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Understanding Workers’Compensation Insurance Rates

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Steven Bell, Vice President of Underwriting & Sales, Lovell Safety Management

For the last seven years, Workers’ Compensation (WC) Insurance has been one of the few bright spots in the insurance landscape. Unlike other coverages, rates for WC have been falling. More importantly, insurance carriers have had an appetite for WC risk, and market competition has benefited employers throughout the state. As 2024 approaches, the landscape is changing ever so slightly as carriers appear to be becoming more selective. What does that mean for the typical construction company? When the market begins to turn, it first starts to affect businesses with higher losses. At this point, your WC costs should not be rising unless you have had adverse loss experience or payroll growth.

Several key trends that are expected to shape the WC market in the coming year:

1. Loss Costs, Experience Rating and Rates: Effective October 1, 2023, WC loss costs/rates on average will decrease another -2.6%. Since 2017, WC loss costs/rates have decreased approximately 45% in New York. There are many factors that have been driving the loss cost/rate decreases, such as loss experience and development; loss frequency, severity, and wage trend factors; loss adjustment expenses; benefit levels; catastrophe and disaster premium; and industry differentials. While all these factors play a role, the future wage trend had the most impact on loss costs. All other factors being equal, as more wages are paid, more premium is generated and, if losses remain the same, then loss costs/rates will go down.

Experience Rating is designed to modify the loss cost to better fit an individual employer’s loss experience. You may have seen a larger credit or debit on your most recent renewal due to the New York Compensation Insurance Rating Bureau (NYCIRB) changing the methodology and formula for determining your experience modification. To temper the change, NYCIRB used the lowest of either the new formula, a claim-capping procedure, or the old formula plus 30 points. Effective 10/01/23, the new formula will use the lowest of either the new formula or claim capping procedure, which may further impact these changes.

Since 2022, we have seen a steady increase in interest rates. While higher interest rates can stagnate economic growth, they may extend the competitive workers’ compensation market as improved investment returns may offset the need to increase pricing if losses and frequency deteriorate.

2. Regulatory Revisions: In 2023, the legislature passed two bills that may impact system costs: the Minimum Weekly Rate A.2034-A/S1161-A and the Mandatory Initial Hearings A.6208/S.5867. The Minimum Weekly Rate legislation establishes a new minimum weekly indemnity rate of compensation that would be indexed to not less than 1/5 of the State Average Weekly Wage (SAWW) or the employee’s full wages if equal to or less than 1/5 of the SAWW. The Mandatory Hearing legislation will require the Workers Compensation Board to index a claim upon receipt of a medical report, hold a hearing within 60 days, or 45 days upon request, hire stenographers to record hearing minutes and send all notice decisions to claimants in their native tongue. All businesses should be concerned about the potential financial impact of these bills.

3. Technology: The latest technological trend is Artificial Intelligence (AI). Carriers are actively deploying AI to improve claim processing, early intervention, diagnosis, treatment, fraud detection, pricing, and loss prevention. In terms of occupational safety, you will see the rise of AI tools such as wearable technology that can monitor employee vital statistics and monitor things like air quality and warn workers instantly of unsafe air quality. Other technology includes video monitoring where AI monitors video of employee activity identifying unsafe behavior and actions and instantly sends out notices to address them. While these potential advancements may be able to impact safety, they raise concerns about privacy.

4. Labor, Subcontractors, Independent Contractors, and Gig Contractors: The shortage of labor has employers expanding the use of subcontractors, independent and gig contractors. New York has clear rules such as the Fair Play Act, that distinguish an independent contractor from an employee and additional rules that define who is chargeable for the premium. The Fair Play Act rules can be difficult to understand but as a simple rule of thumb, if you hire someone to do work for you and they don’t have valid WC coverage it is likely you will be charged premium for a portion of that work. In summary, it is likely the New York State’s WC market in 2024 will remain competitive for most employers. Political and Regulatory reforms have the potential to increase system costs, but only if signed into law by the governor. AI technology is poised to significantly impact carriers, employers, and workers as its use continues to evolve. Finally, the use of subcontractors needs to be closely monitored to ensure proper coverage, and avoid premium charges.

For more information on workers’ compensation, please contact the professionals at Lovell at 1-800-5-LOVELL or visit online at www.LovellSafety.com.

Deducting Business Travel Expenses

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Nicholas L. Shires, CPA, Dannible & McKee, LLP

Historically, there has been a lot of confusion surrounding the tax deductibility of travel expenses within the construction industry. The shift to a more remote workforce resulting from the pandemic has furthered complications and confusion. We will answer a few of the most frequently asked questions about deductible business travel expenses.

When Are Business Travel Expenses Deductible?

Business travel expenses are deductible when an individual must travel away from their tax home or main place of work for business reasons. This is a straightforward definition, right? Well, maybe additional clarification is needed. 

An individual is traveling away from their tax home if they are away for more than an ordinary workday and need to sleep to meet the demands of their work while away. Obviously, this brings in the cost of traveling to the destination. It also brings in deductible expenses such as lodging, meals, cleaning (uniforms, work clothes, etc.) and telephone costs.

Where Is an Individual’s Tax Home?

The answer to this question is complicated. Generally, your tax home is your regular place of business, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located. For instance, if you’re living Central New York while working in a main office in
Syracuse, your tax home is considered Syracuse and the immediate surrounding area.

In the construction industry, individuals will often have more than one regular place of business because they work on different job sites. In these cases, their tax home their main place of business or work. An individual’s main place of business or work is determined by:

  • The total time the employee ordinarily spends in each place,
  • The level of business activity in each place, and
  • How much money the employee earns at each place.

It is important to note that commuting travel is not deductible. Therefore, an individual cannot deduct the cost of traveling between their main place of business or work and their residence. They can, however, deduct the cost of traveling between business locations. This means that traveling from the main office location to a job site would be deductible.

How Do You Handle Temporary Work Assignments?

It is common within the construction industry to have a temporary work assignment at a different location than the individual’s tax home. In cases where an employee’s work location assignment is temporary, the individual’s tax home doesn’t change, and the individual is considered to be traveling away from home for the entire period of the assignment. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less.

An employer can deduct an employee’s travel expenses if the employer paid or incurred those expenses during an employee’s temporary work assignment and the employee’s work assignment doesn’t last for more than one year.

If an employee is given an indefinite work assignment at a different location, the individual’s tax home changes to the new work location. This would be the case if the employee is scheduled to work at a job site for work expected to last longer than one year. In this situation, the employer cannot deduct the employee’s expenses as business travel expenses while they are working at the new location because the employee is not considered to be traveling away from his tax home. Individuals with indefinite work assignments must include in income any amounts they receive from their employer for living expenses.

What Travel Expenses Are Deductible?

To be deductible, business travel expenses must be ordinary and necessary expenses for traveling away from home for a business, profession, or job. An ordinary expense is one that is common and accepted in the individual’s trade or business. A necessary expense is one that is helpful or appropriate for the business.

Examples of deductible business travel expenses include:

• Travel by airplane, train, bus or car between the individual’s home and business destination;
• Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel or to a work location;
• Shipping baggage and sample or display material between regular and temporary work locations;
• Using a personal car for business travel;
• Lodging and meals while away;
• Dry cleaning and laundry while away;
• Tips paid for services related to any of these expenses; and
• Other similar ordinary and necessary expenses related to business travel.

What Records Should Be Kept?

The business traveler should keep well-organized records that substantiate the amount, time, place, and business purpose of their travel expenses. A business traveler must substantiate the cost of each separate expense for travel, lodging and meals. Incidental expenses, such as taxis, fees, and tips, may be totaled in reasonable categories.

Besides keeping receipts, canceled checks, credit card statements, bank statements (for debit card purchases) and other documents, an individual traveling for business should keep a diary, log or calendar noting the dates and times of any business travel, as well as the business reason for that travel.

As the deductibility of travel expenses continues to become increasingly complex, it is a great idea to have a plan. I always recommend consulting with your tax professional up front to properly document and structure an expense reimbursement plan to maximize the tax benefits of business travel costs.

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

NYS 2023 Workers’ Compensation Updates

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Brett Findlay, Vice President, Business Risk Specialist, OneGroup

In this article, we’ll give a brief update on the significant changes to New York State Workers’ Compensation in 2023. None are as big as the 2022 change to the experience modification rating formula (or EMR), the effects of which some policyholders with effective dates prior to October 1, 2023, have yet to see .

Yet again, an aggregate rate decrease is on the horizon, minor increases to both the maximum weekly payroll limitation cap and maximum weekly workers’ compensation benefit are now in effect, and the New York State Assessment dropped in January. Also, the impacts on individual workers’ compensation policies from the changes to the experience rating (EMR) formula have come to fruition.

On May 15, 2023, the New York Compensation Insurance Rating Board filed its annual loss cost indication with the New York State Department of Financial Services. An approved and published filing for the expected decrease of 2.6% of the overall loss cost level was confirmed and announced Aug. 1, 2023. The change in rates is effective on policies renewing on or after Oct. 1, 2023. This is the eighth consecutive year with an overall workers’ compensation rate decrease in New York state.

The impact of the loss costs, or rates, will vary depending on each individual classification code. For an understanding of the potential impact on your business, please reach out to OneGroup; you’ll find our contact information below.

Again, it is important to note that these rate changes will not go into effect on any individual policy until Oct. 1. If your effective date is before that date, you will have to wait until your policy renewal before any potential rate changes apply. Regardless of when your effective date is, you should know the exact rate changes to your classifications sooner rather than later. It’s important to not only forecast the future costs of your program, but also to develop a plan for your upcoming renewal.

Also, the maximum weekly payroll limitation/cap for eligible classifications has risen. Effective July 1, 2023, the new cap is $1,718.15. This is a 2% increase from last years’ cap of $1,688.19 and a 7% increase from 2021 cap of $1,594.57. This will have an impact on the cost associated with eligible employers’ workers’ compensation premiums. Furthermore, the maximum weekly workers’ compensation benefit rose from $1,125.47 to $1,145.43 effective July 1, 2023.

In January, the New York State Assessment saw another decrease. This year the assessment dropped to 9.8% from 10.2% in 2022 and even more so from 11.8% in 2021. Overall, there’s been a 17% decrease in the aggregate cost to policyholders since 2021.

As far as the new formula to determine Experience Modification Ratings, or EMR’s, those changes went into effect on Oct. 1, 2022. The formula is significantly different than in years past. OneGroup has been monitoring the impact on policyholders, hosted multiple educational seminars and developed materials to explain the changes in detail. The formula changes significantly impacted many businesses, both positively and negatively. For more information on how you have been or will be affected, please do not hesitate to contact us directly.

Finally, you may ask what any of this means for your organization? For any individual questions and/or concerns, please do not hesitate to contact Brett Findlay, Vice President of Business & Construction Risk. We are a team of specialists, dedicated to risk management and construction industry-specific insurance issues. We hope to serve as a resource to your organization for all your construction specific questions and concerns. OneGroup takes great pride in being at the forefront of industry trends and assisting others where we can.

You can find out more about us here: www.OneGroup.com or more specifically, http://www.OneGroup.com/business insurance/uniqueindustry-solutions/construction-industry/.

Please feel free to call me directly at (315) 280-6376 or email me at BFindlay@OneGroup.com for any further clarification.

Roadway Excavation Quality Assurance Act

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Diana Plue, Esq., Sheats & Bailey, PLLC

New York State has once again passed new legislation that will affect contractors and their bottom line. The state has passed new legislation known as “The Roadway Quality Assurance Act” that amends Labor Law §220 and adds a new section, Labor Law §224-f. The purpose of this act is to ensure that when a private utility company hires contractors or subcontractors to perform work that requires a permit for the excavation, opening or use of a public street those workers are paid prevailing wages. 

The Roadway Quality Assurance Act mandates that contractors and subcontractors to a utility company, as defined under Public Service Law §2 (23), pay prevailing wages to workers performing work on a “covered excavation project.” Utility Company is defined as individuals or corporations that operate an agency or agencies for public service and are subject to the jurisdiction, supervision, and regulations prescribed in the Public Service Law. 

A covered excavation project means a construction project where a permit is issued by the state, a county or a municipality to a contractor or subcontractor of a utility company to use, excavate, or open a street. The statute does not define “use” or provide any guidance on what “use of a street means, but we believe it will be liberally construed. The prevailing rate to be paid is the prevailing rate set for the trade or occupation performing the work in the locality where the covered excavation project is situated. 

Covered excavation projects are not considered public works but are subject to the requirements of: (a) Labor Law §220, which limits a legal work day to 8 hours and requires overtime for all hours worked over 8 hours a day, requires payment of prevailing wage and certified payroll be maintained and also sets out consequences for failure to pay prevailing wage; (b) Labor Law §220-a, which requires subcontractors upon receipt from the contractor or subcontractor above them of the schedule of prevailing wages to review such schedule and submit a verified statement to the above entity that the schedule was reviewed and the subcontractor will pay the applicable prevailing wage and also requires contractors to certify to the owner that all certified payroll has been received from subcontractors and the amount, if any, that is known to be owed to laborers; (c) Labor Law §220-b, which addresses the withholding of money to contractors for the benefits of laborers who were not paid and addresses penalties contractors and subcontractors may be assessed for failure to pay prevailing wages; (d) Labor Law § 223, which makes a contractor responsible for a subcontractor’s failure to pay prevailing wage; (e) Labor Law §224-b, which allows the fiscal officer to issue a stop work order to any contractor or subcontractor not in compliance with Labor Law section 220, 220-a, 220-b and 224-f and; (f) Labor Law §227, which discusses the procedure to review an order by the fiscal officer pertaining to hours of labor or prevailing wage rates under Labor Law §220. 

Utility company contractors and subcontractors as a condition to the issuance of a permit to use, excavate or open a street on a covered excavation project must file with the department of jurisdiction an agreement confirming that the payment of prevailing wages to workers on the project has been contractually mandated. Labor Law §224-f, defines Department of Jurisdiction as “the state, board or officer in the state, or municipal corporation or commission or board appointed pursuant to law, whose duty it is to issue a permit to a utility company, or its contractors or subcontractors, for a covered excavation project.” 

The New York State Department of Labor has indicated this prevailing wage will be enforced like any other prevailing wage in New York state. If an employee is not being paid a prevailing wage for their occupation, they can file a complaint with the Bureau of Public Work. Also, violations of this new act (i.e., Labor Law §224-f) will be subject to determinations and orders pursuant to Labor Law §220-b.

This Act was signed into law on Aug. 16, 2023. Despite aspects of the law being unclear and there being no guidance on its application, the law will go into effect on Sept. 15, 2023, and will apply to all contracts for construction and permits issued on a covered excavation project on or after its effective date. 

For more information, contact Sheats & Bailey, PLLC; a law firm dedicated to serving the construction industry. Tel: (315) 676-7314 

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.

Design Specialists: Thinking Outside the Box to Better Design Inside the Box

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By Tami S. Scott

When you first walk inside Design Specialists—a Syracuse-based independent design firm established in 1988— expect to be greeted by at least one of three small dogs with big personalities. Buck, Addie, and Gretta are experts at creating smiles and welcoming guests.

Much like the business’s founder and president, Krista Taskey.

Not only does Taskey have a knack for interior design, but she also has a gift for making people feel at home and building lasting connections. So, it’s only logical that, based on those two attributes alone, her 35-plus-year career has climbed to what it is today, where 90% of her business is repeat or referrals.

“We started out as an interior design firm specializing in commercial, fee-based work, but I also sold product, such as furniture, window treatments, artwork and accessories. We realized that our clients were thrilled to have a single source for their design and procurement,” she said. “Gradually, the procurement part of the business just grew and grew, [and] now we have two businesses here—the interior design business and a window treatment business.”

The window treatment business started about 15 years ago.

“We received a call from a local general contractor who noticed that we are a certified WBE business in NYS and City of Syracuse and asked if we would consider submitting a bid for blinds for a dormitory project that they were bidding on,” Taskey said. “At that time, we had never bid window treatments to any contractors.”

The contractor convinced Taskey to try—and they won the project! Today, at any given time, two to four employees dedicate their time bidding and project managing work in the window treatment side of the business.

The concept of “thinking outside the box to better design inside the box” is the way of life at Design Specialists. “I don’t ever say no to a customer,” Taskey said. She explained that if a potential client asks for a specific service or product that they haven’t yet done, she will research the request before responding either way.

The interiors library at Design Specialists is most likely the largest commercial library in all of Central New York. It consists of samples for carpet, tile, specialty flooring, wallcoverings, paints and fabrics for upholsteries and window treatments, and other specialty product.

“One of the things that’s important about our library is that we can typically design pretty fast. Probably 99% of what we need to design a space, is right here at our office,” Taskey said. “If we need larger samples of specific items and/or additional options, we simply reach out to our vendor reps who will then ship things directly to us.”

 

Currently, Design Specialists purchases product directly from more than 100 vendors. “We only team up with vendors that will support us and our clients when issues surface, which we all know that happens more than we like!” she said.

Taskey credited a large part of the business’s success to “our great staff and our liaisons with other businesses.” 

“Some of the partners we collaborate with take care of fabricating and installing soft window treatments, framing and hanging artwork, and other specialty services.  We have long standing relationships with these businesses,” she said.

In terms of the window treatment business, “we have our own installers, they are on our payroll, they are not subcontractors. This allows us to control the quality of the work and the scheduling. Our installation team, led by Dave Reid, is top notch! Dave always watches out for us while putting the customer first. We have received many compliments that are a testament to the entire team.”

When Taskey talks about her crew, the admiration and respect she feels toward them is palpable.

It’s all about trust

When Taskey moved her business from Rome, NY to Downtown Syracuse, her first office was located in an old firehouse, which is now the beloved Wolff’s Biergarten on Montgomery Street. She moved a second time before settling 13 years ago in her current location on Joy Road in East Syracuse.

“Part of the reason I bought this building is because it has a receiving area for the window treatments,” she said. “An 18-wheeler can just pull up with the product and we can get it unloaded directly into our warehouse. Once the product is checked in by our team, we can arrange installation with the general contractors and/or clients.” 

Design Specialists serves clients within a 3-hour radius, with the majority in Buffalo, Orchard Park, and Albany. Yet, Taskey says that her company is still kind of ‘under-the-radar.’

“Not a lot of people know about us,” she said. Those that do, however, keep coming back.

“Some of our clients are at a point where I send them a quote and they don’t even want to see the finishes or the colors anymore,” she said, paraphrasing one customer who told her that ‘in all these years, you’ve never disappointed me so just do what’s right.’ “There’s a trust factor. The longer you work for a client, you build that trust and they pretty much sign the check and send it to you.”

For instance, senior living properties and continuing care communities that have independent living, assisted living, skilled nursing, and memory care are very familiar with the firm—and very satisfied.

“A lot of those clients, we do everything—finishes, lighting, furniture, window treatments—the whole soup to nuts,” she said. “At this point, really all of our business is referral or the same people over and over again—I don’t have to look for work anymore.”

Other clients include those in the healthcare, corporate, education, and hospitality markets. It’s noteworthy to mention that safety, accessibility, and ergonomics are always built into the designs.

Customer service

Imagine contacting a business that has a 24-hour callback/email policy, that doesn’t have voicemail but rather takes messages with handwritten notepads. You might ask why in this advanced technological age, but that’s how Design Specialists rolls — its relationship driven and aims to provide the best customer service for its clientele.

In fact, the DS staff knows where Taskey is, so if she’s on the road and a painter needs her guidance to move forward on a project, he can pick up his phone and call her cell. “In our business, accessibility for our clients and our contractors is really important.”

How it all started

Taskey’ s path to interior design first began by earning a degree from a community college in Ontario, Canada. Though she always felt this work came naturally to her, it was finding the right employers to teach her the industry ropes that really put her on the right path forward.

Taskey’s first job was with a dynamic interior designer in Williamsville, NY.  The move to this area found her working for a large architectural firm in Utica.  Then finally, in true Mary Tyler Moore fashion, she threw her hat in the air (figuratively speaking!) and decided to try to make it on her own.

What may surprise you is … “I never had a business plan,” she said. Rather, Taskey learned through trial and error. By making mistakes or doing it right, the business organically evolved.

When asked what her favorite part of interior design is, she said it’s making the client happy; hearing that we did a good job; hearing they’re thrilled with the results: “Servicing people,” she said. And while money is a motivator, it’s not what most attracts her to the world of design. Rather, the work is rewarding. “I think 99% of what we do here every day is positive.”

“The nursing home environment, where about 80% of our workload is, that’s even more important because for the people that live there, that is their home. I feel very blessed that I can make those spaces beautiful for the residents and the staff,” Taskey said.

The present and the future

When you walk inside the open space facility, there are three large portraits of Buck, Addie, and Gretta that adorn the left wall. The quarters are bright from the natural sun, and the walls are bedecked with bold, rich colors. Multiple work rooms are home to stacks of samples, fabrics, furniture, and artwork. And the comforting and stimulating smell of coffee brewing in the kitchen permeates the air. There’s no slowing down in sight at the DS office. 

As for Taskey’ s retirement, which she’s been asked about on occasion: Put your fears to rest, there’s no plan for that, either.

 “I still love what I do for work,” she said, “and as long as I still have that passion, I don’t see me retiring in the near future.”

For more information about Design Specialists, visit their website at designspecialistsinc.net or call 315.479.1551.

Rising Interest Rates and the Impact on Your Business

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Kaitlyn H. Axenfeld, CPA/CFF, CFE, Dannible & McKee, LLP

As we move further from the height of the COVID-19 pandemic, we are seeing a drastic hike in interest rates. Over the past fourteen months, the prime rate has increased by 5.00% (3.25% in 2022 to 8.25% as of May 2023). Today’s high rates are expected to stay, if not continue to increase, which means financing is more expensive, and projects are less affordable. Interest rates should be evaluated and considered in all aspects of your business – the cost of equipment, estimating and bidding, cashflows and backlog.

When considering financing or leasing machinery and equipment, it is imperative to look at the interest rate implicit in leasing and financing agreements and compare the cash flow in the short and long term for all available financing and purchasing options. The days of 0% interest rates are gone. Implicit and stated interest rates for equipment financing now typically range from 7% to 20%.

For example, a contract that requires a piece of equipment that costs $500,000, leased or financed over five years with an interest rate of 10%, would require cash flows for interest payments of approximately $42,000 in the first year. It would be approximately $137,000 over the five years. While the average savings account earns 0.39% APY. The $500,000 of cash in a savings account, with compounded interest over the same five years, would earn approximately $16,000 in interest income. The cost of financing the equipment is almost $120,000. It is crucial to evaluate these decisions and consider the best use of available resources and the impact on short- and long-term operations and goals.

When estimating and planning jobs, it is also important to consider borrowing requirements and the impact of interest. As an example, $1,000,000 over five years with an interest rate of 3.25% would result in a monthly payment of approximately $18,000 with a total interest expense of approximately $85,000. This same loan with a rate of 8.25% would result in a monthly payment of approximately $20,000 with a total interest expense of approximately $223,000. In a little over a year, the cost of financing $1,000,000 changed drastically, with an increased monthly payment and interest over the period increasing $138,000. This is important to consider when planning and estimating jobs. What is the expected timing of purchases and outlays compared to billing the customer? Is there an option to bill for significant upfront costs? What is the timing of incurring costs and subsequently receiving billings?  If cash flows are such that borrowings from a line of credit are unavoidable, interest expense would need to be considered into account to ensure coverage of capital outlays. Streamlining payments and billings will help ensure the project stays on track and decrease the chance of liens, delays and unnecessary interest and penalties.

Not only is the contractor affected by rising rates, but interest rates also impact the buying power of investors, businesses and property owners. It’s common to rely on short-term or long-term loans to pay for construction and improvement costs. Rising rates impact the availability and qualifications lenders use to evaluate financing. The overall scope of projects increases as costs increase, but the amount of funding may not. Over time, the number of new projects may start to decrease, and existing projects may be delayed due to higher financing costs. This could lead to increased competition as there are fewer available projects.

Rising rates have a significant impact on daily operations. To remain successful, contractors must ensure that projects are estimated using anticipated interest rates and that projects are profitable enough to cover any increased financing costs. With the uncertainty of continued rate increases, contractors have to re-evaluate their thoughts on financing, specifically cash flow stability as debt becomes more expensive and implement a cash management strategy to ensure the best use of resources during this time.

Dannible & McKee, LLP, is 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 Kaitlyn at (315) 472-9127 or visit online at www.dmcpas.com.

Understanding Workers’ Compensation Insurance Rates

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Steven Bell, Vice President, Underwriting & Sales

On May 15, 2023, the New York Compensation Rating Board (NYCIRB) filed with the Department of Financial Services, a 2.6% decrease in the overall loss cost level in New York State, to be effective on October 1, 2023. The proposed loss cost decrease was determined by NYCIRB applying their standard ratemaking methodology.

This marks the seventh consecutive year where NYCIRB has filed for a loss cost decrease. While insurance costs have been on the rise across most lines, Workers’ compensation loss costs have defied inflationary pressures. Since 2017, loss costs in NYS have decreased on average nearly -45%.

 

During the same time, the average weekly wage increased nearly +31.6%.

There are many factors that have been driving the rate decreases such as improved loss experience and development, lower loss frequency, lower loss severity, higher wage trend factors, modest growth in loss adjustment expenses, higher benefit levels, lower catastrophe and disaster premium, and modest industry differentials. While all these factors play a role, calculated future wage trends appear to have had the most significant impact on loss costs during the last seven years. Conceptually, if the entire potential cost of losses for NYS is $5 billion, then loss cost must be set to raise $5 billion in premium. In this example, if wages are expected to increase 5%, and losses remain the same, then loss costs must decrease to generate the same amount of premium.

Loss Costs, Rates and Premium
In New York State, workers’ compensation pricing begins with the creation of what is known as a loss cost. NYCIRB collects payroll and loss data divided into approximately 580 classes of businesses such as plumbers, electricians, and painters. The loss cost is created by determining the total losses and payroll for those in a similar class of business. The result is a loss cost, which is an average unit of cost that can be charged for each one hundred dollars of payroll exposure. Carriers in NYS then apply a loss cost multiplier to the loss cost to create their rate. The multiplier, generally greater than one, is based upon each carrier’s expenses and loss experience and covers the carrier’s expenses and profit. Workers’ compensation premium is then determined by multiplying the amount of payroll (divided by 100) for each class code/business type by the carrier’s rate.

There are many factors that drive your final premium. In addition to manual rates, the final cost you pay is affected by your experience modification, the size of your payroll, the construction premium adjustment program, the payroll limitation, scheduled rating and the carrier discount. The experience rating modification is designed to adjust the manual rate to better fit an individual employer’s loss experience compared to all other employers in their class. You may have seen a larger credit or debit on your renewal due to NYCIRB’s recent change to the methodology for determining your experience modification. The construction premium adjustment program (CPAP) develops a credit for those employers who pay higher hourly wages for construction operations. Its purpose is to address premium differences between high–wage and low–wage paying construction employers. In addition to the CPAP program, employers performing commercial construction are also eligible to apply a payroll limitation equivalent to the NYS average weekly. Schedule rating credits and debits along with carrier discounts are also applied in many cases but are subjective and applied by your carrier based on their assessment of your operation. The maximum schedule rating credit/debit is 5% and private carriers can also apply a premium discount, which generally ranges from 1-15% of premium based on premium size. NYSIF can apply discounts and differentials based on their assessment of each individual insured. Policies that perform poorly may be debited and employers who are performing better than average, such as employers in a NYSIF safety group, receive as much as a 30% upfront discount.


If Loss Costs are Down 45%, Why Aren’t My Premiums?

The likely answer to the question is a combination of many of the factors noted above. Given the yearly increases in other lines of insurance, you may not be looking hard at your workers’ compensation costs as your premium may not be increasing. This is human nature, as we tend to focus on those items that are increasing in cost. However, it is wise to periodically market your insurance. If your payrolls have not gone up significantly and all other factors are equal, then your workers’ compensation renewal may be a place where savings awaits you!

For more information on workers’ compensation, contact Lovell at 1-800-5 LOVELL or visit online www.Lovellsafety.com.

 

Latest NLRB Rule Restricts Language Employers Can Use in Employee Contracts

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By Darby Peters and Abigayle Garrett

It is common for employers to have a contract such as a non-compete or severance agreement with an employee.  On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision that restricts what an employer can put in severance agreements and other employer-employee contracts. This NLRB decision applies to both unionized and non-unionized workers, protecting employees’ rights to make public statements, communicate about the workplace, self-organize, and form unions if they wish to do so.

Although this decision can impact any contract an employer offers an employee, some of the contracts that will be under the most scrutiny include severance agreements, offer letters, non-compete agreements, non-solicitation agreements, and confidentiality agreements. Generally, the agreements require the employee to waive certain rights in exchange for employment or receiving a severance package. Employers use such agreements as useful tools to protect their companies. Employers often ask employees to agree to a non-disclosure or non-compete agreement when the employee could be privy to information that could harm the company if the information was shared with competitors, such as bidding techniques. Similarly, employers often offer severance agreements to terminated employees that contain broad liability releases, which attempt to waive the employee’s rights to sue the company in the future.

However, the February 21, 2023 decision by the NLRB limited the scope of rights an employer-employee contract can waive. Now, if an employer is not careful and the agreement language is too broad, the agreement will be a violation of the decision and will be void. Overly broad language that infringes on an employee’s rights is strictly prohibited, such as limiting an employee’s rights to make public statements or communicate with other current or former employees. Examples of such overly broad language may be a non-disparagement clause that prohibits employees from making statements that could disparage or harm the image of the company, or a confidentiality clause that prohibits employees from disclosing the terms of the agreement to anyone besides a professional advisor or spouse. It is important to note that merely offering a contract of this nature is now a violation of the Act, regardless of whether the employee signs it.

This NLRB decision is effective immediately and applies retroactively to previously executed agreements. The NLRB recommends employers with contracts that may be unlawful to contact the affected employees and notify them that provisions that are overly broad are null and void. Doing so could help the company later on, if it finds itself litigating over such agreements because a judge would be more likely to rule favorably towards a company that attempted to comply with the new Rule. Before taking any action, each employer should evaluate their own company’s circumstances and consult an attorney if necessary to decide what steps should be taken.

While this decision changes what language can be included in employer-employee contracts, it does not totally prohibit employers from offering them. Severance agreements, non-disclosure clauses, and other contracts can still be legal and binding if carefully crafted. A lawful agreement must be narrowly tailored to the specific issues it wishes to address, rather than broadly banning an employee’s rights to communicate with the public or each other. The agreement should also have a temporal limitation where it binds the employee for a certain period of time based on legitimate business justifications, but does not bind the employee indefinitely. Finally, a lawful agreement should avoid overly broad language such as prohibiting “all disputes,” making “any statement that may harm the company,” or prohibiting disclosure of the terms of the agreement.

The attorneys at Sheats & Bailey, PLLC are experienced with drafting and revising employer-employee agreements such as non-compete agreements, offer letters, confidentiality agreements, non-solicitation agreements, and severance agreements. For more information or assistance with navigating the NLRB’s most recent decision regarding employer-employee agreements, contact Sheats & Bailey, PLLC, at (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.

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.