In case not everyone who receives these postings doesn't understand what nxtARROW is doing in Buffalo, let us link you to this very inspiring story that recently aried on NBC Nightly News.
http://www.msnbc.msn.com/id/3032619/#36059451
What the Park State Bank is doing (in above linked story) is what nxtARROW is facilitating in Buffalo. We are asking property owners who have excess available space to donate a portion of it to a pool of resources that nxtARROW will provide to startups moving into Buffalo to launch or to take their business to the next level.
We are in the process of gaining commitments from business and residential property owners/managers to make space available for those who are willing to come to Buffalo, build a business and create jobs for local people.
Anyone having a good business idea, whether funded by Venture Capital, Angels, Private Equity-- or not yet funded, nxtARROW can set them up with free assets and services for their first year, including housing, office/manufacturing space, a vehicle, personal lifestyle services, business to business services, and amenities. Virtually everything needed to do business with the exception of the cost of operating the core business is free to those entreprneurs coming to Buffalo from out of town.
In the near future we plan to hold a "Buffalo Summit" meeting of everyone in the public and private sectors who has influence and/or assets to donate to the cause, and we'll be asking them to join each other in making a commitment to Buffalo's rebirth as an entrepreneurial hub.
If you know anyone who has resources to share for this cause, or who is starting a venture and would consider relocating to Buffalo (whether from the Buffalo suburbs, out of state, or out of the country) contact us and contact them on our behalf.
Tuesday, March 30, 2010
Wednesday, March 24, 2010
Healthcare Reform and Startups
Now that we have health care "reform", it is important to understand how the new law may affect entrepreneurs.
First of all, the bill's proponents like to laud the fact that people can now leave their place of employment and start a business without having to worry about health care. This is true to an extent, however the creation of an exchange from which the uninsured can purchase health insurance is a long way ahead of us, and there is no immediate provision to make your current group coverage as affordable as it is portable.
It might be better to start from scractch and create a plan for your new company that is designed to avoid the features of the current norms in health insurance that are bound to continue to escalate in cost.
In actuality, the solution to health care for startups and small business is not much different than it was before the legislation, at least in the short term.
The good news is that there is a way to create a health plan that will be cost-effective and should not be subject to dramatic premium increases in future years.
Anyone starting a business or already in business and considering what, if anything, to do about health benefits, should consider this strategy. The following is a recommended structure for small business health benefits.
In summary this Self-Funded, Self-Insurance plan utilizes the following features, products, and strategies to maximize efficiency and effectiveness:
1. Catastrophic Care insurance with very high deductibles and 100% coverage with no caps, over the deductibles, provided by traditional health insurance company
2. Health Reimbursement Arrangement (HRA) to cover costs between the plan deductible and the catastrophic care deductible.
3. Permanent Life Insurance as a means of funding the HRA, a retirement plan and a profit sharing program.
Catastrophic Care: This custom hybrid benefit plan utilizes high deductible "catastrophic care" insurance. We recommend that you set deductibles at between $5,000 and $10,000. Using this approach, a traditional health insurance company such as Blue Cross, Independent Health, Univera, etc., would only cover medical expenses over the deductible amount, but you can elect to have 100% of expenses covered once the deductible is met. High deductibles keep your costs contained much better than low deductibles.
The self-funded aspect of the plan pertains to how plan participants are covered for expenses that fall below the catastrophic deductible and a reasonable deductible amount you elect to establish for your plan. We recommend $2,000, since this is typical of group plans currently. You can put in some extra perks such as free preventative care, and prescription coverage if you wish, though prescriptions can eat up that $2,000 very quickly, even for a relatively healthy person, so we recommend that you make prescriptions subject to the $2,000 deductible also.
A Health Reimbursement Arrangement (HRA) can be set up with your catastrophic care provider to process and pay claims over your lower deductible amount ($2,000, etc.). The money to pay the claims would normally come directly from company funds (hence the self-funded designation) but we are going to show you how you can avoid making these payments directly from company funds.
We recommend that you set up a Benefit Fund that includes money for profit sharing, retirment benefits, and health reimbursement dispersements so that employees know that abuse of their health benefits will reduce the funds available for profit sharing and/or retirement. That creates a natural incentive not to over-utilize medical benefits.
This combined fund can be created from the savings you enjoy between the cost of catastrohic care premiums and the combined cost of traditional lower deductible health insurance plans plus what you would contribute to a 401K, typically 3% of matching funds for each employee.
As an example, if a traditional plan would cost you $1,000 per month per employee but your new catastrophic plan only costs $300 per month per employee, you can put the $700 per month per employee of savings into your combined benefit fund. If you elect to divert what would have gone into your employees retirement fund (3% of gross pay, for instance) into this fund you would add that amount to the $700 per employee per month and pay into the benefit fund.
There is a way to increase the value of your combined benefit fund, by putting the money into a permanent life insurance policy on each of your employees rather than simply paying it directly into a bank account or bond fund. We recommend that you do this, and that you purchase Northwestern Mutual's portfolio permanent life insurance. Northwestern Mutual is the best in the business. Their permanent life insurance has earned 6-11.5% dividends over the past 30 years, at an average of 8%. You can purchae an "overfunded" life insurance policy in which half of your premiums goes to death benefit and the other half goes directly into cash value, increasing the liquidity of your plan.
An additional benefit of puting these funds into whole life is that whole life cash value can be used as collateral for business loans, or if you choose not to voluntarily assign it as collateral, it is protected from assignment or seizure by the courts or the IRS. Loans can be taken on cash value life insurance, up to 95% of the total cash value available without surrendering the insurance benefits. Therefore, you can pay your medical claims that fall between the deductible you have established for your plan, and the high deductibles of your catastrophic care plan in the form of loans on life insurance rather than out of company operating funds.
This essentially makes your plan a self-funded or self-insured plan. By law, self-funded plans are not subject to the same regulations that govern regular group health insurance. Therefore you can put some additional stipulations on what you will cover with your plan.
We recommend that you require a certificate from an emergency room physician that any care received in an emergency room was medically necessary. Without such a certificate, you can exclude payment for ER care in your plan. The difference between the cost of a typical Emergency Room visit for a minor illness and a visit to a Minor Care clinic or a family practice is 3,000%! By adding this stipulation you have saved your plan thousands of dollars and made it much less likely that your costs will increase beyond the rate of inflation in the future.
The Bottom Line is convincing. Imagine for a moment that you have a traditional health care plan and a traditional 401K plan and you pay a combined total (average) of $1,200 per month per employee for health and retirment benefits. Now imagine that you switch to this customized plan. You now have control over $900 per month of benefit premiums and contributions that until now were going to the health plan and the 401K. You are now paying $900 in total premiums to Northwestern Mutual for permanent life insurance on each employee, which is funding your combined benefit fund. By overfunding the life insurance, you have immediate access to $450 per month of cash value, and over time you have an increasing cumulative amount of cash value and dividends added to value. If it is needed to pay health reimbursement arrangement claims, it is used for that purpose. Otherwise, it continues to accumulate and compound with interest. Instead of sending $1,200 per month per employee away permanently, you maintain control over $900 per month and have $450 per month per employee of immediately accessible liquid assets.
You can set up policies to vest employees with an increasing percentage of the cash value left on each of their insurance policies for their retirement and profit sharing plans. Any employees who leave the company prior to vestment forfeit all funds. Those who leave after vesting, take a portion of the cash value with them, but not all of it unless they have been in your employ for many years. Therefore, your company enjoys dramatically increased liquidity as your cash values on each permanent life insurance policy continue to compound and grow.
We realize this is very complicated and difficult to explain clearly in a blog. Anyone wanting more information on how this works, please contact us: info@nxtarrow.com or 716 698-1553.
It should be noted that we are not affiliated with Northwestern Mutual nor do we receive any financial incentive to recommend Northwestern Mutual's products. We recommend them because they are the best, due to the dividend rate and efficient management of their portfolio products, and the only such product that makes this solution viable.
Please check previous postings regarding current trends and innovation in personnel policies.
First of all, the bill's proponents like to laud the fact that people can now leave their place of employment and start a business without having to worry about health care. This is true to an extent, however the creation of an exchange from which the uninsured can purchase health insurance is a long way ahead of us, and there is no immediate provision to make your current group coverage as affordable as it is portable.
It might be better to start from scractch and create a plan for your new company that is designed to avoid the features of the current norms in health insurance that are bound to continue to escalate in cost.
In actuality, the solution to health care for startups and small business is not much different than it was before the legislation, at least in the short term.
The good news is that there is a way to create a health plan that will be cost-effective and should not be subject to dramatic premium increases in future years.
Anyone starting a business or already in business and considering what, if anything, to do about health benefits, should consider this strategy. The following is a recommended structure for small business health benefits.
In summary this Self-Funded, Self-Insurance plan utilizes the following features, products, and strategies to maximize efficiency and effectiveness:
1. Catastrophic Care insurance with very high deductibles and 100% coverage with no caps, over the deductibles, provided by traditional health insurance company
2. Health Reimbursement Arrangement (HRA) to cover costs between the plan deductible and the catastrophic care deductible.
3. Permanent Life Insurance as a means of funding the HRA, a retirement plan and a profit sharing program.
Catastrophic Care: This custom hybrid benefit plan utilizes high deductible "catastrophic care" insurance. We recommend that you set deductibles at between $5,000 and $10,000. Using this approach, a traditional health insurance company such as Blue Cross, Independent Health, Univera, etc., would only cover medical expenses over the deductible amount, but you can elect to have 100% of expenses covered once the deductible is met. High deductibles keep your costs contained much better than low deductibles.
The self-funded aspect of the plan pertains to how plan participants are covered for expenses that fall below the catastrophic deductible and a reasonable deductible amount you elect to establish for your plan. We recommend $2,000, since this is typical of group plans currently. You can put in some extra perks such as free preventative care, and prescription coverage if you wish, though prescriptions can eat up that $2,000 very quickly, even for a relatively healthy person, so we recommend that you make prescriptions subject to the $2,000 deductible also.
A Health Reimbursement Arrangement (HRA) can be set up with your catastrophic care provider to process and pay claims over your lower deductible amount ($2,000, etc.). The money to pay the claims would normally come directly from company funds (hence the self-funded designation) but we are going to show you how you can avoid making these payments directly from company funds.
We recommend that you set up a Benefit Fund that includes money for profit sharing, retirment benefits, and health reimbursement dispersements so that employees know that abuse of their health benefits will reduce the funds available for profit sharing and/or retirement. That creates a natural incentive not to over-utilize medical benefits.
This combined fund can be created from the savings you enjoy between the cost of catastrohic care premiums and the combined cost of traditional lower deductible health insurance plans plus what you would contribute to a 401K, typically 3% of matching funds for each employee.
As an example, if a traditional plan would cost you $1,000 per month per employee but your new catastrophic plan only costs $300 per month per employee, you can put the $700 per month per employee of savings into your combined benefit fund. If you elect to divert what would have gone into your employees retirement fund (3% of gross pay, for instance) into this fund you would add that amount to the $700 per employee per month and pay into the benefit fund.
There is a way to increase the value of your combined benefit fund, by putting the money into a permanent life insurance policy on each of your employees rather than simply paying it directly into a bank account or bond fund. We recommend that you do this, and that you purchase Northwestern Mutual's portfolio permanent life insurance. Northwestern Mutual is the best in the business. Their permanent life insurance has earned 6-11.5% dividends over the past 30 years, at an average of 8%. You can purchae an "overfunded" life insurance policy in which half of your premiums goes to death benefit and the other half goes directly into cash value, increasing the liquidity of your plan.
An additional benefit of puting these funds into whole life is that whole life cash value can be used as collateral for business loans, or if you choose not to voluntarily assign it as collateral, it is protected from assignment or seizure by the courts or the IRS. Loans can be taken on cash value life insurance, up to 95% of the total cash value available without surrendering the insurance benefits. Therefore, you can pay your medical claims that fall between the deductible you have established for your plan, and the high deductibles of your catastrophic care plan in the form of loans on life insurance rather than out of company operating funds.
This essentially makes your plan a self-funded or self-insured plan. By law, self-funded plans are not subject to the same regulations that govern regular group health insurance. Therefore you can put some additional stipulations on what you will cover with your plan.
We recommend that you require a certificate from an emergency room physician that any care received in an emergency room was medically necessary. Without such a certificate, you can exclude payment for ER care in your plan. The difference between the cost of a typical Emergency Room visit for a minor illness and a visit to a Minor Care clinic or a family practice is 3,000%! By adding this stipulation you have saved your plan thousands of dollars and made it much less likely that your costs will increase beyond the rate of inflation in the future.
The Bottom Line is convincing. Imagine for a moment that you have a traditional health care plan and a traditional 401K plan and you pay a combined total (average) of $1,200 per month per employee for health and retirment benefits. Now imagine that you switch to this customized plan. You now have control over $900 per month of benefit premiums and contributions that until now were going to the health plan and the 401K. You are now paying $900 in total premiums to Northwestern Mutual for permanent life insurance on each employee, which is funding your combined benefit fund. By overfunding the life insurance, you have immediate access to $450 per month of cash value, and over time you have an increasing cumulative amount of cash value and dividends added to value. If it is needed to pay health reimbursement arrangement claims, it is used for that purpose. Otherwise, it continues to accumulate and compound with interest. Instead of sending $1,200 per month per employee away permanently, you maintain control over $900 per month and have $450 per month per employee of immediately accessible liquid assets.
You can set up policies to vest employees with an increasing percentage of the cash value left on each of their insurance policies for their retirement and profit sharing plans. Any employees who leave the company prior to vestment forfeit all funds. Those who leave after vesting, take a portion of the cash value with them, but not all of it unless they have been in your employ for many years. Therefore, your company enjoys dramatically increased liquidity as your cash values on each permanent life insurance policy continue to compound and grow.
We realize this is very complicated and difficult to explain clearly in a blog. Anyone wanting more information on how this works, please contact us: info@nxtarrow.com or 716 698-1553.
It should be noted that we are not affiliated with Northwestern Mutual nor do we receive any financial incentive to recommend Northwestern Mutual's products. We recommend them because they are the best, due to the dividend rate and efficient management of their portfolio products, and the only such product that makes this solution viable.
Please check previous postings regarding current trends and innovation in personnel policies.
Friday, March 19, 2010
Models for Startups: Guaranteed Employment?
In our last issue we discussed the benefits of patterning startups personnel policies after Fortune's 100 Best Companies to Work For, as well as other lists such as Working Mother's Top 100.
Today we suggest another personnel policy that could serve to strengthen one's company and foster employee loyalty. It's guaranteed employment.
Recently there have been a few stories on public radio about a unique company, Lincoln Electric. This is an older company that is publically traded and has a unique contract with its employees. Basically they tell their employees that as long as we're in business and you fulfill your job description, you will not be laid off. In exchange, employees agree to a variable pay rate that is subsidized at the end of the year by a large bonus that has ranged from 30% to 78% of their base pay, depending on the company's financial health.
Lincoln has never failed to pay a bonus, even during the Great Depression. And they've never laid anyone off. They continue to exceed market expectations despite having such a policy.
So here's the lesson for startups. Be careful not to over-hire at first, but when you do hire, make a similar contract with your employees. Let them know that how much they earn will depend on how much the company earns, but their job is secure as long as the company survives, so they don't have to worry about missing mortgage payments or losing health insurance.
For more on this unique concept, see the following link to a story that appeared on yesterday's edition of PRI's Marketplace, heard on many NPR and other public radio stations. http://marketplace.publicradio.org/display/web/2010/03/18/pm-spark-q/
In our last issue we discussed the benefits of patterning startups personnel policies after Fortune's 100 Best Companies to Work For, as well as other lists such as Working Mother's Top 100.
Today we suggest another personnel policy that could serve to strengthen one's company and foster employee loyalty. It's guaranteed employment.
Recently there have been a few stories on public radio about a unique company, Lincoln Electric. This is an older company that is publically traded and has a unique contract with its employees. Basically they tell their employees that as long as we're in business and you fulfill your job description, you will not be laid off. In exchange, employees agree to a variable pay rate that is subsidized at the end of the year by a large bonus that has ranged from 30% to 78% of their base pay, depending on the company's financial health.
Lincoln has never failed to pay a bonus, even during the Great Depression. And they've never laid anyone off. They continue to exceed market expectations despite having such a policy.
So here's the lesson for startups. Be careful not to over-hire at first, but when you do hire, make a similar contract with your employees. Let them know that how much they earn will depend on how much the company earns, but their job is secure as long as the company survives, so they don't have to worry about missing mortgage payments or losing health insurance.
For more on this unique concept, see the following link to a story that appeared on yesterday's edition of PRI's Marketplace, heard on many NPR and other public radio stations. http://marketplace.publicradio.org/display/web/2010/03/18/pm-spark-q/
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