Boca Benefits Consulting Group Inc.

Many employers are struggling to determine the precise COBRA requirements under the 2009 ARRA. Employer size, state situs of the benefit plan, specific state actions, and other things, effect the answers. In addition, where certain responsibilities have been placed on carriers, their unique administrative decisions may also drive procedures.

Below is a link to a Frequently Asked Questions (i.e., FAQ) piece on this subject provided by United Healthcare. Although some of it is specific to their own client base, much of it provides generic information that benefits professionals might find valuable as they weave their way through the huge number of variables.

This subject may also be something that in-house and contracted financial professionals need to address. Who pays the 65% COBRA subsidy and how it is ultimately recovered are key items.

Non-benefit HR types may also want to spend some time with the definitions of eligibles. Although this appears at this point to be a short-term program, the costs of which are recoverable as a credit against future payroll tax liability, certain CEO’s may want to minimize participation due to the hit on quarterly cashflow or if the company is clearly in such dire straights that a payroll tax recovery may not be viable.

Link to FAQ Resource

In mid-2008 BBCG began sending an email newsletter with various items of topical interest to benefits professionals, business owners and senior managers. As with this blog, we got somewhat distracted during the last few months with other priorities. We intend to have the next addition of The Insight out shortly. In the interim, below is a link to the archive page that contains the prior editions.

Archive link below:

http://archive.constantcontact.com/fs009/1102162493446/archive/1102248850983.html


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[Originally written in February 2009 for publication in the Clearwater (Florida) Regional Chamber of Commerce’s Voice of Business bi-montly newsletter.]

 Governmental Affairs Committee Commentary

by

Robert W. Murphy, 2009 Chair

***************************************************************

Why So Big a Net at GAC

In December of 2008 the Governmental Affairs Committee (“GAC”) was fundamentally changed. Prior to accepting the chair, I asked that the Chamber put together a steering committee which would set the broad agenda for our work. It did so immediately and we met to determine how best to meet the perceived needs of Chamber members as expressed  in the 2008 survey of things members felt were most important. The result was the formation of six functionally based GAC standing task forces. We also held in reserve two additional task forces which could be activated at a later date.  The active task forces are listed below. We have been extremely fortunate to have some really excellent community leaders step up to head each of them and to bring on board other high quality people to serve with them.

• Economic Development
• Education
• Energy Policies
• Health & Welfare
• Local Government Liaison
• National/State Liaison

Recently, I was challenged by a colleague who indicated to me that we might have really bitten off more than we can chew. He also opined that we may have stepped beyond the traditional functions of chambers of commerce. His conclusion was that certain of our task forces could not possibly address their respective mandates in a meaningful way and that we were probably just wasting resources. In other words: our GAC net was just too darn big. His was kind of a Moby Dick type warning with the image of us chasing out after a white whale.

An easy reply would have been to tell him that the Chamber is obligated to its membership to respond to the items that were identified in the 2008 survey. The GAC structure is just a means to that end. However, such a reply would have been disingenuous on its face.

The GAC Steering Committee has knowingly established an incredibly challenging 2009 agenda that does press up against the traditional limits of chamber of commerce type functions. We fully recognize that we may only be able to marginally effect some of the more aggressive objectives we have placed there for action. We may indeed fail to deliver very much on those. However, the alternative, doing nothing at all, was never considered by the Steering Committee to be a tenable position for the GAC. We concluded, admittedly with a minority dissent, that action will trump no action every time.

As an arm of the Chamber whose unique function is interaction with local, state and national policymakers, we feel strongly that our GAC mandate goes beyond the clearly short-term economic interests of our members. The Chamber has other missions as well, both economic and social.  Long-term positioning associated with the factors that are required for preserving our local economic health (e.g., energy policy) is equally important. Having a properly educated, healthy, secure and satisfied workforce (e.g., education, health & welfare, etc.) are also all critical factors which impact our economy. Additionally, providing assistance to those who are interested in bringing businesses to our city cannot be overstated (e.g., economic development). Lastly, quality of life in a community has a direct economic impact by significantly influencing the interest new industry has in locating, or staying, there. All the above considerations ultimately come full circle to economic health. One piece cannot be viewed separately from the whole.

Yes, so the GAC has cast a really big net. It has made public its goals. It has allowed the cynics free reign to expect the worse. It has done it all with some trepidation of failure but also with the expectations that we all could celebrate some real successes along the way. It has taken the position that either it would positively effect the community in some manner or its new concepts would crash and burn badly.

We want all our members to be aware that each has an open invitation to become a member of the GAC. No prior political experience is necessary. Nor is there a need for any GAC member to join a task force or be an activist on any issue. We encourage you to just come and be part of the dialogue that takes place at 7:45 AM on the first Wednesday of every month in the Chamber’s Community Room. Contact the Chamber (phone: 727-461-0011) with any questions you might have regarding participation.

Bob Murphy

2009 GAC Chair

[The below is excerpted from a column written by Tim Meyers for The Signal in Santa Clarita Valley, CA.  Click here for original. ].

Mr. Meyers insight into the workings of a Ponzi Scheme is timely relative to the substantial emerging losses of both wealthy individual and institutional inevestors during the last two weeks.

What constitutes a Ponzi scheme?

The scheme carries the name of Charles Ponzi, an Italian immigrant who originally perpetrated the fraud. The scheme simply involves promising extremely high rates of return and then paying those from the frenzied investments of subsequent investors.

The actual method of the Ponzi varies, but two things always occur in common: First, the Ponzi artist operates NO substantive business, certainly none that could generate the returns promised. Second, and most tragically, the Ponzi artist must rely for success on the extreme naivete of the investors.

Unfortunately, right now constitutes probably one of the most fertile times for Ponzi artists, especially when they prey on the elderly with nest eggs invested conservatively in retirement plans or large amounts of home equity.

Legitimate and wise advisers place these folks in conservative, nonleveraged fixed income investments that at best might yield five to six percent a year in investment return.

Now the Ponzi promoter might promise investment returns of 10 percent per month, or 24 times the return of a safe investment. This requires the threshold of credulity and lack of knowledge.

A savvy investor knows he or she can earn these types of returns only with high risk (the potential of losing the entire value of their investment) or taking on large amounts of debt or leverage (also risky).

When questioned about the exorbitant returns, the promoter might say that wealthy people hide these opportunities from the more modest, and he is in fact providing a Robin Hood-type service by letting them in on the action.

So our Ponzi promoter raises $100,000 from five investors, promising 10 percent per month in returns for a total of $500,000. At the end of 30 days, the promoter dutifully cuts checks for $50,000 for the first month’s return and is left with $450,000 (remember, no actual investment or business exists).

This could persist for nine more months as the promoter exhausts the investor funds, and the investors would realize they only received their money back, only losing out on the return.

But a Ponzi scheme does not remain static. The first five investors excitedly talk up to their friends the investment that returns twice as much in one month as their old staid investments.

Even at the rate of just five new investors per month, and paying out the 10 percent return per month, at the end of six months the promoter possesses just under $2 million in investor cash.

Now they make the next move. They convince the existing investors they need to roll over their monthly investment returns to further increase their returns.

Now, with five new investors a month and no cash payouts, in six months the promoter possesses dominion over slightly less than $5 million. Comfortable with the stability of the cash balance and with new investors still coming in, the promoter begins to divert large amounts of the cash to his or her personal use.

This actually helps with the recruitment of new investors because people flock to those showing material success.

What causes the Ponzi scheme to collapse? Two things, and if they occur concurrently, the faster the demise.

First, the pool of new investors drys up. Second, existing investors request their principle.

Unfortunately for the criminal, for the Ponzi schemes targeting seniors, the second happens more frequently. Seniors die and then heirs with professional executors want to liquidate the investment. With no cash available to pay returns, investors become suspicious and requests for payouts spread like wildfire, collapsing the scheme.

Now all Ponzi criminals of late share one thing in common: They possessed some harebrained investment scheme that would eventually come to fruition and pay off all the investors in full.

Before their sentencing they will protest that “with a bit more time” they could make all their promises good.

So in the end, the criminal acts with the same naivete of their investors.

In his November 7, 2008 New York Times Economix blog post titled “The Health Care Challenge: Sailing Into a Perfect Storm” Princeton economist Ewe E. Reinhardt tells it the way it is: health care costs accelerate faster than incomes. What he does not say is that it is not a new trend. Having been an employee benefits practitioner of one sort or another for 28 years, I have been an empirical observer of the phenomenon since Read the rest of this entry »