Posts by admin

Research and Development Credits Within the Construction Industry

Posted on by admin

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

Posted on by admin

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.”

Building an Effective Job Site Safety Program

Posted on by admin

Paul Coderre, Vice President of Risk Management Services, OneGroup

If you’re a contractor, your job sites present the most consistent and, in most cases, the greatest potential for employee, subcontractor and visitor injuries. While your shop, yard and office can generate occasional accidents, most injuries occur on the job site. The reason isn’t mysterious – your job sites carry the greatest risks and hazards. For the most part, those risks and hazards are known and recognized by site superintendents, foremen, and workers.

So, why do we still have incidents and injuries if most of the hazards are known? It comes down to the level of risk that you, and in turn your supers and employees, are willing to accept in order to get the job done. Other than asteroid strikes, earthquakes, and locust swarms, if we recognize something as a hazard, we can reduce or eliminate the risk of an injury. Now that you’ve rolled your eyes, let me say that I agree with you. If we want to get anything done; on a construction site, or getting to work, or walking across the street, we must accept a certain level of risk. We can’t escape risk; it is inherent to life.

However, the level of risk we accept is not an all-or-nothing proposition. In construction, deciding the level of risk we will accept is a dynamic part of our decision-making process. As business leaders, you make those decisions. If your job requires an excavation, there is risk associated with that part of the job. Your risk acceptance decision could range from high-risk (excavation without a trench box or cut-back) to low or moderate risk, in which you apply controls to minimize the potential for collapse or cave-in. The accident and injury results that your organization faces are an outcome of your risk mitigation decisions.

But how do we keep people on our job sites from taking decision making into their own hands? We are all familiar with the employee who works on the roof without a harness and lanyard; or the one that operates a saw without the guard; or the one that uses the unsteady scaffold, on the brink of falling over. That’s where we come back to the fact that this is your company. You decide the level of risk that your company is going to accept. The trick is getting that message out and making sure your decisions are followed.

Easy job site safety fixes can be tempting – do some inspections, hold a couple toolbox talks and – boom – your job sites are safe. Unfortunately, job site safety is more involved than that. If you leave the decisions up to your employees without any guidance, then your job site and your results are uncontrolled. The level of risk being accepted is being left to the person you hired yesterday.

Here are the key elements of an Effective Job Site Safety Program:

  • Commitment
  • Understanding
  • Communication
  • Accountability

Consistently applying these elements of risk management to your organization will result in a risk level that you have decided is acceptable.

Commitment: Do your site supervisors manage the risk on your site (to your expectations), or do they go through the motions? I often go into organizations as a safety consultant, and am handed a three-ring binder, and am told, “This is our safety program.” It typically requires the supers to hold daily toolbox talks, document their safety inspections, hold workers accountable for everything from wearing hard hats to lifting with their legs, and more. The jobsite usually engages in some variant of the program described, but very rarely do they enforce every step of that program.

When you develop your safety program, make sure it is your program. We put together program templates for companies all the time. Each time we put together a program template for a company, we tell the owner to go through the program and make it their own; eliminate the things that don’t apply to their operations and even more importantly, eliminate or modify the things they do not intend to do. Once the program is built to accommodate an acceptable level of risk, commit to it. Make that program the rule by which you, your supervisors and your employees will live by. This is by far the most important aspect of keeping job sites safe.

Understanding: After building your safety program, you must make sure that everyone in the organization (particularly your managers and supervisors) understand your expectations. They should know, and be able to apply, the protocols you established in the plan without having to reference it (because it’s at the office or in the trailer, not out on the job).

If you have certain requirements for inspections or training or PPE, the supervisors should know the requirements and why they are in place. They must also know your level of commitment to those requirements. Only then will they understand that they must maintain that acceptable level of risk on your site, because that level of risk will yield the results you are looking for. And only then will your supervisors understand the need for them to administer those protocols over the job.

With the understanding built among the supervisors, they will also extend that understanding to the employees. Again, if the employee group doesn’t understand the expectations, they can’t be expected to work within them. Building this understanding takes both continuous training (upon hire and periodically during the project) and constant reinforcement by the supervisors – which brings us to our next element.

Communication: Risk management is a very broad discipline, particularly in construction. Minimizing the possibility of an accident or injury can include everything from health exposures (i.e., silica), to mechanical (i.e., power tools), to electrical (i.e., arc flash), to falls (i.e., ladders and scaffold) and many other risks. We cannot expect employees to intuitively know or understand all our expectations. Therefore, we must commit to continuous communication of those expectations as the demands arise. If a job involves work from elevations, then we must build understanding in those risks. If it involves a chemical exposure, then that must be trained (establish the expectation) and reinforced with continuous reminders.

Much the same as establishing the expectations for production results, your supervisors must continuously be present to build understanding of the safety protocols, and to provide appropriate reinforcement to workers based on observation. The term “reinforcement” brings us to our next element.

Accountability: The term accountability has developed a negative slant in recent years. Holding your staff accountable is really just making sure they are operating to your expectations, which isn’t a bad thing. Accountability, driven by the process of providing feedback and reinforcement to people, is the most important way to make sure they understand what you desire for your company and for their safety. Holding someone accountable could mean providing positive feedback or acknowledging that an individual (or group) executed their jobs successfully. On the other side, accountability can also mean providing feedback if the group did not perform as expected, requiring you to restate your expectations or provide additional education or training on an issue that was missed. If your expectations continuously go unmet, you can make risk-based decisions as you find appropriate.

However, you look at it, holding people accountable and providing feedback is the best way to ensure that your expectations (safety program) are being followed. Don’t shy away from routinely providing feedback.

Summary

The bottom line is that job site safety isn’t rocket science (unless you’re building a launch pad). Effective job site safety is based on deciding what you are trying to get done and the level of risk that you are willing to accept to do it (commitment), teaching your people about your expectations (understanding), continuously reinforcing those expectations (communication), and letting people know whether or not they are meeting those expectations.

Nothing will be as effective as creating a thorough and realistic safety plan and making sure it is enforced at all times. For those just getting started on Building a Job Site Safety Program, here are few items:

  • Get a Safety Program Template
  • Train your employees
  • Conduct site inspections
  • Do accident investigations, and
  • Maintain the appropriate documentation.

This is a much shorter list of things to do, you’ll notice that the title was also shortened by taking out the work “Effective.” The only way to have an effective job site safety program is to take a comprehensive approach and follow through with it.

For more information, please contact Paul Coderre, Vice President of Risk Management Services at PCoderre@OneGroup.com.

MAJOR CHANGES COMING REGARDING CERTIFICATION AS A VETERAN OWNED SMALL BUSINESS (“VOSB”) AND SERVICE-DISABLED VETERAN OWNED SMALL BUSINESS (“SDVOSB”)

Posted on by admin

Diana Plue, Esq. Sheats & Bailey, PLLC

The United States government has promoted veteran owned businesses as essential for the U.S. economy.  Each year the federal government and NYS awards a portion of contracting dollars on federal projects to certified veteran and service-disabled veteran owned small businesses.

The federal government had two programs that provided federal agencies authority to set aside government contracts for exclusive competition among veteran owned small businesses.  Those programs were 1) A self-certification program under the Federal System for Award Management (SAM.gov) that gave access to non-VA government contracts set aside exclusively for SDVOSBs and VOSBs; and 2) the Veterans First Contracting Program, which required VOSBs and SDVOSBs, who wanted to bid on VA government contracts set aside for veteran owned businesses, to be certified by the VA’s Center for Verification and Evaluation (“CVE”).   

As of January 1, 2023, there will no longer be two separate programs. There will no longer be a self-certification program under the Federal System for Award Management and the CVE will no longer be certifying businesses as VOSB or SDVOSB.  Instead, starting January 1, 2023, all veteran owned small businesses will be required to apply for and be certified as a VOSB or SDVOSB by the Small Business Administration (“SBA”).

What does this mean for businesses currently certified by the CVE and for businesses currently self-certified? For businesses currently certified by the CVE they can continue to bid on VA and other government veteran set aside contracts until the end of their three-year approval term, at which time they would then need to recertify with the SBA. 

A self-certified VOSB or SDVOSB must apply for certification with the SBA by December 31, 2023. A self-certified SDVOSB that applies for certification with the SBA within this period may continue to compete for non-VA veteran set-aside contracts until the SBA has acted upon the application for certification. 

To be certified by SBA as a SDVOSB or VOSB the following criteria must be met:

  1. At least 51% ownership by one or more veterans or service-disabled veterans.
  2. The service-disabled veteran owners must have a service-connected disability.
  3. Veteran or service-disabled veteran ownership must be real, substantial, and continuous. The Veteran or Service-disabled veteran owners must have the authority to independently control the day-to-day operations of the business and make long-term decisions for the business and must run the business.
  4. Must be a small business according to SBA’s size standards.
  5. The veteran or service-disabled veteran owners must share in the profits equal to their ownership interest.
  6. The veteran or service-disabled veteran owner must hold the highest officer position in the company.

In addition to Federal SDVOSB certification a business can also apply for New York State SDVOSB certification. NYS has its own SDVOSB program ran by the Office of General Services.  NYS has legislated that 6% of state contracts be directed to NYS certified SDVOSB companies. The requirements for certification under the NYS SDVOSB program are similar to the Federal Program requirements but there are some differences as follows: 1) NYS defines small business as having 300 or less employees; 2) NYS requires the SDVOSB be located within NYS or have significant business presence in NYS; and 3) NYS requires the business to be operating for one year prior to application.

Before certifying as a VOSB and SDVOSB it is imperative that a business understands the control and ownership requirements of VOSB and SDVOSB certification. The business must be unconditionally owned and controlled by a veteran or service-disabled veteran. This unconditional control must be reflected in the business’ controlling documents and everyday operation of the business.

Procuring contracts that are set aside for VOSB or SDVOSB when the business is not unconditionally owned and controlled by a veteran is a violation of the False Claims Act and can have dire consequences such as prison time, large civil fines up to triple the profit earned on improperly gained contracts as well as debarment for five years from future federal contracting opportunities.

The process for VOSB and SDVOSB certification has many nuances. The attorneys at Sheats & Bailey, PLLC are experienced with these processes, and always ready to lend a hand to applicants filing for certification or businesses facing False Claim Act charges and debarment.  For more information or assistance contact Diana Plue, Esq. Sheats & Bailey, PLLC, Tel: (315) 676-7314, www.TheConstructionLaw.com.

The information provided in this article is not intended to serve as specific legal advice for any particular situation.  Competent legal and experienced counsel should be consulted.

Move Along, Inc.: Enhancing Abilities for All

Posted on by admin

By: Liz Landry

Ten years ago, Mike Smithson suffered a spinal stroke and became an incomplete paraplegic, only able to walk and stand up with the help of assistive equipment. As a Navy veteran, retired air-traffic controller, husband and father, the following years were very difficult and involved re-learning his entire way of life.

In 2016, Mike attended an event hosted by the VA hospital and a not-for-profit organization called Move Along, Inc. There, he saw other disabled veterans playing sports, being active and genuinely enjoying life. He was so inspired by the participants that he became involved with Move Along and learned how to play adaptive sports himself, re-capturing his passion for life with every new activity he experienced.

Fast-forward to 2022 and Mike is now the newly elected board president of Move Along, working to achieve the organization’s goal of helping many more physically limited people re-gain enjoyment of life through adaptive sports and human connections.

In operation for over 20 years, Move Along has its roots in the still-active wheelchair basketball and sled hockey teams, the Flyers, which began in 1979. Move Along’s mission is to provide and promote inclusive adaptive sport and recreation opportunities for people with disabilities and allies.

The organization aims to make a difference for disabled people of every age and from every walk of life: veterans, stroke victims, amputees, the elderly, those born with cerebral palsy, spina bifida and other congenital disorders, and the list goes on.

The main goal of Move Along is to make adaptive equipment as available as possible to everyone in the community. Move Along owns many types of devices that are adapted for use by people with varying levels of physical abilities. Recumbent chairs, hand cycles, tennis chairs, wheelchairs for wheelchair basketball, sleds for sled hockey, kayaks equipped with pontoons, and many more, are all available for borrow or rent. Additionally, the organization sponsors and coordinates several events and sporting activities, such as wheelchair basketball and sled hockey tournaments, as well as stroke victim support group meetings, to name a few.

As the organization evolves, another of Mike’s initiatives for Move Along is to build partnerships with other like-minded organizations and increase educational awareness about interacting with disabled people. “We want able-bodied people to engage with us and not ignore us,” Mike explained.

People with physical disabilities often feel marginalized and disconnected from the wider communities they live in. When these individuals get the chance to actively participate in sports and other recreational events, their spirits are uplifted and their excitement is unmistakable.

“We want to reach people to tell them they should not be alone, they should not be looking out the window at their friends riding their bikes – they should be able to get out and play. I know how life-changing it can be,” Mike said.

As a 501(c)(3) non-profit, Move Along accepts donations to help reach its goals and continue to provide adaptive equipment for the community. All are welcome to get involved and help live out the organization’s mission.

To learn more about Move Along and how you can help or lead others to utilize their services you may visit their website at www.MoveAlongInc.org or call 315-350-1726.

Wilkins Mechanical: ‘I accept this challenge’

Posted on by admin

By Tami S. Scott

When Susan Heffernan was presented with a chance for change, she grabbed it. It wasn’t part of her plan though it certainly served its purpose.

Heffernan had just enrolled at the Whitman School of Business at Syracuse University to further her education. She had been working as an accountant but felt an inner tug to do something different. Earning a master’s degree in her field was a sensible, safe route to start.

One phone call changed everything.

She learned through a friend that the owners of Wilkins Mechanical were looking to retire and sell their business. Her friend, who was aware of her current discontent, encouraged her to inquire. And so, she did.

“The broker asked if I’d ever considered owning my own business and I said ‘well, not consciously,’” Heffernan said, noting that for years she always worked hand-in-hand with business owners. “I guess you could say in a way, I’ve always been in training for this very moment, it didn’t take long for me to realize that this was the right path to take, so I gladly accepted the challenge and the process began.”

On Dec. 30, 2021, Heffernan became a business owner. For 11 months leading up to that moment, she embraced every occasion to learn from the people who built it.

“I worked alongside the previous owners for a few months with the intent of hitting the ground running a little faster upon closing,” Heffernan said. “That experience certainly helped me gain some insight on what challenges they faced and what I might expect.” 

Heffernan credits her mom and grandmother — her biggest heroes — for instilling the strength to take challenges and leaps of faith because, “if you don’t you never really know what you are capable of, and without risk, there’s no reward, right?”

Looking back, Heffernan said never once did she feel like she couldn’t do it. “I had the attitude of ‘yes, you can do this.’ The experiences I’ve gained over the years have prepared me for this.’”

Heffernan is in the process of working on obtaining her WBE certification, which she hopes to achieve by the end of 2023. “Through research, webinars, and speaking with other certified WBE business owners, I know the process is quite extensive,” she said.

Challenges and rewards

When asked what are the challenges and rewards of this new venture, Heffernan responded by saying that everything is rewarding and challenging all at once.

“They feed each other,” she said. “It’s exciting to be faced with a challenge or obstacle, and finding the solution or resolution to those situations are the reward.”

Before pursuing a shift in her career, Heffernan worked in finance for almost ten years at Martin-Zombek Construction. “We were all encouraged to “think like a business owner,” “think like an entrepreneur,” she said. “At that time, it was practice; now, it’s the real deal.”

Stopping the “I’m an employee” thought process was one of Heffernan’s biggest challenges. Her background at Martin-Zombek, however, prepared her well for the new path she walks today.

“I’m grateful to have had the experience at Martin-Zombek,” she said.

Though Heffernan is the new leader of this female-owned business, she’s mindful of each team member’s purpose within the establishment.

“We all have a very important job to do here and none of us can do it [alone],” she said. “The kind of culture I’m trying to create and build off of [is] the foundation that the Wilkins’ [had] so tirelessly built. We’ve got a solid crew, in the field and in the office.”

Aside from the employee-to-employer transition, Heffernan is also conscientious of continuous learning and the value of networking. The Construction Financial Management Association (CFMA) and the Syracuse Builders Exchange (SBE) — had both served as substantial resources for her in the past. She plans to engage with each again.

“[CFMA] and [SBE] were huge for networking and were resources when I was in my previous position in construction,” she said. “I miss that education because [not only] would I learn something new, but it also validated what I knew [already]. That’s how I can be most helpful to my team, by making sure I’m continually learning and knowing  the best way to account for all the hard work my team is doing.”

Though it’s been less than a year, the rewards so far, she said, are seeing the teams come together and watching the business develop.

A little history

Wilkins Mechanical Inc. was formally incorporated in 1997 and family-owned for 41 years. That’s a history that would make anyone who succeeds the founders feel both secure in their acquisition and apprehensive about filling their shoes.

“Many people dislike change,” said Heffernan. “There are times when it’s even uncomfortable for me. So, I understood there was going to be some apprehension [and] potentially some resistance.”

Heffernan noted how oftentimes when a new owner takes over, they decide to build their business from scratch. “It makes sense that there would be some concern,” she said, “but that was definitely not my plan.”

In fact, the only changes she sees on the horizon are newer technology and more staff. For herself, Heffernan implemented an accounting software program within the first six months to keep organized in job costing and project tracking. Her next focus will be organic expansion — growing the business in a way that makes sense.

“I hope to increase employment over the next few years,” she said. “New York State has been a very good customer; we have had success in bidding OGS, DASNY and SUNY projects. ”

Heffernan looks forward to having internal conversations with employees on exploring other gainful avenues, too.

What should their customers know?

Sometimes change can shake up customers’ confidence if they’re uncertain about what to expect. At Wilkins Mechanical, Heffernan exudes a commitment to excellence.

“I carry the same values, work ethic, and pride that the former owners had,” she said. ”I respect that. I want to continue to preserve the reputation that the previous owners worked so hard to build — that’s my goal.”

Does that mean there won’t be any “oh shoot,” “oh darn,” or “I’m sorry” moments? Of course, there might be, she said, because learning curves are a natural — and healthy — part of a new process, and show humility. Heffernan advocates for customer conversations to bring her up to speed on current happenings.

“I appreciate our customers and I am thankful for their patience in our growth,” Heffernan said. Our customers have been wonderful to work with. I’ve very much enjoyed getting to know them.”

In essence, Heffernan’s view on success for everyone is about collaboration. “We’re very prideful in the work that we do because we do a knockout job. We’re welders, we’re pipefitters and nobody can weld as good as we can,” she said. At the same time, feedback is critical, too. “If our client is unhappy with a certain situation, we entertain that. We’re open to that conversation.”

“I see everything as a team,” she added. “Everybody needs support, whether it’s on a project from a project manager to the foreman to the client’s project manager — we all need to work together and that’s the kind of culture and philosophy that I’m trying to build.”

Heffernan may not have ever consciously thought about owning a business, but her experience, philosophies, and can-do attitude, together with team-building principles, appears to have put her on the path she had been seeking from the start.

Breakout Box or Sidebar

Wilkins Mechanical Apprenticeship Program

The Wilkins Mechanical Apprenticeship Program is accredited through the National Center for Construction Education & Research (NCCER), which is recognized by the New York State Department of Labor.

“We encourage anyone, at any age, to join our organization and learn the plumbing, pipefitting, and steam-fitting trade,” Heffernan said.

The typical program is five years. The work processes that an individual is trained on and the minimum required hours are set by the DOL. A newly hired individual who enters the program will “test in,” which will determine their knowledge and skills to influence their entry level.

NEW YORK STATE POISED TO ADD REGISTRATION REQUIREMENT TO PUBLIC WORKS CONTRACTING NYS Senate Bill S5994C

Posted on by admin

By Joseph Schuler, Sheats & Bailey, PLLC

Public works contracting in NYS is subject to various statutes, rules, and regulations under Article 8 of the NY Labor Law.  The state is on the brink of adding another onerous registration requirement to the list. The requirement would apply to all contractors on public works projects in NY and is on the way to the Governor’s desk after passing the State Senate and Assembly.

The bill is a self-described attempt “to better enforce existing labor laws and regulations in the public works industry.” In reality it is a way for NYS to raise revenue and add another unnecessary layer of bureaucratic review for contractors to navigate.  The bill requires contractors to register with the DOL’s Bureau of Public Works. The registration must be renewed every two years and prior to bidding on any public work. Unregistered contractors may not bid on public contracts. Additionally, registered contractors may not use the bids of unregistered subcontractors. Proof of application is not accepted as proof of registration. All bidders must provide proof of their own registration and that of any underlying subcontractors their bid relies on when submitting their bid.

Noncompliance with any of the registration or proof of registration requirements may, after notice and a hearing, result in a fine of up to one thousand dollars.  It may be prudent for contractors to revise their current form subcontracts to include indemnification clauses specifically covering potential fines under this new law.  Also, it may be wise to add language permitting claims for lost profits if an unregistered subcontractor causes the prime contract to be terminated.  Including subcontract language that subcontractors must maintain and renew their certification at their own cost could mitigate a contractor’s risk. Furthermore, requiring proof of registration in advance of bid submission by subcontractors and developing an in-house database of registered subcontractors may reduce the chance of using a bid from a sub that is not registered.  The proof of registration terms could be included in RFPs sent to subcontractors.

Registration, in its simplest form, is completed in three parts. First, there is a registration fee of $200, which the Commissioner has the discretion to lower for M/WBEs. Second, the registrant must fill out a fairly extensive disclosure form. Finally, the company must show proof of workers’ compensation insurance coverage for all employees.

The form is statutorily required to include the following criteria: (1) company name and address, (2) business entity type, (3) contact information for any individuals with company interest, (4) company tax ID number, unemployment insurance registration number, and workers compensation board employee number, (5) outstanding wage assessments in NY, (6) debarments in the last ten years in NY, (7) debarments in the last ten years outside NY, (8) past violations of NY labor or employment tax law, (9) past OSHA violations, (10) associations with apprenticeship programs, and (11) status as a M/WBE or not.

After paying the fee, filling out the form, and showing proof of workers’ compensation insurance, the Commissioner of the Bureau of public works has the broad discretionary power to determine a contractor’s fitness. The unelected Commissioner is required to “promulgate regulations to determine under what circumstances a contractor would be unfit to be registered.” A bright spot for some, past debarment is not permitted to be the sole determining factor of fitness, unless the debarment is currently still in effect under section 220-b(3) of the Labor Law (five-year debarment for two prevailing wage violations in six years) or 141-b of the Worker Compensation Law (one-year debarment for workers compensation payment violations).

If the Bureau of Public Works Commissioner finds a company unfit the company will have the opportunity to dispute the finding at a hearing. Then the Commissioner will make a final determination. Companies found to be fit at the outset or after a hearing will be issued their certificate of registration. The Bureau is required to establish an online interface for contractors to access their certificates.  

The attorneys at Sheats & Bailey, PLLC are experienced with compliance in the public works bidding process. For more information or assistance with navigating the Public Works Construction landscape contact Sheats & Bailey, PLLC.

The information provided in this article is not intended to serve as specific legal advice for any particular situation. Competent legal and experienced counsel should be consulted.

Workers’ Compensation: Changing the Experience Mod Calculation

Posted on by admin

Paul Coderre, CSP, ARM, Vice President of Risk Management Services

What does it mean for your business?

  • It’s good and getting better / It’s bad and getting worse
  • Changes go into effect 10/1/2022
  • Intent: Incentivize companies to do better at preventing injuries
  • Withdraw from NCCI for multi-state operations

They say, “Change is good”

As you may have heard, the New York State Compensation Insurance Rating Board (NYCIRB) is changing the way they calculate your Experience Modification Factor (aka “mod”). They are also withdrawing from the National Council on Compensation Insurance (NCCI) and eliminating the “Merit Rating” system for small businesses. This would probably be interesting if you are an insurance person (Like me). If you’re not an insurance person, you probably just want to know how it’s going to affect you in insurance availability and cost.

First: How is Workers’ Compensation Premium Calculated?

Your workers’ compensation (WC) carrier calculates your organization’s premium, using data provided by you, the State of NY, and their own (approved) factors. The calculation follows a standard formula in which the underwriter uses your workers’ compensation classification codes, loss cost rates tied to those codes (set by the State) and your payrolls to calculate your manual premium, which is the first step in setting the premium for a guaranteed cost policy.

The manual premium would be the same for any two companies that do the same thing, have the same number of people, and pay their people the same in wages. It does not consider the loss performance of either company. This is where other factors, including the loss cost multiplier (LCM) and the experience modification factor (EMF) come in.

LCM: The loss cost multiplier is a factor that is developed by the WC carrier, and approved for use by the State. Carriers can have several LCM’s approved for use, and reflect the carrier’s “feeling” about how your company will perform. Loss cost multipliers can range from 1.10 to over 1.5.

EMF: The experience modification factor is calculated by NYCIRB based on your classification codes (what you do), three years of your payrolls, and three years of your losses (how well you do what you do). This is the thing that is changing as of 10/1/2022.

A key to remember about the LCM and EMF is that they are “multipliers” in the premium formula; meaning the underwriter takes that initial “manual premium” figure and multiplies it by both factors.

Manual Premium X LCM X EMF = Standard Premium

The standard premium is the important premium number. There may be other discounts introduced by the underwriter, but it is the true basis for your annual workers’ compensation premium. Needless to say, the lower either “factor” is, the lower the impact on that standard premium number. So, if you want to control your workers’ compensation premium, you need to do what you can to control the LCM and the EMF.

Control: Since the LCM is set by the underwriter, you have little control over the number itself. Your opportunity to control the LCM stems from your operations, your overall performance, consistency in performance and the presence and effectiveness of your risk management efforts.  It is really a more subjective decision by the underwriter whether you get an LCM of 1.12 or 1.45.

However, the EMF is a controllable factor. It is based on your injury costs over a three year period; if you minimize the frequency and severity of incurred losses, your modification factor will be lower, and will have a more positive impact on your premium. Unlike the LCM, the EMF can actually calculate to be less than one (<1). When the manual premium is multiplied by a modification less than one (called a Credit Mod) it actually reduces the ultimate premium figure (Yay!). So the bottom line is that in order to control your workers’ compensation premium, your best opportunity is to control your EMF.

This is why the State’s change to the EMF formula are so important to you and your business.

Second: Why is the State Changing?

New York State has been studying the performance of organizations from the standpoint of workers’ compensation injuries and costs. Those studies have revealed that companies performing very well (minimizing the frequency and severity of on-the-job accidents) are not realizing the benefit of their performance in their workers’ compensation premiums (remember, the EMF is based on performance over a three year period). The State also found that companies performing poorly in workers’ compensation outcomes are not being assessed adequately for their poor performance. (Note that the experience rating system is supposed to reward good performers and “incentivize” poor performers to do better) The bottom line is that the State felt it necessary to change the EMF formula to better affect what organizations pay in premium based on their performance.

Discontinue participation in NCCI:  The National Council on Compensation Insurance is an organization that provides EMF calculations for companies with operations in multiple states. While they do not cover all states, those companies whose operations are within a state that is a member of NCCI would have a common EMF for all such operations in all such states. Not all states participate in the NCCI system. In a case where a company has operations in both NCCI states and non-NCCI states, premiums will be calculated for NCCI States using the common NCCI mod, and for Non-NCCI states individually using the experience mod calculated for that state on its own merit. Since NY no longer calculates a mod the way that NCCI does, it needed to withdraw from the NCCI program.

Discontinue the merit rating system: Very small companies in New York (WC Premium < $5,000) have traditionally been treated differently in their workers’ compensation premium calculation than larger companies. They fell under a program called “merit rating.” With the changes made to the experience rating formula (specifically the variable split point) the State felt it was no longer necessary to have a separate means of premium calculation. Companies who previously qualified for merit rating will now be rated the same way as all other workers’ compensation risks in the state. The changes to the EMF calculation are designed to accommodate small, medium and large risks. (More on the variable split point in a moment).

What Has Changed?

Key elements of the experience rating formula have changed. It is felt by the State that those changes will result in the following:

Organizations that in the past have had a very favorable credit mod will likely see their EMF improve further. Those companies who in the past have struggled with a very poor debit mod will likely see their new mod get even worse. And those companies who have been in the middle (not great but not terrible) will see only minor changes to their newly calculated EMF. That is how the State described the expected outcome of changing the mod formula. Our early observations have shown a little more tendency for mods to move up slightly for those in the middle group.

Variable Split Point: A key change to the formula has been the establishment of a “Variable Split Point.” The split point defines what portion of incurred claim costs on a specific claim will be considered primary, and what will be considered secondary. The mod formula leans heavily on costs associated with small to moderately severe claims, and discounts high severity claim costs so they don’t over skew the mod.

This was a point in which a smaller company’s mod could be overly impacted by a single claim, while a larger company may not feel the impact of several claims as intended by the State. The new method sets the split point value based on the company’s payrolls and Expected Losses. A small company may have a split point of $1,500, while a larger company’s split point may be $60,000. The result is that if each company had a single claim that totaled $65,000: the small company would have $1,500 used in the mod calculation while the larger company would have $60,000 entered into their calculation. While it seems harsh, the larger company’s higher expected losses do soften the blow of the higher split point.

Caps and Limits

First Year Cap: During the first year of applying the new calculation (experience mods effective from 10/1/2022 to 9/30/2023), a mod calculated under the new method that generates result greater than 0.30 higher than using the old calculation will be capped at the mod calculated by the old method plus (+) 0.30. This will show up on the experience rating sheet provided by the State (NYCIRB).

Claim Count Limits: There is also a limit on the experience modification for organizations having only 1, 2, 3 or 4 claims in the rating period. This is another way for the State to limit the impact of a single or a very few claims having a severe impact on a smaller company’s experience rating; and for a larger company’s mod to be limited by a calculated cap (although this cap can still be fairly high).

  • For an organization having only 1 claim, their mod cannot exceed 1.12.
  • If the organization has only 2 claims, their mod is capped at 1.40.
  • If the organization has 3 claims, the cap is 1.75, and
  • If the organization has 4 or more claims the mod is capped via formula – (2 + 0.000003 X Expected losses)

 

The Bottom Line and What Can We Do About It?

The bottom line in the changes made to the experience rating formula is that it is here and it is real. The State (NYCIRB) has begun applying it to those mods effective on 10/1/22 or after. For many, their mod will go up; some slightly, others not so slightly. For others, their mod will go down and they will realize the benefits in their next policy renewal.

What we can do is:

  • Work with OneGroup to stay ahead of the game. We can do some prospective calculations of your mod to see (approximately) where it’s going to be at renewal time. This will help in making decisions relating to carriers and programs.
  • Work with OneGroup Risk Management and Claim professionals to help minimize the occurrence and severity of workers’ compensation losses. Remember, the only real option you have in controlling your experience mod is to control the losses driving it.

What Else:

If you want to know more about the details surrounding the change to the mod formula and the potential impacts of those changes:

CASH IS KING

Posted on by admin

Kenneth C. Gardiner, CPA, CCIFP, CDA, Dannible & McKee, LLP

With inflation at its highest since the early 1980s, contractors are required to fund higher construction costs to perform the same construction operations. The cost of materials and labor have increased significantly, and cash requirements have never been higher. It takes money to make money, and contractors need cash to mobilize projects, fund payroll and stay afloat.

Here are 10 strategies to help preserve cash flow and reduce construction costs:

  1. Negotiate and ask for material escalation provisions– Historically, escalation provisions have been limited to asphalt and a few other commodities. It is becoming much more prevalent to obtain escalation on a wide variety of construction materials and equipment. Many contractors are approaching contract owners and negotiating inflation-oriented contract increases.
  2. Manage over- and under-billings – One of the best sources of cash flow is over-billings. Manage bid and pay items to front-load as much profit as reasonably possible into early construction phases. Use the early cash flow to reduce line credit borrowing and fund project costs. Conversely, minimize under-billings; discuss pay items with project engineers to confirm when items can be billed on applications for payment. Strategically time when significant material purchases need to be paid to suppliers to when you can bill the owner for these materials and equipment.

3.Explore new sources of products and materials– Now might be the best time to research new sources of products and materials. Inflation and ownership transition in the construction materials and suppliers’ industries may create opportunities to forge new relationships with vendors hungry for new business. We have seen relationships that were once deemed taboo turn into new opportunities for better pricing and/or payment terms. The Internet also may be a great source of new supplier opportunities.

4.Teamwork– Make sure construction teams work together with purchasing personnel to obtain the best price and delivery options. Don’t let construction teams purchase goods and services in a silo. Centralize purchasing as much as possible at the home office, or at least make sure large purchases amongst projects are coordinated to maximize volume purchase pricing and related discounts.

5.Contract outside advisors– Stay connected to your outside advisors. Industry professionals such as accountants, legal counsel and construction industry associations can help identify federal, state and local programs to assist contractors with programs, such as was the case with the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC), that can provide substantial government incentives to maintain your workforce and provide much-needed cash flow.

6.Billings, collections and year-end payments– Review your billing and collection policies. Consider emailing invoices, applications for payment and other communications with customers. Provide electronic payment options such as EFT and credit card options. Negotiate better payment terms with vendors. Offer wire transfer payments on a specified due date or use credit card payment services to provide additional cash flow or credit card rewards to extend cash terms or use rewards for future purchases.

7.Subcontractor and supplier buyouts– Despite having quoted prices, consider going back one more time to negotiate or obtain better pricing on significant subcontract or supply contracts. You might be able to hit on a few cost savings that could have an impact on overall job profitability.

8.Review equipment needs– For contractors with significant rolling stock and equipment operations, consider a review of equipment usage on current and future projects. Sell off idle or low-usage equipment for new purchases. Look at short- or long-term equipment lease options vs. financing purchases. The acquisition of new equipment requires a cash flow analysis, including an increase in cash for potential reductions in repairs and maintenance to replaced equipment and a decrease in cash for interest components of any long-term financing.

9.Evaluate estimated tax payment requirements– Whether you are a regular tax-paying C corporation or a pass-through entity, consider deferring estimated tax payments to assist in short-term cash needs. Most taxpayers believe you must make estimated tax payments equal to your prior-year tax. Evaluate current year profitability and determine if you can adjust estimated payments based on your current year’s quarterly taxable income.

9.Lines of credit– While most contractors have a line of credit, the best time to ask for an increase or expansion of your line is when you don’t need the money. It might seem counterintuitive, but banks may be hesitant to lend money when you need it, however, tend to be much more willing to increase or provide a line of credit when you demonstrate healthy cash flow management. With inflation and costs dramatically increasing, now might be the best time to request an increase in bank borrowing availability before it is too late.

It’s not likely the impact of materials inflation is going to reverse, and it looks like the “new” costs are here to stay. Additionally, there is no way to reverse labor inflation, so we are all going to have to manage the impact of increased costs. These are just a few suggestions to help you improve cash flow, manage costs and increase profitability.

 

Update on NYS Secure Choice Savings Plan Law

Posted on by admin

By:  Brian Schiedel (Burke Group) and Earl R. Hall (Syracuse Builders Exchange)

On October 21, 2021, Governor Kathy Hochul signed the New York State Secure Choice Savings Plan into effect, in a move to join other states Nationwide which are establishing mandatory state-run retirement plans for private sector workers. When the enrollment window opens (exact date TBD), employers with ten or more employees who do not currently offer a qualified retirement plan must automatically enroll their employees in the NYS plan within nine months. 3% mandatory contributions will be made to Roth (after-tax) Individual Retirement Accounts (IRAs) – investment options and costs are currently unknown.

Background Information – Retirement Reality Check

Employers of all sizes have faced significant challenges when it comes to offering a retirement plan to their employees. In fact, there are an estimated 55 million working Americans who do not have a retirement plan available from their employer. Recent legislative and executive actions have delivered new ways to help employers deliver effective and efficient retirement plan solutions to their employees, enabling them to save for retirement. The challenges these employers face include:

  • Plan costs associated with offering a retirement plan
  • Fiduciary duties, responsibilities, obligations, and liabilities
  • Limited resources to manage the plan daily
  • Reduced focus on growing the revenues and profits of the company

The Solution – Multiple Employer Plan (MEP)

Rather than establishing a plan of its own, a business can choose to join with other employers in a Multiple Employer Plan (MEP). The entity that establishes the MEP is its sponsor, which typically designs the basic features of the MEP. These include the provisions that determine any waiting periods that employees must satisfy to participate, which types of contributions can be made to the MEP, when and in what form participants can take distributions from their account balances, whether other optional features are available, etc. Adopting employers have flexibility with respect to plan design for their participating employees.

The MEP sponsor also generally serves as the official plan administrator—the primary administrative fiduciary for the plan. It is the MEP sponsor that appoints the trustee and other service providers for the plan, communicates with participants regarding plan benefits, ensures compliance with regulatory rules, decides claims disputes and other plan issues, and determines available investment menus, among other duties. Certain fiduciary responsibilities are often delegated to hired professionals.

Costs are lower for participating employers because the MEP sponsor can negotiate lower fees from service providers based on larger participant numbers and account balances. Much of the fiduciary and legal risk is transferred to the MEP sponsor, administrator and hired professionals. Employees who participate in the MEP have access to the same low-cost investment funds that large employers can offer. Smaller employers can more easily compete with larger companies in recruiting and retaining workers.

A “closed MEP” covers employers within the same geographical region who meet certain commonality requirements (i.e., members of an Association). They are treated as a single retirement plan, file a single Form 5500 report annually, undergo a single audit and determine ERISA (Employee Retirement Income Security Act) bonding requirements on aggregate MEP assets.

Stay tuned as the Syracuse Builders Exchange is performing due diligence on a MEP plan solution for our member employers, and your employees, that may be available before the end of 2022.