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Qualified Small Business Stock is a type of stock that includes immense tax relief for investors. Those benefits serve to stimulate investment in small businesses by mitigating the tax consequences that attach to their returns. Below is an article that discusses the definition of QSBS, the relevant IRC section at play, the tax benefits flowing from QSBS, the standards for obtaining QSBS, and the costs and importance involved in gaining a QSBS certification. What is Qualified Small Business Stock? Qualified Small Business Stock is that class of stock issued by a small C corporation that meets specific qualifications specified in the Internal Revenue Code. It enables the investor in QSBS to exclude from federal income taxation up to 100% of the capital gain realized upon the sale of such stock, provided certain requirements are met. The provision is meant to incentivize investment in startups and small businesses as a means of promoting innovation and driving economic growth. Governing Section of the Internal Revenue Code Treatment of QSBS is given under Section 1202 of the Internal Revenue Code. This section was enacted as part of the Revenue Reconciliation Act of 1993 and has undergone several amendments to expand the benefits available to investors. Section 1202 outlines those requirements that must be satisfied for stock to qualify as QSBS, along with particular tax benefits available to the investors. Examples of Qualified Small Business Stock Tax Benefits Investing in QSBS offers substantial benefits in terms of tax. Example: Exclusion of Capital Gains: Depending on when the QSBS was acquired, up to 100% of the capital gains from the sale of QSBS can be excluded from federal income tax. The exclusion percentages are as follows: 50% of the stock acquired from August 11, 1993 to February 17, 2009. 75% for stock acquired between February 18, 2009 and September 27, 2010. 100% for stock acquired after September 27, 2010. Limitation on Gain: The amount of gain to be excluded is limited to the greater of $10 million or ten times the adjusted basis in the stock. The generous cap allows for significant tax savings by investors. The Alternative Minimum Tax (AMT) stipulates that gains exempted under Section 1202 do not qualify as preference items for the purposes of AMT, potentially offering supplementary tax relief. State Tax Benefits: Some states follow federal QSBS exclusion rules, giving additional state tax benefits. Investors should check the particular rules of the state pertaining to QSBS. How to Meet the QSBS Requirements To qualify for QSBS treatment, certain requirements must be met: Qualified Small Business: The issuing corporation must be a domestic C-corporation and it must meet the definition of a “qualified small business.” A qualified small business is one in which the corporation’s aggregate gross assets do not exceed $50 million at any time before and immediately after the issuance of the stock. Active Business Requirement: During at least 80% of the period the investment is held, assets of the corporation must be used in the active conduct of one or more qualified trades or businesses. The following types of businesses specifically do not qualify:. The stock must be obtained directly from the corporation when the stock is originally issued, in exchange for money, other property but not stock, or as compensation for services. Holding Period: The investor must hold the QSBS for more than five years to qualify under the capital gains exclusion. These requirements are often complex to navigate, and guidance is usually sought from a tax specialist to ensure compliance with the law. What is a Qualified Small Business Stock Attestation? A Qualified Small Business Stock Attestation is the declaration of a corporation; a formal statement that the stock of the particular corporation meets all the qualifications necessary for the classification to be deemed a QSBS under Section 1202 of the Internal Revenue Code. This certification gives assurance of qualification both to investors and the tax authorities, confirming the eligibility for the tax advantages to the owners. Importance and Cost of a Qualified Small Business Stock Attestation Investor Confidence: It enhances investor confidence because the attestation is basically a documented proof that the stock is qualified for favorable tax treatment; thus, making it more attractive to prospective investors. Tax Compliance: An attestation plays a crucial role in confirming adherence to tax regulations and can promote more efficient engagement with tax authorities. It functions as proof that the corporation satisfies the QSBS requirements, which may streamline the tax reporting procedure. Risk Mitigation: The attestation works by giving a risk mitigation of disputes or challenges in the future that may develop in the mind of the IRS about the stock’s QSBS status. Cost The costs for obtaining a QSBS certification will depend on many factors, such as the extent of complexity of the company’s organizational structure and how much any given professional services company charges for providing the certification. In most cases, the costs range between several thousand to tens of thousands of dollars. Regardless of the monetary investment, the tax advantages likely to be gained for the backers, coupled with increased certainty of conformity, could make the expense a wise investment. Conclusion Qualified Small Business Stock provides substantial tax advantages to investors in the interest of enabling small businesses to energize the economy. Controlled by Section 1202 of the Internal Revenue Code, QSBS enables considerable exclusions from federal income taxation of capital gains. However, fulfilling these requirements can be tricky, and the ability to get a QSBS attestation may provide much value through assurance with compliance and qualification for huge tax benefits. Although obtaining such certification does involve some costs, the potential tax incentives and reduced liabilities make it an important consideration for companies and investors alike.
Depending on who you are talking to, Private Equity is either the Great Satan or the savior of small and mid-market companies in the United States. The stories depend a lot on the personal experience of the speakers. Once a vehicle for high-risk investment plays in corporate takeovers (see Bryan Burrough’s Barbarians at the Gate,) Private Equity has morphed into tranches where specialists seek opportunities in everything from a Main Street entrepreneurship to multi-billion-dollar entities. What is Private Equity? The term itself is relatively generic. According to Pitchbook, there are currently 17,000 Private Equity Groups (or PEGs) operating in the US. The accepted business model for our purposes is a limited partnership that raises money to invest in closely held companies. The purpose is plain. Well-run private businesses typically produce a better return on investment than publicly traded entities. The current Price to Earnings (or PE – just to be a little more confusing) ratio of the S&P 500 is about 27.5. This is after a long bull market has raised stock prices considerably. The ratio is up 11.5% in the last year. That means the average stock currently returns 3.6% profit on its price. Of course, the profits are not usually distributed to the shareholders in their entirety. Compare that to the 18% to 25% return many PEGs promise their investors. It’s easy to see why they are a favorite of high net worth individuals, hedge funds and family offices. As the Private Equity industry has matured and diversified, they have even drawn investment from the usually more conservative government and union pension funds. Private Equity Types Among those 17,000 PEGs the types range from those who have billions in “dry powder” (investable capital,) to some who claim to know of investors who would probably put money into a good deal if asked. Of course, which type of PEG you are dealing with is important information for an owner considering an offer. private equity moneyThe “typical” PEG as most people know it has a fund for acquisitions. It may be their first, or it may be the latest of many funds they’ve raised. This fund invests in privately held businesses. Traditionally PEGs in the middle market space would only consider companies with a free cash flow of $1,000,000 or greater. That left a plethora of smaller businesses out of the game. For a dozen years I’ve been writing about the pending flood of exiting Boomers faced with a lack of willing and able buyers. I should have known better. Business abhors a vacuum. Searchfunders Faced with an overabundance of sellers and a dearth of capable buyers, Private Equity spawned a new model to take advantage of the market, the Searchfunders. These are typically younger individuals, many of whom graduated from one of the “EBA” (Entrepreneurship By Acquisition) programs now offered by almost two dozen business schools. These programs teach would-be entrepreneurs how to seek out capital, structure deals, and conduct due diligence. Some Searchfunders are “funded”, meaning they have investors putting up a stipend for their expenses. Others are “self-funded.” They find a deal, and then negotiate with investment funds to back them financially. Both PEGs and Searchfunders seek “platform” companies, those that have experienced management or sufficiently strong operational systems to absorb “add-on” or “tuck-in” acquisitions. The costs of a transaction have bumped many seasoned PEGs into $2,000,000 and up as a cash flow requirement. Searchfunders have happily moved into the $500,000 to $2,000,000 market. In the next article we’ll discuss how PEGs can promise returns that are far beyond the profitability of the businesses they buy.
Early last month, the Occupational Safety and Health Administration (OSHA) proposed the Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings rule. The aim is to curb heat related injuries or death which OSHA identifies as “the leading cause of death among all hazardous weather conditions in the United States.” The proposal places new responsibilities on employers: establishing heat thresholds, developing Heat Injury and Illness Prevention Plans, regularly monitoring temperatures, and establishing safety measures when heat thresholds are met. This rule is yet to be finalized however, it is a sign of what’s to come. The standard applies to all employers except for the following: Work activities for which there is no reasonable expectation of exposure at or above the initial heat trigger. Short duration employee exposures at or above the initial heat trigger of 15 minutes or less in any 60-minute period. Organizations whose primary function is the performance of firefighting and other certain emergency services. Work activities performed in indoor work areas or vehicles where air conditioning consistently keeps the ambient temperature below 80°F. Telework (work from home). Sedentary work activities at indoor work areas that only involve some combination of the following: sitting, occasional standing and walking for brief periods of time, and occasional lifting of objects weighing less than 10 pounds. Heat Thresholds There are two heat thresholds which will trigger employer action: An “initial heat trigger” means a heat index of 80°F or a wet bulb globe temperature (defined below) equal to the National Institute for Occupational Safety and Health (NIOSH) Recommended Alert Limit; and A “high heat trigger” means a heat index of 90°F or a wet bulb globe temperature equal to the NIOSH Recommended Exposure Limit. The “heat index” is calculated by measuring the ambient temperature and humidity. Wet bulb globe temperature is a heat metric that considers ambient temperature, humidity, radiant heat from sunlight or artificial heat sources and air movement. Employers may choose either method of measuring the temperature. Heat Injury and Illness Prevention Plan (HIIPP) Requirements If an employer does not fall under the exceptions, it must develop a HIIPP with the input of non-managerial employees and their representatives for occasions when the heat threshold is surpassed. This plan may vary on the worksite but must be written if the employer has more than 10 employees and use a language employees will understand. The HIIPP must contain: A comprehensive list of the type of work activities covered by the HIIPP Policies and procedures needed to remain compliant with the standard. Identification of which heat metric the employer will use heat index or wet bulb globe temperature. A plan for when the heat threshold is met. Along with creating the HIIPP, employers must designate one or more “heat safety coordinators” responsible for implementing and monitoring the HIIPP. The HIIPP must be reviewed at least annually or whenever a heat related injury or illness results in death, days off work, medical treatment exceeding first aid, or loss of consciousness. Employers must seek input from non-managerial employees and their representatives during any reviews or updates. The definition of “representative” is not defined; if this is broadly defined, this could be a major complexity employers must face. Identifying Heat Hazards Employers must monitor heat conditions at outdoor work areas by: Monitoring temperatures at a sufficient frequency; and Track heat index forecasts or Measure the heat index or wet bulb globe temperature at or as close as possible to the work areas. For indoor work areas, employers must: Identify work areas where there is an expectation that employees will be exposed to heat at or above the initial heat trigger; and Create a monitoring plan covering each identified work area and include this work area in the HIIPP. Employers must evaluate affected work areas and update their monitoring plan whenever there is a change in production processes or a substantial increase to the outdoor temperature. The heat metric employers choose will affect the thresholds. If no heat metric is specified, the heat metric will be the heat index value. Employers are exempt from monitoring if they assume the temperature is at or above both the initial and high heat trigger, in which case they must follow the controls below. Control Measures When Heat Triggers are Met When the initial heat trigger is met, employers must: Provide cool accessible drinking water of sufficient quantity (1 quart per employee per hour). Provide break areas at outdoor worksites with natural shade, artificial shade, or air conditioning (if in an enclosed space). Provide break areas at indoor worksites with air conditioning or increased air movement, and if necessary de-humidification. For indoor work areas, provide air conditioning or have increased air movement, and if necessary de-humidification. In cases of radiant heat sources, other measures must be taken (e.g., shielding/barriers and isolating heat sources). Provide employees a minimum 15-minute paid rest break in break areas at least every two hours (a paid or unpaid meal break may count as a rest break). Allow and encourage employees to take paid rest breaks to prevent overheating. At ambient temperatures above 102° F, evaluate humidity to determine if fan use is harmful. Provide acclimatization plans for new employees or employees who have been away for more than 2 weeks. Maintain effective two-way communication between management and employees. Implement a system to observe signs and symptoms of heat related problems (e.g., a Buddy system). When the high heat trigger is met, employers are additionally required to: Provide employees with hazard notifications prior to the work shift or upon determining the high heat trigger is met which includes: the importance of drinking water, employees right to take rest breaks, how to seek help in a heat emergency, and the location of break areas and water. Place warning signs at indoor work areas with ambient temperatures exceeding 102° F. Other Requirements Training: all employees and supervisors expected to perform work above the heat thresholds must be trained before starting such work and annually. What’s Next? The rule is yet to be published in the Federal Register. Once this happens, there will be a 120-day comment period when all members of the public may offer OSHA their opinion about the rule. Whether this rule comes to fruition may also depend on which party wins the White House. Furthermore, if finalized this rule would likely be challenged in the courts, which now have more discretion to overrule agency rules following the US Supreme court case of Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce (overturning the Chevron deference decision). Employers should review their heat illness prevention policies to maintain compliance with regulations. If you have questions, call competent labor and employment counsel. Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560
Private equity leverage can dramatically increase ROI, but it can also be a trap. In our previous
Today we are highlighting the FIREPOWER Owner Sweet Spot Sessions! We’re about to embark on a game-changing conversation that will revolutionize the way you approach your business. It’s time to shift gears and start envisioning the future of your company in a new personal role. The Small Business Universe: Common Concerns of Owners Similar concerns echo throughout the small business universe. Maybe you feel like you’re lacking the right leadership, or worse, you don’t have any leadership at all. Perhaps your workforce has hit a plateau, or you’re dealing with the frustrating challenge of high turnover. And let’s not even get started on the never-ending cycle of decision-making, where it feels like you’re carrying the entire load on your own. What is the Work that Only You Can Do? We’re here to share a secret to successfully moving your business into the future. It all starts with a simple question: What is the work that only you can do? It’s time to tap into your natural talents and abilities that have fueled your business success from its inception and then refocus your efforts in a new way. Now, brace yourself for a little revelation that’ll bring a smile to your face. The answer to that question is much less than what you’re currently doing. Yes, you heard it right. You’re probably sporting way too many hats, it’s time to bid farewell to those unnecessary responsibilities and rediscover your true sweet spot. Enter the FIREPOWER Owner Sweet Spot sessions. These sessions are crafted to help you pinpoint those burdensome responsibilities that are holding you back from doing the work your company desperately needs from you. We’re here to lift that heavy weight off your shoulders and set you free to focus on what truly matters in achieving your future goals. Deciphering the best use of your time is the key to solving both short-term challenges and long-term business goals. It allows you to stay fully engaged in the work that only you should do, helps your teams to know your true superpowers, and ultimately unleashes your full potential to lead your company into the future. At FIREPOWER, we truly get the challenge, we live it every day. We understand the struggles you face as an owner. Juggling numerous roles and tasks can be incredibly overwhelming and downright draining. But here’s some fantastic news – it doesn’t have to be that way. By identifying your unique strengths, you can reclaim your valuable time, restore your energy reserves, and reignite your enthusiasm for your business. So, are you ready to unlock your Owner Sweet Spot? Then it’s time to bid farewell to all the hats you’ve been wearing, delegate those unnecessary responsibilities, and rediscover the true value you bring to your company. Our owner-focused approach led by Maria Forbes, will expertly guide you through the process, empower your team, and take your business to unprecedented heights. Conclusion Remember, sustainable growth flourishes when you harness the potential of your team and become laser-focused on the work that only you can do. The number of hats you wear will shrink, while the quality of your life expands. It’s time to embrace the FIREPOWER within you and achieve the success you’ve always dreamed about. Together, we can make it happen! Fuel your people power, Maria Forbes with FIREPOWER Teams
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In previous communications, we’ve discussed the significant changes brought about by the SECURE 2.0 Act. Effective implementation of many provisions within the act relies on guidance from the IRS and DOL. IRS Notice 2024-02 and IRS Notice 2024-55 offered clarification on several crucial aspects of SECURE 2.0. Guidance is helpful as plan sponsors make decisions regarding both required and optional provisions in the act. Here are some key provisions to consider: Automatic Enrollment Requirement SECURE 2.0 mandates automatic enrollment features for 401(k) plans established after December 29, 2022, effective in 2025. The IRS guidance clarifies that a plan is deemed to be established when the employer adopts a 401(k) plan, regardless of the plan’s effective date. The notice also provides further clarity for plan mergers and spin-offs. Mergers: If a plan established after December 29, 2022, merges into a 401(k) plan that was established prior to that date, the ongoing plan will generally be subject to the automatic enrollment mandate unless the merger is: 1) a result of a business acquisition, and 2) the plans are merged by the last day of the plan year following the year of the transaction. Spinoff plans will be treated as a pre-December 29, 2022 plan as long as that portion of the plan had been established before that date. Higher Salary Deferral Catch-up Limits for Ages 60-63 For 2024, the salary deferral contribution limit is $23,000. If a 401(k) plan permits catch- up contributions, those age 50 and older can also make catch-up contributions up to $7,500. Those limits are expected to increase in 2025 based on cost-of-living adjustments to be announced later this year. Beginning in 2025, plans may also take advantage of a provision in SECURE 2.0 that would permit participants age 60-63 to make higher catch-up contributions. For those plan participants, employers may increase the catch-up limit to the greater of: * $10,000 (which will be indexed for cost-of-living adjustments in later years) or * 150% of the regular age 50 catch up deferral limit. De Minimis Financial Incentives Employers can now provide “de minimis” financial incentives to encourage employee retirement plan contributions. These incentives must not exceed $250 and are available only to employees who have not previously elected to defer contributions. The incentive can be provided incrementally over time, contingent on the employee’s continued participation. Employees receiving these incentives are subject to regular tax, withholding, and reporting requirements. Terminal Illness Distributions SECURE 2.0 introduced a new exception to the 10% penalty on early distributions for terminally ill employees. The IRS notice defines a terminally ill individual as someone who has been certified by a physician to have a condition or illness that can be reasonably expected to result in death in the next 84 months. This exception does not create a new type of distribution; rather, employees must still qualify for another permissible distribution from the plan. While this provision will be optional for employers, if a plan opts out, employees may categorize a distribution as a terminal illness distribution on their own tax return. If an employer does elect to recognize terminally ill distributions, the plan must obtain a specific certification from the physician rather than relying on an employee’s self-certification. Hardship Distributions with Self- Certification Most plans that permit hardship withdrawals allow such withdrawals only if the hardship satisfies one of the “safe harbor” reasons. Such reasons include the purchase of a principal residence, amounts needed to prevent eviction or foreclosure on a personal residence, qualifying medical expenses, tuition, funeral and burial expenses, certain expenses to repair the employee’s principal residence, and expenses and losses related to a federally – declared disaster. SECURE 2.0 provides that a plan can adopt employee self-certification rules. That means a plan sponsor may rely on an employee’s written self-certification that the distribution is for one of the plan’s safe harbor hardship reasons and is not more than the amount required to satisfy the financial need and they do not have alternate means that are reasonably available to satisfy the hardship need. The participant is expected to maintain records that support the hardship. Many plan sponsors are adopting self-certification. Emergency Personal Expenses Distributions SECURE 2.0 permits a 401(k) or other defined contribution plan to offer emergency personal expense distributions. If the option is offered, eligible employees can withdraw up to $1,000, or their vested balance (if less) for “unforeseeable” or “immediate” personal emergency expenses once each calendar year. Self-certification is available. The distribution is not subject to the usual 10% tax on early distributions. Also, emergency expense distributions can be repaid to the account within a three-year window. Another emergency expense distribution can’t be made within the three-year window unless the previous distribution is fully repaid or contributions equaling the distributed amount are deposited. Domestic Abuse Victim Distributions SECURE 2.0 permits a plan to offer domestic abuse victim distributions. This type of distribution may be made to a participant within a one-year period beginning on the date when a participant becomes a victim of domestic abuse by a spouse or partner. The maximum distribution is the lesser of $10,000 or 50% of the participant’s vested account. The $10,000 limit is subject to future cost of living adjustments. Self-certification is available. The distribution is not treated as an eligible rollover distribution for tax withholding purposes; however, the participant may repay the distribution any time during the next three-year period. The distribution is taxable, but there is an exception from the 10% early withdrawal penalty. (Note that plans which are subject to the spousal consent requirements for distributions may not be able to adopt this provision.) The IRS has also delayed the deadline for SECURE 2.0, SECURE, and CARES amendments until December 31, 2026. This gives them additional time to issue further clarifying guidance. As always, we are committed to keeping you informed as things develop.
In a significant ruling, the Supreme Court has overturned the NLRB and Sixth (and other) Circuit’s approach to evaluating preliminary injunctions under Section 10(j) of the National Labor Relations Act (“NLRA”). This decision, stemming from the high-profile case of Starbucks v. McKinney, again declares the power of the courts over federal executive branch agencies. Background The case originated when Starbucks terminated seven employees allegedly for their pro-union stance. The National Labor Relations Board (“NLRB”) sought a preliminary injunction under Section 10(j) to force Starbucks to rehire those employees until the underlying charge of illegality was resolved. The federal District Court granted the injunction. On appeal, the Sixth Circuit upheld the injunction applying its unique two-part test used by the NLRB. This test requires demonstrating “reasonable cause to believe that unfair labor practices have occurred,” and that injunctive relief is “just and proper.” Circuit Split and the Winter Test The Sixth Circuit’s test has been a point of contention due to its deviation from the more widely adopted Winter test, which is used in other judicial circuits for assessing all preliminary injunctions. The Winter test, named after the 2008 Supreme Court case Winter v. Natural Resources Defense Council, Inc., uses a four-part analysis. It requires plaintiffs to clearly demonstrate: They are likely to succeed on the merits; They are likely to suffer irreparable harm without preliminary relief; The balance of equities tips in their favor; and An injunction is in the public interest. This discrepancy in the appropriate test led to a circuit split. The Supreme Court ended the split. Supreme Court’s Decision In its ruling, the Supreme Court rejected the Sixth Circuit’s approach, emphasizing the importance of a uniform standard across all jurisdictions. The Court favored the Winter test, arguing it is more in accord with the traditional, rigorous framework for preliminary injunctions. The Court reasoned that, A preliminary injunction is an extraordinary equitable remedy that is never awarded as of right . . . . The default rule is that a plaintiff seeking a preliminary injunction must make a clear showing that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest. These commonplace considerations applicable to cases in which injunctions are sought in the federal courts reflect a practice with a background of several hundred years of history. (Citations and quotations removed.) Taking it further, the Court declared, “absent a clear command from Congress, courts must adhere to the traditional four-factor test.” After analyzing the text of 10(j), the Court concluded there was no Congressional intent to deviate. Implications of the Ruling The Supreme Court’s decision has significant implications for employers, employees, labor unions, and the NLRB. By endorsing the Winter test, the Court has (in some jurisdictions) raised the bar for obtaining preliminary injunctions under Section 10(j), potentially making it more challenging for the NLRB to secure temporary relief in cases of alleged unfair labor practices. Additionally, the Supreme Court’s ruling is a clear message: even if the NLRB endorses liberal labor law interpretations, the conservative judiciary remains in place as a check. This flexing of judicial muscle is a trend we have recently seen from the Court and expect it to continue for years to come. Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560
What is the cornerstone in the strategy for scaling and preparing your business for the future, to grow, to thrive, and to build a legacy that lasts? That’s right – Regular Progress Check Meetings! Think of them as your business’s GPS, helping you navigate the winding roads of growth and strategy. These are not the same conversations as the old water cooler chats. These are checkpoints along the journey to ensure your highly regarded employees and associates are engaging purposefully and meeting the expectations of their roles. Why are these meetings essential? Here’s the breakdown: Tracking Growth: Stay updated and informed about your Team’s collective journey to success. Ensuring Alignment: Everyone must know not only the what but the how and why behind their goals, ensuring harmony as you move forward collectively. Unify Direction: This is where your team member’s hard work shines. Each team member’s contribution is crucial and should enable the entire team to move in sync towards a common goal. When every team member is crystal clear about their role, that’s when the magic happens. That’s when a small business is not just a player, but a force to be reckoned with. Use a Progress Check Meeting to fuel team participation and guide your business growth. Team participation means understanding each role and its impact, assuring that every step takes us closer to our goals. Remember, in your team every voice is influential, and your team’s ideas, feedback, and perspectives are the answer to the next level of greatness and success in your business. With the guidance of Maria Forbes and FIREPOWER Teams, you can empower your team to drive sustainable growth. Let’s Connect!
On May 28, 2024, Governor Ned Lamont signed legislation expanding Connecticut’s 2011 Sick Leave Law. The new legislation is effective on January 1st, 2025. The law covers more employees, expands the reasons under which employees may use paid sick leave, and reduces the required hours to accrue paid sick leave. Who is covered by the new law? Currently under Connecticut law, employers with more than 50 employees in specific retail and service occupations must provide their employees with up to 40 hours of paid sick leave annually. The new law expands the type of eligible worker to almost every occupation (not just retail or service occupations). It also expands the number of employers who must comply by reducing the number of employees they must employ to be covered. It is important to note that seasonal employees and certain other temporary workers remain exempt. The threshold number of employees required for coverage is gradually being lowered. Starting January 1, 2025, employers with 25 employees must provide their employees with paid sick leave: this drops to 11 employees on January 1, 2026, and one employee on January 1, 2027. When can employees use paid sick leave? Governor Lamont declared the current law leaves “broad categories… unprotected….” In response, the legislation has extended the definition of a family member to include more than that person’s minor children. This expansion includes “spouse, sibling, child, grandparent, grandchild or parent of an employee or an individual related to the employee by blood or affinity whose close association the employee shows to be equivalent to those family relationships.” The legislation also addresses the impact COVID-19 had on employees, allowing paid sick leave to be taken in instances related to declarations of a public health emergency. How do employees accrue paid sick days? Eligible employees will now accrue one hour of paid sick leave for every 30 hours worked, accruing up to 40 hours per year. This is a ten-hour reduction from the previous one hour for every 40 hours worked. Employers may grant more time off or allow accrual at a faster rate. Limits on Employers’ Control over the Use of Sick Time In Connecticut and across the nation, generic Paid Time Off policies have replaced the old-fashioned sick leave, personal leave, vacation, and many other forms of paid time off. As a result, sick leave mandates are allowed to be covered by PTO. Thus, when a company offers four weeks of PTO, they are really offering three weeks of PTO and one week of sick time. The question we address here is if employers can put any limitations on how employees use their sick time. When Connecticut’s Sick Leave law was first effective in 1997, employers had the right to mandate that employees use their sick leave when they take other unpaid leaves. The employers’ motivation was to limit how much total time off employees were allowed. That all changed on January 1, 2022. In 2022, the law was amended to require employers leave at least two weeks of PTO to be used at the total discretion of the employee. This change was missed by most employers. To be sure you don’t run afoul of this law, employers should check their policies to ensure the mandated use of sick leave for all unpaid leaves is not their policy and not in their handbooks. Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560
There’s an old joke about a couple who were celebrating their 50th anniversary. When asked about the secret to their long marriage the husband replied, “when we got married, we made a pact that no matter what happens, we would always go out twice a week.” His wife nodded in agreement. He then added, “We never missed a week. I went out on Mondays and Wednesdays, and she went out on Tuesdays and Thursdays.” Perhaps you have your own secret to a long and happy life together, but the reality is that retiring as a couple can pose challenges, both with regard to doing the planning and to actually implementing your plan. And plan you should, for there might be a lot of togetherness ahead. Maybe you’ve spent two or three weeks on vacation with your other half in the past, but we’re talking about (potentially) decades here. The Skipton Building Society is a financial services organization in the U.K. They conducted a poll about retirement in 2013 and found that 8 in 10 retirees said they no longer shared any of their spouse or partner’s hobbies or interests, while 29 percent they didn’t have same expectations for retirement as their other half. Our early family experiences can shape those expectations. For example, imagine that your father had few hobbies or interests outside of work, and after retiring he spent most of his time at home driving your mom crazy. It’s understandable that you would be wary about the same thing happening in your relationship. The retirement transition isn’t always easy, and in some cases, it can lead to an unfortunate outcome. Divorce rates in the United States are declining — except for people over 50. Twenty years ago, just one in 10 spouses who split were age 50 or older; today, it is one in four. Couples who have historically avoided conflict may resist talking about retirement, which delays planning and can lead to rushed decisions. And couples who have not resolved past conflicts may repeat them, disrupting the planning process. But by recognizing the typical challenges surrounding retirement, you’ll be less apt to be alarmed by them, shy away from them, or view them as sign that your relationship is in trouble. Your retirement decisions and planning will likely revolve around two broad questions: WHEN will you begin the transition, and WHAT do you want it to look like and feel like as it unfolds? WHEN will you begin the transition? Some people launch into retirement abruptly while others adopt a gradual path, but you still need to decide whether the process starts 3 months from now or 3 years from now. Will you retire separately or together, and how does that impact your timing? I was curious about how people actually decided to retire, so I conducted interviews and compiled a dozen personal stories into a short book called Done With Work. My respondents spoke of the internal thoughts and feelings that propelled them to retire, as well as the external circumstances at play. They typically decided to retire when there was convergence between the internal and external factors. They felt psychologically ready to retire, and their external circumstances supported their doing so. WHAT do you want retirement to look like and feel like? There are many decisions you will need to make as a couple. For example, where will you live? What are you each looking for in terms of climate, type of community, type of residence, and so forth? How do you anticipate spending your time, and how much time will you spend together? How have you negotiated such matters in the past? Family As you enter this transition, you may need to consider certain family relationships. For example, as a couple you might have older adult parents to care for. They may have differing needs, and you and your partner may have a different relationship with your respective parents, a different perspective on caregiving, different sibling involvement and so forth. Perhaps you have children, stepchildren, and/or grandchildren. Here too there are numerous circumstances that could potentially require honest conversation, healthy debate, lots of good faith effort, and perhaps a negotiated compromise. Money Money is another area that couples need to consider. By this point in life you probably have a sense of where and how you diverge when it comes to spending priorities and your approach to money. But the stakes can feel much higher knowing that you may live for decades on a fixed income. Your financial advisor likely has resources to help you have productive discussions about money and can suggest ways to reach a workable compromise. For example, if you’re very cautious about money and your partner tends to spend more freely, you could agree to adopt your partner’s style when it comes to smaller expenses but employ your prudent approach when it comes to big ticket items. Communication All of the decisions you need to make will require some degree of discussion, exploration, negotiation, and the like. As with other transitions in your life together, this one requires solid communication. Roberta Taylor and Dorian Mintzer wrote a terrific book called The Couple’s Retirement Puzzle: 10 Must-Have Conversations for Creating an Amazing New Life Together. They wisely note that just because you’ve been together a long time doesn’t necessarily mean you can read each other’s minds. One barrier to effective communication is that fear gets in the way. One or both parties may avoid discussing an issue because they’re afraid of opening a “Pandora’s Box”. Some fears are realistic and give us warning about what we ought to be paying attention to. But Taylor and Mintzer note that other fears may be “related to a lack of information or an overreaction based on past experience.” And as noted cognitive therapist Robert Leahy says, “sometimes the disagreement we envision in our head is worse than what actually occurs.” It’s rare for couples to always be on the exact same page. Disagreements are often due to differences of opinion, differences in your approach to problem-solving, or differences in your decision-making style. Those differences can obscure the fact that in reality you may be in greater agreement than you think. Stylistic differences can also hamper communication. Recognize them for what they are, but don’t conclude that they reflect character flaws. Your husband isn’t necessarily uncaring because he doesn’t like talking about the future. Your wife isn’t necessarily neurotic because she likes to talk about what’s troubling her. The conversation is less apt to derail if you can remember that the friction you’re feeling is probably more related to style than to substance. Even if you’re unable to agree on something you both want (e.g. where you want to live), can you reach agreement on things you don’t want? It can reduce tension if you reassure your partner that you won’t push for something that they feel is unacceptable. Individual Development Although it is important to plan together, you both need to figure out your own path as well. A very common concern involves identity. Who am I if my role changes, if I’m no longer a physician, a manager, a teacher? As Taylor and Mintzer wisely point out, “if one partner is dealing with issues of identity, chances are it affects both of you.” One of my professors, the late gero-psychologist David Gutmann discovered that with age, it’s not unusual for long-dormant aspects of our personality to emerge. For example, one member of a couple might wonder, “now that I no longer have to be the hard charging businessperson, can I also embrace the nurturing side that I had previously disavowed?” Will your relationship flexibly accommodate such a shift if it appears? Look to Your Past Retirement is a transition, and as a couple you should consider how you’ve each dealt with past transitions. Do you deal with them differently (e.g. speed through vs. tolerate the journey) and how did you manage to support one another during the process? Thinking about how you navigated those inflection points. Did you learn anything about yourself or your other half? Past transitions can shed light on strengths that you can then apply to this one. For couples contemplating retirement, planning your next chapter can feel complicated. The good news is that you don’t have to do it alone. Your financial advisor has helped many other people just like you sort through the head and heart side of retirement. In the unlikely event that you reach an impasse, they should also be able to refer you to counselors who specialize in assisting couples who are going through this transition.
As an Exit Planner, most of my engagements involve assessing a management team. They may be the intended buyers of the company, or else they are key factors in the saleability of the business. The biggest and most frequent complaint I hear about managers is that they don’t know how to THINK. Business owners lament the inability of employees to discern critical paths, assess alternatives, or analyze complex problems. Examples of Thinking Shortfalls A CPA is doing final review of a client’s tax returns, as prepared by an associate. As with many business owners, the client has two related entities, one acting as the management company for the other. The reviewing partner notices the income from management fees in the one entity, but no corresponding expense deduction in the other. The associate’s explanation is that the client’s books didn’t show the offsetting expense, so he ignored it. The owner of an IT services company receives an irate call from a client. His technician has just spent two billable hours on the client’s PC, and it still won’t print his documents. When the employee is asked for an explanation, he points out that the client said he needed updates to his printer drivers, and that is exactly what he (the technician) did. At no point did he try to determine whether updating the drivers would solve the customer’s problem, or even what that problem was. The customer made a request, and the technician complied. He didn’t perceive the customer’s lack of technical knowledge as a factor. As the adage goes, “When someone asks you for a drill, what he really wants is a hole.” If you are in any business where the customer expects you to be more knowledgeable than him (and why would he hire you otherwise?) thinking is a core competency. I Can Look Up the Answer
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