East Tennessee Business Journal » Monthly Columns

Tag, you (employers) are it!

admin — Tue, 01 Jun 2010 18:57:12 +0000

For those of you who remember playing the childhood game of Tag, you might feel like you’ve just been “tagged” under the U. S. Department of Labor’s (DOL) new “Plan/Prevent/Protect” strategy. This new strategy is outlined in DOL’s Spring 2010 Regulatory Agenda and seeks to place increased responsibility on employers to take steps to ensure compliance with the laws and regulations enforced by DOL.

According to DOL statements on this strategy, Plan/Prevent/Protect is aimed at those employers who have not taken the necessary steps to ensure compliance. DOL states its recognition that some employers’ lack of compliance is the result of difficulty understanding the laws and regulations that govern America’s workplaces. For other employers, DOL’s opinion is that complacency or a “catch me if you can” philosophy may be why they have not taken more proactive actions to achieve compliance.

The Labor Department seeks to change the behavior of such employers by requiring employers to “find and fix” problems, rather than waiting for a Labor Department investigator to discover the problems and enforce the law. Although the specifics will vary by law, industry and regulated enterprise, this “Plan/Prevent/Protect” strategy will require all regulated employers to take three steps to ensure safe and secure workplaces and compliance with the law:

* “PLAN”: The Department will propose a requirement that employers create a plan for identifying and remedying risks of legal violations and other risks to workers – for example, a plan to search their workplaces for safety hazards that might injure or kill workers. The employer would provide its employees with opportunities to participate in the creation of the plans. In addition, the plans would be made available to workers so they can fully understand them and help to monitor their implementation.

• “PREVENT”: The Department will propose a requirement that employers thoroughly and completely implement the plan in a manner that prevents legal violations. The plan cannot be a mere paper process. The employer cannot draft a plan and then put it on a shelf. The plan must be fully implemented for the employer to comply with the “Plan/Prevent/Protect” compliance strategy.

• “PROTECT”: The Department will propose a requirement that employers ensure that the plan’s objectives are met on a regular basis. Just any plan will not do. The plan must actually protect workers from violations of their workplace rights.

What the strategy proposes is that employers be required to assemble plans, create processes and designate people charged with achieving compliance. They will be required to implement these plans and evaluate their effectiveness in achieving compliance.

New rules will primarily target compliance with the Fair Labor Standards Act (FLSA), the Occupational Safety and Health Act (OSHA), the Federal Mine Safety and Health Act of 1977 (Mine Act), the Employee Retirement Income Security Act (ERISA), and Executive Order 11246 (affirmative action for federal contractors and subcontractors).

As part of the recordkeeping requirements of the Fair Labor Standards Act, the DOL proposes to establish a requirement that employers perform a classification analysis for any worker that the employer classifies as an independent contractor. The employer would then be required to disclose that analysis to the worker and retain that analysis to give to DOL investigators who might request it.

Without a doubt, DOL’s new enforcement program will compel employers to institute more proactive policies and actions to attempt to ensure their compliance with Federal employment laws. The first step is for employers to “find and fix’ violations – that is, assure compliance – before a Labor Department investigator arrives at the workplace. The audit can then be used as the basis for writing and implementing a compliance plan to prevent future violations. The plan must contain implementation steps such as annual compliance audits, methods for employees to participate in the plan, and designation of particular employees who are responsible for ensuring compliance. Ongoing education and training for these designated employees will also be a necessity, as well as a system for compliance reporting.

Employers who fail to take the steps necessary to comprehensively address the risks, hazards, and inequities in their workplaces will be considered out of compliance by DOL and, depending upon the agency and the substantive law it is enforcing, subject to remedial action. In other words, “Tag, You’re It” for developing, implementing and enforcing company policies that will ensure your company’s compliance with employment, safety and employee benefit laws.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves. He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

If the recession is over, then what’s next?

admin — Tue, 01 Jun 2010 18:32:15 +0000

Many economists and government representatives tell us the recession has ended. An official declaration based on economic statistics may be months away. And, while individuals vary in their predictions, there is a general expectation that the economic environment will gradually improve over time.

As we encounter more signs of vitality — increased hustle and bustle in stores; fewer For Sale signs on your block; and, eventually, an upswing in employment rates — what’s the best way to react? Should we return to “business as usual,” or should we use the experience of the recession to guide our financial decisions going forward?

Here are some suggestions on how to manage your financial life in a post-recession world:

#1 – Be a smarter consumer

This wasn’t called the “Great Recession” for nothing. The unemployment rate reached its highest level in 25 years. Many homeowners found themselves facing foreclosure. Consumers were caught carrying too much debt. Even the country’s financial system required massive infusions of government money to avoid a major crisis.

As a consumer, your biggest lesson should be to remain vigilant about controlling your expenses, even as the economy brightens. If you found yourself falling deeper into debt during the recession, safeguard yourself from a similar fate this time around. Scrutinize your spending habits. Even if you have felt deprived of some of your favorite things (dinners out, regular stops at the gourmet coffee shop, travel plans), resist the temptation to revert to those same old spending habits unless you can really afford them.

A good rule to live by is to only spend money that you have. Try to avoid putting purchases on credit cards unless you are able and willing to pay off the bill on time each month when it arrives. This will help you avoid some of the same problems the next time the economy goes through a rough patch.

#2 – Prepare for emergency needs

One positive trend to emerge from the recession is that more Americans are putting money into savings. Make sure you have adequate emergency reserves to meet short-term income needs. The value of an emergency fund has become especially apparent after seeing a number of Americans lose their jobs during the economic downturn. You should try to build emergency savings equal to at least six months worth of expenses. Given the risk of extended periods of unemployment, it may even make sense to have the equivalent of nine months worth of living expenses set aside.

You may also consider making sure you are properly protected from potential financial loss. This is important regardless of economic conditions. Assess the status of your current auto, home, life and disability income insurance policies to make certain you will be adequately protected if an unforeseen event should disrupt your life.

#3 – Keep Up Retirement Plan Contributions

If you are still working (or have returned to the workforce), it is important to make regular contributions to a workplace retirement plan (if offered by your employer) and/or an IRA. Facing a financial crunch as the recession took hold, many individuals halted contributions to their retirement plans in order to increase their take-home pay. If you can afford to resume retirement plan contributions, you should do so. It provides you with notable tax advantages and will keep you on track to achieve your retirement goals.

#4 – Focus on Personal Growth

The recession serves as a necessary reminder that nothing is certain and, if we aren’t careful, our financial security can disappear in the blink of an eye. A number of people who never would have imagined losing their job found themselves among the millions of unemployed in the past two years. Even if you managed to keep your job and your income intact, consider the post-recession period an opportunity to be better prepared for any eventuality.

We all hope that an improved economy will relieve some of the anxiousness we feel about our financial lives. It is also a good occasion to achieve greater financial wellbeing for any challenges that lie ahead.

New rules for credit card companies feature consumer protections

As if home foreclosures, a rising unemployment rate and plummeting retirement savings aren’t enough to give us heartburn, the economic recession has pushed many Americans deeper into credit card debt. Though most of the blame lies with individual consumers–after all, no one forced us into an overspending frenzy; we did it ourselves—certain dubious practices by credit card companies have exacerbated the problem and, as a result, prompted legislative action by Congress.

CARD Act takes aim at deceptive practices
On May 22, 2009, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. The legislation is intended to eliminate excessive fees, penalties and predatory lending practices.

Fairness in fees
In the past, creditors reserved the freedom to shorten payment cycles at their discretion, which could result in late payments and stiff late fees for consumers. The CARD Act requires a monthly payment cycle of at least 21 days. It also bans the practice of calculating interest charges on a previous month’s higher balance, requires companies to apply payments to higher interest balances first, and minimizes over-limit fees by requiring that consumers be notified before being allowed to go over their credit limit and trigger costly over-limit fees.

Crystal clear disclosures for the customer
The new rules are designed to help reduce confusion regarding credit card rates and fees. Credit card terms must be clearly visible and legible to the consumer and disclosed in language that is easy to read and understand. The new rules require creditors to provide crystal clear statements of account activity once a card is in use so consumers can easily see new charges and fees. Creditors are also required to show the financial consequences of paying less than the full balance due over a period of time. The goal is to educate consumers and encourage responsible use of credit.

Accountability rather than secrecy
Going forward, credit card companies must publish their contracts in a public place and in plain language. Companies that do not adhere to these new regulations can be fined. Credit card regulators will continuously monitor credit card practices and introduce additional safeguards as needed.

Advance notice and opt out options
Credit card companies no longer will have the option to raise rates on a whim. Rather, they will be required to provide a notice of change in terms a full 45 days in advance. As a card holder, you will have the option to opt out of a new, higher rate and can repay your debt at your current rate. However, by opting out, your card will be cancelled and you will no longer be able to use it. There are some exceptions to the opt-out rule worthy of note. Consumers cannot reject a higher rate if it results from a change in the prime rate (if a variable rate is attached to their card) or if they are more than 60 days late in making payments.

More regulations planned
More changes will be rolled out in the coming months aimed at keeping a lid on interest rates, preventing card companies from targeting young adults and even regulating interest assessed on gift cards. Credit card issuers will be hammered with new requirements to protect consumers and ensure fair business practices.

Limit your debt

The changes to credit card rules will ultimately make the use of credit a more expensive proposition. Credit cards are convenient tools for purchasing plane tickets, reserving hotel rooms and renting a car, so it’s difficult to eliminate them from our lives altogether. The key is to pay your bill in full each month or as soon as possible. As soon as you carry a balance, your debt will grow rapidly under the weight of hefty interest rates assessed by most card companies. If you’re struggling under the burden of credit card debt, talk to a credit counselor or trusted financial advisor about your options. The sooner you can repay what you owe, the better.

Todd McCamey is a Certified Financial Planner and Financial Advisor with the Knoxville, Tenn., office of Ameriprise Financial Services Inc. He welcomes your comments on this topic and related financial planning subjects.
Mr. McCamey can be reached at (865)690-6169, or by e-mail at todd.a.mccamey@ampf.com.

This column is for informational purposes only, and is solely published for residents of Tennessee. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Mr. McCamey is licensed in the states of Tennessee and Georgia.
Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation.
Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

Find out what kind of car matches your budget

admin — Sun, 02 May 2010 05:27:49 +0000

It’s a good time to buy a car — if you do it right

As automobile manufacturers work to recover what was lost in the Great Recession, many are offering up sweet deals to car buying customers. If you’re among those tempted to drive off the showroom with shiny new wheels, it’s important to do your homework first. Fortunately, there are plenty of resources available to help you in the process. Here are a few things to keep in mind as you begin car shopping:

Be financially prepared

First and foremost, figure out what you can afford. You can be certain that most dealers will try to assure you that anything you look at is affordable, but don’t take their word for it. Do an honest assessment of your own finances and determine what fits your budget and your needs. (Remember: a used car is always an option if your budget is tight).

Determine what’s right for you

If you’re a car aficionado, you probably know what you’re looking for and what your choices may be. If you aren’t, you should be sure to test drive a number of vehicles from different manufacturers and find what feels right for you (and matches your budget). If possible, check out consumer reviews of specific vehicles you’re interested in to help you compare.

Know what it’s really worth

Web sites such as Edmonds.com or a TrueCarTM price report allow you to find out what the dealer’s invoice price is. This puts you in a position to negotiate with the dealer before signing on the dotted line. If possible, get quotes from different dealers for the vehicle you want. There are online options you can pursue for this as well to avoid having to drive to distant dealerships.

Assess the value of your trade-in

If you’re trading in your current vehicle, it’s important to know what it’s really worth to the dealer. Check the Kelley Blue Book or NADA Guides on used car prices to find out the fair value of your trade-in. Then you can be in a position to negotiate with the dealer. Many experts recommend not telling the dealer that you’ll be including a trade-in until they’ve made their best offer on the car you hope to buy or lease.

Find your best financing options

Think carefully when determining whether buying or leasing is the best option for you. Most models today are capable of running well over 100,000 miles and have the potential to last for many years. If you’re borrowing money for the purchase, consider loan options beyond what the dealer offers to assess what’s the most economical for you.

Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

Selling your small business? Keep these things in mind

admin — Sun, 02 May 2010 05:25:28 +0000

Thinking about stepping down from your small business to retire or pursue other passions? If you hope to sell it for a profit, there are many things to consider and do to ensure a successful transaction and transition.

Assess and assign value. Arriving at a realistic valuation for your business can be tricky. Setting your price too high will deter serious buyers. Setting your price too low may also undermine a sale. Find out what comparable businesses have sold for to help determine your price. Your figure should take into account inventory, receivables, equipment, property, market share and other business assets and be based on historical and projected revenues. SCORE, a volunteer organization dedicated to helping small business owners, recommends enlisting the help of a third party to obtain an independent valuation of your business.

Clean house and crunch the numbers. Just as you would tidy up your home before opening your doors to buyers, clean up your business before putting it on the market. Your office or plant should be spic and span, but orderliness goes deeper than that. Straighten your books and get the necessary paperwork together to demonstrate financial viability. A serious buyer will ask for profit-and-loss statements, balance sheets and tax returns going back several years. You’ll also need to provide a list of inventory, equipment, furniture and whatever else will be included in the sale.

Market your business. Approach the sale of your business as you would the sale of any product: with a marketing plan. Create a brief document that describes the business opportunity and its income-generating potential. Run ads in trade publications or online communities to get the word out that your business is for sale. To safeguard your proprietary information, ask interested parties to sign a confidentiality agreement before revealing details about your business.

Choose the best candidate. If it matters to you whether your business thrives under new ownership, then finding the right buyer is very important. Don’t overlook the possibility of handing your business off to a capable employee or even selling to a competitor who wants to expand. Look for someone you believe has the right motivation and skills to maintain and grow your business. It’s perfectly acceptable to ask for financials and other history from a prospective buyer before you open your books for review. This step will help you weed out individuals who are “just looking” or financially unable to purchase your business. Even as you enter final negotiations with a buyer, it’s important to continue to answer inquiries and keep the doors open for other bidders just in case the deal in process falls through.

Help finance the sale. Most small business deals are not 100 percent cash arrangements. To facilitate a sale, you may need to finance a portion of the transaction. Talk to your bank in advance to determine if your business qualifies for financing. You will have a smaller tax bill by receiving payments over time versus in one lump sum. However, going the installment route also introduces risk and makes it even more important to find a suitable buyer who will continue to operate your business successfully. If your successor fails, you may end up receiving less than you had counted on.

Consult professionals. There are a number of professionals whose services can help make the sale of your business easier and less risky. Ask your accountant to make sure your books are in order and to perform additional number crunching as needed to demonstrate the worth of your business. A business broker or mergers and acquisitions professional can help you locate a buyer and negotiate the sale. A financial advisor can help you examine the financial consequences of selling your business, both in terms of tax liability and income. Once you find a buyer, a lawyer can draw up your purchase agreement and escrow arrangement.

Give it some time. Realize that selling your business, even a small one, is a process that takes time. Plan on a minimum of six months to a year or more to prepare your business, locate a buyer and seal the deal. One risk of being in a hurry to sell is you put yourself in a weaker bargaining position and will not have the leverage to command top dollar. In addition, you may not be able to attract a quality candidate if you rush prospective buyers. Take your time and do things right.

EEOC sees spike in male sexual harassment claims

admin — Sun, 02 May 2010 05:14:19 +0000

The most recent EEOC statistics show that the number of sexual harassment complaints by men is growing. In fiscal 2009, there were 2,094 harassment charges filed by men. Those claims made up over 16 percent (more than one of every six) of all sexual harassment claims handled by EEOC.

The EEOC does not keep a record of the sex of the alleged harassers, but it is apparent that an increasing number of sex harassment claims filed by men are male-on-male cases. Those cases range from clear-cut unwelcome sexual advances to locker-room type behavior, including vulgarity and horseplay with sexual connotation. Often, there is bullying and sexual groping alleged.

Some experts believe that the extent of the presence of such sexual harassment is not fully represented by the number of claims filed. That under-reporting may be due to the stigma associated with men being victims of other men. In addition to the potential humiliation, men may actually fear physical retaliation in some cases if they report or refuse to allow the unwelcome conduct.

Men who feel that they are victims of sexual harassment may tend to view their situation as a no-win dilemma. They could appear to be unmanly if they are claiming harassment by a male and if they are being harassed by a female, they may be viewed as weak if they cannot take care of it themselves. That can cause them to be reluctant to report what is occurring in their workplaces. Men also may, perhaps correctly, fear that a jury will not be as sympathetic toward them as it would be toward a similarly-situated female victim.

There may be some correlation between sexual harassment claims filed by men and the economic recession. The recession has resulted in almost twice as many men losing their jobs as women according to the U.S. Bureau of Labor Statistics. A statistical link can also be seen between the increase in jobs lost in some states and in the increase in charges filed in those states. Whereas in the past, when jobs were more available, men (and women) may be chosen to simply change jobs rather than file a sexual harassment complaint. When jobs are more scarce, they may choose to endure the harassment or to file a complaint.

Employers should continue to be certain that their anti-harassment policies are in keeping with the latest court decisions and EEOC positions. It is also advisable to conduct periodic training and education sessions for supervisor and employees. Focus should be placed on all types of illegal harassment, including religion, national origin, disability, race and age.

EEOC proposes regulations on “reasonable factors other than age” defense

The EEOC has proposed regulations defining the “reasonable factors other than age” defense to be consistent with recent U.S. Supreme Court decisions in the area. The proposed rule explains that “a reasonable factor is one that is objectively reasonable when viewed from the position of a reasonable employer under like circumstances.” It is one that would be used in a like manner by a prudent employer mindful of its responsibilities under the ADEA. A “prudent” employer “knows or should know that the ADEA was designed in part to avoid the application of neutral employment standards that disproportionately affect” employment opportunities for older persons. “Accordingly, a reasonable factor is one that an employer using reasonable care to avoid limiting the employment opportunities of older persons would use.”

The proposed rule provides that an employer asserting the “reasonable factor other than age” (RFOA) defense must show its challenged employment practice was “reasonably designed to further or achieve a legitimate business purpose and was reasonably administered to achieve that purpose.” The EEOC proposal includes a non-exhaustive list of relevant considerations in deciding whether an employment practice is “reasonable” within the meaning of the defense. These considerations include whether the employment practice and its implementation are “common business practices”; the extent to which the factor is related to the employer’s stated business goal; whether the employer took steps to define the factor accurately and apply the factor fairly; whether the employer assessed the adverse impact of its practices on older workers; the severity of harm to older individuals; and whether the employer had other options available and why it selected the option it did.

The EEOC gives some examples of how its criteria would work, such as where an employer is downsizing for business reasons. Employers are cautioned against giving unfettered discretion to low level supervisors to decide who has such aptitude or skills, such as the ability to learn new computer skills, where such aptitude or skills might rely on age stereotypes. Employers must be particularly careful to avoid giving such discretion to rate employees on criteria known to be susceptible to age-based stereotyping, such as flexibility, willingness to learn, or technological skills. Employers are urged to use evaluation criteria “as objectified to the extent feasible.”

The EEOC in its proposal contrasts certain more stringent requirements under Title VII, as opposed to the ADEA. Under the ADEA, those asserting the RFOA defense need not prove “business necessity” to an adverse impact claim. However, under Title VII, where an employment criterion adversely impacts a protected group, an employer must show that the employment practice causing the disparate impact based on things such as race or sex was necessary and that there existed no less discriminatory alternatives. In contrast, in an age discrimination case, an employer need only show that its use of a factor causing adverse impact is “reasonable,” and the employer need not choose the option with the least discriminatory impact.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves. He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

Investors look to a new decade

admin — Wed, 31 Mar 2010 16:43:32 +0000

If you feel your portfolio hasn’t made much progress over the last 10 years, you’re not alone. Historians may well look upon this period as a “lost decade” for investors.

It’s difficult to remember that the environment was completely different at the outset of this decade. As the 1990s came to a close and the world prepared to celebrate the start of a new millennium, economic optimism was peaking and the stock market was wrapping up two consecutive decades of superior performance.

What a difference a decade makes. From 2000 through 2008 (a nine year period), the stock market generated an average annual return of -3.60 percent (based on the Standard & Poor’s 500 stock index, an unmanaged index of stocks). Thanks to a recovery in 2009, the average annual return for the entire decade will be slightly better than that, but still most likely in negative territory.

This came on the heels of what was probably the greatest bull market in the history of stocks. The S&P 500 index returned 17.55 percent on an average annual basis from 1980 through 1989, and 18.20 percent for the 10 year period that ended in 1999. This far surpassed the historic annual return for stocks, in the 9 to 10 percent range.

Though it might’ve been painful to endure if you were actively invested in the market in recent years, there is another way to look at it: you have survived one of the worst decades of stock market performance ever recorded.

Looking back at the history of the market, the only other decade in which stocks performed so poorly was the 1930s, the era of the Great Depression. In all other decades leading up to the 2000s, the broad market (as measured by the S&P 500 or comparable yardsticks) generated positive returns.

Watch for the tide to turn

The stock market reached its low point in the current cycle in early March, 2009. Still, the major measures of stock market performance, including the Dow Jones Industrial Average, the S&P 500 and the NASDAQ Composite Index, are all still well below the peaks they reached in 2007.

Will the market malaise continue? Factors such as economic trends will have a lot to do with where stocks go from here. History, at least, may provide a glimmer of hope. The market, as measured by the broad S&P index, has never suffered two consecutive decades of poor performance. The negative markets of the 1930s were followed by the 1940s, which generated an average annual return of 9.17 percent (a period that included World War II).

The next weakest decade (until now) was the 1970s, an era of oil price shocks, the Watergate scandal and high inflation and interest rates. The S&P 500 returned just 5.9 percent on an annualized basis for that 10 year period. At the end of the 1970s, one business magazine suggested that equities might never again be considered an attractive investment.

Then came the booming 1980s and 1990s, a 20-year period where the market averaged a return of slightly less than 18 percent per year. The market’s past performance is not an indication of what you might be able to expect in the years to come, but there is some encouragement in the historical record. For stocks to match what has been the historical normal return, some catching up may need to occur in the years to come.

It is important to keep in mind that on a year-to-year basis, stock market performance remains fairly unpredictable. If you are able to maintain a long-term investment perspective, it is more likely that you can ride out the down periods in the stock market in order to benefit from the long-term potential equities can provide.

As you assess the performance of your own portfolio, you need to assess what mix of stocks (compared to other types of assets such as bonds, real estate and cash-equivalent investments) is most appropriate for you. This is an individual decision, based on your own investment time horizon and risk tolerance.

The shape of the recovery

The debate among economists, market strategists and media pundits over the strength of the economic recovery intensified as the third-quarter 2009 gross domestic product (GDP) report revealed that the U.S. economy grew for the first time since the second quarter of 2008.

We have those calling for a V-shaped recovery, in which the economy bounces back strongly, commensurate with the depth of its decline, a somewhat normal pattern. We have those predicting a W-shaped recovery, where the economy recovers in normal fashion only to relapse into a second recession as government stimulus expires before consumers and businesses are back on their feet. We even have the square root symbol () recovery. Under this scenario, we get a modest recovery period followed by a subpar expansion.

No matter what the shape of the recovery, you should consider positioning your portfolio to take advantage of opportunity while avoiding risks.

Dividend stocks

It might be a good time for many investors to consider the benefits of dividend-paying stocks. Larger companies typically pay dividends and historically their stock prices tend to be less volatile than those of smaller companies. Conservative growth in dividend-paying stocks and steady income from the dividends themselves can help insulate portfolios from declines in the market, while still positioning portfolios for potential market rallies. However, investors should be aware that there is some discussion by lawmakers in Washington, D.C. about changing the tax rates on dividends, which could have a significant impact on actual returns of dividend-paying stocks.

Don’t be afraid to take profits

If you have participated in the market rally, consider cashing in on some of your success. The markets rose more than 60 percent from their lows in March 2009, creating strong returns for investors who were able to put their money to work in the stock market during the rally. By taking a portion of your profits, you can build up your cash reserves so that you can take advantage of the next market correction, buying stocks and bonds when they are on sale. Just remember to keep enough savings on hand to cover unexpected, emergency scenarios you could encounter, such as losing a job or a sudden increase in household expenses.

For long-term investors, positioning a portfolio based on a specific shape of the economic recovery might not be practical. It’s typically better to have a balanced and diversified portfolio that can better weather the ups and downs of most market scenarios.

No matter what the shape of the economic recovery, you should conduct a careful review of your financial plan to make sure that your portfolio is in shape for whatever 2010 brings. Consider speaking to an advisor about which investments might be appropriate for you.

Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

DOL publishes answers about employee hours, pay reductions

admin — Wed, 31 Mar 2010 16:27:42 +0000

The Department of Labor’s (DOL) Wage & Hour Division has published a list of frequently asked questions about furloughs and other reductions in pay and hours. The beginning point under the Fair Labor Standards Act (FLSA) is that employers are required to pay all non-exempt employees the full minimum wage and any overtime on the regularly scheduled pay date for a particular work week. Although an employer must pay non-exempt employees for all hours worked, employers legally may lower workers’ hourly rates so long as the rate matches at least the minimum wage.

An employer must pay an exempt employee the full predetermined salary for any week during which the employee performs any work, regardless of the number of days or hours worked. However, the Wage-Hour law does not require that the salary be paid if the employee does not work for an entire work week.

An employer is allowed to make prospective reductions in pay for a salaried exempt employee due to an economic downturn, provided the purpose of the reduction is to meet long-term business needs. Short-term, day-to-day or week-to-week deductions from a fixed salary based on operating requirements of the business are not permissible, and would result in the loss of the wage-hour exemption.

Wellness programs and employee health risk assessment

Published reports indicate there are a number of employers that “swear by” employee wellness programs. For example, officials at Con-Way Freight report getting back about $1.6 for each $1 that it is invested in such programs. Con-Way has reportedly seen a drop of about 20 percent in workers’ compensation costs at terminals that have had at least one wellness coach on site overseeing the program for at least a year. In addition, such terminals have fewer absences and higher productivity among other benefits.

Employees at Con-Way are made aware their wellness coach will be onsite at scheduled times and will make an effort to start general health-related dialogues with employees. Con-Way also offers drivers telephone or Web-based communications sessions with coaches. Programs began with an initial health assessment.

Perhaps because more employers are using health assessments, on Aug. 10, 2009, the Equal Employment Opportunity Commission (EEOC) issued an opinion letter on the subject. The opinion concludes that an employer’s “requirement” that all employees complete a health risk assessment to participate in an employer-funded health reimbursement arrangement, likely violates the Americans with Disabilities Act (ADA). The opinion states that employers may ask only disability-related questions and require employees to undergo medical examinations if job-related and consistent with business necessity. These actions are also permitted where they are a follow-up to an employee’s request for a reasonable accommodation, in specific medical circumstances such as periodic medical examinations for positions affecting public safety, or if part of a “voluntary” wellness program. Further, other circumstances may arise involving a particular employee who cannot perform his or her job, to determine whether he or she will face a direct threat because of a medical condition.

The health assessment addressed in the opinion letter required employees to answer over 100 questions in various categories, such as family health history, self care, personal health, women’s health, older adult health, nutrition choices, physical activity and alcohol and tobacco use. The opinion letter states:

Although the Commission has not yet taken a formal position on the question you have asked, requiring employees to complete a health risk assessment that includes many disability-related inquires — such as questions about how often they feel depressed; whether they ever have been told that they have certain conditions, such as asthma, cancer, heart disease, or diabetes; how many different prescription medications they currently take; or how much alcohol they consume — as a prerequisite to obtaining reimbursement for health expenses does not appear to be job-related and consistent with business necessity.

The letter goes on to state that many questions in the assessment are not disability-related and may be asked of employees. These include questions such as whether the employee sees a personal physician for routine care or has a health care directive, how many servings of fruit and vegetables the employee eats, whether the employee takes vitamin supplements, whether the employee eats breakfast, and how much the employee exercises. Such questions “are not likely to elicit information about a disability and, therefore, are not subject to the ADA’s restrictions.”

Lastly, the letter addresses the issue about the health risk assessment being part of a wellness program.

“Finally, even if the health risk assessment could be considered part of a wellness program, it is not voluntary because it penalizes any employee who does not complete the questionnaire by making him or her ineligible to receive reimbursement for health expenses.”

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves. He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

Employers being sued over inflexible leave policies

admin — Mon, 30 Nov 2009 08:00:33 +0000

A number of cases are being brought across the country challenging employers’ inflexible leave policies, sometimes known as administrative separation policies, under which an employee is terminated for failure to return to work following a maximum period allowed for a leave of absence. Many employers have policies that if an employee is absent for leave for more than a set period of time, e.g., three months, six months, 12 months, or 24 months, they are administratively terminated from employment. Such policies have traditionally been seen as desirable, inasmuch as otherwise an employee can stay on the employment rolls forever, and the objective nature of the policy is often considered desirable in avoiding discrimination claims. More recently, however, these traditional notions of sound policy are being legally challenged.

On Aug. 28, 2009, the Equal Employment Opportunity Commission (EEOC) announced that it filed a major class action lawsuit against United Parcel Service (UPS). The suit alleges that UPS terminated the employment of the plaintiff because of her disability rather than accommodating her by extending her leave of absence in violation of the American With Disabilities Act (ADA), and the lawsuit further claims that UPS discriminated against a class of individuals with disabilities by maintaining an inflexible 12-month leave policy which did not provide for a reasonable accommodation and which instead provided for termination of employment, also in violation of the ADA. The EEOC seeks an order requiring UPS to grant full relief to a class of disabled individuals by providing them with appropriate back pay with pre-judgment interest, compensation for past and future monetary losses resulting from their unlawful termination, compensation for non-pecuniary losses including but not limited to pain and suffering, and punitive damages.

According to a press release issued by the EEOC, the plaintiff administrative assistant took a 12-month leave of absence from work when she began experiencing symptoms of what was later diagnosed as Multiple Sclerosis. She returned to work for a few weeks, but soon thereafter needed additional time off after experiencing what she believed to be negative side effects of her medication. The press release further claims that although the plaintiff allegedly could have returned to work after an additional two-week of absence, UPS fired her for exceeding its 12-month policy.

UPS in its public statement expressed frustration with the government’s attack on “one of the most generous and flexible leave policies in corporate America.” UPS stated that it intends to “vigorously defend” its leave policy as the litigation progresses.

In another lawsuit, brought in September 2009, the EEOC announced a $6.2 million settlement of a class action that accused the Sears department store chain of widespread disability discrimination. The EEOC noted that the $6.2 million settlement is the largest recovery in a single lawsuit filed by the agency over alleged violations of the ADA. According to the lawsuit, Sears maintained an inflexible one-year workers’ compensation leave exhaustion policy and fired employees instead of providing them with reasonable accommodations for the disabilities as required under the ADA.

In a third related case, involving slightly different issues under the ADA, a divided Ninth Circuit Court of Appeals has reinstated the disability discrimination claims of a former employee who sued her employer for requiring that she pass a physical capacity evaluation (PCE) before returning to her job after medical leave. The employer’s policy required employees to undergo PCE’s before returning to work from medical leave, and the employer sent the employee to an occupational therapist for the exam. The PCE, which lasted 2 days, included, as the employee described it, “testing, poking, palpating and examining.” The employer ultimately told the employee that she could not have her old job and no other jobs were available for someone with her qualifications. Ultimately she was fired under a provision in the collective bargaining agreement that allowed the company to terminate employees who have been on leave for two years.

The 2-1 Ninth Circuit majority ruling agreed with the employee’s argument that the PCE was an improper medical examination under the ADA, which prohibits employee medical examinations that are not job-related and “consistent with business necessity.”

The majority concluded that the employer’s PCE went way beyond what was necessary to determine an employee’s ability to perform the essential functions of her job. Although the purpose of the PCE may have been to determine whether the employee was capable of returning to work, “the substance of the test clearly sought information about the employee’s physical and mental impairments or health, and involved tests and inquiries capable of revealing to the employer whether she suffered from a disability.”

The bottom line of much of this litigation is that the EEOC insists that in some circumstances an exception may have to be made to an objective leave of absence policy as a reasonable accommodation. However, the current state of the law suggests that an employer is not required to make exceptions to their normal leave policies, unless the employee requests an accommodation. Employers are advised to stay abreast of court decisions in this area, a good number of which should be expected over the next several years, given the recently-filed lawsuits challenging employers’ leave of absence policies.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves. He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

Five pitfalls you should avoid in retirement

admin — Mon, 30 Nov 2009 08:00:28 +0000

You work hard and save aggressively so that one day you can retire from the workforce. When the fabled day arrives and you enter the blissful state of retirement, you may be tempted to think you’re done agonizing over your money and savings. The truth is the hard work is probably just beginning. Assuming you’re like most of us, with a finite number of dollars available to fund your retirement, you need a plan to make sure you are spending and investing in the most optimal way to make your money last as long as possible. Here are five pitfalls to avoid in retirement to help you preserve your assets and maintain your lifestyle for years to come.

Don’t retire too early. It’s difficult to predict how long you will live, but longevity trends suggest the likelihood of longer life spans for current and future retirees. If you retire at age 62, you could live another 20 or 30 years. Not only do you need to think about how long your money will last, you should also consider the consequences for taking early withdrawals from your retirement nest egg. Also consider that if you choose to take Social Security early, you agree to receive a reduced amount each month for the privilege of potentially more years of the benefit. Your Social Security statement can help you determine the financial trade-offs of taking early benefits or postponing Social Security income for a few years.

Don’t rely on just one form of income. You probably realize that Social Security is unlikely to provide you with enough money to live on in retirement, and that you will need additional sources of income to live comfortably. Most retirees look to a number of sources to cobble together a retirement income. Even though you’re retired, you can still seek out growth investments, assuming you retain a good share of your savings in less risky ventures. Seek balance by diversifying or spreading your savings across a variety of investments with varying levels of risk. A financial advisor can help you select from available stocks and bonds to keep your money working for you and help generate investment income.

Beware of insurance gaps. Your insurance needs may change in retirement, but they won’t go away. You may need to replace employer-sponsored benefits such as life, health and dental insurance after you retire. Shop around for attractive price points and good quality plans. Even if your home is paid for, you should maintain an appropriate level of homeowners’ insurance in case of theft, fire or other incidences. Consider whether long-term care insurance for you and your spouse is something you want to help pay for things like long-term care in a nursing home.

Avoid tax mistakes with retirement distributions. Your sources of income in retirement may include Social Security, a company-sponsored pension plan, IRA, 401(k) or a profit sharing plan. How you access your savings in these various investment vehicles can have a profound affect on how long your money lasts. The IRS regulates how much you can take out of your retirement accounts each year and you can incur stiff tax penalties if you do not abide by the rules. Talk to your tax preparer and financial advisor about required minimum distributions from your retirement accounts and establish a schedule of withdrawals that satisfies requirements while preserving principal. At retirement, you are generally required to begin taking minimum distributions from qualified retirement plans by April 1 of the year after you turn 70½.

Don’t underestimate the impact of inflation. When you estimate how much you need in retirement, don’t forget to consider how inflation reduces the value of your savings over time. Your budget should factor in rising health care costs and other expenses that may grow disproportionately. In general, early retirees spend more on travel and hobbies while they are still active and healthy; these costs may go down as you get older.

Get professional advice. A knowledgeable financial advisor can help you analyze your retirement portfolio and recommend steps to help you make choices with your retirement assets. Talk to your advisor and tax professional to plan your distributions to help reduce your tax obligation. With careful planning, you can effectively manage your retirement assets — and relax and enjoy the golden years.

Holiday fun can be affordable

Traditionally, the holiday season is a time of indulgences. Any combination of gifts, travel and entertaining can result in big end-of-year expenditures. But this year — in light of declining investment portfolios, sinking house values and a shaky job market — many American consumers will be looking for ways to toast the season without breaking the bank. If you, too, want to avoid over-spending, here are some tips to celebrate more frugally:

Set proper expectations
It helps to make sure everybody in your family is onboard with the cost-conscious approach. If you are married, have a frank discussion with your spouse about spending limits. If you have children, make sure they understand that your plans for the holidays will focus on fun that can be had without spending a lot of money. If your children are old enough, you may even use this as an opportunity to explain the fundamentals of household economics and involve them in setting holiday spending priorities for the family.

Plan ahead
Take time to write down a list of possible gifts you hope to purchase for family and friends. Knowing what you want ahead of time may help you avoid making poor decisions and impulse purchases once you hit the stores.

Invest time to save money
The best deals can be found by shopping around. Check out stores in your area and investigate what’s available online. The emergence of online shopping has made it much easier to do your homework before you buy. Web retailers will help you determine best prices for the products you are looking to purchase.

Track your spending
One of the best ways to keep spending under control is to set a limit. Within your family, this can be on a per-person basis, or you can set a budget that dictates your maximum holiday spending. Once this number is chosen, see if you can come in under budget. Track all of your purchases and be certain to hold onto receipts. You might also request gift receipts where available and tuck them inside cards or gift boxes.

Be smart about gift cards
Gift cards have become increasingly popular and more widely available. Make sure you understand the terms of a gift card (such as expiration dates) before making a purchase.

Get a jump on the season
Given the forecast for below-average consumer spending, many retailers are cautious to avoid stockpiling large inventories this holiday season. If you shop early, you will be more likely to find what you’re looking for at a reasonable price. Conversely, last minute shopping could result in spending more than you planned, particularly if you are determined to buy specific items.

And finally…
These tips are about gift buying. But rather than making gifts and packages the center of your holiday celebration, try putting more emphasis on spending quality time with family and friends. Encourage games and conversation; you may be surprised to find how little you miss the excesses of years past. n

Sorting through the financial professionals alphabet soup

admin — Sat, 31 Oct 2009 08:00:13 +0000

One of the biggest lessons coming out of the recent bear market is that you need to find financial professionals you can rely upon. A number of factors can go into the process, such as the professional background and history of the individuals you are considering, referrals from others who have used them and your own comfort level from having a one-on-one discussion.

But for many, a good starting point is to understand the credentials of the professionals you are considering. As you look at their business cards, letterhead or office nameplates, you are likely to see professional designations being used.

Financial advisors

There are several different certifications you may commonly see attached to financial advisors. These typically provide an indication that the professional you are considering has invested time and energy to increase his or her knowledge to a specific area.

Here are some basic explanations of financial designations:

CFP® (Certified Financial Planner ™ professional); ChFC® (Chartered Financial Consultant)

To qualify for these designations, professionals must have at least three years of experience in financial planning and pass rigorous exams that typically require one-to-two years of study and ongoing education. The coursework provides these individuals with more in-depth knowledge about key financial planning topics that should better prepare them to develop beneficial solutions for their clients.

CLU® (Chartered Life Underwriter); CPCU® (Chartered Property Casualty Underwriter)

Both are professional designations for those who provide insurance products to individuals and companies. Again, they require a course of study and continuing education, often dealing with more complex topics related to the application of insurance coverage to meet individual financial planning needs.

RIA (Registered Investment Advisor)

These individuals must be registered with their states or the Securities and Exchange Commission (SEC) in order to provide investment advice and manage investments for others. They typically are held to a high standard of fiduciary responsibility by regulators.

Registered Representative

These are professionals licensed by the Financial Industry Regulatory Authority (FIRA), a self-regulating body of the securities industry. They have to complete a course and pass an exam to be licensed and abide by industry regulations.

Tax Preparers

You have many options when considering a professional to help you manage and prepare your tax returns, from a one-person shop on the street corner to large, international tax preparation companies. In most states, there is little regulation of tax preparers and no licensing requirements. Those who have more complex needs may want to consider a CPA.

CPA (Certified Public Accountant)

Individuals with this designation have passed an in-depth exam and, in some states, must have completed a work experience requirement. If you are choosing a CPA to help you with taxes, it may be beneficial to find one that specializes in working with individuals or businesses, depending on your need. An experienced CPA can provide advice to help you sort through key financial and investment decisions that may have tax consequences.

Designations don’t mean everything

Finding professionals who have achieved designations is one qualification of many to consider as you go through your own selection process. Keep in mind that the designation alone does not necessarily assure the level of quality you will find in the professional.