January/February
Joan Gilles - Financial Coach Newsletter
In This Issue
Retirement Plan Options
Top Ten Ways For Small Business to Avoid Litigation
Common Sense Ain't So Common
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Natalie Wyatt-Brown
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Dear Joan,
 
Welcome to the January/February, 2008 issue of The Joan Gilles - Financial Coach Newsletter.  I hope is will give you some insights into what's happening in the financial world as well as giving you tips and tid-bits about money that will benefit you and your business.
 
I am excited to introduce you to Natalie Wyatt-Brown of Oberman Thompson & Segal, LLC (Attorneys).  Natalie specializes in employment law.  Her easy to read, interesting article is written in the David Letterman "top ten list" style about avoiding litigation.  It is must know information for any business owner.  Enjoy!
 
Please feel welcome to pass this newsletter on to friends and colleagues. 
Retirement Plan Options 
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Small business owners, whether incorporated or not, have a number of retirement plan options available.  If you are considering starting a retirement plan, you should first learn about the kinds of plans available to you.  In this article, we'll discuss two popular retirement plans used by small businesses and the benefits of each. 

 

One of the most popular is the SEP or Simplified Employee Pension.  You can contribute 25% of your compensation up to $45,000 for yourself.  Of course, you must make a similar contribution for any employees you have.  In other words: if you make a 25% contribution for yourself, you must make a 25% contribution for your employee(s) based on their salaries.  The benefits:

§         You can still set up, make a contribution and get a tax deduction for 2007 as long as it's done by your tax filing deadline. 

§         SEP plans have the least paperwork and reporting requirements of any plan, making it easy to set up and administer. 

§         You decide whether to make a contribution year-to-year giving you some flexibility in an economic slowdown.

 

Another popular plan - especially if you have employees - is the SIMPLE IRA or Savings Incentive Match Plan for Employees.  The benefits:

§         A SIMPLE plans allow for payroll deductions by employees - $10,500 in 2007 with a catch-up provision for those over age 50.

§         Employee contributions are matched, usually dollar for dollar of the first 3%.  In other words...you are only providing a contribution for those who choose to participate. 

§         No annual filing requirements and most of the paperwork is handled by the bank or financial institution making the investments for you and your employee(s).

 

 

For more detailed information on retirement plans, including rules for setting them up, the IRS offers a free CD-ROM called "Individual Retirement Arrangement Resource Guide for Small Business Owners and Individuals".  You can order a copy at www.irs.gov/retirement (the fastest way to find it on the website is to type IRA Resource Guide for Small Business Owners in the search box).  Also check out IRS Publication 560 - "Retirement Plans for Small Business".   

 

There are significant tax benefits to any retirement plan.  They include the fact that contributions are tax deductible and contributions plus earnings grow without taxation until they are withdrawn.  Of course, there are drawbacks as well - plan assets are illiquid and there is a substantial penalty (10% plus tax)  for early withdrawal - are just 2. 

 

In addition to helping your practice, yourself and your employees, recent tax law changes have handed out more incentives to establish a retirement plan.  They include:

§         Contribution limits that increase regularly allowing you and employees to set aside every larger amounts for retirement.

§         Catch-up provisions that allow employees age 50 and over (including yourself) to side aside additional contributions.

§         Tax credit for small employers that may enable you to claim a tax credit of 50% of the cost of setting up and administering a SEP or SIMPLE IRA plan.  There is a maximum cap of $500 per year for each of the first 3 years of the plan.  As exciting as this sounds, it's very unlikely that you'd ever get to use it since these plans typically don't involve a fee for set up and administration.

§         Tax credit for certain low and moderate- income participants (including the self-employed).  The amount of the credit is based on the contribution made and the credit rate.  The maximum contribution eligible for the credit is $2,000.  The credit rate can be as low as 10% or as high as 50% depending on adjusted gross income.  Talk with your tax advisor for more information.

 

Take Away Wisdom

As a small business owner, there are lots of really good reasons to have a retirement plan.  The type of plan you choose is based on your business and personal situation.  You may want to talk with your tax advisor or give me a call and we can flesh-out which plan is appropriate for you.  However, if you are looking for a tax deduction for 2007 - your only option may be a SEP Plan.

 

Natalie Wyatt-Brown Top Ten Ways For Small Businesses To Avoid Litigation

by:  Natalie Wyatt-Brown, Attorney

Small businesses often underestimate the importance of staying on top of employment issues, which can lead to litigation and other problems down the road.  There is little difference between avoiding litigation and effectively managing the workplace.  The bottom line is that happy, contented employees rarely sue.  By following these ten recommendations, you should have fewer management problems and less litigation.  In the rare situation where litigation simply cannot be avoided, following these key points should improve your chances of successfully defending a lawsuit.

10.       Don't Make Promises You Can't Keep

You must manage employee expectations.  For example, if your employment handbook has a progressive discipline policy, you should follow it.  Don't make promises like, "you have a job here until you retire," or "of course you will get that promotion."  You will be surprised at what employees remember about even casual remarks-in the employment arena, there is no such thing as an empty promise.  Disappointed employees often become plaintiffs. 

9.         Mind Your Own Business

Do not have inappropriate discussions about people's personal lives, hug employees, or otherwise violate people's sense of personal space and boundaries.  Don't ask applicants or employees about their religion, marriage, plans for children, etc.  It is also inadvisable for managers to "get personal" with subordinates, by inviting them over to their house, or out for lunch.  It does NOT mean, however, that an employer should not check employee emails and computers for inappropriate content.  

8.         Cooperate

Employers should try to work with their employees, rather than against them.  Treating employees as the enemy is a sure-fire way to lead to litigation.  If an employee has a problem, try to solve it.  If he or she needs an accommodation for a disability, work to find a solution.  If an employee complains about unfair treatment or sexual harassment, take it seriously, investigate, and deal with the problem. 

7.         Don't Tease

Don't make fun of other people's age, gender, sexual preference, race, disability, etc.  Similarly, singling out a particular employee for teasing, joking and pranks can lead to problems.  While it is fine to have a relaxed, casual atmosphere at work, sometimes joking can go too far and you must be careful to keep any teasing and joking within acceptable limits.  Employers should also be responsive to employee complaints about such conduct-it is not acceptable to tell the complainer that he or she "just needs to learn how to take a joke."

6.         Use Your Words

Tell employees how they are doing!  Often, particularly in Minnesota, employers want to be "nice" and don't want to criticize employees.  Sometimes, however, you have to be cruel to be kind.  Which is worse-telling an employee where he or she is falling short and giving them a chance to improve, or simply terminating them without a word of warning?  Constructive criticism is a valuable tool-both from a management perspective and for litigation avoidance.  If you tell employees what is wrong, they may change their behavior.  And, the employee terminated with no warning is more likely to sue, and your defense will be difficult with no documentation supporting your position. 

5.         Be Fair

Employers should be consistent when dealing with employees.  If one employee has five tardies, they should receive the same discipline as any other employee (in a comparable position) with five tardies.  Don't play favorites, even when one employee is considered to be a "star" or a better performer than his or her coworkers.  Jealousy can be a very destructive force.

4.         Don't Retaliate or Be Emotional

There is nothing more upsetting for a business owner than an accusation of discrimination or other unfair treatment by an employee.  Under the law, however, employers must resist the instinct to fight back.  Under a recent Supreme Court decision, Burlington Northern v. White, it is now much easier for employees to prove they suffered an "adverse employment action," one of the elements of proving a retaliation claim.  Under the new standard, a negative performance review, job transfer, or even being excluded from the supervisor's weekly poker game can be considered adverse actions.  Therefore, an employer who receives a complaint of discrimination must be particularly cautious in subsequent dealings with that employee.

3.         Follow the Rules

Employers should follow their own policies.  If an exception is to be made, it should be carefully considered and the reasons for making the exception should be documented.  Plaintiffs will often try to prove that a particular decision was a pretext for discrimination by examining whether the employer has followed that policy in the past.  Consistent treatment can avoid such problems.

2.         Be Honest

Some business owners are uncomfortable with confrontation, so instead of telling an employee the real reason for her termination (performance reasons, for example), make up a less painful explanation.  In order to prove discrimination, the employee must show that the reason given by the employer is a pretext, and the real reason is discrimination.  The primary way to do this is by showing that the reason given by the employer was false.  Do not hand a potential plaintiff such a weapon by trying to avoid hurting her feelings.  While it may feel uncomfortable, telling the truth from the start is ultimately less of a headache.

1.         The Golden Rule:  WWJD

"What Would A Jury Do?"  Every issue with an employee has the potential to be second-guessed by a judge and/or jury.  Most jurors are employees, so when they decide employment cases, they look at it from their own perspective-"how would I have wanted to be treated?"  Try to step back and be objective about the decision you are making-would this seem fair to someone else looking at it two or three years later? 

CONCLUSION

There are no perfect solutions to managing employees-they are human beings, and as such think and act unpredictably.  On the other hand, using common sense, fairness and even a little empathy can go a long way to avoid problems in the workplace. 

Natalie Wyatt-Brown is an attorney with the firm of Oberman Thompson & Segal, LLC.  You can reach Natalie at 612.217.6448 or nwyatt-brown@otslawyers.com
I Guess the old saying is true:  "Common Sense Ain't So Common
 
The more the media talks about the "R Word" (recession) and tells us how bad the economy's going to be, the more likely it is to become a self fulfilling prophesy. 
 
When the media says "the DOW was down 170 points today"; did you know that they're only talking about 20 stocks? 
 
Economic principal #1:  have adequate savings, low debt and our work skills up to date.  This are true if the US economy is booming or not. 
 
Economic Principal #2:  Diversify our investments - not all our eggs should be in one basket. 
 
Economic Principal #3:  Be aware of economic issues without being panicked by them. 
 
We have to keep our wits about us and use some of that common sense. 
If you'd like some help getting your financial life together (business or personal), just let me know.  I'm here to help.
Joan
Joan Gilles - Financial Coach
This email was sent to jmgilles@pressenter.com, by jmgilles@pressenter.com
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