riSk M a N aGEMEN t - SilverStone Group...interruption values, use the following five-step action...

2 S i l v e r l i n k | S P R I N G / S U M M E R 2 0 1 2

10Preparing for Business InterruptionWhen the Clock Stops

r i S k M a N a G E M E N t

2013 Change 14

Constructing a Working Relationship 16

Polluted PropertyDon't Close that Door Yet... 18

A Method to the Madness 20

History 101 24

Driving with DisregardA Cautionary Tale for the Trucking industry 28

e m p l o Y e e b E N E f I t S

A Fresh PerspectiveBenchmarking in 2012 30

Declining Interestlow rates impact Defined Benefit plans 36

What Do the Numbers Really Represent?performing Actuarial evaluations 40

S i l v e r S T o n e G R o U P. c o M 3

p r i v AT e C l i e n T S E R v I c E S

C o n S u lT i n g S E R v I c E S

C o v e r S P o t l I G h t

i n T e r n A l h a P P E N I N G S

Capitalizing on Your Network 56

Clear for Takeoff

Where it all began... 4

SilverStone GroupStanding out From the rest 60

Wellness Activities Grouppractices What We preach 66

44 The Gift vs. The ConundrumTransferring Wealth in 2012

Goodbye Golden Era 48

Keeping Your Head Above Water protecting Those You love 52

for Takeoffby Rachel Buser

P h o t o G R a P h y , I N c l U d I N G c o v E R , b y M a l o N E & c o

for TakeoffC l i e n T S p o T l i g h T | f R o M t h E c o v E R

Where it all began . . .


DENNy WALkER, FOUNDER & ChAIRMAN, WITh SON, JAMIE WALkER, PRESIDENT

The pride was audible in Jamie Walker’s voice as he guided

us down the long stretch of grey carpeted hallway in his

Omaha headquarters. The President of Jet Linx has every

right to be grinning from ear to ear when giving a tour of his

thriving business’ home base. Inside these concrete walls

are busy staff members – booking private planes, monitoring

flights and arranging client accommodations. His enthusiasm

for the operation is almost tangible – making it difficult to

imagine that just over a decade ago, Jamie’s professional life

had taken off in a much different direction.


Looking Back…Jamie was born and raised in Omaha and graduated from Creighton Prep. After obtaining a degree in English and a minor in Journalism from the University of kansas, he uprooted from the Midwest to begin a sales and marketing career in the downtown Manhattan real estate industry. After 4 successful years, he was abruptly faced with a market standstill. Jamie was among many profession-als who felt the ripple effects of 9/11. The New york real estate market went cold and he had to make a career change. Ironically enough, the events surrounding 9/11 led him full force into the air travel industry.

Denny Walker, Jamie’s father, initially gained professional success in 1989 when he founded CardMember Publishing Corporation (a consumer services direct marketing company). A decade later, Denny began searching for fractional ownership in a private plane to meet his professional and personal needs. however, the pursuit proved to be frustrating and he quickly recognized a gap in the market. This discovery inspired Denny to create Jet Linx Aviation in 1999 and he invited his Manhattan-based son to play a long-distance role in the company. When Jamie was forced to consider a career change 2 years later, he made the decision to fully commit to Jet Linx and return to Nebraska. The aviation industry may have seemed like a risky commitment at the time, but a unique demand for private air travel was quickly developing. Consumers were seeking safer ways to travel the skies, and the Walker family was eager to provide.

Setting the StandardJet Linx’s clients enjoy several options when flying privately: • They may own or have fractional ownership in a plane and

choose to have it housed and managed by Jet Linx; or• They can participate in fractional membership, which allows

customers to purchase hours on a private plane that never expire and are even refundable. This option truly caters to consumer demand, allowing clients to enjoy the benefits of ownership without taking on such a substantial investment.

Jet Linx is structured upon a local concept to ensure each client receives an unmatched level of customer service. It is a company dedicated to serving the individual, not the masses. Flights are booked by a local dispatcher, and planes depart from a local private terminal and are flown by local pilots who passengers know and trust. But the perks don’t stop there – local representatives will often greet clients at the airport, arrange ground and hotel accommoda-tions, set up kenneling services for pets, and cater favorite meals and beverages onto the flight. Upon returning, clients will find their cars freshly detailed and waiting for them just outside the plane.

The personal touch Jet Linx provides sets them apart from their national competitors and is the cornerstone of their operation – a standard they refuse to sacrifice at the cost of rapid growth. Jet Linx has followed a cautious expansion plan, adding locations in San Antonio, Dallas, Indianapolis, Denver, Scottsdale and St. Louis. Each growth spurt has been executed only after extensive research and negotiations with their operating partners. Slow and steady seems to be the secret to this company’s success. Jet Linx’s revenue has nearly doubled in the past 2 ½ years. At a time when most people are cutting luxuries, this Omaha-based private jet company has experienced continued growth – a testament to the quality of service they provide.

Another standard Jet Linx will not compromise on is safety. Follow-ing an exhaustive on-site audit in 2005, ARG/US (the worldwide leader in performing safety audits among corporate flight depart-ments, charter operations and commercial airlines) awarded Jet Linx with the Platinum Safety Seal – a designation less than 4% of their peer group receives. This is the highest safety rating an operator can achieve, and Jet Linx’s unwavering commitment to safety has continued to earn this top rating every year since. Pilots, flight crews and service representatives are required to participate in ongoing education and training, putting them at the forefront of the industry’s safety policies and practices. Additionally, Jet Linx utilizes a back-up safety program that monitors various aspects of their operations, such as flight crew rest time and aircraft mainte-nance. Jet Linx knows that in order to provide clients with the most


enjoyable flight experience, safety must be the highest priority. No matter how many accommodations and luxuries they can provide, it all becomes irrelevant if a flight does not make it safely from one location to another.

In June 2004, Jet Linx formed a working relationship with Silver-Stone Group. As their fleet experienced continued growth in size and complexity, our Aviation Risk Services Team worked diligently to improve the coverages and pricing within their aircraft insurance program. SilverStone Group also guided the placement of their group benefits package and provided property and professional liability solutions to meet their evolving needs. Additionally, our Team has provided ongoing assistance to the Jet Linx safety team (including pre-post third party audit and SMS support), helping maintain high levels of safety across the entire operation. Jet Linx has made safety a top priority; for that, we proudly serve as their risk management advisors.

What’s Next?While Jet Linx continues with carefully plotted expansion, Jamie has also branched out with a sister corporation called CoGoJets. The new venture is based on the concept of “jetpooling” – an air-bound version of carpooling. Although flight-sharing was previously against the Federal Aviation Administration’s (FAA) regulations, Jamie worked closely with the FAA to see this dream come to fruition. Always attentive to the customer, Jamie recog-nized a consistent desire to combine the economics of commercial travel with the convenience of private flying. CoGoJets – an online network – has been designed to meet this demand, allowing clients to log into the site, propose travel terms and share the costs with others. This novel idea will make private jet travel more accessible to the public – an option many are eager to have.

Up for the ChallengeThe aviation industry has undoubtedly experienced a decade of historic downfalls. Despite the obstacles, Denny and Jamie have been able to pool their ingenuity and unfaltering business sense to create an industry mainstay, breathing new life into the skies.

As the Walkers continue to reach new heights in the private jet industry, they can push forward knowing that the sky is truly their only limit.

JET LINx MANAGEMENT COMPANy: JAMIE WALkER | PRESIDENT & DENNy WALkER | FOUNDER & CEO JET LINx AvIATION: MARk MATThES | PRESIDENT

JET LINx OMAhA CORPORATE OFFICE


r i S k m A n A g e m e n T | P R o P E R t y & c a S U a l t y

INTERRTERRUPERRUPTIUPTION


Preparing for Business

When the Clock Stopsby Chuck Eckert

INTERRTERRUPERRUPTIUPTION



virtually every industry in every part of the world is vulnerable to at least one form of this exposure. Natural disasters, human error and cyber-terrorism are just a few of the potential threats that could bring a company’s operations to an abrupt and unexpected halt. Nearly half of businesses that experience a serious loss related to a business interruption event never reopen. More than 25% of those who do manage to restart operations ultimately close their doors within the following 3 years.1 Considering these staggering facts and statistics, it is shocking that less than 50% of organizations carry business interruption insurance.

So, why are the majority of business owners failing to secure this important coverage? Many find it difficult to determine what their maximum possible loss would be following a business interruption. It can also be challenging to fit the business interruption risk within the framework of an insurance budget. The uncertainty surrounding business interruption coverage, extensions of coverage and respective limits of that coverage often results in companies operating either uninsured or underinsured, leaving them short on cash when faced with a major loss.

Stepping in the Right DirectionObtaining adequate business interruption coverage doesn’t have to be an overwhelming process. When calculating business interruption values, use the following five-step action plan:1. Communicate – Meet with senior management to review

existing business risk assessments, previous loss history, business plans and financial projections, and to identify potential mitigation strategies.

2. Diagnose – Identify contingent and extended exposures, internal and external interdependencies, and other exposures that may not be triggered by first party property damage claims.

3. Integrate Technology – Incorporate technological solutions to create an efficient and timely valuation process.

4. Analyze – Perform a thorough risk exposure analysis to facilitate the quantification of business interruption values.

5. Document – Create detailed schedules supporting calculated values by operations and location, including the underlying assumptions.

The summer of 2011 was a catastrophic learning experience for many business

owners in the Midwest. Widespread flooding forced countless businesses to

cease work until the water receded and rebuilding could take place. Disasters

such as this are forcing CEOs and risk managers around the globe to recognize

the important role business interruption insurance plays in a company’s

financial security plan.

It’s critical to understand your exposures and how they tie into your insurance policy. Calculating the appropriate business interruption values will help you select the proper coverage and respective limits, enabling you to minimize your financial risk. As part of the process, you should also evaluate the various extensions of coverage that are available to help mitigate your risk. Following are some additional coverages to consider:

Contingent Business Interruption – This coverage provides additional protection against loss related to the suppliers and the receivers of your goods and services. Without this coverage extension, a company could potentially find itself at the mercy of a supplier or customer’s rebuilding schedule, ultimately impacting its ability to operate or generate income. A physical loss experienced by a supplier or customer could potentially lead to your shutdown if you don’t have adequate coverage.

Ordinary Payroll Coverage – your managerial and salaried employees are normally covered as a continued expense under your business interruption policy. however, your hourly and non-managerial employees may not be covered depending on your carrier’s policy. If you have hourly, skilled labor, or if you are in a tight labor market and cannot afford to lose trained workers due to your inability to pay them during a business interruption, you can purchase an extension of coverage that will allow you to pay these workers for a specified period of time while the company is shut down. The coverage is generally purchased for a specific number of days (i.e., 30, 60, 90 or 365). In order to determine how many days of coverage you may need to purchase, you must determine the skill level of your workforce and evaluate the possible risk of them not returning to work after a closure of your operations.

Extended Period of Indemnity – your business interruption coverage indemnifies you through the period of interruption, which is referred to as the “period of indemnity” or “restoration.” This period is often defined as the time it takes to rebuild or restore the damaged property to its pre-loss condition using normal due diligence. you can purchase a coverage extension to facilitate continued indemnification from your insurance carrier for the extra time needed to restore your business to its pre-loss levels after repair work has been completed.

Other coverage extensions you may want to consider include:• Claims preparation fees • Service interruption/power outage (including off-premises

service and overhead transmission lines)• Finished goods inventory (selling price)• Ingress/egress• Civil authority

Assess Your RiskWhile it may seem overwhelming to quantify the potential expenses associated with your business’ inability to operate, it is essential to prepare for that possibility. Business owners should closely examine their business interruption values, limits and available coverage extensions already established in their current policies. Adequate business interruption coverage can be one of your most valuable assets, providing the critical working capital needed to survive a catastrophic event.1 “Business Interruption Insurance.” 2012. The hoffman Group. Accessed on March 1, 2012 at

www.thehoffmangrp.com/products/commercial-insurance/business-interruption-insurance/

Contact Chuck Eckert | [email protected]


14 S i l v e r l i n k | S P R I N G / S U M M E R 2 0 1 214 S i l v e r l i n k | S P R I N G / S U M M E R 2 0 1 2

r i S k m A n A g e m e n T | P R o P E R t y & c a S U a l t y

by Jeff Barrett, CIC

On August 4, 2011, the National Council on Compensation Insurance (NCCI)

announced changes to the way experience modifications will be promulgated in 2013.

The NCCI has not made any changes to primary or excess loss amounts in more than

20 years. However, due to the increased cost of claims over the past two decades, the

Council is concerned that the current promulgation fails to accurately reflect the true

modification and that the experience rating plan is giving less weight to each employ-

er’s actual experience. The 2013 changes will serve as an attempt to bring

the calculation back in line.

2013 Change

S i l v e r S T o n e G R o U P. c o M 15S i l v e r S T o n e G R o U P. c o M 15

What’s Changing?The NCCI is changing the value of primary losses in the modifica-tion calculation. Currently, the first $5,000 of loss is considered the employer's primary loss and any claim over this amount becomes the excess portion. The NCCI has recommended a primary/excess split point transition over the next several years, suggesting an increase from the current primary loss cap of $5,000 to $10,000 beginning in 2013, followed by auto-matic increases to $13,500 in 2014 and $15,000 in 2015. The split point modification will then be indexed for claim inflation going into the future. The NCCI is confident this will better align the calculation with today’s trends.

What Impact Will This Have?The primary portion of loss was considered an indicator of loss frequency. Considering this portion will be initially increased to $10,000, the obvious effect is that it will raise experience modifications. Losses above the primary portion have historically been treated as excess portion losses and were discounted in the calculation formula, but 2013 will usher in changes to that weight-ing that will emphasize the concept of “frequency leads to severity.” A company with a higher occurrence of small primary losses will always have a higher modification than a company who experi-ences larger but fewer losses.

Our Analysis To test this change, we reviewed client data with the same losses and only changed the primary loss cap. The effect was to increase the client modification. While it can’t be known what the impact will be in every situation, experience modifications increased in several scenarios that we promulgated. For example: • 1.45 changed to a 1.83• 1.36 changed to a 1.72• 0.89 changed to a .96

Our analysis demonstrated increases for both credit and debit modifications. The immediate impact to clients would be an increase in their workers’ compensation premiums over the next few years. Fortunately, we do have the ability to project the impact that the split point change will have on individual situations; however, this will require more strategic planning concerning workers’ compensation cost.

Our RecommendationThe NCCI has created numerous models to determine the overall impact their changes will have on the entire marketplace. They indicate the following data:• 1/2 of clients will see a modification decrease of 2 points

or more• 1/3 of clients will experience modification changes of

-2 to +2 points• 1 in 7 clients will experience a modification increase

of +5 points or more

When testing the modifications ourselves, the results are more dramatic than the above data indicates. Therefore, we believe it is critical to prepare for the impending changes to avoid unwanted surprises in your workers’ compensation plan. We recommend the following action plan with your current broker of workers’ compensation: 1. have an in-depth conversation about the NCCI changes and

the split point modifications. 2. If you have not received an impact study or if one is not yet

planned, we strongly recommend requesting this service.3. Schedule a strategy planning discussion about how to react

to these changes and how you will be specifically impacted.4. Discuss your losses and how they will impact your workers’

compensation premiums.

If your current broker fails to accommodate any of the aforemen-tioned strategies, they may not be proactively managing your workers’ compensation costs. you may need to begin asking whether or not they specialize in workers’ compensation. It is important to aggressively prepare for these expected changes. SilverStone Group’s Property & Casualty Team possesses the resources and knowledge to successfully guide your company into the 2013 changes. Our strategies, developed on a client-by-client basis, will be tailored to meet your unique needs following a thorough analysis of your calculation data. Please contact our Property & Casualty Team if you have questions or concerns regarding your workers’ compensation plan.

Contact Jeff Barrett | [email protected]

With the economy still balancing on shaky ground, key players in the construction industry are reevaluating their business relationships and the way in which they are structured. In recent years, it has become increasingly important for contractors to establish a well developed relationship with their surety underwriters. Sureties have grown more concerned with project financing, contract terms, collection of accounts receivable (and retainage), access and use of bank debt and exposure to subcontractor default. Additionally, sureties have come to expect a higher standard of conduct from contractors and want to see them grow balance sheets from profitable operations and retain earnings. In questionable financial times, strong business relationships are critical. So what is the key to building these successful relationships? Open and honest communication.

Where Do You Stand?The strength of a contractor/surety relationship is dependent upon an open line of communication among both parties. however; in order to achieve this, contractors must first ensure that they have accurate information regarding the current status of their business. To begin, all contractors should assess their capabilities within the

industry. Possessing a clear understanding of project limits will help contractors gainfully operate and maintain a history of completing contracts in a profitable manner. Complete, accurate and timely job costing and financial reporting is required in today’s economy.

Should a thorough review of operations reveal a less-than-stellar position, there are a number of key operational strategies contrac-tors should follow to strengthen their position in the market:• Aggressively bill and collect receivables• Lock in prices when possible• Maintain an adequate bank line of credit to support the

business plan• Adjust overhead and maintain profit margins in order to bid

jobs successfully• Be cognizant of the terms of each contract• Work with a construction-oriented CPA, banker and attorney

In this industry, knowledge is power. Ignoring financial pitfalls will not only turn away surety underwriters, but it will prevent contractors from taking proactive measures to improve their current situations.


r i S k m A n A g e m e n T | S U R E t y

Time to TalkOnce contractors have an accurate assessment of their operations, they should communicate both good and bad news in real time to their surety partners. When problems arise, the most important thing a contractor can do is keep the surety informed. This proac-tive approach will assist all parties in a possible resolution. Sureties are key players on any contractor’s team; therefore, it is essential to invest the time / energy needed to build a long-term relationship based on open communication. There are 3 basic components that can help build and strengthen this relationship:1. An Agenda – At least once a year, contractors should

meet with their surety. In some cases, their CPA, attorney and banker should also attend. Scheduling annual meet-ings will ensure information is being communicated to all parties involved. Planned meetings will also encourage contractors to remain focused on their financial standings and business plan.

2. Facilitation – Make it standard practice to communicate frequently, openly and honestly. Routine job information is an essential component of this communication. Jobsite

visits are valuable, and regular and accurate financial reports are a must.

3. Rapport – Establishing a sense of camaraderie between the contactor and surety will go a long way toward building a strong business relationship. This requires commitment, trust, communication, timely reporting and teamwork.

Step It UpSureties are searching for more than just a contractor who can build a project. They demand a sound business partner who possesses the commitment and honesty necessary to run a successful construction company. A simple handshake and signature on a dotted line will not create a foundation strong enough to support a working relationship. Open and accurate communication, along with a plan to facilitate it, is necessary to build a mutually beneficial partnership.

Contact Shannon Klein | [email protected]


r i S k m A n A g e m e n T | S U R E t y

by Shannon Klein, AAI


by Andrew Fereday

Polluted Property

r i S k m A n A g e m e n T | E N v I R o N M E N t a l I N d U S t R y

Don’t Close that Door Yet…

Historically, real estate investors and developers have avoided contaminated properties at all costs. However, many are beginning to see the value in converting a contaminated property into a profitable and successful investment. Over the last several decades, information concerning environmental contaminants (causes, prevention techniques and effective corrective measures) has significantly evolved. As a result, today’s real estate entrepreneurs are equipped with the knowledge and tools needed to safely remediate contamination problems. Furthermore, investors now have the option to purchase environmental insurance to protect themselves against potential exposures and future risks. The added knowledge and ability to mitigate risk has given property investors the confidence needed to deliberately purchase contaminated properties and restore them to productive use.


Acquisition AssessmentCommercial and industrial property buyers should always perform due diligence when pursuing a new acquisition, regardless of known contaminants. This begins with hiring a consultant to conduct a Phase I Environmental Site Assessment (ESA) on a potential investment. Many Phase I assessments lead to a Phase II assessment (sampling/characterization studies). If the Phase II findings are significant, remediation work (Phase III) may be required. keep in mind that each step requires time. Purchasing and rehabbing a contaminated property is generally a lengthy process, so potential buyers must be prepared to play a waiting game (a difficult task for many expanding companies).

The most common environmental exposures encountered during the buying and selling of commercial real estate include the following:• Contaminants from known and unknown historical usage and

operations of the property or neighboring properties• Local and regional soil and groundwater contamination• Air emissions from ammonia-based refrigeration systems• Construction debris containing hazardous materials (i.e., paint

cans, tars, etc.)• Sick Building Syndrome (i.e., carbon monoxide, mold or

bacterial air releases from faulty heating, ventilation or air conditioning systems)

• hazardous chemical storage (laboratory chemicals, medical wastes from doctor and dentist’s offices, dry cleaning solvents, pesticides and herbicides used both indoors and outdoors, etc.)

• Lead, asbestos, polychlorinated biphenyls (PCBs) and radioactive material

• Methane contamination from buried tree stumps and construction debris

• Pollutants from past landfills, lagoons and other solid waste disposal areas

• Contamination from past and present use of septic systems for disposal of wastes

• Unknown leaking from underground or aboveground storage tanks and piping

It is critical to hire a reputable consultant who is capable of performing an exhaustive assessment of your potential purchase. Collecting the most information available about existing contaminants will adequately prepare you for the work ahead and properly equip you to develop a successful remediation plan.

Maintaining a Clean SlateFollowing successful remediation of contamination problems, investors should go a step further and protect against possible exposures that could surface in the future. Environmental insurance has significantly evolved in recent years and can provide needed protection in a variety of situations, such as:• Loss resulting from first- and third-party pollution, as well as

related clean-up and legal expenses at scheduled locations• Mortgage impairment for banks/lenders• Business interruption and extra expense (including loss of

rental value from a pollution condition)• Diminution in value• Divested property coverage• Coverage for a public relations firm to help restore a company’s

image after a pollution event• Green change (expenses for incorporating green technologies

and implementing green standards)

In addition to insurance, effective risk management practices should also be implemented (such as mold deterrence or proper disposal procedures for toxic waste). While insurance can provide significant protection against potential risks, every effort should be made to avoid them in the first place.

Are You in the Market?Purchasing anything with known defects is a tough transaction to make (let alone a multi-million dollar commercial property), but don’t let a contaminated property scare you away. Considerable value can be gained when remediation is done safely and correctly. you don’t need to be an environmental specialist to pursue this type of purchase – trained experts are available to guide you through every step of this process. If your company’s dream location is sitting on a contamination hot spot, don’t give up! SilverStone Group’s Environmental Risk Services Team can recommend a plan of action and help you decide on coverages to protect the viability and future success of your business.

Contact Andrew Fereday | [email protected]

Don’t Close that Door Yet…


r i S k m A n A g e m e n T | h E a l t h c a R E I N d U S t R y

a d ne s s

TO ThE

A

Method

by John Marshall, CRM, CIC, AAITorri Criger, JD

Todd Flickema, MBA, AAI


Pricing Your Risk Once you have identified your insurable risks, you must then attempt to quantify them. Often, physicians have too much cover-age in certain areas and not enough in others because they have not based their coverage selection on the historical experience within their practice environment. When setting coverage limits, review state and local data specific to your area of practice to gain perspective on the appropriate limits for your situation. For example, a few questions worth exploring include:• What has been the largest medical malpractice verdict within

the counties in which you practice?• What state caps on damages or other tort reforms are in place

to limit the severity of exposures facing your business?

• What state disciplinary actions have been brought against other practitioners in your field? This can provide valuable insight as to what might become a focus of a state disciplin-ary board or what may be viewed as a higher risk in your particular area.

The Physician Insurers Association of America (PIAA) provides data on the largest verdict by specialty. Below you will find a select group of specialties and the largest verdicts reported by the major-ity of malpractice carriers in the United States:

Many healthcare practitioners find it challenging to determine how much insurance they need to adequately protect themselves from the various risks and liabilities they are exposed to in their professions. Unfortunately, there is always the possibility that someone could sue for an amount greater than what is covered by insurance. Moreover, there is a growing list of exposures that are often underinsured or even uninsurable. So how does a healthcare provider approach the seemingly impossible task of determining what coverage and corresponding limits will best protect their practice? The answer lies in a set of well-documented steps that can guide healthcare providers to coverage and limits that are appropriate for their unique situation.

In this economic environment of finite resources, it is critical to properly identify and insure the risks that pose the greatest threat to your business’ longevity.

What Can You Insure?Securing suitable coverage to protect your business begins with identifying which risks are insurable under your professional liability policy. This initial review is the most important step in the process because you must first identify which risks are insurable versus those that are not to build an effective risk management plan. Following is a brief list of insurable and uninsurable risks for consideration:

Medical Professional LiabilityinSurABle riSkS uninSurABle riSkS

Malpracticecomplaints Sexualmisconductacts

defensecoverageforcertaintypesofallegationsandgenerallyanythingassociatedwiththespecialtyforwhichyou’relicensed

Regulatoryrisks,suchasRacauditsorhIPaafinesandpenalties

conductasamemberofapeerreviewcommittee breachesofinformationduetosomeonehackingintoyourelectronicmedicalrecords

defensecoverageforstatelicensingmatters certainnon-fdaapprovedproceduresSource: PIAA

1985-2010 AverAge inDemniTY lArgeST pAYmenT

GeneralSurgery $193,482.00 $3,116.180.00

ENt $208,956.00 $4,199,329.00

familyPractice $169,239.00 $4,089,414.00Source: PIAA


Percentage of Claims Filed Against a Practitioner with Previous Claims Experience

GeneralSurgery 81%

ENt 75%

familyPractice 68%Source: PIAA

In addition to reviewing risk data specific to your operating environment, it is also important to consider your own history in the medical field. Ask yourself the following questions:• What procedures are you performing that are most likely

to cause a claim? • What is the largest verdict you have experienced? • What information has been posted to the national practitioner

data bank or similar state databank about you? Once a

practitioner has had a judgment awarded against them, it becomes more likely for others to file a suit in the future because a potential plaintiff knows you have been successfully litigated against in the past. Most claims are brought against practitioners who have had prior claims.

• What are some of the non-medical misadventures you have encountered? In other words, identify events that don’t neces-sarily involve direct malpractice but still expose you to risk. A few of these examples include: Improper performance – This usually speaks to the technical ability of the healthcare professional.Errors in diagnosis – This typically concerns the practitioner’s ability to diagnose in a timely manner.Failure to supervise or monitor a case – This can involve a number of factors, including delegated medical tasks or patients on high-risk treatment regimens and medications.Medication errors – This is a growing area and is further complicated by the use of electronic medical records, which (in some systems) have been found to associate files with the wrong patient.

Preemptive ActionOnce you have identified and quantified your insurable risks, it is important to back up your insurance policies with risk management techniques to help reduce, avoid or prevent exposures. While insurance goes a long way toward protecting healthcare practices, physicians should also put forth a proactive effort to avert various exposures. A few ways to do this include: • Training your staff.• Looking to your insurance carrier for malpractice risk manage-

ment resources.• Looking at debt collection practices and whether those create

malpractice events if they exacerbate a situation with an unsatisfied patient.

• Segregating certain exposures by separating or confining them within your organization or by outsourcing entirely to another organization if there is an internal risk you are not comfortable managing, such as certain types of lab work, medication handling or communication with patients (which is probably the most common source of malpractice claims).

• Avoiding certain types of procedures associated with a higher likelihood of malpractice claims.


• Reviewing data on the actual claims that have been litigated by your malpractice carrier, (which is usually available on their

website). The three most common claims by specialty are outlined below:

Top 3 Most Common Claims by SpecialtygenerAl SurgerY enT FAmilY prACTiCe

1 diagnosticinterview,evaluationorconsultation

operativeproceduresonnose,nasalbonesornasalcavity

diagnosticinterview,evaluationorconsultation

2 operativeproceduresofgallbladderandbiliarytract

diagnosticinterview,evaluationorconsultation

Prescriptionofmedication

3 operativeproceduresonsmallandlargeintestines

operativeproceduresinvolvingmiddleear,innerearandmastoidregion

operativeproceduresonskin,excludingskingrafts

Source: PIAA

Not Enough? Consider ThisMany physicians in larger groups have opted to develop captive insurance companies in which they set up their own insurance company to manage some of the risks that are either uninsurable or on a heightened severity level because they are less likely to occur. This is a proactive strategy and typically occurs in tough market cycles for medical malpractice. It has grown in popularity due to additional advantages associated with setting up various forms of captives, such as:• A reduction in your total cost of insurance• The ability to control your risk more efficiently• Improved cash flow• A wealth transfer mechanism• Availability of certain tax benefits

Protect Your PracticeContrary to popular belief, mitigating risk in the healthcare industry is a manageable process. Carefully following the aforementioned steps can guide practitioners toward a properly structured insur-ance plan that is capable of providing the protection needed to survive in today’s market. you do not need to navigate these steps on your own; the healthcare Risk Services Team at SilverStone Group is ready to assist you with the data collection necessary to make informed decisions about your insurance needs in the healthcare field.

Contact John Marshall | [email protected] Torri Criger | [email protected] Todd Flickema | [email protected]

r i S k m A n A g e m e n T | o U t d o o R R E c R E a t I o N I N d U S t R y


History

101Spanish philosopher George Santayana

is known for his foretelling quotation,

“Those who do not remember the past

are condemned to repeat it.” It’s a

mantra that can serve you well in life,

but is equally appropriate in the world

of risk management.

by Dave Berliner


This is specifically true for golf course managers, whose predecessors have encountered a variety of experiences which deserve attention. Examining past claims can equip today’s managers with the ability to take proactive steps toward running a safe and efficient course. While the list of potential risks a golf course owner is exposed to can be daunting, identifying those which pose the greatest threat and taking specific precautions can protect the long-term success of a club.

In an effort to heed Santayana’s words and learn from the past, Travelers conducted a study called “Safety on the Fairway,” which identified the most costly and frequent claims for golf facilities. Claims were examined in two categories: general liability and property loss. This article will examine the top two claims in each category, identifying the industry’s most significant exposures and providing advice to reduce risk in those areas.

General LiabilityWipe Out! General liability insurance protects businesses against claims of negligence made by both customers and employees. According to Travelers, the primary reason golf courses encounter this type of claim is a result of slips, trips and falls. These claims are not only the most costly due to litigation settlements, but they are also filed most frequently. While this risk is prevalent in virtually every industry, golf courses are uniquely exposed because of their rolling terrain, water hazards

and various pathways and walkways. It is critical to instruct grounds maintenance staff to identify problem areas such as holes, depressions or cracks in the cart paths that could lead to an accident. Additionally, stairways on the course and inside the clubhouse should be thoroughly examined. Ask the following questions: Are steps on the facility grounds in good shape? Are additional handrails needed anywhere? Are all concrete steps up to code? If you don’t know the answers to these questions, you should! While this exposure can never be completely eliminated, you can help reduce its likelihood by recognizing problems and addressing them before they become an issue.

Fore! It should come as no surprise that the second spot on Travelers’ list of top general liability claims is a result of patrons and staff being struck by objects – more specifically, being hit by golf balls. Again, it is impossible to completely eliminate this exposure, but there are some simple precautions that can reduce claim frequency. Ask the following questions: Is there one particular spot on the course where this occurs more often? I s there a blind shot or hole that may place people in the line of fire? Are the tee boxes in close proximity to the greens? Recognizing potential problem areas creates an opportunity to do something about them. you can install fences or other barriers for prevention, or you can warn players with signage on the course. Taking preemptive steps can go a long way toward overall liability reduction.


photo courtesy of client, Ballyneal in holyoke, Colorado

Property LossesBurning Through Your Bottom Line Given the size of a typical course and the nature of the facilities thereon, property loss is a significant exposure that deserves attention. According to Travelers’ study, fire is the top cause of property loss among golf courses. Most frequently, electrical deficiencies exist in the golf cart storage area, creating charging stations that are not equipped to handle the number of carts being charged at once. Ask the following questions: Is your staff trained on proper equipment storage and charging procedures? have you employed an electrician to examine this area? What kind of fire detection equipment do you currently utilize? While sprinkler installation may not be feasible in this area of the course property, smoke or heat detectors (coupled with a staff trained to recognize fire hazards) can help minimize this risk at a fraction of the cost.

Blustery Business The second spot on Travelers’ list of top property losses is caused by something you can’t even see – wind! Accounting for 23% of total claim costs, this invisible threat poses a noticeable problem for golf course owners.1 While weather is a peril that cannot be controlled, there are a few steps course managers can take to lessen the overall impact it may have. Ask the following questions: Are trees, shrubs and plants properly landscaped? have dead limbs been removed from large trees?

Does your staff know how to properly react to unfavorable weather? Trimming dead limbs from large trees and immediate clean-up of debris can prevent further damage to club property (and prevent injuries to people on the course). When dealing with a risk that is impossible to control or predict, it is crucial that your staff is prepared to respond in a proactive manner.

Hope for the Best, Prepare for the WorstWhile this article has briefly highlighted the top claims impacting the golf industry, it is important to remember the myriad of other common losses creating hot spots for claims, such as lightning detection/safety, swimming pool safety and liquor liability. Training and awareness among your staff, as well as a review of club policies and procedures, is the most effective way to mitigate claims. Prepare for these incidents and follow-through with a sound risk management plan – this will not only have a positive effect on the daily operation of your club, but a lasting impression on your insurance carrier and your premiums.1 “Risk Control- Safety on the Fairway,” The Travelers Companies, 2008. Accessed on March 16, 2012

at https://rccustomers.travelers.com/riskcontrol/rcpublicdocs.nsf/0/47DD226E0D7BEE518525751500767423/$FILE/58507a_Golfing_Safety_QP.pdf

Contact Dave Berliner | [email protected]


r i S k m A n A g e m e n T | t R a N S P o R t a t I o N I N d U S t R y


On September 3, 2008, Roger Reagan was driving his truck along an Arkansas highway when

he was suddenly struck head-on by a tractor-trailer. Morgan Quisenberry, a hired driver for

Dunaway Timber Co., had veered over the center line and clipped two other vehicles before

ultimately colliding with Reagan. At the time of the accident, Quisenberry had been at the

wheel for 14 hours – 3 hours longer than the legally permitted driving time for a commercial

truck operator. Reagan was badly injured and trapped in the burning wreckage of his vehicle

for 20 minutes before rescue crews were able to free him. Sadly, he died of heart failure before

reaching the hospital, leaving behind his wife and two young children.1

Accidents, when out of our control, are simply an unfortunate part of life. however, when extenuating circumstances exist that could have prevented them, someone is usually held liable – a fact that businesses should always keep in mind when making operating decisions. Truck drivers wield an enormous amount

of power when navigating our roads with their commanding vehicles and sizable cargo. It is a responsibility that should not be given lightly. When hiring drivers, companies must protect themselves (and fellow drivers) with sound risk management practices.

Driving with DisregardA Cautionary Tale for the Trucking Industry

by Pete Hanley


Hire CarefullyReading resumes and applications is a good starting place when searching for potential drivers for your company – but the process should not end there. The ink on those documents should be verified with a thorough background check. This is an inexpensive way to screen applicants and review driving records. Quisenberry’s driver’s license had previously been revoked on two different occasions for driving while intoxicated (DWI) – a fact that he failed to include in his application for the driver position at Dunaway Timber Co. The company neglected to invest the minimal amount of time and money required to perform a basic background check and Quisenberry’s two infractions went uncovered.

At the present time, nearly half of states hold employers legally responsible for checking the background and references of job applicants prior to placing them in a position of high public contact. Employers who fail to perform this due diligence can be found liable for negligent hiring and retention of dangerous or incompetent employees. In addition to background checks, employers should also consider employee drug testing and physical exams. These measures can help ensure safe and legally compliant employment practices.

Supervise ResponsiblyThe trucking industry has established safety guidelines for drivers to follow in an effort to prevent accidents. The U.S. Department of Transportation (DOT) has ruled that drivers operating property-carrying commercial motor vehicles (CMvs) may not exceed 11 hours of continuous driving.2 This restriction serves to prevent driver fatigue, and log books are required by all drivers to verify compliance. As stated, Quisenberry had exceeded the maximum driving limit by several hours. It was later revealed that Dunaway Timber Co. had assigned Quisenberry a schedule that was impossible to meet in the 11-hour allowable time period (unless he was speeding). The operating expectations were negligent on Dunaway Timber Co.’s part, and Quisenberry should not have attempted to accommodate his employer’s unrealistic orders. had either party followed industry regulations, this tragic accident likely wouldn’t have occurred.

Pay the PenaltyReagan’s wife filed a lawsuit against Dunaway Timber Co. and Quisenberry on the grounds of negligent hiring and negligent supervising. During the trial, J. kent Emison (the plaintiff’s attorney) stated:

We all expect trucking companies who send truck drivers out onto the public roads to do so with professional, competent people and then make sure the company trains them and monitors them…But this was an example where a company hired someone who had no business driving a truck in the first place, and then blatantly ignored the regulations that govern the trucking industry. 3

The jury in this case ruled on a $7 million settlement in favor of the plaintiff, holding Dunaway Trucking Co. 75% responsible and Quisenberry 25% responsible. While the jury awarded this amount, the actual settlement figure was not disclosed because the parties entered into a high-low agreement prior to the trial. This type of arrangement ensures that the plaintiff walks away with a specified minimum amount, and the defendant does not pay above a certain amount.

Prevent the LossEntrusting individuals with the transmission of your goods and products should be undertaken with the utmost caution. Implementing risk management practices can protect your business, as well as the people with whom your operation comes in contact. This process begins with basic concepts: • Diligently screen potential drivers • Carefully manage their hours of operation • Assign fair and law-abiding schedules • Refuse to compromise on the quality of your staff

There is a lot more to lose than just your business’ reputation and bottom line – a devastating reality that Roger Reagan’s family must now endure every single day. 1 “Driver’s Extended Driving Time Led to Crash.” ALM website. March 6, 2012. Accessed on April 10,

2012 at www.michiganverdicts.com/index.jsp?do=news&rep=recent&art=2044582 “Summary of hours-of-Service (hOS) Regulations. ” 2012 Federal Motor Carrier Safety

Administration website. Accessed on April 10, 2012 at www.fmcsa.dot.gov/rules-regulations/topics/hos/index.htm

3 Emison, kent J. “$15 Background Screening Could have Saved $7 Million.” January 2, 2012. Background Screening, LLC website. Accessed on April 10, 2012 at http://blog.background-checks-systems.com/15-background-check-could-have-saved-7-million-dollars/

Contact Pete Hanley | [email protected]

A Fresh PerspectiveBenchmarking in 2012


e m p l o Y e e B e n e F i T S | G R o U P b E N E f I t S

A Fresh PerspectiveBenchmarking in 2012


by Amy Stefka, MBA, HIA

Utilizing comprehensive benefit benchmark data can help put a stop to the revolving door of new hires by allowing employers to compare their plans against those offered by competitors. Such knowledge will enable business owners to identify areas that require attention and generate new ideas to stay ahead of the competition, ultimately positioning them to attract and retain valuable employees within the parameters of their operating budget.

The effectiveness of any benchmark comparison relies on the credibility of the data involved in the analysis. SilverStone Group continues to be named one of the largest and most successful benefit specialists in the region and country (Sources: Business Insurance : “100 Largest Brokers of U.S. Business;” Business Insurance : “Largest U.S. Benefits Specialists;” Omaha Book of Lists : “Largest Omaha Independent Insurance Agencies and Brokerages”). Our expansive reach in the industry provides the critical mass necessary to put together key data points that are relevant to executives and human resource staff. In the Fall 2011 SilverLink article “Benchmarking: Gaining Perspective During healthcare Reform,” we proudly published the first publicly released snapshot of our healthcare benefits benchmark report. Once again, we are excited to share a snapshot of our most current data with the public. This latest report contains information from clients with 100 or more employees enrolled in their medical programs. Our 2012 update will help employers determine where they stand in key areas of their benefits programs and offer strategies for improvement.

First Thing’s First: Healthcare Reform The various implications of healthcare reform continue to have a significant impact on benefit plan decisions. Many business owners want to know if they will be grandfathered or non-grandfathered under the Patient Protection and Affordable Care Act (PPACA) guidelines since its inception in late 2010. Of those firms that have renewed in 2012 and are subject to healthcare reform, only 37% have remained grandfathered, while 63% have moved to non-grandfathered status. In 2011, the figures weighed out quite differently, with 59% remaining grandfathered and 41% moving to non-grandfathered status. This change is the result of many contributing factors, including the addition of new plans (i.e., Consumer Driven health Plans [CDhPs]) and carriers/third party administrators requiring clients to move to non-grandfathered status due to changes in their claim or administration systems. The numbers also reflect a developing need to change contributions or plan design beyond the limits allowed by grandfathered status, ultimately forcing plans into non-grandfathered territory.

Our Methodology – Traditional vs. CDHPsSilverStone Group tracks plan design features separately for traditional plans and CDhPs. Traditional plans include Preferred Provider Organization plans (PPOs), health Maintenance Organization plans (hMOs) and Point of Service plans (POSs) with traditional deductibles and copay structures. CDhPs include high deductible health plans that allow members to use health Savings Accounts (hSAs) or health Reimbursement Arrangements (hRAs). The following will break down the plan design characteristics for both categories utilizing the most current benchmarking data available.


There is no question that today’s job market is competitive. In order to gain and

retain key personnel, employers must offer benefit plans that meet or exceed

expectations. High turnover rates are a drain on financial resources and cripple

production levels – a devastating combination for any company.

Deductible Since 2009, traditional plan deductibles have increased by nearly 20% for both individuals and families because many employers are shifting toward higher deductible options to keep premiums low. CDhPs have experienced a modest increase of 4.8% for average individual deductibles, and an even smaller increase of 1.4% for average family deductibles. The figure below illustrates the deductible trend thus far in 2012:

Out-of-PocketOut-of-pocket maximums for traditional plans have experienced continual growth since 2009 for both individuals and families (12% and 10%, respectively). Increasing the out-of-pocket maximum has become a favorable alternative, as it provides savings for employers while only passing a fractional increase to employees.

CDhP out-of-pocket maximums have also increased since 2009 (12% for individuals and 7% for families). however, many plans are adding coinsurance after the deductible has been met, which makes it appear as though they are increasing at a faster rate. The illustration in the following column outlines the averages at this point in 2012.

Prescription DrugsOver the past decade we have witnessed substantial changes in prescription drug copay structures. Almost all Midwest employers have moved away from a 2-tier generic and name brand structure to a 3- or even 4-tier structure. While the 3-tier structure has been the norm, the addition of a fourth tier for specialty medications is becoming more commonplace (as these drugs can cost thousands of dollars per month). however, when implementing a new structure it is important to avoid setting an excessive copay dollar amount. As stated, these types of medications are extremely expensive, and requiring the consumer to pay an additional $50-$75 will not have a substantial impact on the amount paid for the claim. Medication adherence often plays a key role in preventing higher claims down the road. If the copay is set too high, there is an increased risk that the member will choose to discontinue use due to cost, which could potentially lead to larger claims resulting from an emergency room visit or a hospital stay.


0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

CDHPTraditional

Average Deductibles

Individual

Family

$841

$3,963

$2,087

$1,614

0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

CDHPTraditional

Average Out-of-Pocket Maximums

Individual

Family$2,666

$6,396

$3,595

$5,094


While Tier 1 (generic) and Tier 2 copays have remained relatively stable over the past few years, Tier 3 copays have experienced an increase of 16% since 2009 as more employers encourage the use of lower cost generic alternatives. The following figure outlines the average copays in 2012:

Preventive/Routine CareWith wellness program initiatives on the rise, preventive and routine care is beginning to experience 100% coverage in benefit plans. Annual dollar maximums (such as $300 or $500 per member) are common within benefit structures. Traditional plans have generally averaged a lower annual maximum of $475, while CDhPs have averaged approximately $986.

healthcare reform has required some employers who lost grandfather status to remove any annual dollar maximum that was previously in place. In the first part of 2012, 93% of traditional plan clients had an "unlimited" routine care maximum, an increase from 82% in 2011 and 50% in 2010. Among those with CDhPs, 74% have an “unlimited” routine care maximum, an increase (again) from 69% in 2011 and 41% in 2010.

Premiums/Cost SharingAlthough premium increases have declined, employers would still like to see an even greater reduction. SilverStone Group’s approach to benchmark data shows both a “gross” and a “net” increase in premiums:

This chart illustrates how plan design changes (which often create more out-of-pocket costs for members) can skew results. Employers shift an average of 2-4% of costs back to employees by increasing deductibles, out-of-pocket maximums, copays and other benefits each year.

Employers continue to contribute 5-10% more toward premiums for individuals than for families. Furthermore, companies are enticing employees to move toward CDhPs with premium contributions that are approximately 3-5% higher than those for traditional plans. Please reference the graph on the next page.

5.0%

6.0%

7.0%

8.0%

CDHPTraditional

Average Premium Increases

Gross

Net

5.2%

7.5%

6.2%

6.3%

0

$10

$20

$30

$40

$50

Tier 1

Average Prescription Drug Copays

$9

$50

$30

Tier 3Tier 2


What Are Your Peers Up To? More and more, companies are investing in their employees’ health. Wellness programs have experienced a dramatic increase in the past several years. Not only do they serve as an added benefit for employees, but they are an effective way to curb medical costs. Approximately 40% of firms now offer a “formal” wellness program, which may include a biometric screen, a health risk assessment and ongoing activities throughout the year. Among companies who offer a wellness program, 71% issue incentives for program participation (such as premium reductions and contributions to hSAs).

Companies are also discovering that employees enjoy a choice when it comes to their benefit options. Presently, 10% of employers offer dual or triple-choice options to employees. Another growing trend is to offer a CDhP alongside a traditional plan. Since 2009, this strategy has increased by 8-15% (most frequently with larger employers).

Among SilverStone Group clients, 71% offer a self-funded plan. This strategy provides savings on premium taxes and flexibility in plan design, while creating the potential to earn savings when claims are running well. As healthcare reform guidelines continue to develop, we anticipate an increase in smaller employers (<150) looking at self-funding as an option to avoid premium increases that could arise when some of the regulations are implemented in the fully insured market.

Looking ForwardAt SilverStone Group, we constantly strive to improve our benchmarking report so we may equip consumers with the most relevant data to aid them in their plan comparison efforts. Our 2013 report is slated to include enhancements such as prescription drug generic utilization rates, alternative medicine program implementations and the inclusion of elective benefits as part of the employer-sponsored program. We know cost-management strategies are a top priority in the business world. Reviewing benchmark data will enable business owners to structure a benefits package that works within their budget while being competitive enough to attract and retain quality employees. For more detailed information and to get a full benchmark report, please contact SilverStone Group.

Contact Amy Stefka | [email protected]

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Offering more

than 1 plan

General Plan Information

37.1%

61.0%

71.0% 71.0%

Offering

Wellness Programs

Offering Incentives for

Wellness Participation

Self-Funded

Firms

0

$300

$600

$900

$1,200

$1,500

CDHPTraditional

Average Total Premiums

Individual

Family$462

$1,133

$368

$1,311


e m p l o Y e e B e n e F i T S | d E f I N E d b E N E f I t S

by Renee Nolte, ASA, MAAA


low rates impact defined benefit plans

While this might benefit homeowners and businesses who intend to build upon their assets through leveraging, it is bad news for the retirement industry. Lower interest rates mean higher premiums for annuities and lower returns under fixed income funds, potentially leading to inadequate income at retirement. Due to higher accounting and funding costs, these low interest rates are a direct hit to companies with defined benefit pension plans.

Interest Rates for Valuing Your PlanFor funding purposes, the liabilities for a defined benefit plan are typically measured by 3-segment interest rates. The rates are based on a 24-month average of corporate bond rates, indicative

of the duration of the bonds. For simplicity, the 3-segment rates can be combined into one equivalent rate that considers the expected duration of payments from the plan. The combined single rate is referred to as the “effective interest rate.” A declining effective rate means plan liabilities will increase. This requires an increase to pension plan contributions, causing a strain on corporate cash flows.

The following graph illustrates the declining rates of a typical calendar year pension plan:

The Federal Reserve announced plans to keep interest rates “exceptionally low” through 2014 in an effort to stimulate a stronger economic recovery and to keep inflation in check.1


HIGHER

PRE

MIUMS FO R A

NNU IT

IES

& LOWER

RET

UR

NS

U

NDER FIXED INCOME FUNDS...

0

1

2

3

4

5

6

7

88.0%

6.6%6.1%

5.6%5.2%

2009 2010 2011 2012 2013*

Valuation Year

E�ec

tive

Inte

rest

Rat

e

* As of this writing, 15 of the required 24 months of interest rates are already known for a January 1, 2013 measurement date. 5.2% is the average if current rates remain level to the end of the year.

Following the economic turmoil of 2008, funding relief was offered that kept the 2009 valuation year rates artificially high. Without significant improvement in asset returns, plans are now feeling the pinch of high liabilities compared to assets. As a rule of thumb, a 100 basis point decrease in interest rates roughly equates to an 8% increase in liabilities for retirees and a 20% increase in liabilities for both active and terminated participants with a vested benefit. When looking at the graph, you can see the rate decreased 100 basis points from 2010 to 2012. If a plan is weighted with 30% of the liabilities attributable to retirees, a 16.4% increase in the liabilities occurs over that 2-year period. This increase is above and beyond the normal increases from benefit accruals and aging. If the Federal Reserve follows through with its current plan, we can expect to see low interest rates for a number of years due to the 24-month averaging.

In addition, the Citigroup Pension Discount Curve (a standard benchmark for pension liabilities) hit an all-time low of 4.40% in December 2011, down 114 basis points from the year before.2 Just as with the funding, the balance sheet liability and pension expense both increase dramatically as the discount rate decreases.

Protect Your PlanA Liability-Driven Investment (LDI) is one strategy for risk mitigation frequently discussed among industry professionals. An LDI matches investments to the expected duration of liabilities. This generally means that the more volatile equity investments are reallocated into long duration bonds resulting in a trade-off of higher plan contributions for less volatility. A plan sponsor will want to discuss this strategy with their financial advisor to determine if it is consistent with their risk tolerance and to decide upon an appropriate time to move into a heavier bond portfolio weighting. For smaller plans, an LDI may be cost prohibitive and less likely to be successful without the bigger numbers and higher predictability associated with larger plans.

When a plan sponsor has the ability to contribute more than the minimum required, any extra contributions can be set aside in a prefunding balance to be used in a future year when cash is less accessible (as long as the plan is not restricted). This strategy can alleviate the fluctuations in required contributions from year to year and help companies stay on budget.

Lump-sum benefits are also determined by fluctuating bond rates. A smaller plan’s assets can be hurt by significant lump-sum benefit payments. Therefore, a plan sponsor of a smaller plan might consider allowing the funding level to fall below 80%. This threshold restricts the payment of lump-sum benefits to half of their value. Once the rates recover, the funding is likely to increase to levels above 80% again and lump-sum amounts will be calculated at a higher rate, thus decreasing the payment due from the plan. This strategy works if the asset allocation generates a return in excess of the corporate bond rates while the plan is restricted from paying lump-sums. The down side is that notice of the low funding level will need to be communicated to participants. keep in mind, this strategy is not recommended for larger plans (over 500 participants) which are subject to at-risk funding rules.

Hopeful for ReliefAs this article goes to print, we are watchful of activity in Congress which could provide funding relief. Proposed relief is expected to establish a floor on the valuation interest rates that are used to measure plan liabilities. Ultimately, the hope is that this floor will produce more stable and predictable liabilities.

Know What Lies AheadIn time, interest rates will more than likely rise. Until that happens, it is important for companies to proactively manage their defined benefits plans. Given the uncertainty of future legislation and the expected duration of lower rates, plan sponsors should consider a forecast analysis of their plan. your actuarial team can provide such analyses under various scenarios. knowing the spectrum of funding requirements and accounting costs that lie ahead will enable companies to actively plan and budget.1 2012 Monetary Press Releases. January 25, 2012. Accessed on March 30, 2012 at

www.federalreserve.gov/newsevents/press/monetary/20120125a.htm 2 Society of Actuaries website. Citigroup Pension Discount Curve. Accessed on March 30, 2012

at www.soa.org/professional-interests/pension/resources/pen-resources-pension.aspxSecurities Offered Through M holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. SilverStone Group is independently owned and operated.This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney, tax advisor or plan provider. The information in this article has been obtained from sources believed to be reliable, but there is no guarantee as to its accuracy. There are risks involved in investing including the possible loss of principal. Strategies discussed may not be suitable for all investors.

Contact Renee Nolte | [email protected]




WhatDo the

ReallyRepresent?

e m p l o Y e e B e n e F i T S | P o S t - R E t I R E M E N t b E N E f I t S

by Michael Vech, ASA, MAAA

performing actuarial evaluations

As an employer who offers post-retirement welfare benefits you have gone through the process of having an actuarial valuation performed to satisfy the appropriate accounting standards. But what do those numbers really represent? And why should anyone be confident in the results? The answer to both questions is

“assumptions.” The results from an actuarial valuation represent the plan benefits that are available to retirees and the assumptions for how those benefits will be utilized. The extent to which those assumptions represent future expectations reflects how accurately an actuarial valuation is estimating a plan’s total liabilities.

Consider ThisThere are two basic types of assumptions considered in actuarial valuations:1. Economic assumptions – associated with the expected costs

of the plan to the employer; and2. Demographic assumptions – reflect the expected patterns of

how employees move from their current employment status to a different status.

These assumptions are used to develop an expected cash flow for the plan, and those cash flows are discounted back to the valuation date to give the various liabilities and cost results necessary for financial reporting compliance.

It should be noted that the assumptions in any given year will never be precisely correct. They should, however, be reasonable and consistent – both with each other and with the plan’s future experience. historical experience is often a great starting point for future expectations, but possible changes should be considered and reflected when appropriate. The assumptions should ultimately be selected by the plan sponsor, but the actuary can be of assistance in helping the plan sponsor make educated choices.

Types of Assumptions Let’s take a look at some of the most important assumptions involved in a post-retirement welfare benefit actuarial valuation:

Discount Rate (Economic) – For governmental employers reporting under GASB 45, the discount rate should be related to the estimated long-term investment yield on the investments which are expected to be used to finance the payments of benefits, with consideration given to the nature and mix of current and expected investments.1 Plan sponsors financing benefits on a pay-as-you go basis typically pay retiree healthcare benefits from the general fund. Since an employer’s general fund is primarily invested in short-term securities, a low investment return expectation (such as 4 – 5%) is typically used to develop the present value of future benefits. however, plan sponsors who fully-fund retiree healthcare benefits in a separate trust may be able to design an investment portfolio that generates much higher returns (such as 7– 8%). For non-governmental employers, the discount rate will be determined in accordance with the applicable accounting standard.

Healthcare Cost Trend Rate (Economic) – Generally, medical claims are assumed to increase at an initial rate consistent with recent trends and then decrease over time to an ultimate rate. The prevailing practice is to assume these increases will slow in the future based on the macroeconomic result that medical expenses will consume an unacceptable percentage of the gross national product if they are not moderated in the future. A recent survey among companies utilizing the same healthcare cost trend rate for all retirees (regardless of age) showed that the fiscal year 2010 average initial rate was 7.98%. The study also revealed that the average ultimate rate was 4.89% and the median number of years to reach the ultimate rate was seven.2


It should be noted that the assumptions in any given year will never be precisely correct. They should, however, be reasonable and consistent – both with each other and with the plan’s future experience.

Expected Retirement Age (Demographic) – Once a participant has met the eligibility requirements to retire and receive benefits under the plan, a table of retirement rates is used to estimate when the participant will actually retire. For example, there might be a 10% likelihood of retirement at age 55, 20% at age 60 and 100% at age 65. This assumption should be compared to actual plan experience and result in similar patterns and average retirement ages. It should also be reviewed with consideration for potential changes to future patterns, such as employees working to increased retirement ages. In instances when benefits are only available for pre-65 coverage, the expected retirement age becomes increasingly significant because of the direct impact this has on the length of time each employee is expected to stay on the plan. The difference between an expected retirement age of 62 versus a retirement age of 59 would double the average length of time each participant is expected to receive benefits.

Future Retiree Participation Rates (Demographic) – For future retirees, the participation rate reflects the likelihood of enrollment in the plan benefits upon retirement. In cases when the retiree pays the entire premium, participation is likely less than 100%. The participation rate has a direct impact on the liability for active employees, so this is a very important assumption to consider. Plan sponsors should track actual coverage election by eligible retirees and review this assumption for reasonability. There may also be a need to have explicit assumptions for the duration of coverage. For instance, a retiree may only keep coverage until age 65, even if coverage is available through the employer beyond age 65.

Spouse Participation Rates (Demographic) – If a retiree elects to participate in the plan benefits, it is necessary to consider how likely they are to continue coverage for their spouse. Sometimes retiree experience is assumed to continue with the same coverage level that was elected while the employee was active; however, spouses are oftentimes not covered upon retirement. This generally occurs because the spouse pursues coverage with their own employer, or they simply

choose to look elsewhere for coverage due to the higher cost (especially if the only options are single or family premiums). For greatest accuracy, coverage elections of current retirees should be considered when this assumption is being set.

Child dependents are not usually included in post-retirement medical valuations and, even when included, create a very small liability. however, recent changes due to healthcare reform now allow coverage until age 26, which could result in increased participation and may prompt actuaries to reconsider child participation assumptions.

Turnover, Disability and Mortality Rates (Demographic) – These assumptions can be more difficult for plan sponsors to measure compared to actual experience. The assumptions used should be reasonable and mortality tables should be based on recently published mortality rates.

Results You Can Rely OnA post-retirement welfare benefit actuarial valuation is only as good as the assumptions being used. The plan sponsor and the actuary should work together to continue to monitor and consider each assumption. Given the effects these assumptions have on a plan’s total liabilities, it is a good idea to review these assumptions during each valuation cycle. Basing your actuarial valuation on reasonable and consistent assumptions can increase your confidence in the results presented in the report.1 Governmental Accounting Standards Board Statement 45, Paragraph 13(c)2 “Accounting for Pensions and Other Postretirement Benefits,” November, 2011. Accessed on

March 30, 2012 at www.towerswatson.com/united-states/research/5885

Contact Michael Vech | [email protected]


p r i v A T e C l i e n T S e r v i C e S | E S t a t E P l a N N I N G


The Gift v


by Jeff Sharp, JD, MBA, CFP®, CLU, ChFC

The Conundrums


As we approach the conclusion of the Bush Tax Cuts on December 31, 2012, many successful families and business owners will want to meet with their legal advisors to decide how to best capitalize on the $5,120,000 per person Lifetime Estate Exemption. Until the close of 2012 you can either gift up to $5,120,000 or die with that amount and not incur estate or gift tax. After 2012, all bets are off.

If Congress doesn't act by the end of the year, the Lifetime Estate Exemption will drop to $1 million. Also, the Lifetime Gift Exemp-tion will drop to $1 million (the Gift and Estate Exemptions are inter-related in that using the Lifetime Gift Exemption reduces the remaining available Lifetime Estate Exemption dollar-for-dollar). We believe there's a decent chance an extender will be passed that will put the Lifetime Estate Exemption at $3,500,000, but we also believe that the Lifetime Gift Exemption will drop to the $1 million level. Thus, 2012 will likely be the final year to make lifetime gifts to family members greater than $1 million without incurring gift taxes.

When meeting with your lawyer, the discussion will ultimately come down to whether it makes sense to make outright gifts of assets/property and whether the grantor is able to part with the ownership. What’s important is that there is a difference between giving up "ownership" on the one hand, and "control" on the other.

There are a number of strategies available wherein legal ownership of an asset or property can be transferred, yet the transaction may still provide "control" to the party making the gift. The challenge is to retain enough control to keep the grantor comfortable, but to avoid retaining too much control so that the IRS doesn’t argue that you never made a completed gift. Should this happen, it may be treated as an asset of the estate and, as a result, be subject to Federal Estate taxes. When considering how many strings of ownership the grantor could retain in the

context of a gift, a court in 1970 stated it well: “The cost of holding onto the strings may prove to be a rope burn.” (Old Colony Trust Co. v. U.S., 423 F.2d 601,604 [1st Cir. 1970]).

So, what are the available strategies you'll want to discuss with your lawyer? The following may serve as a good checklist when you first meet:

If you haven't used any of your available $5,120,000 per person Lifetime Gift or Estate Exemption, strategies include:a. Outright gifts of cash, assets, company stock or property

Once the property is in the trust, the gifted asset and growth thereon is out of the estate of the grantor and escapes estate tax upon the death of the grantor. The income generated on the property can be invested, used to purchase life insurance or some combination thereof. The life insurance leverages the corpus passing to the next generation via the death benefits.

b. Same as “a” above, but if the grantor still wants some access to the gifted asset, the trust can loan money back to the grantor The loan must be an arm’s length loan on commercially reason-able terms. The grantor/borrower will annually pay interest back to the trust with a balloon note typically due at the end of 20 years. The interest rate on the loan from the trust could be in the 3-5% range, but must not be so low as to jeopardize the transaction. In effect, the greater the interest rate paid to the trust, the greater the amount that ultimately passes to the next generation. The advantage here is that the grantor is able to lock in the $5,120,000 Lifetime Gift/Estate exemption, yet still “stay in the game” of growing assets in the estate. Any return in excess of the interest paid to the trust accrues on the grantor’s side of the balance sheet.

If you’ve already used up your available $5,120,000 per person Lifetime Gift or Estate Exemption, the strategies below essentially at-tempt to “freeze” your estate growth, but aren’t gifts and don’t result in new gift or estate taxes if properly structured: a. GRAT (Grantor Retained Annuity Trust)

With a GRAT, an asset (i.e., land, business interest, farm ground) is contributed to a Trust that is typically for a term ranging from 2-10 years. By the time the trust ends, the grantor will have received back value equal to what they contributed, plus interest. The key is that the interest owed to the grantor is very low (typically less than 2%), thus permitting the appre-ciation in excess of the interest to pass to the next generation and escape estate taxes.

b. Installment sale to an IDGT (Intentionally Defective Grantor Trust) This strategy envisions a “sale” (not a gift) of property, business interest, land, etc. to a Grantor Defective Trust. The term “defective” is used because we want the grantor, not the trust, to pay any income taxes on trust income, yet not have the asset taxed in the grantor’s estate. When the grantor is paying the income tax and not the trust, it is in effect a non-taxable benefit to the next generation because the trust doesn’t have the burden of more taxes.

The grantor essentially enters into an installment sale with the trust which typically has a term of 9 years. At the end of the ninth year, the trust owes the grantor the value of the property sold plus accrued interest on the note. here again, the interest owed to the grantor is very low (i.e., less than 2%), so the trust can use the purchased asset for 9 years and, to the extent it produced a return in excess of 2%, the excess stays with the trust. Sometimes the earnings in excess of 2% are used to purchase life insurance on the life of the grantor,

which leverages up the amount passing to the next generation from the trust.

c. Intra-Family Loan to a Life Insurance Trust In this strategy, a loan from mom and dad to a trust is made for a period of 9 years.

At the end of the ninth year, the trust owes mom and dad the balance on the loan plus interest. Again, the interest is low (roughly 2% or less). A typical strategy envisions the trust using the loan proceeds to invest two-thirds of the proceeds in a diversified investment portfolio and the other one-third in life insurance. If structured properly, the life insurance requires no further premiums at the end of the ninth year and the investment fund has grown sufficiently to pay off the loan and accumulated interest at the end of the ninth year.

Plan AheadIt is important for families to review their estate plans soon given the likelihood that many planning opportunities will end when the calendar flips to January 1, 2013. Planning now may save families significant tax dollars. Lawyers will most likely become very busy during the second half of 2012 helping clients get their estate plans in order, so don’t wait! SilverStone Group’s Wealth Transfer Team is available to discuss any of the aforementioned strategies to assist with your wealth planning needs.

Securities and Investment Advisory Services Offered Through M holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. SilverStone Group is independently owned and operated.This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney, tax advisor or plan provider. Pursuant to IRS Circular 230, we notify you as follows: The information contained in this document is not intended and cannot be used by anyone to avoid IRS penalties.

Contact Jeff Sharp | [email protected]


p r i v A T e C l i e n T S e r v i C e S | E S t a t E P l a N N I N G


Goodbye Golden erA

by Mark Weber, JD, MSFS, CLU, ChFC

Goodbye Golden erA


Although we are months away from watching the ball drop in Times Square, now is the time to review your estate and income tax portfolio with your advisors to secure advantageous planning strategies before they no longer exist.

Estate PlanningEffective January 1, 2013, estate taxes are scheduled to significantly increase. If Congress does not take action, the following changes will automatically occur:• The amount of assets one can pass to heirs without federal

estate taxes will decrease from $5 million to $1 million;• The top tax rate estate owners are required to pay will

increase from 35% to 55%; and• The amount grandparents can pass directly to grandchildren

(“generation skipping”) will decrease from $5 million to $1 million.

In addition to elevated taxes, the Administration’s 2013 budget proposes further restrictions on long-established estate planning techniques, such as Grantor Retained Annuity Trusts (GRATs), Intentionally Defective Grantor Trusts (IDGTs) and valuations on the sale or gift of certain assets.

Should these changes take effect, 2011 and 2012 will likely be remembered as the “golden era” of estate planning by future financial advisors. We currently enjoy generous estate law provisions, historically low interest rates and depressed valuations – all of which allow huge sums of wealth to be passed to heirs free of estate taxes. Although many taxpayers have already taken advantage of this incredible planning environment,

there are still quite a few who have yet to act on this fleeting wealth transfer opportunity. The type of planning necessary to take maximum advantage of the various planning strategies still available often takes several months to implement; therefore, it is risky to delay planning. Those who wait until the last quarter of 2012 may be too late. SilverStone Group recommends scheduling a meeting with your tax advisors before October 2012.

Income Tax PlanningIn addition to the increases in estate taxes, income taxes are also scheduled to automatically increase as of January 1, 2013. If Congress does not act:• The top tax rate on ordinary income will rise from 35% to

almost 44% (an increase of nearly 25%);• The top tax rate on capital gains will rise from 15% to almost

24% (an increase of nearly 60%);• The top dividend tax rate will increase from 15% to almost

44% (an increase of nearly 300%); and• A new 3.8% Medicare tax will apply to taxable investment

income (interest, dividends, capital gains, etc.) for families with adjusted gross income in excess of $250,000.

The chart on the following page illustrates the dramatic income tax increases that consumers can expect to see in 2013.

Tax advisors across the U.S. need your attention – before it’s too late! Impending legislation slated to take effect in 2013 will drastically change the wealth planning environment at the close of the year. Taxes are scheduled to increase and greater restrictions will be placed on estate planning techniques.


Again, this is not an issue taxpayers should ignore. SilverStone Group recommends visiting with your tax advisor and investment advisor before the fourth quarter of 2012 to discuss year-end tax planning.

Don’t Miss OutThe inability of our elected leaders to reach an agreement on a comprehensive tax policy has frustrated many taxpayers; however, it is important to proactively manage your wealth planning strategies and take full advantage of these fading opportunities.

For those who are vigilant and decisive, opportunities to save tax dollars still abound. Act soon – before you are forced to wave them goodbye!

Securities and Investment Advisory Services Offered Through M holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. SilverStone Group is independently owned and operated.This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney, tax advisor or plan provider. Pursuant to IRS Circular 230, we notify you as follows: The information contained in this document is not intended and cannot be used by anyone to avoid IRS penalties.

Contact Mark Weber | [email protected]

0%

10%

20%

30%

40%

50%

60%

Tax Rate Changes

OrdinaryIncome Top

Tax Rate

Capital Gains Top Tax Rate

Dividend Tax Rate

Estate Tax Rate

Medicare Tax > $250k

Tax

Rat

e %

2012 2013



by Pam McCawley, AAI

p r i v A T e C l i e n T S e r v i C e S | P E R S o N a l I N S U R a N c E

Protecting Those You Love

Keeping Your Head

above


Keeping Your Head

above

Flooding poses a severe threat in every part of the country, yet a startling percentage of homeowners do not own a flood insurance policy. Many people mistakenly assume they are not vulnerable to a flood loss because their home is not located near a large body of water. however, not every flood is the result of a tidal surge or overflowing river. Unexpected flooding has a variety of triggers, such as increased development, clogged or insufficient storm drains, and excessive rain, ice or snowfall. In fact, approximately 30% of all flood insurance claims are paid on losses occurring in low- to moderate-risk areas. Unfortunately, thousands of homeowners who experience flood damage in low-risk areas do not have coverage for a loss and are left to pick up whatever pieces remain once the waters recede. Given the widespread and unpredictable impact flooding can have, it is critical to know how to protect yourself, your family and your home.

Here are the FactsWhile floods have many causes and can occur anywhere in the country, some of the most common events that lead to flooding include:• Snow melt (caused by still-frozen ground unable to absorb

excess water)• Storm surges in hurricane-prone areas• Flash flooding caused by periods of intense rainfall• Mudslides caused by long, heavy rain periods near hills

and mountain-sides• Ice jams, which occur when an ice chunk following a river

or stream blocks dams or narrows passageways, causing overflow

• Urban development, such as new construction and/or ground paving, which can alter topography and prevent land from draining properly

Flooding is erratic in nature and leaves a deep, lasting impact. It can hit during any season, in any part of the country. Want to protect yourself from a flooding disaster? keep reading.

Flood CoverageA typical homeowners policy excludes losses caused by flooding, and government assistance (federal or state) is not easy to obtain. A separate flood policy is needed to adequately cover the losses sustained by your property in the event of a flood. Coverage will be provided for items such as:• Structural damage correction• Furnace, water heater and air conditioner repair/replacement• Flood debris cleanup• Floor surface repair/replacement (carpeting and tile)

Flood policies that cover the contents of your home (such as furniture, collectibles, clothing, jewelry, etc.) can also be purchased for added security.

Adding Things Uphomeowners can insure their properties up to $250,000, with an additional $100,000 for contents. yearly premiums for flood policies in low- to moderate-risk areas average approximately $355, while premiums for high-risk areas can range up to $2,734. Flood insurance premiums are based on a number of factors, including but not limited to:• Whether or not the home is located in a flood zone• Building occupancy (i.e., single family, 2-4 family dwelling)• Building type (i.e., 1 floor, 2 floors, split-level, manufactured)• Whether or not the home has a basement• Date of construction

If you had the opportunity to protect your home, your finances and your sense of security from the nation’s most common natural disaster, you would – right?



• Whether or not the home is in a primarily residential area • Whether or not the location has ever experienced a flood loss

or received disaster assistance resulting from a flooding event

Opportunity to SaveSome homeowners have the opportunity to obtain affordable flood coverage through the Preferred Risk Policy (PRP). This policy was created to provide inexpensive coverage for properties located in low-risk flood zones that meet certain underwriting criteria. The PRP is available for building and contents packages.

you can qualify for a PRP or a combined building and contents package if:• you own a 1-4 family dwelling• your property is located in one of the low-risk flood zones

designated by the Federal Emergency Management Agency (FEMA) (B, C or x) as of the effective date of the policy.

• your property has not experienced two flood claims or disaster assistance payments, each more than $1,000, or three flood claims or disaster assistance payments, regardless of amount

For a complete listing of subcategories and tools to map out the zone in which your home or business falls in, visit www.floodsmart.gov – the official website of the National Flood Insurance Program (NFIP).

Keep in MindNot all water losses are considered flood damage. For damage to be covered under a flood insurance policy, the following definition of a flood applies:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow, inland or tidal water, or unusual and rapid accumulation.1

If water damage in your home does not meet the above criteria, it may be covered under your current homeowners insurance. For example, if an appliance leaks or a pipe bursts and causes a loss, you can file a claim with your existing homeowners policy for help with the repairs to your home.

Consult an ExpertThere are many misunderstandings regarding the parameters of flood insurance. At SilverStone Group, we can provide helpful information about the NFIP and its coverages to alleviate the confusion and highlight the program’s various benefits. Our Property & Casualty Team is ready to guide you to a policy that suits your individual situation and protects you from the risks associated with flooding.1 “National Flood Insurance Program Summary of Coverage.” FEMA. Accessed on February 16, 2012

at www.floodsmart.gov/floodsmart/pdfs/NFIP_Summary_of_Coverage.pdf

Contact Pam McCawley | [email protected]

Unfortunately, thousands of

homeowners who experience flood

damage in low-risk areas do not have

coverage for a loss and are left to pick

up whatever pieces remain once the

waters recede. Given the widespread

and unpredictable impact flooding

can have, it is critical to know how

to protect yourself, your family and

your home.

C o n S u l T i n g S e r v i C e S | h U M a N c a P I t a l



Capitalizing on Your

netw

ork

In recent years, social networking has received more attention with the introduction of sites like LinkedIn, Facebook and Twitter, all of which enable users to access and expand their social connections online. Social networking is often discussed in terms of who is connected to whom and how those relationships and connections can be leveraged to benefit someone from a personal or professional standpoint. The focus of this article is twofold: 1) To discuss how employees’ social networks in the workplace can influence their thoughts, attitudes and behaviors; and 2) To discuss how social networks can be leveraged from a business standpoint.

An Infectious ImpactSocial networks are driven by the forces of connection (who is linked to whom) and “social contagion.” According to Group Dynamics author Donelson R. Forsyth, social contagion is the spread of thoughts, attitudes and behaviors through crowds and other types of social aggregations from one member to another.2 Contagion in social networks has been studied in relation to a multitude of topics including emotions, smoking, divorce, employee motivation, performance, burnout and job satisfaction.

For Example: Social and organizational psychology professors from Utrecht University in the Netherlands examined burnout

contagion in 1,849 Intensive Care Unit (ICU) nurses. These researchers predicted that burnout could spread from one nurse to another when burnout-related comments were made. In this study, the participating nurses filled out questionnaires pertaining to their job demands, workload in the ICU, decision-making latitude, perceived burnout complaints among colleagues and actual burnout. The researchers concluded that nurses who regularly collaborated did in fact “catch” the negative feelings, cynical attitudes and impaired job behaviors of their colleagues.3 This study demonstrates what many of us have probably experienced in the workplace. That is, the attitudes and

behaviors of one employee can spread to another and eventually infect the entire workgroup.

Nicholas A. Christakis and James h. Fowler, authors of Connected: The

Surprising Power of Our Social Networks and How They

Shape our Lives, have also published several

pieces of work on social contagion

in various networks. According to these authors, our connections can influence

our thoughts, attitudes and behaviors. Therefore, if you are connected

to the right people, you may be influenced in ways that positively affect your career and personal life. Conversely, if you are connected to the wrong people, their negative influence may be detrimental in those areas of your life.4 Consider your social network – especially those individuals you are connected to and influenced by at work. Do those individuals impact you


While the term “social network” seems to be a fairly new addition to our daily vocabulary, this phrase was actually coined over a half century ago by J. A. Barnes. According to this sociology professor, a social network consists of an association of people drawn together by family, work or a hobby. Today’s use of the term has expanded to include customers and fans.1

in a positive way and influence you to be more engaged at work, participate in wellness initiatives, community activities, etc.? Or do those individuals impact you in a negative way and influence you to slack off at work, withhold effort, engage in counterproductive work behaviors, etc.? Think about the answers to these questions. Decide what actions you may need to take, if any, to improve your social network – particularly in the workplace.

Business LeverageAnother interesting point worth exploring is how social networks can be leveraged from a business standpoint. While formally diagramed relationships based on the organizational structure of a business serve a purpose, so can the informal relationships that exist in the workplace. Rob Cross, Associate Professor at the University of virginia’s McIntire School of Commerce, has documented his work on applying social network analysis to critical business issues in his 2009 book Driving Results through Social Network Analysis: How Top Organizations Leverage Networks for Performance and Growth. Cross recommends assessing and managing social networks to identify the

“invisible” aspects of an organization (informal relationships among co-workers). This information can be used to better align people around strategic objectives, execute essential processes and adapt to change. Once invisible relationships are made visible, leaders can better understand the people, resources and relationships at their disposal.

Invisible relationships can be uncovered through an Organizational Network Analysis (ONA), which involves collecting survey data from employees and analyzing it with organizational network software. Essentially, an ONA provides an x-ray of the inner workings of a business. This analysis can show how information flows in the organization, who collaborates with whom, peripheral and central people to the business and subgroups that may exist within a network.

This information can be vital to performance and strategy execution and may be used to promote efficiency within an organization.5

For Example: A pharmaceutical company benefitted from social networking during the development of a breakthrough medication for a form of blood cancer. This particular drug was granted the fastest possible approval by the FDA for a cancer drug.6 The internal networks that helped create this groundbreaking medication were not formal networks that could be found on the drug company’s organizational chart. Rather, this drug was the product of an informal network consisting of internal and external relationships characterized by collaboration and the right amount of risk-taking. The network characteristics that enabled this team to take such an innovative approach did not arise on their own – they were the result of management’s strategic decisions that enabled such a network to develop. Conducting an ONA in your organization and utilizing a social network strategy could be exponentially beneficial when executing your own business goals.

Get Connected Social networking is not a new concept, but one that is often reinvented and used in exciting and innovative ways. It is important to know who is in your social network and how those connections can impact your personal and professional life. Consider social networking beyond the realm of how your connections may benefit you and consider how those connections influence you – both positively and negatively. For employers, it is important to become familiar with the social networks that exist within your organization and how you can leverage those networks for business purposes. This information is at your fingertips – now is the time to evaluate it and begin using it to your advantage.1 PCMag.com. 2012. Accessed on February 20, 2012 at www.pcmag.com/encyclopedia_term/

0,2542,t=social+network&i=55313,00.asp.2 Forsyth, Donelson. 2010. Group Dynamics (5th ed.). Belmont, CA: Wadsworth. 3 Bakker, Arnold, Pascale Le Blanc, & Wilmar Schaufeli. 2005. “Burnout Contagion Among

Intensive Care Nurses.” Journal of Advanced Nursing, 51, 276-287. 4 Christakis, Nicholas & James Fowler. 2009. Connected: The Surprising Power of Our Social

Networks and How They Shape our Lives. New york: Little, Brown and Company. 5 RobCross.org. 2009. Accessed on February 23, 2012 at www.robcross.org/networkona.htm.6 Cross, Robert & Robert J. Thomas. 2009. Driving Results Through Social Network Analysis: How

Top Organizations Leverage Networks for Performance and Growth. San Francisco: Jossey-Bass.

Contact Ashley Thomalla | [email protected]



i n T e r n A l h A p p e n i n g S | P E o P l E & c o M M U N I t y

SilverStoneGroup

Standing OutfromtheRest

Recent RecognitionUnder the guidance of the third generation of the Nelson family, SilverStone Group has created a team of nearly 200 highly trained professionals with backgrounds in law, actuarial science, insurance underwriting, accounting, financial services and human resource consulting, just to name a few. SilverStone Group is pleased to announce a new addition to their Omaha headquarters' staff, and an Associate recognized as the "Best of the Best."

“In Everything We Do, Our People Make the Difference.”

– J o h n p. n e l S o n


Joe Hefflinger Joins Our Private Client Services Team

J o e h e F F l i n g e r | W E a l t h a d v I S o R | P R I v a t E

c l I E N t S E R v I c E S

J e F F S h A r p | P R I N c I P a l | Q U a l I f I E d P l a N

I N v E S t M E N t S & P R I v a t E c l I E N t S E R v I c E S

Jeff Sharp Among "Best of Best" Financial Advisors Attending Baron's SummitJeff Sharp attended the fourth annual Barron’s “Winner’s Circle Top Independent Advisors Summit,” hosted by Barron’s magazine to promote best practices in the industry and the value of advice to the investing public. The invitation-only conference was held at the JW Marriott Desert Ridge, March 21-23 in Phoenix, AZ.

Sixty-five of the Top 100 Independent Financial Advisors in the U.S. (as ranked and published in Barron’s August 29, 2011 issue) were in attendance. This annual ranking is the basis for the Top Independent Advisor’s Summit and the advisors are chosen based on the volume of assets overseen by the advisors and their teams, as well as the quality of the advisors’ practices. The Top 100 Independent Advisors are comprised of Registered Independent Advisors and Advisors from Independent Broker Dealers.

“The work these independent advisors do and their influence will only increase as the nation’s Baby Boomers plan for retirement and all Americans nurture their portfolios and husband their businesses through difficult times,” said Ed Finn, Editor and President of Barron’s. “This Summit brings together the industry’s leaders from across the country and provides a forum where they can address the key concerns of their clients and develop solutions to their financial-planning needs.”

Jeff Sharp was one of approximately 350 financial advisors who were either selected by Barron’s or their affiliated firm to participate in the event.

As a wealth advisor, Joe will help his clients identify and prioritize their financial goals by tailoring a customized investment, insurance and retirement strategy to work towards achieving those goals. Joe’s clients include business owners, executives, professionals and those at or nearing retirement.

Prior to joining SilverStone Group, Joe served six years as an attorney with the law firm of koley Jessen P.C. in Omaha, Nebraska where he practiced law in the areas of Corporate/General Counsel, Mergers & Acquisitions, Tax Planning and Securities. While an attorney, Joe authored articles that were published in the Nebraska Law Review, as well as the Nebraska Lawyer Magazine. Joe’s experience as a lawyer in structuring transactions and planning for individuals and corporations allows him to see many alternatives for each situation.

Joe graduated from Creighton University with his Juris Doctorate and received his Bachelor of Science from Santa Clara University.

i n T e r n A l h A p p e n i n g S | N E W S & E v E N t S

SilverStone Group Recognized with Eighth PAR Award by Assurex GlobalBy definition, par excellence means being the best of a kind or preeminent (Merriam-Webster). For the eighth year in a row, Assurex Global has recognized SilverStone Group with the PAR Excellence Award. This honorable distinction is granted to a select group of agents and brokers in acknowledgment of their employees’ total commitment to excellence in client service and quality management.

“Receiving the PAR Excellence Award the first time illustrates years of hard work and continual improvement to your consulting practice. Eight years running is a true testament to the dedication and desire to provide only the best consulting services to our clients,” said Robyn Larson, Project Manager in Group Benefits. Assurex Global, a worldwide network of insurance brokers, sponsors the PAR Quality Management Program and the annual quality award.

Our Chairman, John P. Nelson, proudly accepts this award, stating, “We consider ourselves fortunate to have a team of Associates that work together and respect one another. Their common focus is giving the best possible service to our clients.”


SilverStoneGroup

Standing OutfromtheRest

SilverStone Group Honored with Bronze Safest Companies AwardSilverStone Group has been recognized for the first time with the Nebraska’s Safest Companies award. Companies qualify by designing unique safety initiatives with the goal of bettering their company. The award, which was of Bronze honor, is given to first-year recipients. Joe Freeman, SilverStone Group’s Safety Engineer-ing Manager, will accept the award on behalf of the company and shared, “This acknowledgment reflects our company’s wide dedication to safety and will hopefully be the first of many.”

“SilverStone Group achieved the Bronze Award,” said kay Farrell, President/CEO of the National Safety Council, Nebraska. “They have undergone an extensive review by the Nebraska’s Safest Companies Awards Committee, which is made up of safety professionals representing a broad variety of industries and safety disciplines. The performance, results and achievements of SilverStone Group’s workplace safety program were all taken into consideration.”

A luncheon was held at the Embassy Suites, Lavista Conference Center on May 17, 2012 to honor each company. keynote speaker Garrison Wynn delivered a presentation entitled “Making the Most of Difficult Situations: Communicating Safety.”

SilverStone Group Listed as Number One in Employee Benefits Category SilverStone Group has been voted number one in the Employee Benefit Company Category for 2012. Omaha Magazine has produced the annual ranking of the city’s best for 20 years by creating the Best of Omaha program. The program caters to both Omaha residents and visitors, providing them with a categorized list of the best the city has to offer. Over 10,000 voters participate in the selection process via an online ballot that is audited to ensure accurate results.

Brett Sesker, Principal & Senior Consultant, accepts this award with pride, stating, “We have a talented Grou Benefits Team of 45 Associates who constantly strive to meet and exceed expectations of our clients. It is an honor to be recognized.”

SilverStone Group Named to United Way’s “Fab 45”United Way is a powerful partnership of people and organizations who care about our community's future. United Way's mission is to improve lives by mobilizing the caring power of the Omaha-Council Bluffs-Bellevue community. SilverStone Group Associates raised over $50,000 in employee, corporate and retiree gifts to aid in their cause. Together, we create life-changing opportunities in Education, Financial Stability and health – the building blocks of a good life – so our neighbors can grow stronger and remain independent.



Hong kong

Where on earth have you taken your

SilverStone Group hat?

Whenyou’reouttravelingtheland,keepyourSSGIcapinhand.

fromthevastmountainpeakstothebusyurbanstreets,

Snapaphotoofyourselfatafamoussite,andourassociatesyouwillexcite.

Sendyoursnapshotsbye-mailandthebestphotoswillprevail;

Remembertoshowourlogoorelsethephotoisano-go.

We’llpostthebestpicturesonline,soletyourcreativityshine!

Don't have a hat? visit with your Account manager.

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silverstone-group-hats.html

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Internal Contest Winning Photo by Betsy Allerton


SilverStone Group's Wellness Activities Group (WAG) attended the Wellness Council of the Midlands (WELCOM) Lunecheon and 30th Anniversary Celebration on April 12, 2012 where Elizabeth Smart was the key speaker. This luncheon recognizes Platinum, Gold, Silver and Bronze Well Workplaces based on the level of the company's wellness program. Currently, more than 50 companies throughout the state of Nebraska have received this prestigious national designation. SilverStone Group was one of seven companies awarded the Gold Award for Well Workplace.

i n T e r n A l h A p p e n i n g S | W E l l N E S S a c t I v I t I E S G R o U P

SilverStoneGroup’s

WAGPracticesWhatWePreach

Well Workplace Gold Award

W i l l i A m m . k i z e r | F o u n D e r o F W e l C o m , r e B e C C A

v i n T o n D o r n | e x e C u T i v e D i r e C T o r o F W e l C o m ,

g o v e r n o r D A v e h e i n e m A n , W A g C o m m i T T e e C o -

C h A i r S m i C h e l l e h A n S e n & m e r l e r i e p e , D r . J o A n n

S C h A e F e r | n e B r A S k A ' S C h i e F m e D i C A l o F F i C e r

Red Cross Blood Drive

In April, WAG hosted our first American Red Cross Blood Drive for 2012. The Red Cross set up in our Omaha office and 22 Associates donated the generous life-saving gift of blood. Each year, the Red Cross collects over 6 million units of blood, and during 2010 – 2011 SilverStone Group Associates donated 60 units. Thanks to all who donated and a special thanks to Pat Spieler for coordinating!


SilverStoneGroup’s

WAGPracticesWhatWePreach

Spring Corporate ChallengeThis spring, 26 SilverStone Group Associates participated in WAG’s Corporate Challenge. This six-week-long contest included a kettlebell workout program requiring compliancy with a healthy diet and Russian kettlebell Certified (RkC) training through SG human Performance (an Omaha-based kettlebell training facility).

A total of four teams were formed, including spouses and significant others, all competing to gain the highest cumulative score. Points were earned based on each individual's performance in workouts and nutrition compliancy. Each participant set a personal goal, such as body fat reduction, strength training improvement or reaching a desired weight. Thorough measurements were taken every two weeks and participants were required to log their food intake and exercise schedule. The challenge participants had plenty to brag about! As a whole, participants lost a total of 58 pounds and decreased their body fat by 16.8%, while increasing their body muscle by 15.8% and lowering their body mass index (BMI) 10.5 points.

At the beginning of the contest, each team selected a charity to receive a donation in the winning team's name. This spring the check was awarded to Children’s Respite Care Center, a local, non-profit organization which focuses on the holistic development of children with special needs. The organization provides an array

of programs designed specifically for those children, enabling them to reach their maximum potential in terms of health, well being, and social and cognitive development. SilverStone Group is proud to support such a powerful organization.

S p r i n g C o r p o r A T e C h A l l e n g e W i n n i n g T e A m

B e n e F i T T i n g T h e C h i l D r e n ' S r e S p i T e C A r e C e n T e r

p i C T u r e D l e F T T o r i g h T : T o D D r o g g e , m i C h e l l e

h A n S e n , S u S A n g i e r A S C h , A m Y B o W e n ( S g h p ) ,

S h e l lY l A n g , n i k k i S n o W ( S g h p ) & A m B e r B u r k

( C h i l D r e n ' S r e S p i T e C A r e C e n T e r ) . n o T p i C T u r e D :

J A n e T r o g g e & m e g A n g i e r A S C h .


i n F o r m AT i o n t E c h N o l o G y

m A r k e T i n g & c o M M U N I c a t I o N S

Pamela Terryi know how hard it is to find solid quality people to work for any

organization and i want you to know that pamela Terry is such a

pleasant and professional first impression at SilverStone group.

She always remembers who i am, calling me by my first name,

and typically always knows who i need to see even if i do not

have an appointment.

it’s always great to hear good things about your people and

i just wanted you to know pamela does great work for

SilverStone group.

Jackie Schultei just want you to know you are one of those folks who impress

and inspire me to go above and beyond in delivering results.

Thank you for being a role model!


Renee Nolte & Dani McCawleyrenee and Dani (and anyone else) did an excellent job preparing

the packet materials as well as the powerpoint presentation.

We had several people indicate the information was so well

presented that they had no further questions. i also appreciate

the extra time you took to review what we needed to do for

contributions and to ensure we were taken care of.

We couldn’t have gotten this far in the changes to the retirement

plan without you and everyone’s help at SilverStone group.

r i S k M a N a G E M E N t

Joe SchaffnerJoe and i share the same business values as well as confidence

in our respective work. he is knowledgeable, professional and

a straight shooter. he delivered what he said he could. he

and SilverStone group were very accessible and very prompt

in returning my calls and in delivering what i requested. i will

definitely do business with him and his group again.



Amy DeJongThank you so much for your quick response and your wealth of

knowledge. You'll never know what a new and great experience

this is for me to have you as a resource.

p r i v AT e C l i e n T S E R v I c E S

Kathy Leithi wanted to drop you a short note and commend kathy. her

dedication to details, customer service and ability to see the big

picture are simply outstanding. This is my experience with her

on every client request. if what she has is contagious, we should

make her stand next to everyone…including some of us during

some harried days! i know we are all very busy these days, but

i think it’s important to stop, even for a moment once in a while,

to recognize people like kathy who perform this way day in and

day out, so that we don’t run the risk of taking them for granted.


John Carlson & Susan Gieraschi recently attempted to complete a broker services survey, but

i had trouble submitting it. i’ve decided to contact you directly

to let you know there are no better consultants to be found.

i’m sure John takes time off, but you would never know it!

he always makes sure i receive the best and most efficient

help, even when he is out of the office. i am thoroughly

impressed with the reliable, top-notch service and consulting

advice John and Susan provide – they rock!

SilverStone Group is Poppin’ Tabs for

Ronald McDonald House Charities

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SilverStone Group Associates have donated over 266,000 pop tabs to Ronald McDonald House Charities.

A pop tab is made of 100% aluminum, making them more valuable than the

can themselves. Once the tabs are gathered, the collection is weighed at a

local recycling center to determine their value. The proceeds help to

create, find and support programs that directly improve the health and well being of children in our community.

That is Wisdom at Work.


SilverLink Committeeo Linda Askewo virginia Collinso Barb Daleo Bill Foxo Michelle hansen | Layout o Pat hillero Lizanne Steneo Dana votava

Editorial Boardo Rachel Buser | Lead Editoro katie Jacobso katie Rockwello Pamela Terryo Cindy Tullyo Erin Weekly

Securities and Investment Advisory Services offered through M Holdings Securities, Inc. a registered Broker/Dealer and Investment Advisor Member FINRA/SIPC. SilverStone Group is independently owned and operated. This material is not intended to present an opinion on legal or tax matters. Please consult with your attorney or tax advisor, as applicable.The SilverLink is published by SilverStone Group, Incorporated . ©Copyright 2012, All Rights Reserved

Cindee AdamsThis past January during national mentor month, Cindee

Adams was honored by the State of nebraska and governor

Dave heineman for her outstanding service as a volunteer

mentor to omaha youth. Cindee has been mentoring for 4 years

through the Teammates program, an organization dedicated

to positively impacting the world by inspiring young people

to reach their full potential. She has been paired with her

current mentee for the past 2 years and they meet on a weekly

basis, enjoying friendly competition through board games,

cards and computer games. Cindee also helps her mentee with

homework and they attend Teammates sponsored activities,

such as Creighton basketball and baseball games. She looks

forward to her time with her mentee each week and is happy

to encourage continued education.

Cindee is eager to assist anyone who is interested in becoming

a Teammates mentor. if you would like to make a positive impact

in a child’s life, contact her today at [email protected].

Terry KovacsTerry played an integral role at SilverStone group for 17 years. her

professional expertise and work ethic will be sincerely missed. From

the entire SilverStone group Team, we wish Terry the best in her

retirement years. The following note was sent to John h. nelson by

a long-time commercial and private client of the Firm:

"i wanted to mention a call i received a short while back from Terry

kovacs. She called to tell me she was about to retire and wanted me

to know how much she enjoyed working with me over the years. it

was really a nice gesture and conversation, and i would be remiss

if i didn’t let you know what a great job she did for me – she was

as competent and helpful (always) as she was fun and pleasant to

work with. if i still had a business she would be The model for my

customer service staff."

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