, the team is comprised of 13 multi-generational members, and has nearly $3 billion in assets under management as of December 31, 2022. Schoff describes their philosophy as not product-oriented, but solution–oriented, and attributes their success to an ability to recognize and fill gaps in the marketplace.

 Partnership Culture

One such recognition was realized in the Fall of 2021 when the group formally added Institutional Consultants Michael Valenti and Samantha Maley. The team had been working with institutional clients of all kinds for years but would often have to outsource business to other specialist teams at the firm. Years of working with corporate stock option plans showed Schoff the value in providing a fully integrated service offering and when the opportunity to add an institutional-specialist team arose, it felt like fate.

“For years, our team had provided high-level wealth management for high and ultra-high net worth families, entrepreneurs, and corporate executives, and we focused on executive stock plans at public companies. The addition of these two top professionals offered us the opportunity to reach a broad array of clients in the institutional marketplace without having to outsource… the synergies there are fantastic. Frankly, I don’t know of another team in the country that offers everything that we offer in a one-stop shop,” says Schoff.

Valenti and Maley were enthusiastic about joining the team. “Our goal is to have true relationships in this business, not just with clients but within our team. It’s not enough to simply work together… the magic happens when everyone feels like they’re rowing in the same direction. It was immediately apparent that The Schoff Group had built their team on the same principles” Valenti said.

“Mike” and “Sam” had spent the majority of their careers working for a Rochester-based money manager where they developed their relationship-centric approach to client interactions. They focused primarily in the Central New York region serving high net worth individuals, endowments and foundations, hospitals, religious organizations, construction trades unions, contractor business owners and everything in between.

Maley looks back at this time with great fondness. “Mike put who knows how many thousands of miles on his car, visiting clients daily…up and down the NYS Thruway…Syracuse, Utica, Binghamton, repeat…pick any town and he can tell you the top three Italian restaurants there! He always insisted on having in-person interactions when he could, and no destination was too far or request too mundane to be there for a client.”

The depth of relationships forged during this time, and the recognition that those clients had a diverse set of needs soon led the Valenti/Maley team to seek out industry partners that could provide the sophisticated solutions required. They were already acting in a consultative capacity for many of their relationships but could only offer a limited set of investments and services.

“Having the ability to problem-solve and design portfolios that were not bound to one investment manager was really attractive to us,” said Valenti.

The move to UBS and Schoff’s team made perfect sense.

Business Better than Usual

As one of the largest wealth management firms in the world, UBS has all of the resources one expects from that descriptor; teams of research analysts conducting manager due diligence, cutting edge financial planning software and cybersecurity protocols, a staggering array of investment choices.

The combination of world-renowned resources and a boutique firm delivery model set the firm, and this team, apart. 

“Our ‘product’ is our team and our service. Our job is to listen to a client’s individual needs and connect them to, not sell them, a solution,” Maley says. “Katie calls it ‘business better than usual’.”

The team represents the best of what the financial services industry has to offer, comparable to teams in cities like Boston, New York, Chicago but focused on the regional community.

“The local aspect of it is very important because our business is based on relationships. We think that in order to have a truly trust-based relationship, you have to feel comfortable and confident that the person knows and understands your situation and is there physically to provide support. So many of our competitors are Zooming in for meetings once a quarter at most, they’re not on the ground in the territories they serve. None of the contractors or trade unions we work with could do their jobs virtually, and neither can we,” Valenti explained.

One particular area of focus is in educating clients on all of their financial services related options. Years of experience have revealed a desire amongst clients of all types for education. Whether it is helping employees understand their compensation and stock benefits, a small business owner to optimize their retirement plan structure, families wealth plan for generations, or a new plan trustee to understand their fiduciary duties, the team prioritizes learning and growing alongside their clients.

Titus likens the team’s particular set of investment and financial knowledge to the specialty knowledge and training required in the construction trades. “You get the best welders, electricians, plumbers, etc.… and everyone comes together to produce the best product. What we’ve done is bring together those same specialists in our various lanes and we can provide a truly comprehensive solution,” she said.

Future-ready: A Multigenerational Team for Multigenerational Clients

The recent additions have not only expanded The Schoff Group’s suite of service offerings but strengthened an already flourishing multigenerational dynamic. Senior teammates have an industry average of more than 30 years and bring that experience to bear mentoring colleagues.

“We want clients to feel that they have a relationship with the whole group, not just an individual, Schoff says. “None of our awards or recognition can be credited to one person alone, so developing a deep bench of talent is a huge priority.”

In some cases, succession plans have been in the works since the team’s inception. Second generation member Bryan Schoff has taken a prominent leadership role and is at the forefront of innovation for client portfolios.

“We know circumstances  are constantly changing- in the markets and for clients individually. We’ve been able to utilize technology not to depersonalize our service, but to make the intensity of it more scalable,” he says.

Titus emphasized the importance of succession planning in sustaining a business’s success. “Construction businesses are oftentimes family owned and they pass from one generation to the next. Skills are honed over time and passed down, while incorporating new ideas and technology. Our business is the same. The generational diversity brings breadth and depth to our organization. We have longer-tenured folks like Bill, Steve, Barb, myself who can mentor newer peers, and in turn the newer members bring a fresh perspective and identify with clients in a different way.”

That generational connection is key for the group to prepare for one of the largest wealth transfers in history, as baby boomers move out of the workforce and into their later years. Bryan says they are cognizant of what this portends for clients’ changing needs. “We’re constantly educating ourselves for the next stage, estate planning, cash flow modeling… and using our tech. tools to enhance oversight, efficiency, and most importantly, communication.”

Beyond their daily collaboration, the group meets weekly to discuss topical items and strategize, staying ahead of the curve. As she looks toward the future, Titus muses on the possible challenges ahead. Market volatility, ever-changing tax codes, inflation uncertainty… tough conversations broached with clients daily.

“I think the idea of developing a partnership with clients really sprung from a desire to make them feel like we were in it together. To help put them at ease in uncertain conditions… to always answer the phone, be proactive, and really understand every individual circumstance. We have witnessed a yearning in the marketplace for a high-touch model. That should be the industry standard, and we lead by example,” Titus says.

Bolstered by adding Valenti and Maley, The Schoff Group is poised for growth. The group will continue to bring its talents to clients across the country, while contributing to their local community.

“Apart from just growing our business, a big goal of ours is to become an even greater member of the community,” said Maley. “We want someone to read our names or see our faces and know they are in excellent hands. There’s no reason the talent of our team should be a well-kept secret! We would love to count everyone reading as clients in the near future, and we’re ready to start logging miles again.”

For more information on third party rating methodologies, please visit ubs.com/us/en/designation-disclosures

The Schoff Group are Financial Advisors with UBS Financial Services Inc. a subsidiary of UBS AG. Member FINRA/SIPC in 400 Linden Oaks, Rochester NY 14625. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice.  Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc.  Neither UBS Financial Services Inc. nor its employees (including its Financial Advisors) provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion, strategy or investment, including any estate planning strategies, before you invest or implement. As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that you understand the ways in which we conduct business, and that you carefully read the agreements and disclosures that we provide to you about the products or services we offer. For more information, please review client relationship summary provided at ubs.com/relationshipsummary, or ask your UBS Financial Advisor for a copy.

Updating Payment Releases and Lien Waivers to be Effective

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By Joseph Schuler, Sheats & Bailey, PLLC

It is common construction industry practice for projects to be broken down into a monthly payment schedule. Due to the statutory right for subcontractors to place liens on projects they have supplied materials or labor for, monthly payment applications representing work completed are often approved contingent upon the signing of payment release or lien waiver by a subcontractor. In itself, this practice is sensible. Payment for completed work is exchanged for a subcontractor waiving its right to place a lien on the project for the work allegedly completed.

Where problems often arise is when the scope of the work completed is inconsistent with original contractual obligations, and the payment application and lien waiver process does not coincide with the approval of change orders or construction change directives for the excess work. When a change order has not been properly documented, but an expanded scope of work may have been completed, a payment dispute over the change order can implicate a lien release signed after the extra work was completed.

If a subcontractor feels work outside the original contract scope was completed but has no approved change order in hand, and the general contractor, construction manager, or owner is holding a lien waiver postdating completion of the extra work, a question of whether the lien waiver bars a lien based on the extra work arises.

Traditionally, the legal standard was that a lien waiver was effective against any work completed before the date the lien waiver was signed, and any intent by either the subcontractor or general contractor to resolve extra work payment down the line was irrelevant. However, over the years the legal standards have shifted, and courts have elected to construe the waivers more liberally given the circumstances on each project.

At times, courts have disregarded lien waivers that appear on their face to bar claims to extra work already performed. Courts have more recently construed these waivers to be ineffective against extra work claims in cases where, even after the waiver was signed, the general practice was to pay for some extras performed prior to the waiver. Furthermore, a general contractor simply indicating it was awaiting owner approval to pay for extras can show intent not to enforce a previously signed lien waiver. This may effectively give subcontractors an opening to lien a project based on the extras despite any waiver. In some cases, the waivers have been considered to be no more than a receipt for the payment referenced in the waiver, having little relation to payment for extras.

Ultimately a lien waiver may not provide much protection if it is only effective against work underlying the payment amount referenced in the waiver. This is especially true since the payment released is often limited to an amount contemplated in the original contract for the original scope of work. Those extras outside the original scope that may or may not be properly documented could still be grounds for a subcontractor filing a lien on your project.  That lien waiver you have trusted ever since you came into the business may not mean what you think it does anymore. Unfortunately, it is simply unrealistic to complete a project without any changes and with perfect agreement on scope of work completed. So, given the shifting legal landscape, is there anything you can do?

Fortunately, within the last year, courts have indicated what kind of language is clear enough to work around these relatively new legal doctrines. While it can be frustrating to keep up with the law, it is hard to beat the “cheap insurance” of a truly effective lien waiver. Diligence updating your forms for documenting projects can pay dividends down the road, especially those forms securing payment and releasing potential claims.

The attorneys at Sheats & Bailey, PLLC are experienced with drafting, revising, and litigating construction contracting forms. For more information or assistance with navigating the construction payment release and lien waiver landscape contact Sheats & Bailey, PLLC, Tel: (315) 676-7314.

The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel in the relevant jurisdiction.

Merit Apprenticeship Alliance: Building the Foundation for a Skilled Workforce

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Elizabeth Landry

When New York State labor law changed about fifteen years ago and began allowing public owners to require apprenticeship training for all contractors, Penny Hazer saw there was a need for open-shop (non-union) apprentice resourcing within the statewide construction community. In 2007, Hazer created Merit Apprenticeship Alliance, an open-shop, multi-employer, registered apprenticeship program sponsor approved by the NYSDOL for apprenticeship training in the Carpentry, Operating Engineer, Skilled Laborer, Ironworker and Cement Finisher/Mason trades.

As the President of Merit Alliance, Hazer has over 35 years of experience in occupational training and apprenticeship. She has also worked as a carpenter and as a BOCES instructor of vocational agriculture. The many years she’s spent honing her own skills and teaching skills to others instilled in her a passion for helping people gain self-sufficiency through hands-on training.

“I’ve always believed that teaching people to do things gives them a sense of confidence and sustainability that’s really unparalleled. If you teach people to do things, they always have those skills. Nobody can take skills away from you,” said Hazer.

In order to recruit apprenticeship candidates who can benefit from new trade skills, Hazer and her team utilize many avenues: pre-apprentice programs, job fairs, career shows, public job postings, social media, and CBOs, or community-based organizations. The Merit Alliance team screens and trains apprentice candidates and then assigns them to work for one of their contractor partners on an as-needed basis. Apprentices then take part in on-the-job training where they learn valuable skills in their trade. When construction work is more difficult to find, typically in the winter months, apprentices participate in Merit Alliance’s educational branch, Merit Alliance Construction Training Institute, or MACTI, which provides apprentices with NCCER-accredited educational training. MACTI also provides training to other firms and workers interested in expanding skills, improving safety and productivity.

Many of Merit Alliance’s apprentices come from socially and economically disadvantaged communities, and 85% of the apprentices identify as minorities. “Our apprentice population is pretty diverse, and we focus on that. The under-served populations just need an extra hand and they are an untapped resource. They sometimes can’t figure out how to get into an apprenticeship program simply because no one has reached out to them to get them started. They just need someone to tell them, ‘You can do this’,” Hazer explained.

Of course, Merit Alliance’s programs not only benefit apprentices – they also provide high value to the organization’s contractor partners. By working with the Merit Alliance, contractors get to be a part of the training momentum and start to develop a skilled workforce. Participation with Merit Alliance also takes the burden off of contractors to find apprentices that meet their specific trade needs while also meeting the stringent requirements of New York State to bid on public jobs.

Jason Poole, Resource Developer at Merit Alliance, has seen first-hand how the organization’s expertise in meeting the NYSDOL’s apprenticeship requirements has helped contractors gain access to more bids.

“New York State law allows public owners to require contractors to participate in registered apprenticeship training. A lot of contractors bypass these bids because they don’t want to deal with the apprentice requirements. My goal is to educate as many contractors as possible that they don’t have to pass on these bids. Our multi-employer apprenticeship program can help them meet the bid requirements and this allows many smaller, newer contractors to consider a wider scope of bids,” Poole explained.

In order to ensure that their contractors continuously meet the public owner’s strict apprenticeship requirements, Merit Alliance operates with a high level of operational integrity. Hazer emphasized that transparency and integrity is at the heart of everything they do. 

“We work with about 130 contractors across New York state and New Jersey. We’ve got about 50 apprentices currently. Our mission is to make sure our apprentices get the highest level of training possible – in full compliance with NYSDOL regulations, and with the NCCER – our national accreditation agency. In my mind, the most significant piece we do is maintain integrity to the rules. If we manage all elements of the program true to the standards, our contractors can rely on the Alliance 100%. Alliance staff commit to working with apprentices and contractors to ensure that both succeed. Apprentice graduation rates are well above 50% for three trades – this helps our partners be more competitive in the bidding market, and our apprentices secure sustainable careers in construction,” said Hazer.

“Our goal is not to be the biggest apprenticeship program for open-shop contractors – just the best.  We believe our contractors are among the ‘best of the best’, and an asset to owners,” she added.

Clearly, when apprentices are successful, contractors are in turn successful. Perhaps the best way to measure the success of Merit Alliance’s programs is to consider how many apprentice’s lives have been changed for the better. Both Hazer and Poole had numerous stories to share about apprentices whose journeys demonstrate the value the organization brings to so many people.

“A young woman had spent a significant amount of time in a federal corrections facility. We assigned her to work for various contractors throughout the course of her program. There were times when we struggled, but we ultimately succeeded. The apprentice finally landed with a company in eastern New York and we celebrated her graduation with her and her many family members. She is currently the crew leader for traffic control for one of our very respected contractors. She found her fit and she’s happy. She’s every bit of rough and tumble but now she’s grounded and enjoying life,” Hazer recalled.

Looking to the future, although Merit Alliance may not be the biggest apprenticeship sponsor program, it’s Hazer’s mission that it will continue to be among the best. “Integrity is our mantra,” she said. “We’ll continue to grow with contractors who are committed to safety and quality, just like we are.”

Understanding the New Experience Rating Formula

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Steven Bell, VP Underwriting & Sales, Lovell Safety Management Co., LLC

When I started in insurance nearly 33 years ago, I was asked to train 100 colleagues on experience rating. New to the industry, I remember looking at the old formula and wondering how I was going to explain it to a group of non-actuaries. I solved the problem by not explaining the actual formula but the underlying concepts.

Insurance had its start in the Guilds and maritime trade of Europe. Tradesmen in Guilds would pay into a pool to cover loss due to fire, theft, or disablement. Underwriters would buy shares of a ship’s cargo, thereby spreading their risk of loss among multiple ships. Workers’ compensation insurance attempts to solve a similar risk of loss by spreading the cost of worker injuries over many employers in similar trades or businesses.

In New York State, workers’ compensation rating begins with the creation of what is known as a loss cost for 580 classes of businesses such as plumbers, electricians, and office workers. The loss cost is created by taking the total losses for those in a similar class of business and dividing it by the total payroll for those same businesses. The result is the loss cost, which is an average unit of cost that can be charged for each one hundred dollars of payroll exposure.

If we know one thing about averages, it is that they can be unfair, because not everyone is average. The experience rating formula attempts to solve this problem by tailoring the cost of insurance through an additional credit or debit for each employer based on their individual loss experience.

Effective 10/01/2022 NYCIRB implemented a new simplified Experience Modification Formula

=   Actual Primary Losses  +  Expected Excess Losses
        Expected Losses

Why was the old experience modification formula changed?

The New York Compensation Rating Board performed a study which revealed that the prior experience rating plan was not equitable. The inequity can be best illustrated in what is known as a quintile test. NYCIRB placed each employer into one of 5 quintiles. The goal of the new plan was to produce, for each quintile, a loss ratio of 100%, meaning for each dollar of loss there should be a dollar of premium.

 

NYCIRB Actuarial Explanation Memo, Exhibit 2

Based on the study’s results, the new plan appears to address the inequities, however, the overall adjustments for those in quintiles 1 and 5 can be quite significant.

What does the new Experience Rating Formula mean to the average employer?

The new plan will likely result in larger credits and debits depending on your loss experience. In addition to the formula change, the new plan makes all New York businesses eligible for experience rating and it eliminates the Merit Rating Program and the use of interstate ratings. The plan introduces a novel variable split point and claim capping procedure to make sure the new plan doesn’t result in too large a swing.

Claim Capping Procedure

Number of Claims

Maximum Experience Modification

1

1.12

2

1.40

3

1.75

4 or more

2 + (.000003  x  Expected Losses)

In year one of implementation, the experience modification will be the lowest of either the new formula, the claim capping procedure, or the old formula plus 30 points. In year two, it will be the lowest of the new formula or claim capping procedure.

There are two core principles that apply to both the old and new formula. First, larger businesses with more employees and higher payrolls are more likely to produce consistent results. Second, the fact that a loss occurred has higher predictive power than the relative cost of a given loss.

Practical Example

Let’s compare three small residential carpentry contractors with the same payroll ($500,000) in each year of the formula.

Contactor

# Claims

Actual Losses

Primary Losses +

Expected Excess Losses /

Expected Losses =

Calculated Exp. Mod.

Max. Exp. Mod.

A

1

$50,000

$11,000

$35,154

$45,300

1.02

1.12

B

5

$50,000

$50,000

$35,154

$45,300

1.88

2.14

C

0

$0

$0

$35,154

$45,300

0.78

NA

The first two examples show the impact of loss frequency. While both A & B have $50,000 in actual losses, B has a much higher experience modification due to 5 claims. Let’s assume each of the 5 claims were valued at $10,000, for a total of $50,000. It is conceivable that each of the 5 claims could have been $50,000 for a total of $250,000 in losses. But the severity of claims is less impactful, as the formula caps the amount of losses based upon payroll size.

What can an employer do to impact their experience rating?

The obvious answer is stop having losses. This is easier said than done but should be the primary goal as the cost of an injury is much greater than the impact to your insurance costs. The losses and exposure used in the formula generally consist of 3 years, so if your policy renews on 4/1/23, the three years used in the formula are 4/1/19 through 4/1/22. This means actions taken today won’t impact your experience modification for another couple of years.

Creating a culture of safety will pay dividends beyond the reduction of losses. One key strategy involves considering paying for non-reportable injuries as set forth in section 110 of the NYS WC Law. To summarize, if an injury requires two or less first aid treatments, no loss time beyond the work shift, and is not permanent in nature or involves injury to the face, then you as an employer have the option to self-pay. If the injury requires further treatment or loss of time, you can report it at that time noting you initially treated it as a first aid claim.

What have we learned about the new experience modification formula?

The new formula attempts to correct the imperfections of the old formula by rewarding the top 20% of businesses with lower experience modifiers while punishing the bottom 20% of businesses with higher costs. While the formula itself is simpler, the system is still quite complex. Practically, it means that many employers will see significant swings in their experience modifications. Whether this is good or bad for you as an employer depends on whether the swing is a credit or a debit.

Major Retirement Plan Changes in the SECURE 2.0 Act of 2022

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Nicholas L. Shires, CPA, Dannible & McKee LLP

On December 29, 2023, President Biden signed the Consolidated Appropriations Act of 2023, which contained the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022 (also known as SECURE 2.0). Included in SECURE 2.0 are dozens of retirement-related provisions that are intended to enhance provisions from the original SECURE Act of 2019. This article summarizes a few key provisions.

Expanding Automatic Enrollment in Retirement Plans

Beginning in 2025, new 401(k) plans must automatically enroll participants when they become eligible. However, the employees may opt out. The initial automatic enrollment contribution amount is at least 3% but no more than 10%. Then, the amount is automatically increased every year by 1% until it reaches 10%. All current 401(k) and 403(b) plans are grandfathered, meaning the requirement does not apply to plans established before the applicable date. There is also an exception for small businesses with 10 or fewer employees, new businesses (i.e., have been in business for less than three years), church plans and governmental plans.

Increasing the Age for Required Minimum Distributions

Employer-sponsored qualified retirement plans, traditional IRAs and individual retirement annuities are subject to required minimum distribution (RMD) rules, which require that accumulated benefits begin to be distributed by the Required Beginning Date. SECURE 2.0 increases the required minimum distribution age to 73 starting on January 1, 2023, and boosts it to 75 starting on January 1, 2033. This change allows people to delay taking RMDs and paying tax on them.

The law also relaxes the penalties for failing to take full RMDs, reducing the 50% excise (or penalty) tax to 25%. If the failure is corrected in a “timely” manner, the penalty would drop to 10%.

Higher Catch-up Contributions

Defined contribution retirement plans under Code Sec. 401(k), Code Sec. 403(b) or Code Sec. 457(b) are permitted, but not required, to allow participants who are age 50 or older to make additional pre-tax elective deferrals, known as “catch-up” contributions. Catch-up contributions are elective deferrals that, among other things, are not subject to the annual elective deferral dollar limit ($22,500 for 2023). The annual dollar limit on catch-up contributions is $7,500 for 2023.

Deferrals under Savings Incentive Match Plan for Employees (SIMPLE) plans are subject to a reduced annual elective deferral dollar limit ($15,500 for 2023). The annual dollar limit on catch-up contributions to SIMPLE plans is $3,500 for 2023.

Beginning January 1, 2025, individuals who are ages 60 to 63 can make catch-up contributions up to the greater of $10,000 ($5,000 for SIMPLE plans) or 50% more than the regular catch-up amount in 2024 (2025 for SIMPLE plans). The statutory dollar amounts are indexed for inflation commencing in 2026.

Eliminating Unnecessary Plan Requirements Related to Unenrolled Participants

Under both the Codes and ERISA, employees that are eligible to participate in a defined contribution plan must receive numerous intermittent notices and explanations of their rights and options under the plan, such as an explanation of available investment options. These intermittent notice requirements generally apply even where eligible employees have opted not to participate in the plan.

The Act amends the Code and ERISA to provide that defined contribution plans are exempt from intermittent notification requirements concerning eligible participants that elect not to participate, who have already received a summary plan description and any other notices related to initial eligibility to participate in the plan (unenrolled participants). Intermittent notifications include disclosures, notices and plan documents. However, an unenrolled participant must still receive: (a) an annual reminder notice of their eligibility to participate in the plan, as well as any applicable plan deadlines; and (b) any document they request that they would be entitled to receive under existing law absent this Act provision. This provision applies to plan years beginning after December 31, 2022.

Conclusion

SECURE 2.0 is one of the broadest pieces of retirement plan legislation in decades and will have lasting impacts on all types of retirement plans. It is important for employers to review existing retirement plan documents to ensure compliance with the above rules and other rules included in SECURE 2.0. There may be required amendments needed to bring retirement plans into compliance on the various compliance dates.

Nicholas L. Shires, CPA, is the partner-in-charge of tax services at Dannible & McKee, LLP, a public accounting firm with offices in Syracuse, Auburn, Binghamton and Schenectady, New York.  The firm has specialized in providing tax, audit, accounting and advisory services since its inception in 1978.  For more information on this topic, you may contact Nick at (315) 472-9127 or visit online at www.dmcpas.com.

The State of The Regional Construction Industry

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By Earl Hall, Executive Director, Syracuse Builders Exchange

2022 proved to be a good, but challenging year for construction industry employers.  Buoyed by both private and public sector investments throughout central New York, the industry enjoyed an abundance of work but saw tighter margins as competition remained strong.  Employers endured supply chain issues, a thin labor market with labor shortages and sky-rocketing inflation that impacted material costs.  In the end, 2022 was a good year for most contractors, but of course their attention has quickly shifted to future opportunities and challenges.

Opportunities

Over the next 1-3 years, central New York will enjoy an extraordinary amount of capital investment by both public and private sectors; however, many of the private sector projects will be subsidized by various governmental entities.  While the normal, routine, and periodic construction work in higher education, public education, hospitals and medical facilities, manufacturing facilities and the service industry will continue, new projects of significance will draw most of the attention of the general public and many contractors.

Besides the well-publicized Micron Corporation’s 20-year investment in their Clay, NY facility, expected to break ground in 2024, contractors will be focused on Onondaga County’s new $90 million aquarium in the Inner Harbor; a $100 million STEAM school in downtown Syracuse; the $2.3 billion Route 81 reconstruction project in and around the city of Syracuse: the $108 million investment in and around Onondaga Lake/Inner Harbor; and $1 billion for development of a new Syracuse neighborhood near Route 81 in the city of Syracuse.  This anticipated construction, in addition to the Davis-Bacon federal infrastructure projects such as sewer and water treatment plants, and highway and bridges reconstruction, will provide employers with an abundance of building and heavy/highway bidding opportunities over the next 3 years.     

Challenges

Labor shortages and lack of skilled labor remains a huge problem with no immediate solution.  Many of the new craftspeople entering the commercial, industrial, and institutional sectors of the construction industry are not skilled or trained to be productive for employers competing in those markets.  In many cases, contractors are being very selective on the projects they bid and occasionally choosing not to bid on projects for fear of a lack of a skilled, productive work force.  While employers and unions alike are investing in future training facilities, such will take time to properly attract and train the next generation construction worker.

Inflation continues to adversely impact contractors’ material costs, as uncertainty remains when bidding on projects.  Anticipating the cost of materials 6-9 months prior to the project starting remains a challenge for estimators and project owners alike.

Wages will increase significantly over the next 3 years.  One of the many features which attracted Micron to central New York is the relatively low cost of labor.  With labor shortages already at historically low levels, demand for skilled labor will increase wages.  Many employers are already experiencing such today, often paying premiums above those wages negotiated in collective bargaining agreements.   Although many of the New York State prevailing wage rates for construction are derived from the Construction Employers Association of Central New York’s collective bargaining agreements, many believe employers will continue to pay above those rates to not only attract new employees, but to retain their current workforce.

Conclusion

Although contractors across the country are experiencing many of the above-noted opportunities and challenges, central New York is well positioned to take advantage of the capital, institutional and governmental investments in our region of New York.  These opportunities do not come without challenges, but what history has shown is that construction industry employers throughout upstate New York are innovative, resilient, and determined.  This region of New York state enjoys some of the best specialty subcontractors, suppliers, general contractors, and construction managers in the United States.  Project owners are fortunate to have access to such contractors as the on-time, on-budget deliverer of construction goods and services will continue despite any challenges the future may hold.  Contractors relish in challenges as opportunities and solutions are often created when challenges are presented.

Enfoqué Images: The Sky’s the Limit

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Elizabeth Landry

Jackie Vidler’s mother always knew her daughter was an interesting, eclectic, and creative person who did things just a little bit differently. Those characteristics reveal why Vidler has always had an interest in art, specifically photography. However, like many people who have an artistic bent, she never dreamed she would be able to make photography her career.

When Vidler had her own daughter 14 years ago, her passion for photography really took off. She found herself wanting to capture all the special moments as her daughter grew, and photography helped her achieve that goal.

“I was taken aback at how fast time flew by and how quickly one milestone was replaced by the next,” Vidler said.

Shortly thereafter, she accepted a job offer to assist a local photographer, and she eventually became an artistic director. Vidler quickly realized how fulfilling it was to be able to document important moments and memories for others: she photographed weddings, families, pets, and any subjects that came her way.

Never being one to stay complacent with her current situation, though, Vidler knew she needed to branch out on her own. Around 2010, she created Enfoqué Images and became a small business owner herself.  She named her business “Enfoqué,” which means “in focus” in Spanish, as a way to pay homage to her Puerto Rican heritage.

For Vidler, her passion for photography stems from her desire to help others and to capture the progression inherent in life.

“It’s easy to recall the before and the after. But there’s so much more to life than just the beginning and the end. The true beauty of any story lies in the middle,” Vidler explained.

A New Client: The Construction Industry

After several years of operating Enfoqué Images, Vidler found herself wanting to expand the business even further. She began to explore how her business could offer photography services to other local businesses, since she has always had a desire to help others and give back to the community.

“Businesses are ideal clients for me because every great business has a commitment to continuous improvement, leaving so much progress to capture. Documenting a brand’s product or service helps to establish visual representation for that business. It’s my own professional spin on showing a business that we ‘see’ them,” she said.

After completing an extensive application process, Enfoqué Images became a Minority and Women Business Enterprise (MWBE) in 2019. The MWBE certification helped expand the reach of Enfoqué Images, opening up new opportunities in the construction industry, specifically. Although Enfoqué Images had been providing photography services to other local industries in the Syracuse area, Vidler found that construction businesses were the most natural clients because progression is so central to every construction project.

As a full-service photography and videography studio serving the construction industry in central New York, Enfoqué Images assists quality management through outstanding photographic documentation during the entire contract period. Services include photography of existing conditions, mobilization, safety setup, material storage, demolition, construction progress, inspection punch list items and final close-out. Enfoqué Images is certified for government contracting through the City of Syracuse, both federally and statewide. The business is certified with industry codes NAICS, 541922 in commercial photography, NAICS, 512120 in motion picture and video and NIGS, 91572 in photography services.

For Vidler, photographing for construction contracts is especially enjoyable because it allows her to truly focus on the process happening in real-time, and because of its fast-paced nature.

“It’s really cool to see a project come together. We did progression documentation for Industry Standard USA at the Syracuse VA hospital when they were putting in new sidewalks. It was cool to go up weekly and to see the progression over the weeks. And of course, you never know what you’re going to get. I might get a call saying, ‘the pourers are going to be here tomorrow, so we need you here tomorrow’ and we’re ready to go. It’s really exciting. It’s great to see a plan come together and to watch it grow,” she described.

Expanding Horizons with Drone Photography and Videography

In order to further progress and evolve as a business, Vidler became interested in utilizing drone technology to add aerial photography and videography services to Enfoqué Images’ repertoire. She knew that utilizing aerial technology would expand her business’ opportunities even further, but by no means was obtaining the needed certification simple or easy.

“I made the investment in purchasing drone equipment. I researched and studied the ins and outs of aerial documentation. After almost a year of extensive and intensive studying, I made it happen, passing my drone pilot license testing and obtaining my Part 107 UAS Remote Pilot Certification in 2019,” Vidler stated.

While flying a drone may seem intuitive to some, Vidler described how the knowledge she gained during her certification process is complex and covers many topics.

“The drone license test is very interesting. It’s certainly not simple for the everyday person to understand,” she said. “I had to learn about the different types of clouds, learn how to read different types of maps, know about the different air spaces and remember not to fly the drone above 400 feet, for example. It’s pretty intense.”

Although obtaining her drone photography certification was strenuous, Vidler knew it would be essential in order for Enfoqué Images to flourish in the company’s work with construction contracts. The construction industry had already experienced tremendous benefits from utilizing drone technology, and she wanted to be able to help local construction efforts by offering aerial photography and videography services herself. Drones provide a new vantage point in the sky that improves the visual documentation of any construction project. Aerial documentation benefits many aspects of construction, including the mapping, planning, surveying, safety, inspecting and service needs that are integral to project success.

The safety benefits of drone technology have been a major draw for Enfoque Images’ construction clients. “I was talking to a potential client recently and I mentioned that I do drone photography and videography. He said, ‘Wow, that’s really great – so, my guys wouldn’t have to get up on the scaffolding and scale the side of the building to check out some corrosion, it would just be sending up a camera?’ It helps save the companies manpower and can even help avoid injuries, which is great,” Vidler explained.

In her research into drone photography and videography, she also found reports that showed construction companies that utilize drones have experienced significant improvement in their operational efficiency and reduced overall costs. Drone technology allows photographers to capture aerial data easier and faster, and allows for improved decision-making, more thorough identification of worksite issues and greater predictability for project schedules.

Vidler explained how she takes great pride in offering these state-of-the-art services to her construction clients. “As a drone photographer, I can offer contractors the best images available to help attain their goals. They’ll be able to use their photos to show the various angles of the project and to demonstrate their abilities to meet the requirements of the hiring agency,” she said.

Onward and Upward

From its humble beginnings over 10 years ago, Enfoqué Images has grown leaps and bounds into the small business it is today. Although the business’s capabilities and services have expanded and evolved in many ways, the core passion behind Vidler’s work has remained the same: to help others through photography and to support the local business community.

Over the next several years, Enfoqué Images will continue to grow and help highlight the progress demonstrated by local industries. For the construction industry specifically, Vidler emphasized that progress should be documented both on and off the jobsite. “With construction, obviously documentation of the actual physical project is a huge part of it, but it’s important to note we also offer headshots and social media content, for example. Those services may not be directly related to the jobsite but there’s always a way I could help the businesses and support them through photography and videography,” she said.

As the business offerings expand, Vidler is also looking forward to growing the Enfoqué Images team. “I will be extending the Enfoqué Images brand as an umbrella to cover all aspects of photography. I want to onboard other photographers and provide a space for each of them to take the lead in the industry areas they have a passion for,” she stated.

When asked about the overall reach of the business in the future, Vidler expressed her excitement about the possibilities, but emphasized that Enfoqué Images will always be ingrained in the central New York business community. “Enfoqué Images, at its core, will always stay a local business. I will always be connected and giving back within the community that’s home to me. But for the future reach of Enfoqué, I feel it is limitless. I take pictures in the sky now, so I can confidently say ‘the sky’s the limit’.”

Research and Development Credits Within the Construction Industry

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Nicholas L. Shires, CPA , Abby K. Sweers, CPA, Dannible & McKee, LLP

When taxpayers think of research and development (or R&D), most picture scientists in long white coats mixing liquids in a laboratory. However, the meaning of research and development in the tax world goes far beyond that. While the construction industry may not be the first that comes to mind when thinking about R&D, it certainly contains its fair share of qualified projects. For construction companies that take advantage of these R&D projects, changes are on the way.

Originally introduced as a temporary credit in the Economic Recovery Tax Act of 1981 (ERTA), the R&D credit was made permanent in 2015 with the passing of the Protecting Americans from Tax Hikes (PATH) Act. For construction companies that qualify for the R&D credit, thousands of dollars in credits can be claimed on the associated income tax returns, depending on the level of qualified expenses. While the R&D credit has been around for several years, effective for tax years beginning after December 31, 2021, as part of the Tax Cuts and Jobs Act (TCJA) of 2017, the treatment of qualifying research expenses used in the credit are undergoing a major change.

Generally, for projects to qualify for the R&D credit, they must be technological in nature, and their application must be intended for use in developing a new or improved business component or process for the taxpayer. In addition, substantially all the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability or quality. Within the construction industry, these research projects could include developing new processes that would reduce the time spent on site, creating new materials for use in projects with unique conditions, designing or improving tools and equipment that would lead to improved job efficiency and many more. For example, say a contractor is working on a road in an area that endures heavy snowfall. If they were to develop a new mix of materials (asphalt, concretes, etc.) that would experience less wear and tear from the snow, that would be considered R&D.

The qualifying research expenses can be broken down into two categories: (1) in-house research expenses and (2) contract research expenses. The in-house research expenses include wages paid to an employee for engaging in qualified research, amounts paid for materials and supplies used in the conduct of qualified research and any amounts paid to another person for the right to use a computer in the conduct of qualified research. Contract research expenses include 65 percent of any amount paid to another person, other than an employee, for qualified research.

As previously mentioned, the way that these R&D expenses are to be treated by the taxpayer is altered for tax years beginning after December 31, 2021. The TJCA amended Internal Revenue Code (IRC) § 174, which outlines the treatment of research and experimental expenditures. Previously, taxpayers were allowed to immediately deduct their qualifying research expenses in the year they were paid or incurred. Based on the amendments to IRC § 174 included in the TCJA, taxpayers must now capitalize these expenses and amortize them over five years.

For example, assume a taxpayer has $200,000 of qualified research expenses for the 2022 tax year. Prior to the TCJA amendments, the taxpayer could expense all $200,000 of these expenses in the year they were incurred. Under the new rules, the taxpayer must capitalize these expenses and would be entitled to an amortization expense of $20,000; $200,000 divided by 5 years and applying a midpoint to amortization to cut the first full year expense in half, as specifically stated in the code section.

Although these changes may appear to make the credit less lucrative, this should not deter taxpayers from pursuing the credit as it’s still very beneficial to those that qualify. The Internal Revenue Service has been known to look further into these credits when claimed by taxpayers, so it is important to contact your tax professional early to ensure that proper substantiation is being maintained throughout the process of each qualifying project.

Nicholas L. Shires, CPA, is the partner-in-charge of tax services and Abby K. Sweers, CPA, is a tax manager with Dannible & McKee, LLP, a public accounting firm with offices in Syracuse, Auburn, Binghamton and Schenectady, New York.  The firm has specialized in providing tax, audit, accounting and advisory services since its inception in 1978.  For more information on this topic, you may contact them at (315) 472-9127 or visit online at www.dmcpas.com.

A-Frame Ladders Vs Platform Ladders

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Wael Khalil, CSP  Safety Representative Lovell Safety Management Co., LLC

Have you noticed in recent years that more general contractors are requiring platform ladders instead of standard A-frame ladders? As a matter of fact, some general contractors (GCs) will not allow ladder usage on their jobsite, period. On some construction sites, A-frame ladders have become a tool of last resort when performing work at an elevation. Most GCs would prefer that employees use manlifts, scissor lifts, boom lifts or other elevated work platforms rather than ladders. The main reasoning behind this philosophy is to eliminate a primary source of costly fall injuries.

FALLS CONTINUE TO BE THE LEADING CAUSE OF DEATH AND SEVERE INJURY IN CONSTRUCTION. In 2020, there were 351 fatal falls to a lower level out of 1,008 construction fatalities (BLS data). A 2014 study published by the Centers for Disease Control and Prevention (CDC) cited ladders as being a leading cause of workplace injuries. According to the study, an estimated 81% of construction-related falls treated in U.S. emergency rooms involved a ladder. The most common ladders used on construction sites to perform work are A-frame ladders. When these ladders are used in accordance with required safety work practices dictated by manufacturers and regulating bodies, they can be a very useful and safe piece of equipment. Unfortunately, A-frame ladders are misused more often than we would like to admit.

Most injuries associated with A-frame ladders occur when employees climb higher than the 3rd step from the top, when overreaching to the side of the ladder, missing or slipping off the bottom step/rung, and using a worn or damaged ladder. Many of these hazards can be significantly minimized by using platform ladders instead of standard A-frame ladders.

On a platform ladder, you are typically standing on a 1’x1.5’ (or larger) platform, not a 3” ladder rung. This provides the use of a firmer and more stable surface to stand on, which minimizes fatigue and subsequently slipping off ladder rungs. The elimination of the ladder cap and second rung eliminates the potential hazard of climbing too high on the ladder. In addition, the fact that the user is standing firmly in the center within the framing of the ladder, the potential of falls due to reaching to the sides of the ladder is minimized.

 

While platform ladders will not eliminate all ladder fall hazards, they can be another tool that can significantly help minimize the potential for fall-related injuries when used properly. As employers, we still need to practice the fundamentals of hazard prevention through steps outlined in the same 2014 CDC Article:

1) plan the work to reduce or eliminate the need for using ladders by apply­ing safety-in-design and constructability prin­ciples to finish as much of the work as possible on the ground;

2) provide alternative, safer equipment for extended work at elevation, such as aerial lifts, supported scaffolds, or mast climbing work platforms;

3) provide properly selected and thoroughly inspected ladders, that are well-matched to employee weight, task, and location;

4) when applicable, provide proper accessories to supplement safe ladder use; and

5) provide adequate ladder safety information and training for employees.

Familiarity and compliance with the provisions of safety regulations, such as recognizing ladder types and conditions, and using ladder positioning and other safe ladder practices, are crucial to reducing injuries from ladder falls.

LSM Group Members Can Contact Their Local LSM Safety Representative for Further Assistance Regarding Proper Ladder Selection or Ladder Alternatives.”