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A Guide to Benefits When Changing Jobs

If you’re changing jobs, you probably have a lot on your mind. As you wrap up work with your previous employer and prepare for your new role, it can be easy to let important benefits-related decisions fall by the wayside. If that happens, you could miss a limited opportunity to sign up for new benefits or miss out on making wise changes to your plans. To stay on track financially during a career transition, be sure to review the status of your retirement accounts and other valuable employee benefits.

Qualified Retirement Plans

Many employers offer qualified retirement plans, such as 401(k) and 403(b) accounts. (“Qualified” means that these plans qualify for tax advantages per IRS rules.) When transitioning to a new job, you’re entitled to keep the vested balance in your qualified retirement plan, including contributions and earnings. You’re also entitled to keep any employer contributions that have vested according to your employer’s schedule.

What can you do with the money? You have several options:

  • Leave the funds in your current employer’s plan if your vested balance exceeds $5,000. If the balance is less than $5,000, the plan could require that you roll over or distribute your assets.
  • Roll over the funds to an individual IRA or, if allowed, to your new employer’s plan.
  • Withdraw the funds and pay any taxes due along with any applicable penalties. (It’s wise to carefully consider any decision to withdraw and spend your retirement savings.)

Accumulation rights. If you wish to roll over the funds, consider the accumulation rights you may be giving up by switching to a different plan. Accumulation rights offer shareholders the potential for reduced commissions when purchasing additional fund shares. If you have such rights with your current plan, they could become important if you plan to purchase a sizable amount of shares.

Potential penalties and fees. It’s also important to consider the possibility of premature distribution penalties, as well as any fees and expenses a new plan may impose. If you’ve separated from service in the year you turn 55, or at any later age, any assets distributed from your old employer’s plan aren’t subject to the standard 10 percent penalty. Once funds are rolled into an IRA or a new plan, however, the 10 percent penalty may apply to subsequent distributions if you’re younger than 59½ at the time, unless you can claim an exception.

Rolling funds over to an IRA. Factors to consider before taking this action include:

Advantages

  • IRAs may provide more investment choices than employer plans.
  • IRA assets can be allocated to different IRAs. There is no limit on how many direct transfers you can make from one of your IRAs to another IRA in a year. This means you can easily move money between IRAs if you’re dissatisfied with an account’s performance or administration.
  • Although 401(k) distribution options depend on the plan terms, IRAs offer more flexibility.
  • IRAs have more premature penalty exceptions than 401(k) plans.

Disadvantages

  • When you turn 72, you must start taking required minimum distributions (RMDs) from pretax IRAs, whereas you may be able to defer them in a 401(k) until the year you retire if your employer allows for it. (There are no RMDs from Roth IRAs during the account owner’s lifetime.)
  • IRA account expenses, such as trading charges or annual fees, may be higher than qualified retirement plans.
  • When you roll funds over from a 401(k) to a Roth IRA, taxes will need to be paid on the pretax contributions; however, any future distributions from the Roth IRA may be tax free if IRS requirements are met.

Rolling funds over to your new employer’s plan. Employer plans offer the following advantages:

  • If you intend to work beyond age 72, participation in the employer’s qualified plan means you can typically delay the first RMD until the year you retire if the plan allows. (An exception applies if you own 5 percent or more of the business offering the plan.)
  • Employer 401(k) plans may receive greater creditor protection than IRAs. Typically, employer plan funds cannot be used to satisfy most creditors, while the federal protection for IRA funds is more limited.

Stock Options and Nonqualified Deferred Compensation Plans

Prepare a list of any stock options you’ve received from your employer. Often, vested options expire within a specified time frame when you leave a job. Deciding whether to exercise your options depends on your financial situation and whether your options are “in the money” (i.e., the exercise price is lower than the market value).

Nonqualified deferred compensation plans allow executives to defer a portion of their compensation and the associated taxes until the deferred income is paid. With these plans, leaving your employment may trigger the need to take distributions in lump-sum or installment payments. You should be aware that any distributions will affect your taxable income.

Life Insurance and Disability Insurance

Employer-provided life insurance remains active only while you are employed. Ask if you have the option to convert the policy to an individual policy offered by the same insurance provider. If you do switch to an individual policy, however, the premium will likely increase. In some cases, it may be time to evaluate policy options from other companies. If you’re in between jobs, for instance, you may want to consider an individual policy that won’t be affected by employment changes.

Health Insurance

Your health insurance will expire once you leave an employer. COBRA may be a good option if you need interim health insurance coverage. Keep in mind, however, that your premium payments will increase when you opt for COBRA coverage. Shopping for an individual health insurance policy that meets your needs could reduce your premiums.

New Benefits Review

Once you start your new job, take time to understand the new benefit options, including health insurance, disability insurance, and employer savings plans. It’s important to review how the new employer retirement plan options fit into your overall savings plan, including any employer matches. Remember to fill out beneficiary designations for insurance policies and saving plans—and review those designations periodically. Finally, if your salary has changed, it’s a good time to determine whether you should adjust your tax withholding and investment elections.

 This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer. 

 If you are considering rolling over money from an employer-sponsored plan, such as a 401(k) or 403(b), you may have the option of leaving the money in your current employer-sponsored plan or moving it into a new employer-sponsored plan. Benefits of leaving money in an employer-sponsored plan may include access to lower-cost institutional class shares; access to investment planning tools and other educational materials; the potential for penalty-free withdrawals starting at age 55; broader protection from creditors and legal judgments; and the ability to postpone required minimum distributions beyond age 72, under certain circumstances. If your employer-sponsored plan account holds significantly appreciated employer stock, you should carefully consider the negative tax implications of transferring the stock to an IRA against the risk of being overly concentrated in employer stock. Your financial advisor may earn commissions or advisory fees as a result of a rollover that may not otherwise be earned if you leave your plan assets in your old or a new employer-sponsored plan and there may be account transfer, opening, and/or closing fees associated with a rollover. This list of considerations is not exhaustive. Your decision whether or not to roll over your assets from an employer-sponsored plan into an IRA should be discussed with your financial advisor and your tax professional.

© 2022 Commonwealth Financial Network®

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The Value of Disability Insurance to Employers and their Employees

By Sherree Craig, CEBS

Sherree L. Craig, CEBS

Sherree L. Craig, CEBS

Companies in Maine and across the country face the challenge of rewarding employees and this struggle rose to the surface significantly during the pandemic. Striking the balance between a workable company budget and the satisfaction of the company’s human capital is critical.

One of the most affordable and valuable forms of financial protection for employees is disability insurance. Offering a disability plan emphasizes a company’s commitment to the health and financial well-being of its workforce, providing employees with an income when recovering from an accident or an illness. An employee can recover peacefully without the burden of worrying where the next paycheck might be and allows them to place their focus on immediate medical needs.

In addition to being a deductible business expense, this offer could have an impact on the company’s workers’ compensation status. Once an employer sponsored disability plan is purchased, conversations with business insurance and accounting partners should take place.

Disability insurance is designed as short-term and/or long-term policies.

The short-term disability benefit is paid weekly. Pricing for the group plan is determined by the design of the contract and the group demographics (age, wages, industry). The following are some plan design considerations:

  • How many days will the employee be disabled before the payments begin? One frequent plan design option is the first day following an accident and the eighth day following an illness. We see these go as high as two weeks, which would keep the costs exceptionally low, but could come at the expense of the employee’s satisfaction.
  • How long will the payments last? Options typically are 13 weeks or 26 weeks.
  • What percentage of earnings will be replaced? Disability insurance does not normally cover full replacement. Insurance theory dictates that full replacement might encourage malingering – an incentive to remain disabled and not return to active capacity as soon as they are able.

Like the short-term disability, long-term disability policies are priced on the demographics of the company and design of the plan. The long-term disability benefit is paid monthly rather than weekly, and the elimination period (the length of time from the start of the disability until payment begins) can be dovetailed to start at the end of the short-term disability benefit. The benefit period may depend on the company size but should be designed to last a minimum of five years or all the way to the normal social security retirement age.

A group disability package has the added advantages of group pricing and are free from medical underwriting, making the plan simple to establish and administer.

Curious to see how your benefits stack up against other employers in your industry and community? Principal insurance has a great benchmarking tool. https://www.principal.com/businesses/compare-benefits

Principal Benefit Design Tool | Principal

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Building Partnerships for Workplace Safety

Safety in the workplace starts with good information, translated into good practice. Recently the management staff at the Belfast Co-Op  joined Sally Miles of Allen Insurance and Financial and Maureen Anderson, an ergonomist from MEMIC, the workers’ compensation insurance company, for a safety workshop designed especially for the Co-op workplace.

They discussed sitting, standing, lifting, carrying, material handling and posture.  The main theme was the  “Power Zone,” which is close to the body, between mid-thigh and mid-chest height − where the arms and back can lift the most with the least amount of effort and with a lower risk of injury.

“Preventative measures such as regular safety meetings can make a real difference for our workers in the long run,”  said Doug Johnson, co-op general manager.  “We’re pleased Allen Insurance and MEMIC took the time to introduce us to this valuable resource.”

Group of three people
From Left: Sally Miles of Allen Insurance; Doug Johnson, general manager of the Belfast Co-op, and Maureen Anderson, ergonomist from MEMIC.
ergonomic training at Belfast Co-op
ergonomic training at Belfast Co-op
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Why Do You Need Cyber Insurance?

Karen Reed

By Karen Reed
This is another in our series of blog posts for business owners.

WHAT IS CYBER INSURANCE?

A cyber insurance policy can help protect your business from the fallout from cyberattacks and hacking threats. Having a cyber insurance policy can help minimize business disruption during and after a cyber incident, as well as potentially covering the financial cost of some elements of dealing with the attack and your recovery from it.

WHO NEEDS CYBER INSURANCE?

If your business stores any form of digital data, you need cyber insurance. These days, this is nearly every business.

WHAT SORT OF ATTACKS RESULT IN CYBER INSURANCE CLAIMS?

Cyber insurance claims can be triggered by many different incidents. Most common are ransomware, fund-transfer fraud attacks and business email compromise scams.

HOW MUCH DOES CYBER INSURANCE COST?

The cost of a cyber insurance policy depends on a number of different factors including the size of your business and its annual revenue. Other factors can include the industry in which you operate, the type of data your business typically deals with and the overall security of your computer network.

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Business Owners: 5 Reasons to Call Your Insurance Agent

Patrick Chamberlin, CIC

By Patrick Chamberlin

When the best or worst happens, we know your insurance agent is not one of the first people you think of first. Even so, whatever change you are facing, chances are it affects or involves your insurance – so when change happens, give your agent  a call. We’re here to help.

  1. When you have a claim. Please, let your agent know ASAP.
  2. You’re contemplating operational changes. Changes in your business offerings may come with a cost (or savings) and  may also open you up to other exposures which you are inadequately covered for.
  3. Signing a contract? Call before, not after. It is important that your agent is not left out of the conversation. Aside from your attorney, we should be reviewing the insurance language in any and all contracts you sign.
  4. If you are frustrated by your insurance costs, give your agent a call. Independent agents work with a range of insurance carriers. If you have pricing concerns, give us a call and let us know how you feel!
  5. We are your advocate. Your insurance agent is your voice to your insurance company. Let us get to know you. Calling just to chat is A-OK.
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Building a Boat? You Need Hull Builder’s Risk Insurance

By Chris Richmond
Originally Submitted to WorkBoat Magazine 

Building boats can be the primary part of your business or just an occasional project. Regardless of how many or how often you do this, one thing is common: You will need a Hull Builders Risk insurance policy. And don’t think that this applies only to a new build. A vessel undergoing a major refit can be covered under this as well. The policy can be extended to cover not only the hull but also material and equipment that has not yet been installed on the vessel.

For the occasional new hull build or the major refit, your policy can be written on single hull basis. For yards in the business of building boats, there is an open builders risk policy for multiple boats.

Valuation of the hull can be calculated two ways. It can be written on the completed value of vessel, or for larger vessels it can be a monthly reporting schedule of the unfinished project which gradually increases to the completed value.

Some policies offer buyback coverage for faulty workmanship. There is a condition to conduct inspections during the build and report any findings to the your underwriter. Keep in mind that claims due to faulty design are not covered. You will want to a professional liability policy for this.

Additional coverages which can be added to the policy includes:

  • Delivery of bare hull to yard to be finished off
  • Launching of vessel
  • Sea trials of vessel
  • Delivery of completed boat to end user

Protection and Indemnity limits are added to cover liability claims due to injury on or around the vessel during the construction process as well as after the vessel has been launched and is conducting sea trials or delivery. And if you are providing crew on board after the vessel has been launched, be sure to have the policy amended to reflect this additional risk.

Whether you are building the vessel for a client of having one built for your own use, the day of launching is always a memorable occasion and one to celebrate. Be sure to do your due diligence beforehand to properly cover potential risks involved with your project to help make this day a great one.

Chris Richmond, CIC, AAI, CMIP
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Maritime Employers Liability – What It Is and Why You Need It

By Chris Richmond
For WorkBoat Magazine

Recently we were reviewing insurance coverage with a local marine contractor. Through the course of our conversation, we learned that one of their employees had been operating a crane aboard another contractor’s barge for that contractor’s project. While this happened only rarely, it did open up a big gap in their coverage. Fortunately, there was a solution: Maritime Employers Liability.

Commercial vessels will carry Protection and Indemnity. As we know, P&I provides coverage for the insured’s crew members. But this only applies to crew members who are employed by the vessel owner or operator. Your employees working on board someone else’s vessel would be covered under an MEL. The MEL follows your employees while they are on non-owned vessels. Coverage under the policy can include:

  • Jones Act
  • Death on the High Seas Act
  • General Maritime Law of the United States
  • Maintenance, Cure and Wages

One important thing to remember is that while an MEL policy will provide coverage for the benefits listed above it does not include a workers compensation policy. You will still need to keep in force coverage under either you state workers compensation policy or your USL&H. One nice thing about an MEL is that you can often have it added to your existing USL&H policy.

MEL is rated differently than typical crew members on your Protection & Indemnity policy. Those crew members are charged per crew for a fixed price, usually between $750 and $1,000 per head. MEL not only looks at how many employees you have working on non-owned vessels but also at your total number of employees as well as payroll associated with both wet and dry exposures. Payroll also needs to be broken out between USL&H, state act (workers compensation) and Jones Act.

There is much more underwriting that goes into an MEL quote as compared with crew on an owned vessel. The premium associated with the MEL policy will vary based on the payroll associated with the exposure − but be prepared to pay at least $5,000 as there is generally a minimum premium with this coverage.

When you send your employees out on a job you want to make sure that they are properly prepared and protected. Do not forget to protect yourself, as well. Without a Maritime Employers Liability policy you could be leaving yourself unprotected against a major claim.

Chris Richmond, CIC, AAI, CMIP
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Why It’s Important Not to Overlook Cargo Insurance

By Chris Richmond
Originally Submitted to WorkBoat Magazine

I met recently with a client who operates a small water taxi service. I noticed several crates in the bed of his truck and learned he was transporting them to one of our local islands. While this seemed like an innocent risk to the insured, there was one glaring problem: His policy excluded coverage for cargo.

While marine policies will have limited coverage for passengers’ personal effects, there is often an exclusion attached for cargo. This can be added by endorsement with a sublimit of coverage, with premium based on the amount of coverage. Be sure to understand the value of the cargo you are going to be transporting, because your policy will only provide the limits you have paid for. You will also have a separate deductible for cargo claims. A good practice is to have a freight contract with your customer which determines the value of the items to be shipped. This can help avoid any surprises in case of a loss.

Take a look at how the cargo has been packed. We all know things can get rough and wet on the water. You should have an established set of guidelines regarding packaging and you should reserve the right to refuse the right to ship an improperly packaged item. You can’t control the weather and you don’t want to have to pay for someone else’s poor work.

As with all insurance, the cargo endorsement will come with exclusions. Be sure to review these with your agent to make sure everyone is on the same page. Negotiations with an underwriter can often result in more favorable coverage.

Here in Maine, small cargo vessels servicing local island communities are lifeblood to those islands. Often the families operating them have been doing so for many generations. The same is true of many coastal and riverine cargo operations throughout the U.S. As the nature of your business changes and develops, so too should your approach to risk management. Talk to your agent and see if your policy needs to be updated.

Chris Richmond, CIC, AAI, CMIP
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Business Income Insurance – What It Is and Why You Need It

Sally Miles, Allen Insurance and Financial

By Sally Miles

If your business has to stop operations unexpectedly, there would be loss of business income. There is a type of insurance coverage which can help a business owner meet payroll and other operating expenses and replace actual loss of net income during the time required to repair or replace the damaged property after a loss.

There are a few important things to know about business income coverage:

  • Business income is defined as net profit or loss before income taxes that would have been earned or incurred if no physical loss had occurred.
  • This coverage is triggered by direct physical loss or damage to your property due to a covered loss AND a partial or full suspension of operations.
  • Business Income coverage can be programmed to fit the needs of a specific business.

We recommend asking your insurance agent to help you determine whether  business income coverage is essential for your operation. It could mean the difference between reopening after a covered loss  or closing your doors for good.

 

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Rein in Workers’ Compensation Insurance Costs

By Chris Richmond
Originally Submitted to WorkBoat Magazine

We’ve spent some time in this space discussing the Jones Act, which covers your crew on owned vessels and USL&H, which responds to your employees who meet the situs and status of the federal act. Now let’s talk about another layer of protection for employees: State workers compensation insurance, which for many smaller yards can be a primary coverage for employees.

The action of every employee at a yard can have a dramatic effect on the cost of a workers compensation insurance policy.  Here’s why:

A workers compensation base premium is calculated by two things: Job classifications for each employee (based on the work they are doing) and the payroll associated with each classification. Your premium is multiplied by your experience mod. A neutral experience mod is 1.0. With yards experiencing frequent or expensive claims, the experience mod will increase, as will your premium. For yards experiencing no claims, this number will go do down − and so will your premium.

The calculation of an experience mod is based on the prior three years of policy period. When a claim occurs, you can reduce the negative impact of an injured employee on your experience mod by getting them back to work as soon as possible. Medical-only claims are weighted far less than indemnity benefits claims.

Aside from telling your employees to be careful and not get hurt there are other ways to help create a safer work space. For starters, contact your workers compensation company. They will have all sorts of workshops and webinars to assist you, very often if not always, at no cost to you. Schedule a visit with their loss control department and have one of their safety management consultants do a walk thru of your facility. This can turn in to an annual event and can help you track improvements or areas of concern to address. Your state department of labor will also have consultation services available. By getting a new set of eyes on your facility and workforce simple improvements can be made that can have dramatic effects in a safer work environment.

Finally, review your experience mod work sheet with your agent. Mistakes in coding can have a negative effect to your policy. Recently we were reviewing a boatyard’s report and noticed a claim that should have been coded as medical-only had been mis-coded as indemnity. This had a dramatic effect to the mod in the wrong direction and once corrected reduced the insured’s premium. Have a chat with your agent, it could save you some money.

Chris Richmond, CIC, AAI, CMIP
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