March | April 2016 | Vol. 12 No. 2 A publication of the Wisconsin Institute of CPAs | wicpa.org
The
valued expert
Lisa M. Cribben,
CPA/ABV, ASA, CMA Partner, Wipfli LLP |6
Plus: Tap into your role as a CPA for M&As | 10 Create the best HR action plan for your business | 28 Why HSAs are a tax-saving deal for employers and employees | 30
A publication of Wisconsin Institute of CPAs | wicpa.org
March/April 2016 Vol. 12 No. 2
6 Features
Columns
6 The valued expert Lisa M. Cribben, CPA/ABV, ASA, CMA used merger-and-acquisition expertise to enrich clientele and start her family’s business. By Cynthia M. Hodnett
26 TAX Top 5 tax issues in mergerand-acquisition transactions Consider top five merger-and-acquisition tax issues for an easier transition. By Christa M. Baldridge, CPA and Ann E. Hanna, MBA, CPA
10 Tap into your role as a CPA in mergers and acquisitions Help your clients avoid common pitfalls and maximize their businesses’ ROI during transactions. By Gordon L. Meicher, CPA 14 LinkedIn: A modern tool for M&A due diligence LinkedIn, the world’s largest business professional database, can be a gold mine during every phase of your merger-and-acquisition due diligence. By Wayne C. Breitbarth, CPA 18 How internal audit can assess and support culture Audit practitioners can play a key role in identifying culture weaknesses and hidden risks in their companies. By Samantha White 20 American Institute of CPAs proposes expanding joint venture with CIMA The AICPA and CIMA are proposing to integrate their operations, strategy and management through a newly formed association. By the AICPA Communications Team wicpa.org
26 30
28 HUMAN RESOURCES HR: Are you asking yourself the right questions? Create a successful HR action plan for your company by answering eight crucial questions. By Christopher Penasa 30 FINANCIAL PLANNING Health Savings Accounts: Better than sliced bread New 2016 HSA rules can provide appealing tax-saving deals for employers and their employees. By Robert A. Buss Jr., CPA, CEBS
Departments 2
Odds & Ends | news briefs
3 Outlook | chair’s letter 5
Membership Matters | member benefits
13 In Touch | president & CEO’s message 24 Kudos | members in the news 24 Memorials | departed members
On Balance
March | April 2016
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Odds & Ends Middleton CPA firm named among best companies to work for in 2015
2013 Apex Award for Publication Excellence
2015–2016 WICPA OFFICERS/BOARD MEMBERS Chair Jean M. Hansen, CPA, MBA, CGMA Chair-elect Steven G. Handrick, CPA, CGMA Secretary-treasurer Joy L. Hertlein, CPA, CGMA Directors Lucien Beaudry, CPA, J.D. Kyle J. Beld, CPA Ryan Hanson, CPA, CGMA Katherine L. Hauser, CPA, MBA, CGMA William L. Komisar, CPA, J.D. Matthew A. Los, CPA Scott Miller, CPA, ABV, PFS, CVA Gregory L. Ryan, CPA Wendi M. Unger, CPA AICPA Council Neil R. Keller, CPA, ABV, CVA Nicholas S. Lascari, CPA, CEA, CGMA President & CEO Dennis F. Tomorsky, CPA, J.D., CGMA Chief Financial & Operating Officer Tammy Hofstede Vice President of Communications Amy E. Gaeth Editor Cynthia M. Hodnett Copy Editor Joan Bahr Design & Layout Kathleen Hess
Meicher CPAs, LLP in Middleton, was recently a finalist for In Business magazine’s “Best Companies to Work For 2015.” Established in 1981, Meicher CPAs offers a full range of tax and accounting services and has extensive experience in a variety of areas.
Komisar Brady & Co. joins CliftonLarsonAllen Komisar Brady & Co., LLP in Milwaukee joined CliftonLarsonAllen (CLA), effective Jan. 1. Komisar Brady continues to serve clients locally and nationally from its current location. Its services include accounting and small business, auditing, tax and health care consulting.
Wegner CPAs presents its international staff exchange program Wegner CPAs presents its International Staff Exchange Program. The program is designed to exchange staff among other participating accounting firms for an arranged period of time. During the exchange, staff will be presented with opportunities to gain international experience, both professionally and culturally. The program allows the firm’s staff the opportunity to share and learn best practices, make connections and ties across borders, learn other cultures and promote the sharing of ideas.
Support Assembly Bill 226 The WICPA recently expressed support for Assembly Bill 226 (http://tinyurl.com/supportab226) to reduce the disparity in interest rates between overpayments and underpayments in Wisconsin. Share your thoughts regarding the bill and this issue with your legislators (http://maps.legis.wisconsin.gov/).
New report reviews sociological, economic effects of family business succession The sociological and economic effects of the family business succession process are highlighted in the report, “Succession reset: Family business succession in the 21st century” (http://tinyurl.com/btreport). The report is a joint effort between Baker Tilly International, Baker Tilly Pitcher Partners and Swinburne University.
Advertising Manager Ellen Engel Printing The Printery, An RR Donnelley Company
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On Balance is published six times a year by the Wisconsin Institute of Certified Public Accountants (WICPA). Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha WI 53188; Phone: 262-785-0445 or 800-772-6939 (WI/MN); Fax: 262-785-0838; email: jessica@wicpa.org. Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2016 On Balance.
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WANT YOUR BUSINESS MENTIONED IN ODDS & ENDS? Email your announcement to cynthia@wicpa.org.
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{ Outlook | chair’s letter } “In conclusion, our WICPA membership foundation is solid, but there is much more effort required to remain The Standard Above™."
The WICPA rocks!
H
ard to believe how fast time flies! This is my last article for On Balance as your board of directors chair. I take away so many positive experiences of being a proactive ambassador of the WICPA. First, the WICPA is an exceptional organization that understands the evolving CPA profession inside-andout. Second, our membership is built on a trusted brand committed to providing the highest quality of career development. Most importantly, how can we personally impact others around us for the good of the profession?
Accounting evolution The AICPA has developed their perspective on the accounting evolution process. A future that’s bright for our profession, but filled with both extraordinary and unexpected opportunities. The WICPA works with the American Institute of CPAs to get the pulse of the public marketplace. The key is to identify ways to get ready for the next generation of accounting professionals, along with the next wave of workplace norms, and support our members with relevant information to help them succeed.
Career development Although it is great strategy to build your career on your strengths, it’s important to challenge yourself. The WICPA offers a menu of continued education from conferences to online courses. Visit wicpa.org, and take advantage of this one-stop membership experience. Learning new things that don’t come easily improves your life skills. It gives you experience pushing through fear and self-imposed limits. It trains you to be more purposeful. It keeps you marketable and makes you well-rounded.
Make an impact Together we can accomplish much more. Get involved. Let your WICPA membership network partner with your
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career growth. Find your passion or something of interest, start small, and be open to where this leads. The benefits will begin to reveal themselves in the most subtle ways. The relationships you create will be amazing. Remember when you make an impact; great things are bound to happen. It’ll start having a positive impact in many areas of your life. In conclusion, our WICPA membership foundation is solid, but there's much more effort required to remain The Standard Above™. We need to continue to promote the WICPA, as well as the CPA profession. Thank you for making my chair tenure both successful and rewarding. It's been a pleasure to work as your WICPA chair, and I'll truly miss all the great individuals I met along the way. I'll take with me fond memories, valuable skills, and I hope to one day leave an impression on others similar to the one the WICPA membership has left on me. The WICPA rocks!
Jean M. Hansen, CPA, MBA, CGMA is CFO/ vice president-finance at Manitowoc Tool & On Balance March | April 2016 Machining LLC. Contact her at 920-682-8825 ext. 114 or jhansen@mantool.com.
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2016
Night Races at the
T H U R S DAY, M AY 5 , 2 0 1 6 F L O R I A N PA R K , G E R M A N TOW N
Be our guest at this Triple Crown event that’s not to be missed! It’s the WICPA’s largest membership event of the year and we hope you can attend! Join us in the Winner’s
Circle as we …
• Honor 2016 WICPA Excellence Awards recipients for dedication and service. • Recognize and thank 10, 25 and 40-year members for membership longevity. • Elect the 2016-17 WICPA Board nominees to the WICPA Board of Directors.
Get your ticket now! wicpa.org/banquet
Complimentary registration for members. Guests $40. RSVP by Wednesday, April 20, 2016.
Thank you to our event sponsors: Event & Excellence Awards Sponsor:
Event sponsors:
{ Membership Matters | The Payroll Company } “With a mission to “earn and retain relationships by providing peerless solutions and customer support,” TPC is poised to provide custom-tailored engagements to meet acute HR needs. ”
HR headache? Take two aspirin and call The Payroll Company
Y
ears ago, it was common for businesses to manage all their own human resources needs. Hiring, training, payroll and benefits administration were handled internally. But in the mid-1980s, things began to change. Human resource management was viewed as a strategic function, with concerns and concepts integrated into overall strategic planning. This forward-thinking view allowed companies to meet the challenges that come with rapid change, intense competition and more efficient operation. The Society for Human Resources Management (SHRM) cites six main reasons that companies outsource HR needs: to save money, focus on strategy, improve compliance, improve accuracy, to take advantage of technological advances or because they lack the resources in-house.
Payroll programs that pay off The Payroll Company (TPC), a WICPA supporter and affinity partner, assists companies of all size with their human resources needs. TPC offers an array of cloud-based solutions that integrate HR, payroll, talent, time, tax and benefits administration, 401(k) record keeping services, and regulatory compliance expertise. With a mission to “earn and retain relationships by providing peerless solutions and customer support,” TPC is poised to provide custom-tailored engagements to meet acute HR needs. CEO Eric R. Schroeder, CPA and WICPA member, founded the company in 1999 in Middleton. While the company name makes clear their expertise in payroll
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processing, TPC offers more. Visit the company’s website at payrollcompany.biz for a listing of its services and solutions. You’ll also find TPC as an invaluable resource for cuttingedge information. With topics ranging from maximizing 401(k) contributions to Affordable Care Act changes for 2016, subscribe to TPC’s blog at http://www.payrollcompany.biz/articles/blog/. TPC is a committed sponsor of WICPA conferences. Look for the company at the WICPA CPAs in Industry Spring Conference and other events throughout 2016. As an affinity partner, WICPA members receive discounted payroll processing. As you look to streamline or outsource HR management needs, consider The Payroll Company. Learn more about The Payroll Company and all member benefit offerings in the WICPA’s Member Benefits Marketplace at http://www.wicpa.org/content/marketplace.aspx.
Ellen Engel is the advertising manager at the WICPA. Contact her at 262-785-0445 On Balance March | April 2016 ext. 4513 or ellen@wicpa.org.
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The
valued expert Lisa M. Cribben, CPA/ABV, ASA, CMA uses her merger-and-acquisition expertise to enrich clientele and start her family’s business
T
he multiple stacks of outdated computer monitors, hard drives and other electronics that line the floors of New Starr Solutions in Green Bay might be worthless to some. However, to the business’ owner, Steve Cribben, they’re a gold mine. Steve started the electronics recycling business four years ago with the help of his wife, Lisa M. Cribben, CPA/ABV, ASA, CMA. New Starr Solutions is one of several businesses Lisa Cribben, a partner at Wipfli LLP in Green Bay, has helped value, purchase and/or sell during her accounting career.
BY CYNTHIA M. HODNETT 6
On Balance
March | April 2016
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Photography by Adam Ryan Morris
Lisa said assisting her husband with his electronics recycling business gives her the perspective as a business owner. wicpa.org
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Lisa talks with her husband, Steve, at the family’s electronics recycling business. “Lisa and I looked at a similar business I was interested in buying or partnering with,” he said. “After Lisa reviewed and analyzed the financial data, we decided starting my own business would be a better investment. Lisa was able to give me financial and business advice when I first started, and she continues to be involved with the accounting and tax paperwork.” Lisa said assisting her husband with his business gives her the perspective as a business owner, which in turn, assists her when working with her clients. “Working with your spouse, they don’t always listen to your advice,” she said with a laugh. “He does well, and I think he learned a lot along the way. Running a business, making the mistakes and seeing what works is a great learning experience for both of us."
“I jumped at the chance”
Lisa majored in accounting at the University of Wisconsin-Green Bay (UW-Green Bay). As an undergraduate, she interned at Wisconsin Public Service (WPS), a regulated utility serving Wisconsin and Michigan. She earned her accounting degree from UW-Green Bay and certified public accounting license in 1992. That same year, she began working full-time at WPS, gaining an array of experiences including cost and financial analysis, plant operations, implementing a large accounting system, and due diligence for acquisitions of power facilities. “When I graduated from college, I really didn’t know there was a full-time opportunity to do valuation and M&A (mergers and acquisitions),” she said. “I knew I enjoyed analyzing financial information, problem solving and cost accounting work. I knew I wouldn’t enjoy auditing and tax. I really enjoyed the acquisition work at WPS. When I had the opportunity to do it full time, I jumped at the chance.”
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In 1999, after the birth of their first child, Lisa landed at Wipfli in Green Bay, working in Wipfli’s valuations and transaction support area. “Going from private industry to public accounting, you take a slight step backwards because it is different work and you have to go into learning mode again,” she said. “However, I knew I enjoyed the work.” When she started at Wipfli, she worked a reduced schedule to balance work and family life. Later, after the kids were older, she started working full-time again.
In demand
After working for Wipfli for 10 years, Lisa had the opportunity to become the chief financial officer at a senior living company. However, after one year, she realized she missed the work she was doing at Wipfli. “At Wipfli, I enjoy the variety, the people, and the ability to find solutions to different problems,” she said. “In the Valuation and Transaction Support area, I really enjoy the negotiating, explaining what’s creating value, looking at ways to improve value, and assessing risk factors for future performance.” About 70 percent of her clients are in health care and are located throughout the U.S. She sees an increasing demand for valuation, mergers and acquisitions services in many markets, including health care. “The changes in the economy and baby boomers looking to retire is driving demand for valuation and M&A services,” she said. “We work with companies ranging in size from under $1 million in sales to companies with over $200 million in sales. Clients may be looking to transition, need a valuation for litigation or regulatory purposes or a business looking to grow and expand.” Karen A. Monfre, CPA, partner, Valuation Litigation
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and Transaction Services at Wipfli LLP in Green Bay, said one of Cribben’s core strengths is her tenacity. “When negotiating transactions where substantiation of value is required for regulatory compliance (such as in health care or nonprofit settings), or defending her valuation in a litigation setting, she does not back down until the opposing party acknowledges the merits of her argument,” Monfre said. “There isn’t always a way to measure who ‘won’ in a transaction, but she is very good at persuading people to her way of thinking. She is also creative at presenting options to bridge parties that are at odds. Lisa is intelligent, efficient, and highly energetic.”
Family ties
Lisa shares her professional expertise serving on various boards and committees. In addition to many local board positions, last September, she was appointed to the American Institute of Certified Public Accountants Forensic and Valuation Services (FVS) Executive Committee for a three-year term. She is also a regular presenter on valuation topics, including presenting at last year’s National AICPA Forensic & Valuation Services Conference in Las Vegas. One of Lisa’s coworkers in the tax area knows her very well. “A couple of years ago, I brought Lisa in on a valuation project where we had some challenging
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client relation problems, to say the least, due primarily to turnover and succession in the client’s organization,” said Pamela W. Schneider, CPA, LLM, J.D., CMA, a partner at Wipfli’s Appleton office. She and Lisa are sisters. “Lisa not only managed through the valuation in a highly professional manner, she has helped to solidify and grow the client relationship ever since,” Schneider said. “Lisa lives out this example in the work she does each and every day.” While her career and family business keeps her busy, Lisa enjoys other activities including camping and boating with her family and attending her children’s sporting events. The couple’s three children, ages 13, 15 and 17, are active in sports and also work at the family business during the summer. “Integrating work and family demands is always challenging but rewarding,” she said. “If you want to leave work to attend your son’s or daughter’s game, you know when you get home you might have to finish up some work. It’s creating the balance in work and family so you don’t focus on one area to the detriment of the other. I don’t want to look back and say I wished I would have done something differently.” Cynthia M. Hodnett is editor of On Balance magazine. Contact her at 262-785-0445 ext. 4516 or cynthia@wicpa.org.
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AS CPA in mergers & acquisitions
Tap intO YOUR ROLE
By Gordon L. Meicher, CPA
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shutterstock.com
W
hen most people think of mergers and acquisitions, they envision large company deals, such as the recent merger of DuPont and Dow Chemical. A CPA can play a critical role in such large acquisitions. However, a CPA can also play a crucial role in small deals. These deals typically involve an individual/entrepreneur or small company. This is when the need for a CPA is greatest.
"Setting a sales price that is agreeable to your client can take hundreds of hours of CPA time."
The CPA's role with the seller
As a CPA, your role in mergers and acquisitions (M&As) depends on whether you’re working for the buyer or representing the business being acquired in the sale. Let’s assume you are working for the seller. The first step is to tell him or her to stay silent about his or her plans. This may seem counterintuitive, as you want as many buyers bidding up the price as possible. However, selling a small or medium-size business is much different than an auction. As the CPA involved in the transaction, imagine you are an employee or customer of the business. What future do you have working for a partner who will be gone in a year? A client interviewing a new CPA firm isn't likely to hire your firm if he or she knows new ownership will occur in the future. The same principles apply to all businesses. Recently, we helped a client sell a business to a synergistic buyer. The deal took two years to complete, and it closed at 9 a.m., on a Friday. At 11 a.m., the public and the seller’s 22 employees were shocked to find out about the sale. Nonetheless, the business continued operating after the sale, and everyone turned out to be significantly better because confidentiality was maintained.
Determine potential buyers and sales price
So, how should you help your client without disclosing his or her plans to sell? First, determine possible buyers. Normally, we start with competitors or businesses in related industries. Previously, we had a carpentry business merge with a remodeling business. We also had a boat selling business merge with a business that installed piers. This created many synergies and a great deal cross-selling. Furthermore, you might look at whether employees of your client’s business can acquire the business. However, this is very risky and seldom works. The reason is, even if the employees are earning $100,000-plus, they're probably spending their compensation or placing their savings in an inaccessible retirement account. Generally, the only way for employees to acquire the business is for the selling owner to finance it, which I seldom recommend. The problem with selling a business on contract is if the business fails, the seller has little or no security. If you sell land or real estate, there’s generally an unencumbered asset to securitize the payment. I’ve seen people try to take back businesses with sale taxes and payroll taxes in arrears. This isn't pretty. Let’s say your client has an interested buyer or two. Before releasing anything or having more than an initial conversation,
have your client obtain a confidentiality agreement. This lets the potential buyer know your client is serious, and it provides some degree of certainty that the prospect will not divulge any information or that your client plans to sell the business. Attorneys have told me that these agreements are difficult and potentially expensive to enforce. However, they're better than nothing. The old axiom that attorneys are great preventive medicine clearly applies here. Setting a sales price that's agreeable to your client can take hundreds of hours of CPA time. When we work with a client, we help them determine a realistic value for the business. We have two certified valuation analysts on staff who assist us with this this matter. Unfortunately, many clients view their sales price for the business as something they need to retire. Selling a business is entirely different than quitting a government job with a defined benefit plan. The price must be obtainable and rational. Having said that, the selling price can always go down, but it can never go up once it's established.
Facilitate, close the deal
When negotiating with your client or the buyer, remember that the primary goal has nothing to do with price or numbers. Your role as a CPA is to facilitate the deal. As a CPA, you can’t get someone to pay too much for a business, no matter how hard you advocate. The other side always has someone just as smart or smarter than you. This rule of being a facilitator applies whether you’re representing the buyer or the seller. Now there’s a willing buyer and a willing seller. The next step is for the buyer to prepare a letter of intent. Once both parties have signed the letter of intent, the transaction has reached a “bright line date,” where many expenses must be allocated to the sale, whether the expenses are considered inherently facilitative to the deal. At this point, the buyer begins in earnest due diligence. When representing the seller, provide all information requested in a matter of fact manner. Never say something like, “2013 would have been a better year except for …” Simply provide the information, and respond fairly and accurately to any inquiries. The final legal documents are prepared after the buyer's due diligence. Generally, one attorney will prepare the documents according to the terms agreed to in the letter of intent and as modified by the due diligence. Assuming the buyer’s attorney has drafted the sales document, the seller’s attorney, the seller and you review the agreement. When reviewing the final sale document, look down the road and exclude provisions that could put your client at risk. Finally, the deal is closed, and at this point, the transaction becomes public knowledge.
Gordon L. Meicher, CPA is managing partner at Meicher CPAs, LLP in Middleton. Contact him at 608-826-1900 or gordym@meichercpas.com. wicpa.org
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{ In Touch | president & CEO’s message } “The new association would have more than 600,000 members in 179 countries worldwide, making it the largest and most influential accounting association in the world.”
Evolution of AICPA and CIMA joint venture: Increasing resources and global influence
T
he American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA) formed a joint venture in 2011 for enhancing resources and value for its members working in corporations, nonprofits and governmental organizations worldwide. The AICPA and CIMA joint venture led to the launch of the Chartered Global Management Accountant (CGMA) designation in 2012. The number of CGMA designation holders has grown to more than 150,000 worldwide, with more than 50,000 in the United States. Resources available to CGMAs include a Competency Framework to continually enhance CGMAs’ skills and value throughout their careers, plus Global Management Accounting Principles to support organizations in benchmarking and improving their management accounting systems. CGMA resources also include publications and a worldwide network of CGMA colleagues to help navigate challenges and innovative opportunities. CGMAs need these resources, as corporate accountants are increasingly recognized as critical resources for strategic business decisions, in addition to their historical accounting and finance responsibilities. The successful AICPA and CIMA collaboration has established the CGMA designation. As a result, the continuously increasing member benefits from shared resources have led to the AICPA and CIMA proposing to expand efficiencies by establishing a new international accounting association that will include all AICPA and CIMA members. AICPA and CIMA members would remain members of their respective associations and become members of the new international association (the Association of International Certified Professional Accountants) at no additional cost.
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The new association would have more than 600,000 members in 179 countries worldwide, making it the largest and most influential accounting association in the world. The new association would also provide a vast worldwide network of fellow members to share knowledge that will enhance their professional and business success. The proposed joint venture expansion to establish the new international accounting association will supplement the AICPA’s continuing support, promotion and expansion of the CPA profession in the U.S. and worldwide. The WICPA and AICPA will continue and expand collaborative activities encouraging students to pursue careers as CPAs, while expanding resources to CPAs in industry, government and education. Visit http://accountinghorizons.org/ for more information and to share your thoughts regarding the proposed evolution of the AICPA and CIMA joint venture and the 2016 AICPA member ballot to approve the proposal.
Dennis F. Tomorsky, CPA, J.D., CGMA is president & CEO of the WICPA. Contact him at 262-785-0445 ext. 4519 or | April 2016 On Balance March dennis@wicpa.org.
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AMODERNTOOL
FOR
M&A DUE DILIGENCE
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By Wayne C. Breitbarth, CPA
W
ith more than 414 million members, LinkedIn is the world’s largest database of business professionals. Each member expresses his or her professional identity by uploading information to a profile, and you can access nearly all of that information for free. This gold mine of information can be invaluable during the discovery, verification and integration phases of your merger-and-acquisition (M&A) due diligence.
In 2013, the law firm Fasken Martineau conducted its first Social Media M&A Survey, querying senior managers in the M&A industry on their use of social media — such as LinkedIn, Twitter and Facebook — for disclosing transactions and gathering information on acquisition targets. Among the survey authors’ findings was the discovery that “respondents love LinkedIn for research.” Results pertaining to strategy and due diligence were reported as follows: Thirty-six percent of respondents used social media platforms to research potential acquisition targets in the last year, and 48 percent used social media platforms to investigate companies involved in transactions. Among the respondents who used social media for research, 72 percent said LinkedIn added the most value; meanwhile, 50 percent said Facebook added value, while 41 percent named corporate blogs, 31 percent Twitter and 23 percent YouTube. If you’re not tapping into this vast reservoir of information, you may be missing out on critical facts that will help you or your client limit risk, establish value and determine what can be done to improve the company following an acquisition.
Social media risks Despite the valuable information that can be found on social media sites, there are some risks that need to be taken into account. In their article “M&A Due Diligence and the Perils of Social Media,” Kelley Parker, Nick Ramphal, Justin Hamill and Paul Weiss, partners in the corporate department and members of the merger-and-acquisition group at the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, acknowledged the benefits of LinkedIn, but cautioned users: “Conducting due diligence through social media sites can be a risky proposition for M&A principals and advisers seeking to keep their intentions private. Digital footprints, or data about an interaction with a website that the website collects and stores, may compromise deal secrecy if exposed.” In a companion video, Hamill shared three important steps to consider prior to and while using social media for due diligence: • Keep deal teams small and coordinate research efforts. • Monitor privacy settings. • Maintain strict anonymity. wicpa.org
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“If you’re not tapping into this vast reservoir of information, you may be missing out on critical facts that will help you or your client limit risk, establish value and determine what can be done to improve the company following an acquisition.” On his second point, I believe Hamill is referring to LinkedIn’s privacy setting: “What others see when you’ve viewed their profile.” Access this setting by scrolling over your photo in the upper right-hand corner of the top toolbar and selecting: Privacy & Settings>Profile>Privacy Controls> What others see when you’ve viewed their profile> You will be totally anonymous.
This isn't the default or recommended setting from LinkedIn, so you will have to be proactive to make this change. Once you’ve adjusted your settings to maintain your anonymity, you’re ready to use LinkedIn to discover information that you cannot find anywhere else. This includes not only information about the acquisition target and its key employees but also information about the company’s competitors and their employees, which can help you assess the competitive landscape.
How to use LinkedIn profiles in M&A due diligence Before the advent of LinkedIn, the main source of written information about the management team and other key employees was limited to a company’s personnel files. But today, you have access to employees’ LinkedIn profiles, which are typically quite detailed and generally very reliable because each person provides his or her own information. On each individual’s profile you’ll be able to view educational background, work history (including dates of employment at each company), groups and
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association memberships, and other interests. Most people also include a narrative about their current responsibilities, goals and expertise, as well as media files that display their accomplishments, all of which can be very insightful. Here are some of the questions that may be answered by an investigation of employees’ individual LinkedIn profiles: • Where have they been employed prior to the target company? Do they have exceptional recommendations from customers, industry leaders, etc.? • Do they display important industry-related credentials? • What's the typical duration of employment at the target company? • Have high-level employees at competitive companies previously worked for the target company? • Have target company employees left the company and gone to work for competitors? • How large are the networks of business development and salespeople? • Do marketing and communications employees have thorough profiles, demonstrating that they’re savvy social media users? These are a few of the many questions that can be answered by looking at LinkedIn profiles. However you can also uncover important information by investigating employees’ daily activity on LinkedIn. If you’re not tapping into this vast reservoir of information, you may be missing out on critical facts that will help you or your client limit risk, establish value and determine what can be done to improve the company following an acquisition. If you look at what employees are sharing with their LinkedIn networks, fellow LinkedIn group members and the entire LinkedIn universe, you’ll be able to determine whether a target company’s staff is established as thought leaders in the industry. A strong thought leadership role can contribute to greater lead generation, increased sales and higher profit margins. Here are some of the questions that may be answered by an investigation of what’s shared on LinkedIn: • Are employees sharing important, relevant and helpful company and industry information? • Does sharing this information position the individual and/or the company as a positive thought leader?
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• What are the number and quality of the “likes,” “shares” and comments on the information being shared? • Are any employees sharing relevant information in important LinkedIn industry groups? You may also find it helpful to compare the target company’s daily activity with that of competitors, since most customers prefer to engage with the company that appears to have the greatest expertise in the marketplace.
Discover valuable information on LinkedIn company pages Most companies have taken advantage of the opportunity to create a LinkedIn company page. This page displays an overview of the company, but it’s also a great way to share relevant information about products, promotions and job openings. People who opt in can also “follow” the company and automatically receive this information (similar to Facebook and Twitter). When doing your due diligence work, you might be interested in seeking answers on LinkedIn to these questions: • What type of information is the company sharing, and how often is the firm sharing it?
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• What are the number and quality of the “likes,” “shares” and comments on the information being shared? • How many nonemployees are following the company page, and how does this compare to competitors? • Which companies are listed in the “People Also Viewed” section of LinkedIn? • What critical job openings are being shared? • Is there a concentration of job openings is a particular area? There's a lot of information on LinkedIn that's not commonly available via other avenues. Before you undertake your next due diligence review, define your team’s procedures and adjust your LinkedIn privacy settings. Then, start digging into the world’s largest database of business professionals.
Wayne C. Breitbarth, CPA, has participated in numerous M&A transactions during his 20-plus years as a CFO and is currently a nationally recognized expert in LinkedIn marketing. Contact him at wayne@powerformula.net. This article was written by Wayne Breitbarth specifically for the Association for Corporate Growth and was published in their Middle Market Growth magazine originally on June 1, 2015. Reprinted with permission from the author.
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assess support &
HOW INTERNAL AUDIT CAN
culture By Samantha White
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here is growing consensus that weaknesses in corporate culture have been a significant factor in a range of corporate and institutional scandals. So it’s not surprising that culture has come under increasing scrutiny. Regulators have treated it as a high priority, and boards are increasingly keen to embed a sound corporate culture in their organization. It's clear that the issue poses a significant risk that cannot be ignored simply because it is difficult to measure, said Peter Montagnon, author of a new report on the subject. Based on interviews with audit committee chairs, heads of internal audit, and heads of ethics and compliance departments, the Institute of Business Ethics briefing looks into what internal audit practitioners can do to evaluate whether an organization’s culture meets its stated ethical standards and values. The briefing suggests that the function can play a central role in identifying weaknesses of corporate culture and where hidden risks lie. Given that the department’s work involves observing and reporting on behavior, internal auditors are also well-placed to join the dots to identify the root cause of any problems. Through its work on assurance, internal audit can help evaluate the health of the company culture and provide a key line of defense against risks.
Recommendations There's a consensus among the practitioners
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interviewed for the report that there is more mileage to be had in looking at the cultural aspects of what's being audited than in separating out culture itself. “Even if it cannot be measured precisely,” the report said, “It pays to look at the way culture within the firm affects the things that are being measured.” The report outlines some of the indicators that can be used. The objectives that are set and how they're communicated throughout the business unit are a critical indicator of culture, as is the way people respond to basic frameworks. Indicators of a flawed culture include the failure of employees to complete relevant training, or late or grudging reporting of information. “Late reporting of a control failure or a hostile response to a critical internal audit report doesn’t say anything immediately obvious about ethics, but it does indicate a state of mind which will readily sweep unpalatable things under the carpet,” Montagnon said at the London launch of the report. “And even this is therefore a good indicator of culture for internal auditors and boards, and often a pointer to where hidden risks lie. “The task for them isn't so much to grade the overall culture, but more to identify the particular parts of the organization where the culture is weak, whether because divisional management is poor or, perhaps, because an acquisition has not been very well-integrated. “When something goes wrong, most investigations simply lead to the introduction of new bureaucratic processes designed to prevent a recurrence,” Montagnon said. “However, asking about the root wicpa.org
“EVEN IF IT CANNOT BE MEASURED PRECISELY,” THE REPORT SAID, “IT PAYS TO LOOK AT THE WAY CULTURE WITHIN THE FIRM AFFECTS THE THINGS THAT ARE BEING MEASURED.”
causes of a problem may point towards a different solution. This means looking at different things, for example, how targets are set, how incentives are communicated, and how appraisals are conducted.” Although it's the role of an organization’s leadership to set the culture, internal auditors can: n Help boards answer the question: “Are we living up to our values?” n Evaluate whether the corporate culture supports the organization’s purpose and business model. n Ask why something has happened, get to the root cause, and seek to correct it, rather than simply identify what has happened.
How boards can support this work To enable the internal audit department to carry out this role effectively, a mandate from both senior management and the board is needed, with the latter usually taking the form of a reporting line and a close working relationship with the audit committee chair.
Audit committee chairs need to be firm in their commitment to using internal audit to examine culture and be willing to listen to the concerns raised, even when these are based more on gut feeling than evidence. An environment in which people are encouraged to speak up so that mistakes can be corrected rather than tempted to cover them up out of fear of punishment will also support this work.
The skillset required Montagnon notes that internal auditors have to strike a balance between being perceived by other employees as policemen and adopting a more consultative role that may compromise their objective investigative status. Ultimately, the report says, internal auditors can be important agents for positive change. To fulfill this role, “They need diplomatic skills and the ability to make judgements which command trust at (a) senior level.” Samantha White is a CGMA Magazine senior editor. Contact her at swhite@aicpa.org.
Copyright © 2011–2015 American Institute of CPAs. Copyright © 2011–2015 Chartered Institute of Management Accountants. All rights reserved. This article first appeared in CGMA Magazine. For more articles, sign up for the weekly email update from CGMA Magazine at http://bit.ly/UZ07NC.
OMG!
They’re doing it again?!
it’s time to
renew
WICPA member fall seminar special:
$100 OFF June 1 – June 30 $50 OFF July 1 – July 31 Register starting June 1 at wicpa.org/register. Not a WICPA member? Join when registering and save! *Discount applies to 8-16 hour seminars. Does not include conferences or Tax Advisors Update by Andy Biebl. There is no limit to the amount you can save.
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your membership keep your vital member benefits coming If you have not yet renewed your 2016–2017 membership, visit wicpa.org/renew for quick and easy online payment to keep your valuable member benefits coming, including On Balance magazine. Pay your dues in the “Renew My Membership” section on the Members page. For information regarding your membership or username and password, contact Jessica Murphy at 800-772-6939 ext. 4502 or Jessica@wicpa.org.
On Balance
March | April 2016
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AMERICAN INSTITUTE OF CPAS PROPOSES
EXPANDING JOINT VENTURE WITH CIMA by the AICPA Communications Team egendary investor Warren Buffett has a saying: “Someone’s sitting in the shade today because someone planted a tree a long time ago.” This quote underscores the importance of anticipating and preparing today for the opportunities and challenges of tomorrow.
L
The CPA profession has a long history of doing just that. Wisconsin Institute of Certified Public Accountants (WICPA) and the American Institute of CPAs (AICPA) currently are working on a wide variety of initiatives to enhance the relevance and vibrancy of the profession far into the future. These initiatives include programs to promote the value of CPAs as trusted business advisors, enhance audit quality, broaden the definition of attest, help firms
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identify and remedy issues during accounting, auditing and attestation engagements, evolve the Uniform CPA Examination, attract the next generation of talent, and meet the information and educational needs of members in public accounting, business, government and specialized services. In response to the needs of members working in corporations of all ownership structures and sizes, the AICPA formed a joint venture with the Chartered Institute of Management Accountants (CIMA) in 2011. CIMA is the world’s leading and largest professional body of management accountants. Founded in 1919, CIMA represents more than 227,000 members and students operating in 179 countries, working in industry, commerce and not-for-profit organizations. In January 2012, the two organizations launched the Chartered Global Management Accountant (CGMA) designation. The number of CGMA designation holders is now more
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than 150,000 worldwide, with more than 50,000 in the U.S. Now, the AICPA and CIMA are beginning a conversation with their respective members about a proposal to integrate their operations, strategy and management through a newly formed association. The AICPA would continue to serve members and protect, promote and grow the CPA profession. The new association aims to maximize efficiencies and provide a broader platform for further enhancing advocacy, promoting public and management accounting on campuses and with employers and clients, and developing new research and educational offerings. According to Arleen Thomas, CPA, CGMA, AICPA senior vice president-Management Accounting and Global Markets: “A presence in Europe will dramatically increase our ability to advocate for members on international matters that
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are increasingly impacting the U.S. securities system. In addition, the proposal would enable the profession to achieve even greater influence domestically and internationally and broaden the appeal of accounting to the next generation of professionals.”
Unwavering commitment to the CPA
“Our strategy is built on the power of ‘And,’” said Barry C. Melancon, CPA, CGMA, AICPA president and CEO. “The AICPA would continue to maintain an unwavering commitment to the CPA, promote high standards for ethics and quality, and protect the public interest and the core values of the CPA profession. What we would gain through this new association with CIMA is the further professionalization of management accounting. Financial reporting is stronger when we drive quality in both public and management accounting.”
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"We are supportive of the direction the AICPA Board is recommending,” said Dennis F. Tomorsky, CPA, J.D., CGMA, WICPA president and CEO. Trends driving need for evolution
The CPA profession has a history of anticipating — and adjusting to — changes in market demands. The profession has grappled with and developed solutions to address increasing complex technology, specialization, and evolving business structures; these drove such evolutionary steps as the computerization of the CPA Exam, non-CPA firm ownership and the adoption of cloud computing solutions. Current trends and challenges on the horizon have been carefully assessed by the AICPA as part of its ongoing strategic planning process. With record membership numbers and the CPA reputation at the highest level, the AICPA believes that the time is right to pursue a proposal that will better enable the profession to tackle such factors as: • The growing worldwide talent shortage and associated demand for ever higher levels of specialized knowledge and services • Significant demographic and generational shifts • The increasing number of accounting graduates bypassing professional affiliation and the associated commitment to a professional code of conduct • The shift of economic growth toward Asian and emerging markets • The greater international mindset of today’s graduates and the overall trend toward more international connectedness and interdependencies • Regulatory impact coming from Europe and other parts of the world that are affecting businesses in the United States • The need for finance professionals, facing an increasingly competitive job market, to differentiate themselves from their peers and demonstrate greater strategic management and business partnering skills
Building on existing joint venture’s success
Approximately 50 percent of most state CPA society and AICPA members work in businesses of all sizes and ownership structures. Creating the CGMA offered these professionals a complementary
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designation and enhanced resources. Since the designation’s launch, the American Institute of CPAs and CIMA have delivered nearly 120 reports and tools plus online events and career development resources to members seeking to increase their knowledge and hone critical skills for the future. The organizations also developed the CGMA Competency Framework and the Global Management Accounting Principles. In addition, so that members and employers could better assess and address accountants’ skills and competency gaps, the organizations launched the AICPA/CIMA
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Benefits of the proposal
“We are supportive of the direction the AICPA Board is recommending,” said Dennis F. Tomorsky, CPA, J.D., CGMA, WICPA president and CEO. “The changes this profession faces today are greater than ever. To preserve our relevance and stature, the profession needs to embrace change and consider innovative ways to better anticipate, reflect and lead. The work between the AICPA and CIMA has contributed greatly to the professionalization of management accounting, and that is much needed today. The proposal would bring together the entire accounting profession and extend the influence of a CPA-led accounting profession in the U.S.” Strengthening the bond between the two organizations would streamline resources and create efficiencies to help both organizations move faster to market and produce content with broader perspective, especially on international business issues, which are increasingly impacting CPA firm clients. In particular, the AICPA cites the gains in advocacy that could be realized when speaking on behalf of more than 600,000 current and next generation accounting professionals. The association of the AICPA and CIMA would form the most influential body for the accounting profession, within the U.S. and globally, advocating on tax, audit, financial reporting and other issues important to members.
What’s next? Competency and Learning platform. The tool also analyzes public accounting skills, such as those related to assurance as well as employee benefit plan and governmental audits. CGMA designation holders also have access to the CGMA Magazine, the CGMA Finance Impact Tool, numerous reports and case studies on best practices, and the Harvard ManageMentor online learning and performance support resource program. The website, cgma.org, is the hub for all of these resources and more.
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Gaining member insights into the AICPA and CIMA evolution is critical to helping the Institute’s governing Council determine its next course of action. Council will assess member feedback and consider authorizing a member ballot in the spring. Moving forward would require a vote by members, with a majority of those voting supporting the proposal. CIMA has a similar requirement and timeline. Members are encouraged to visit aicpa.org/ horizons to find out more about what they could gain from a deeper relationship with CIMA and provide feedback on the proposal.
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kudos Joseph J. Topp, CPA, vice president with Francis Investment Counsel in Brookfield, was recognized as one of the nation’s Top 100 Retirement Plan Advisors by PLANSPONSOR magazine for the ninth time in the firm’s 10-year existence.
Steven G. Handrick, CPA, CGMA completed a 12-year term as managing partner at Hawkins Ash CPAs in Green Bay. Steven G. Handrick, CPA, CGMA
Megan E. Kinney was hired as a staff accountant at Meicher CPAs, LLP in Middleton.
Joseph J. Topp, CPA
Philip S. Klemme, CPA was named shareholder at Schenck SC in Sheboygan. Robin C. Lutz, CPA was hired at The Sullivan Group LLP in Oshkosh, according to New North B2B. Megan E. Kinney
Ashley McCarthy, CPA, a tax associate at KMA Bodilly in Madison, earned her certified public accounting designation. David P. Meicher, CPA, a staff accountant at Meicher CPAs, LLP in Middleton, earned his certified public accounting license.
Philip S. Klemme, CPA
Randy S. Nelson, CPA was appointed to the Business Planning Committee of The American College of Trust and Estate Counsel (ACTEC) for 2016–2017. Anthony J. Pekarske, CPA, a staff accountant at Meicher CPAs, LLP in Middleton, earned his certified public accounting license.
David P. Meicher, CPA
Daniel J. Walsh, J.D., CPA
Daniel J. Walsh, J.D., CPA, an attorney and shareholder with Stellpflug Law, S.C. in De Pere, was selected as a 2015 Wisconsin Super Lawyer for excellence in the elder law practice.
Catherine A. Schwartz, CPA, was hired as vice president of finance and operations at Artisan Cheese Exchange in Sheboygan, according to the Sheboygan Press.
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promotion or
award mentioned in Kudos? Email your announcement and photo in JPG format to cynthia@wicpa.org.
memorials Bart Adams, CPA (1954–2016) Bart Adams, CPA, former president of the WICPA Board of Directors, died Jan. 29. He was 61. Adams earned a Bachelor of Science in Business Administration from Marquette University in 1976. Adams began his accounting career as an intern at what is now Deloitte while attending college. In 1975, he began working at what is now Sikich LLP in Brookfield. There, he held several positions, most recently as partner. He spent his entire 41-year accounting career at the firm.
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A WICPA member since 1977, he served on several WICPA board and committees throughout the years, including president, vice president and member of the WICPA Board of Bart Adams, CPA Directors, and chair, vice chair and member of the WICPA Public Policy Committee. He also was member of the American Institute of CPAs governing Council. Adams earned his certified public accounting designation in 1978. He was a Wauwatosa resident.
www.wicpa.org wicpa.org
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M By Christa M. Baldridge, CPA and Ann E. Hanna, MBA, CPA
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any issues impact a sale transaction, and understanding tax implications early in the process is vital. Generally, tax considerations will drive the buyer and seller to adopt opposing positions. Therefore, the ideal transaction structure requires the blending and negotiation of tax and deal considerations. The following ideas are the most common issues applying to lower middle market stock and asset business sales that generate a tax event.
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{ Tax | Merger-and-acquisition transactions }
"Ultimately, if the opportunity to address tax issues is delayed or missed, there are often material economic consequences." Purchase price allocations Allocation between fixed assets can have a significant tax
When accrued liabilities are assumed by the buyer, the liability is considered in the total purchase price if the liabilities are fixed and determinable under the economic performance rules of Internal Revenue Code (IRC) section 461(h) at the time of closing. With a contingent purchase price, such as an earn-out, the amount that is fixed and determinable at the end of the year of the transaction is considered in the purchase price. If future payments are received, the gain is reported on the installment basis and gain allocations may need to be recomputed for the increased sale price. Regulation 15a.453-1(c) should be reviewed for proper basis allocation based on the specific agreement. If a cost segregation study is imminent, it is advisable to generally assign combined amounts to “fixed assets” in order to preserve the buyer’s right of allocation. The IRS has prevailed in court (TC Memo 2012-8) that the Form 8594 reported and agreed upon sale allocation cannot be reallocated between building, land, equipment, etc. in situations where a precise category or asset is identified in the legal agreement.
338(h)(10) election for S corporation sale When a stock purchase is optimal for legal purposes and asset
sale desired for tax purposes, parties can elect IRC section 338 to treat the sale of stock as an asset sale for tax purposes. Generally, the parties have negotiated the tax implications that accompany such a transaction. Elections under IRC section 338 requires filing of Form 8023 and should be documented at time of closing. Filing of Form 8883 for asset sale price allocation is also required. Determination of valid S-election is critically important, as the election can trigger double taxation and threaten buyer’s stepped-up asset basis if the selling company is determined to be a C corporation. Domestic buyers of foreign corporations can also take advantage of the asset purchase election, often with no detriment to the foreign seller, provided the seller has no U.S. income tax presence.
Liquidation timing of an S corporation, LLC or partnership upon an asset sale Timing of the asset sale does not need to coincide with the ultimate liquidation of the company stock, although it may be desirable within the same tax year. Planning the timing
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Capital losses on stock/interest liquidations can only be deducted against current capital gain income or up to $3,000 per year against other ordinary taxable income, with the remainder carrying forward to future years.
Built-in gains tax Built-in gains (BIG) tax is the tax on built-up value inside a
C corporation that occurred prior to the election to become an S corporation. Upon sale of the company, the gain on assets with built-in value can be taxed at corporate tax rates. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) signed into law in late December 2015 permanently changed the federal BIG tax look back period to five years. State rules must be reviewed, as Wisconsin and other states have not yet conformed to this federal law and Wisconsin is currently still using a 10-year BIG period.
Alternative Minimum Tax (AMT) impacts Planning in the year of a sale can be beneficial in mitigating
the impact of AMT. AMT can impact S corporation and partnership/LLC sellers in the year of sale unexpectedly, if the majority of income from sale is capital gains. If taxpayers’ large income is primarily capital gains, income normally “above” the AMT income range can still impact the taxpayer. The estimated transaction state income tax payments may not be deductible in a specific year if AMT applies, as state tax payments are not an offset to Alternative Minimum Taxable income. Planning state estimates should be reviewed to optimize the year of deduction.
{ Tax | merger-and-acquisition transactions }
impact. Generally, the seller wants to allocate more purchase price to capital gain, and the buyer wants a “stepped-up” basis in assets. To avoid post-agreement conflict between parties in asset purchase transactions, document the purchase price allocation by asset class, per IRS Form 8594, in a definitive agreement.
of liquidation is important in order to coordinate any potential loss upon liquidation to the individual sellers to offset capital gains, often passed through to owners at the time of sale.
Other equally important issues not addressed above include sales or transfer tax impacts, seller’s deduction of accrued vacation pay (PLR 8939002), sellers’ deduction of bonuses vesting upon change of control, deductibility of deal costs by buyer (Rev Proc 2011-29 – 70 percent safe harbor), recapture of acquired 197 amortization upon sale, and tax attribute carryovers. Ultimately, if the opportunity to address tax issues is delayed or missed, there are often material economic consequences. The issues discussed here are just a sampling of the various and nuanced tax considerations that will arise in a given deal.
Christa M. Baldridge, CPA, is a shareholder at Schenck SC in Milwaukee. Contact her at 414-465-5637 or christa.baldridge@schencksc.com. Ann E. Hanna, MBA, CPA, is managing director of Schenck M&A Solutions in Milwaukee. Contact her at 414-465-5537 or ann.hanna@schencksc.com.
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{ Human Resources | HR action plan }
asking yourself
Are you
the right questions?
O
By Christopher Penasa 28
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Paying competitively to your market is a necessary good start. However, your main goal is to create well-laid incentive plans and foster a strong corporate culture to “connect" with your team members’ hearts and souls. How do you do that? Remember back to a former boss that you really respected. How hard did he or she have to push you to give 100 percent? My guess is the statement you most feared hearing from this respected person was, “I’m really disappointed in you.” Correct? This answer proves that he or she had earned a true respect for his or herself, and probably the entire firm. This cultural feeling is crucial to the long-term success of any company. How do you create a similar feeling in your company? There is no set template for a great HR plan. It’s simply identifying the core reasons why your team isn’t as engaged as you would like, and systemizing a solution. The following are eight high-level questions that should be answered by all business owners, partners or firm owners.
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ver the years, the true “solution” to a company’s HR woes has become clouded. As a leader, owner, or partner of a company your No. 1 job is simple. Give yourself and your company’s associates the right corporate culture and structure to successfully under-promise, and over-deliver your products and services to your customers or clients.
“There is no set template for a great HR plan. It’s simply identifying the core reasons why your team isn’t as engaged as you would like, and systemizing a solution.” 1
“What could my company be if everyone thought just like me?”
2
4
Are the main duties and measurable goals understood by every member of my company?
Does each team member have key performance indicators and incentive pay? (How productive and driven would you be if you weren’t financially rewarded for working harder and growing your business?) Is each team member’s duties clear and measurable? Can each team member, CPA, and support staff give feedback and make suggestions as to how to achieve their measurable goals?
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Do I truly have clear channels of communication in my business?
When was the last time you really assessed your firm’s channels of communication? Do you really listen? Do you have a culture of open communication and truly value the input of each team member? Does he or she feel this way? When was the last time you asked? It doesn’t matter what
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“What if I already have the core pieces of my compensation plan in place?”
If you already believe you have all the proper “pieces in place” to attract the right talent, look at your HR marketing efforts. Doesn’t your sales and marketing team have beautiful sell sheets and glossy trifolds to taut the uniqueness of your firm to potential clients? What do your recruitment tools and “sell sheets” look like? Are all of the benefits of becoming a member of your firm or company in an easy-to-present format?
Is the way my team deals with the day-to-day company activities consistent?
Do you have a true “team culture?” I don’t mean a sign on the wall that simply states your Points of Culture or Mission Statement. I mean a true team culture where each person helps each other, enjoys and appreciates each other, and always looks to a solution rather than an excuse? Is your company based on a philosophy of looking to a “systems solution” before a “people solution?”
Am I keeping the team informed and “in the loop” with our company’s strategic plan and goals?
How often does your company meet as a team? Is there a clear path of growth, and is it understood by all? One of the main complaints of employees is that they seem to be the last to know anything that goes on in their company. How could you organize a yearly planning meeting with your team, and incrementally give updates on a quarterly basis? How much more engaged will your team be? Do you think your team members' “ownership” level will change if they knew exactly how they affect the whole, and the overall goals of your company?
Market research: Do you look to the best in your industry for ideas?
When was the last time you did some market research on what the top firms and other businesses in your industry are doing to attract and retain the right people? What are they doing right that you can utilize in your company or firm?
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8
{ Human Resources | HR action plan }
If you didn't own or run your own firm or business, what would it take for you to absolutely love your job? To honestly wake up in the morning, pinch yourself, and be utterly grateful for such a great place to work? What would give you butterflies? In a nutshell, would you come to work for your own company, and would you be a “lifer?” Once you figure this out, it's all about marketing. Marketing for the right customer or client is no different than recruitment of the right company team members. Approach and create your HR strategy plan in the same way!
you think, but what is understood. Remember this: If the plan, strategy, and goals are always yours, how much true ownership do you expect each team member to have?
“What metrics do I openly display to all my team associates measuring day-to-day activities in our company to define our success?”
Meet with your team associates, and define success. Then, create performance metrics to measure corporate activity every day, and display the results for all to see every day. Your team members will respond if the measures are attainable and well defined. Figuring out what they should be is the trick, and then increase the metric goals as your team members become more skilled in their craft. As long as they share in your success, you win! The question is the answer. Think hard about the questions posed above, put a plan around answering and systemizing them, and watch your current and future team members make your business soar (without you doing all the work)! Christopher Penasa is CEO of Small Business Growth Partners, Inc. in Germantown. Contact him at 262-437-3214 or chris@smallbusinessgrowthpartners.com.
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{ Financial planning: HSAs }
Health Savings Acco Better than sliced bread Growing popularity
A
ccording to a recent report by Devenir (a HSA industry participant based in Minnesota), the number of Health Savings Accounts (HSAs) was 13.8 million at the end of 2014, and HSA balances totaled $24.2 billion. These figures represented year-over-year increases of 29 percent and 25 percent respectively. Thirty-one-percent of all employers now offer HSAs, up from 4 percent in 2005. In 2010, the Employee Benefit Research Institute reported that there were 5.7 million HSAs with account balances totaling $7.7 billion. So, HSAs are clearly becoming more popular. By Robert A. Buss Jr., CPA, CEBS
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{ Financial planning: HSAs }
unts: What is a HSA?
An HSA is a tax-exempt trust or custodial account that an individual can open and use to pay his or her health care expenses. Contributions to the account are deductible from taxable income. Distributions for qualified medical expenses are not counted as taxable income. Tax-free distributions are also allowed for certain premiums. Any interest or other capital earnings from the account build up tax free as well. As a result of this triple-tax advantage, some individuals may find it advantageous to use an HSA as a savings vehicle not only for current medical needs but for health care expenses in retirement.
Eligibility
In order to qualify for contributions to an HSA in 2016, the individual must be covered by a health plan that has an annual deductible of not less than $1,300 for self-only coverage and $2,600 for family coverage. Certain preventive
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services can be covered in full and are not subject to the deductible. The out-of-pocket maximum may not exceed $6,550 for self-only coverage and $13,100 for family coverage, with the deductible counting toward this limit. The minimum allowable deductible and maximum out-of-pocket limit are indexed to inflation. No earned income is required. To be eligible for an HSA, an individual may not be enrolled in other health coverage, such as a spouse’s plan, unless that plan is also an HSA-eligible health plan. However, individuals are allowed to have supplemental coverage without a high deductible for such things as vison care, dental care, specific diseases, and insurance that pays a fixed amount per day (or other period) for hospitalization. Individuals enrolled in Medicare are not eligible to make HSA contributions, although they are able to withdraw money from the HSA for qualified medical expenses and certain premiums.
Contributions
Both individuals and employers are allowed to contribute to an HSA. Contributions are excluded from taxable income if made by the employer and deductible from taxable income if made by the individual account owner either through a limited purpose Section 125 plan or directly to their account. The maximum annual contribution is $3,350 for individual coverage and $6,750 for family coverage. Individuals who have reached age 55 and are not yet enrolled in Medicare may make catch-up contributions. In 2016, a $1,000 catch-up contribution is allowed.
Distributions
Distributions from an HSA can be made at any time. An individual need not be covered by a high-deductible health plan to withdraw money from the HSA. Distributions are excluded from taxable income if they are used to pay for qualified medical expenses. Distributions for premiums for coverage under COBRA, long-term care insurance, health insurance while receiving unemployment compensation, and insurance while eligible for Medicare other than for Medigap, are also tax free. Distributions for nonqualified medical expenses are subject to regular income tax, as well as a 20 percent penalty if under age 65. Sufficient records must be kept to show that distributions are used exclusively to reimburse the qualified medical expenses, have not been previously reimbursed and have not been taken as an itemized deduction in any prior year.
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{ Financial planning: HSAs }
Establishing a HSA
An HSA is an IRA-like trust or custodial account that can be set up at a bank, insurance company, or brokerage firm. The HSA arrangement must be exclusively for the purpose of paying the account owner’s qualified medical expenses. These include uninsured costs incurred by the account owner, his spouse and his dependents. Otherwise, HSAs are subject to rules very similar to those that apply to IRAs. For example, HSA contributions for a particular year can be made as late as April 15 of the following year. Account owners can also make tax-free rollovers from one HSA to another.
Potential lifetime tax savings
As mentioned above, HSAs provide account owners a triple tax advantage. The tax treatment is different from a traditional retirement savings plan, such as a 401(k) or individual retirement account (IRA), where contributions reduce taxable income but distributions of original pre-tax and employee contributions are taxed along with subsequent investment returns, and also different from a Roth 401(k) or Roth IRA,
where contributions are taxed but the account growth and distributions are not so long as certain holding periods are attained. As a result, some individuals might find using an HSA as a savings vehicle for health care expenses in retirement more advantageous from a tax perspective than saving in a 401(k) plan or other retirement savings plan. The key to this is to pay for covered expenses with after-tax dollars.
Conclusion
HSAs are a great tax-saving deal. Best of all, they are simple and easy to establish and operate. You probably have a number of clients who do not have generous employer-paid health coverage or can afford to pay medical expenses on an aftertax basis. In any case, obtaining qualifying high-deductible insurance coverage and setting up an HSA to make tax-saving contributions is the best permanent tax deferred vehicle available today.
Robert A. Buss Jr., CPA, CEBS is senior manager - Employee Benefits Services at Wipfli LLP in Green Bay. Contact him at 920-662-2851 or BBuss@WIPFLI.com.
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