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    PostPress

    Print Decorating, Binding and Finishing

    Financial Strategy

    Protecting Print Businesses from Digital Disruption

    By Tom Wojcinski, principal, and Michael J. Devereux II, CPA, CMP, partner, Wipfli

    Is there anything a manufacturer can do to ensure its operations are not hacked? Unfortunately, there is no way that’s possible, especially in today’s connected manufacturing environment. Even if a printer or print finisher disconnected everything from the internet, it still could be the victim of a technology hack if physical access is available to any bad actors or those working on their behalf.

    Cloud-based ERPs, digital transformation and Industry 4.0 solutions are creating efficiencies, customer engagement and business intelligence that are improving operations and profitability, which cannot be duplicated on analog systems. Consequently, however, this increased digitization creates greater risk to printers’ and print finishers’ data and operations; and the research has shown that no manufacturer is too small or too big to be safe from cyber-attacks. Leadership often assumes that no one will hack their company because the data isn’t valuable to others. The bad actors disagree, however. Data is valuable, and they would like to put the company in a position where it must pay a ransom to get its data back. And data isn’t just limited to financial information, it could include confidential customer information, bills of material, product designs, processing data, sampling results and more.

    Wipfli recently conducted a survey of over 200 manufacturers. The survey found that almost half of the respondents experienced three or more network breaches in the past 12 months. That can be overwhelming to leadership, not to mention IT staff or the supporting organization.

    Focusing on Manufacturing Resilience

    A company’s data isn’t the only thing at risk. Cyberattacks can focus on physical assets, rather than digital assets. Cybercriminals can lock up or seize equipment operations. Not only can this result in a significant amount of unplanned downtime but can also pose a physical risk to employee safety.

    For example, consider a printer or print finisher that stores and recalls processing data for each job within an ERP or MES system. What happens if those digital services are disrupted or the underlying operational data is held hostage? Or a worse scenario, what if the technical specifications are changed, and the print finisher continues to make end products that don’t meet internal or external specifications? Similarly, vision and quality systems within the plant could be vulnerable and the target of a potential attack. While some of this seems implausible or unlikely, cyber-attacks are becoming more sophisticated and aggressive, and exposure in these areas can cause very real risks to organizations.

    Printers and print finishers can protect their operations by building and implementing resilience strategies to cyber-attacks. In this instance, resilience does not mean “bullet proof.” Rather, it means that a company can resist an attack, respond quickly and thoroughly when the attack occurs, and efficiently recover any data or business operations that are compromised. That starts by identifying weaknesses in the digital perimeter and then building a multilayered strategy to protect and respond to the cyberattack.

    Common Blind Spots

    There can be multiple physical and digital avenues into operations or data (including financial, operational, technical or front office information). Often, these paths are hidden or are seemingly insignificant. Outdated and unsupported hardware and software on the shop floor are two of the most overlooked sources of vulnerability. While this equipment may not be used like traditional PCs or laptops, it is still connected to the network. If it’s not maintained, it could be a security risk to the organization.

    All too often, the IT department is not involved in all IT decisions. With the advancement of software-as-a-service model and cloud computing, it’s easier for employees to purchase new software, download applications or share files using the cloud, without the oversight of skilled IT or cyber professionals. Systems and software that are not vetted against company policies or maintained properly could pose additional, not-so-obvious risks. In addition, they extend the number of vectors a bad actor may use to gain access, often without a company’s knowledge, making it more difficult to protect data and operations.

    A lack of real-time cyber monitoring is another common blind spot. Without real-time monitoring, a company has no visibility into attempts to infiltrate its network. Stopping and safeguarding against attacks is harder if a company does not know that they’re happening. For instance, real-time monitoring can protect against the violation of impossible travel rules. In this scenario, a legitimate user logs into the network from his or her home office in Milwaukee, Wisconsin. Let’s assume this is the corporate controller of a print finisher, just outside of Milwaukee. Then, just three hours later, the corporate controller logs in from Dublin, Ireland. This is an impossible travel scenario and clearly a sign that the corporate controller’s credentials have been breached. However, it could go unnoticed for some period of time without proper, real-time monitoring in place.

    Creating a Multi-faceted Security Strategy

    The most effective means to resist an attack is to establish a multilayer security strategy. At its most basic level, the strategy should include:

    • Password protocols: Require the use of strong passwords.
    • Email protections: Technologies that limit spam and spear-phishing attempts will reduce the risk of social engineering.
    • Multi-factor authentication (MFA): MFA requires users to take additional steps to verify their identity anytime when logging in or accessing a system or company app. MFA should be implemented on all removed access points, as well as internal administrative accounts. This includes email, VPN and all cloud-based applications.
    • End-point detection and response (EDR): EDR increases the ability to detect suspicious events by providing real-time visibility into potential attacks. EDR often is confused with antivirus software, which should also be used. Antivirus software looks for malicious programs running on the computer or network, while EDR searches for malicious activity in the memory of the computer.
    • Regular vulnerability scans and penetration testing: If a company is not monitoring its environment, printers and print finishers cannot identify their vulnerabilities or ways to fix them. Monthly or quarterly penetration testing of the external systems and vulnerability scans of the internal systems are critical to identifying weaknesses before they can provide access to bad actors.
    • Vulnerability management: Cyber criminals are regularly probing for security gaps. A company can make it more difficult for them by deploying security patches and software updates, removing unnecessary software and disabling unused system processes.
    • Air-gapped backups & segmented networks: If an employee can browse directly to the company’s backup files from its primary network, they are not safe from ransomware or other cyber-attacks. Separated backup files on a stand-along network that requires separate credentials often mitigates this risk.
    • Recovery testing: What happens if a company is attacked? Have steps been taken to restore the network, files or operations? Are the backups occurring as designed? A network failure or cyber-attack isn’t the best time to find out files haven’t been backed up or do not have the means of restoring them. Businesses need to regularly test the backup process to confirm the protocol is working, as designed, and intended.

    The Importance of Employee Engagement in Cybersecurity

    It’s critical that employees understand the importance of cyber security. Many hackers don’t hack systems, they hack people, as they’ve found it’s easier to trick someone into sharing their credentials than to break into a network. That is, if someone gives them the keys, why mess with the lock. It’s for that reason that employee engagement on cybersecurity is just as important as the focus on a company’s perimeter.

    To start with, print-related businesses must put controls in place to govern how data and information are used, managed and stored. Sensitive data should be limited to those who absolutely require it to perform their job functions.

    In addition to understanding where the data is stored and who has access to it, the best practice is to implement a comprehensive training program. Hackers will use a variety of social engineering techniques to steal information, including email (phishing), SMS text messages (smishing) and phone calls/voicemail (vishing). Training employees to be skeptical is key. When employees understand what they need to do and why, company operations will be better protected against cyber criminals.

    Regular Cyber Assessments

    Finally, manufacturing businesses operating in the print industry should engage in regular cyber assessments, whether that’s done internally by IT staff that keeps up with the cyber security trends or by an outside firm. These assessments provide visibility into potential avenues bad actors can access data. From there, businesses can develop or modify safeguards and policies that can better protect them from cyber fraud.

    Tom Wojcinski is a principal in Wipfli’s cybersecurity and technology management practice. He leads a variety of engagements designed to help improve organizations’ cybersecurity posture, including cybersecurity risk assessment, control program development and implementation, incident response planning and simulation, vulnerability and penetration testing, security audit, control verification, and managed security services. Wojcinski is a frequent author and speaker on cybersecurity and information technology risk management topics.

    Michael J. Devereux II, CPA, CMP, is a partner and director of Manufacturing, Distribution & Plastics Industry Services for Wipfli. Devereux’s primary focus is on tax incentives and succession planning for the manufacturing sector. He regularly speaks at manufacturing conferences around the country on tax issues facing the manufacturing sector.

    For more information, visit www.wipfli.com.

    CARES Act Provides Relief to Print Finishers

    By Michael J. Devereux II, CPA, CMP, Mueller Prost

    On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act – the largest relief package ever passed by Congress almost three times over – was signed into law, thereby ushering in a host of new lending and tax provisions available to print finishers.

    The CARES Act made several taxpayer-favorable changes to the tax code that impact print finishers, some of which should provide much need cash during the COVID-19 pandemic. The following provides a brief overview of the business tax provisions of the CARES Act.

    Employer retention credit

    The CARES Act provides for a refundable payroll tax credit against 50% of the wages paid by eligible finishers to certain employees during the COVID-19 pandemic. The credit is available to finishers whose operations have been fully or partially suspended as a result of a government order or finishers who experienced a greater than 50% reduction of quarterly receipts, measured on a year-over-year basis.

    The credit is equal to 50% of the qualified wages paid to employees from March 13, 2020, through December 31, 2020. The definition of qualified wages depends upon the number of average full-time employees in 2019. For finishers who had more than 100 average number of full-time employees in 2019, only the wages of employees who are paid during a shutdown or face reduced hours as a result of the plant’s closure or reduced gross receipts are qualified wages. However, for employers with 100 or less full-time employees in 2019, qualified wages also include amounts paid to all employees due to the reduced gross receipts.

    Qualified wages include amounts paid or incurred to provide and maintain a group health plan (on a pro-rata basis) and are capped at $10,000, making the maximum amount of FICA payroll tax credit $5,000 per employee. Finishers receiving Small Business Interruption loans are not eligible for the Employer Retention Credit.

    Employer FICA deferral

    This provision of the CARES Act allows print finishers to defer payment of their employer share of the Social Security tax (FICA at 6.2%) for payroll tax deposits required to be made between March 27, 2020, and December 31, 2020. The amounts otherwise due during this period will be due in two installments – the first on December 31, 2021, with the remainder due on December 31, 2022.

    Finishers receiving loan forgiveness through the Paycheck Protection Program, however, are not eligible for the deferral for amounts due after they receive notification of forgiveness.

    Net operating and excess business losses

    The CARES Act made two significant changes to the Net Operating Loss (NOL) rules and temporarily removed a limitation on business losses enacted by the Tax Cuts and Jobs Act of 2017 (TCJA).

    First, the CARES Act removes the 80% of taxable income limitation that was enacted as part of the TCJA. Losses generated in any tax year beginning after December 31, 2017, and before January 1, 2021, (tax years 2018, 2019 and 2020 for calendar-year taxpayers) may offset 100% of the taxable income to which the loss is carried. The 80% of taxable income limitation is reinstated for tax year beginning after December 31, 2020.

    Second, the CARES Act allows print finishers to carry their NOLs back to each of the five taxable years preceding any losses generated in tax years beginning after December 31, 2017, and before January 1, 2021, (2018, 2019 and 2020 calendar-year taxpayers).

    The IRS issued special guidance for taxpayers who have already filed their 2018 or 2019 tax returns and would like to avail themselves of the modified rules for NOLs.

    The CARES Act also delayed a provision originally enacted by the TCJA that limited “excess business losses for noncorporate taxpayers.” The TCJA had enacted a new limitation for owners of flow-through businesses (S Corporations, Partnerships or Sole Proprietorships). This provision, as enacted by the TCJA to be effective for tax years 2018 through 2025, limited business losses exceeding $250,000 ($500,000 in the case of married taxpayers filing a joint return) and were not eligible for carryback.

    The CARES Act allows excess business losses for tax years 2018 through 2020 and, if net operating losses are generated, allow for a five-year carryback period.

    Business owners should note, however, that the excess business loss limitation was just one way in which an owner’s loss could be limited. Taxpayers must still be at risk for and have sufficient basis to claim any ordinary loss. Further, passive shareholders may only offset passive income with passive losses.

    Credit for prior year minimum tax (AMT credits)

    The TCJA repealed the corporate alternative minimum tax (AMT). Taxpayers that had previously paid the AMT received Minimum Tax Credits (AMT Credits). The TCJA made those credits refundable over four years (2018 to 2021). The CARES Act accelerated the refundability of this credit, allowing the refundable amount in 2018, but making it fully refundable in tax year 2019. However, the CARES Act also provides for an election to take the entire refundable credit amount in tax year 2018.

    Business interest limitation

    The CARES Act temporarily increases the limitation on business interest expense for those subject to the limitation. The TCJA had introduced a new limitation for tax years beginning after December 31, 2017, whose average annual gross receipts exceeded $25 million, a limitation that is subject to inflations (the limitation applied to companies with average annual gross receipts of $25 million and $26 million in 2018 and 2019, respectively).

    Any business interest expense that exceeds the sum of interest income and 30% of adjusted taxable income is not allowed as a deduction in the year paid or incurred, and the excess amount is carried forward as an interest expense to future tax years (indefinitely).

    The CARES Act temporarily increases the limitation on the deductibility of net interest expense to 50% of adjusted taxable income for any tax years beginning in 2019 or 2020. Finishers concerned that their adjusted taxable income will be minimal or zero are allotted some relief in computing their 2020 adjusted taxable income limitation. At the election of the finisher, the 2020 interest expense limitation will be 50% of its 2019 adjusted taxable income.

    Qualified improvement property

    The TCJA modified both the bonus depreciation rules and the definition of qualified improvement property. The TCJA increased the bonus depreciation percentage to 100%, retroactively, for property placed in service after September 27, 2017, through December 31, 2022. Beginning in 2023, the bonus depreciation percentage is phased down by 20% each year, with the accelerated “bonus” depreciation phased out by 2027.

    In addition, the TCJA consolidated three types of improvement category assets into a new category called Qualified Improvement Property (QIP). For finishers, QIP includes any improvements made to the interior of the facility that are placed in service after the date the facility was first placed in service. Improvements do not include enlargement of the building, elevators or internal structural framework.

    In writing the TCJA, a general 15-year recovery period was intended to have been provided for QIP. However, due to a drafting error, that specific recovery period did not make it into the final statutory language of the bill. As such, under the TCJA, QIP fell into the 39-year recovery period for nonresidential real property, and, therefore, is ineligible for 100% bonus depreciation.

    The CARES Act provided a technical correction to the TCJA and specifically identifies QIP as 15-year property for depreciation purposes. This also makes QIP eligible for 100% bonus depreciation. Given that it is a technical correction, the provision is retroactive, and finishers can write-off any QIP placed in service after December 31, 2017.

    Concluding thoughts

    Numerous other provisions, including the Paycheck Protection Program, the Economic Injury Disaster Loans and Emergency Grants, and individual tax relief, were enacted as part of the CARES Act, and Treasury seems to be issuing new guidance as quickly as issues or ambiguities arise. As it may be suspected, these provisions don’t exist within a vacuum. Many provisions impact others, as well as existing tax incentives. As such, careful planning is advisable.

    Michael J. Devereux II, CPA, CMP, is a partner and director of Manufacturing, Distribution & Plastics Industry Services for Mueller Prost. Devereux’s primary focus is on tax incentives and succession planning for the manufacturing sector. He regularly speaks at manufacturing conferences around the country on tax issues facing the manufacturing sector. For more information, contact mdevereux@muellerprost.com.

    Year-end Tax Planning Opportunities

    By Michael J. Devereux II, CPA, CMP

    The Tax Cuts and Jobs Act of 2017 (Tax Reform) ushered in a host of new tax laws and incentives, and every finisher now has filed at least one tax return under the new tax regime. Many found new ways to defer or permanently reduce their tax bills, whether that be from enhanced expensing, larger tax credits or deferral of revenue to the 2019 tax year.

    The 2019 tax return filing season is right around the corner. As such, December is a time for year-end tax planning, whereby finishers will make significant decisions that impact the amount of tax they ultimately pay for the 2019 tax year.

    Tax planning can mean several things. Sometimes, companies can recognize permanent tax savings by utilizing tax incentives, such as the R&D tax credit, the IC-DISC or the work opportunity tax credit. Other times, tax planning is all about accelerating tax deductions and deferring the recognition of revenue. For many, it’s typically a combination of both.

    Moreover, tax planning is not done in a vacuum. Taxpayers must look at the current tax year, as well as future tax years, as some of the decisions a company considers are whether to accelerate or defer income from 2019 to 2020, or vice versa. So, when companies are reviewing tax-planning options, they should analyze two-year projections to ensure they understand what is being gained or missed.

    The following is meant to provide finishers with some ideas and tips as they embark on year-end tax planning.

    Immediate expensing

    Tax Reform improved two popular deductions that allow for accelerated depreciation – §179 and bonus depreciation. The §179 deduction limit was increased to $1,000,000 for 2018, and after being indexed for inflation, is $1,020,000 for the 2019 tax year. Moreover, additional assets were added to the definition of §179 property, including HVAC and security systems; and the §179 phase-out threshold now begins at $2,550,000 of eligible assets placed in service for tax year 2019.

    Tax Reform also increased the bonus depreciation percentage to 100%, retro-actively, for property placed in service after September 27, 2017 through December 31, 2022. Beginning in 2023, the bonus depreciation percentage is phased down by 20% each year, with the accelerated “bonus” depreciation phased-out by 2027.

    These changes will, inevitably, make cost segregations more valuable. A cost segregation allows taxpayers to analyze their plant and equipment to segregate the cost of real property, which is, generally, depreciable over a 39-year life, from personal property, which is likely to have shorter depreciable lives and qualify for one of the immediate expensing provisions. Taxpayers can “catch up” missed depreciation deductions.

    R&D tax credit

    R-and-D-tax-creditThe R&D tax credit is the tax incentive likely to have the biggest impact in reducing a finisher’s tax liability.

    The R&D tax credit rewards innovation. Finishers that are constantly developing new products or improving their processes may be engaging in activities that are eligible for the R&D tax credit.

    While IRC §41 (the code section governing the R&D tax credit) was not changed, the R&D tax credit’s value increased by 21.5% when Tax Reform reduced the top corporate tax rate.

    For finishers making the proper §280C election on an originally filed return (including extensions), the value of the credit was increased significantly. The §280C election percentage is equal to 100% minus the top corporate tax rate. When tax reform lowered the top corporate tax rate from 35% to 21%, the applicable percentage found in §280C went from 65% to 79%. As a result, finisher’s credits will be greater with the same level of research expenditures.

    Other credits and incentives

    In addition to the R&D tax credit, many other tax incentives are available to finishers. For instance, finishers that regularly export their products may find benefit with an Interest Charge – Domestic International Sales Corporation (IC-DISC), a way of reducing the federal tax liability related to the profits made on export sales. In addition, finishers hiring within specified targeted groups, such as food stamp recipients and qualified veterans, can qualify for the Work Opportunity Tax Credit (WOTC).

    Methods of accounting

    Tax Reform expanded upon the accounting methods available to small and medium-side taxpayers. Finishers with average annual gross receipts of less than $25 million over the prior three years may adopt a number of accounting methods that were not previously available to them. Those with less than $25 million of average gross receipts from the prior three years may change to the cash method of accounting, be exempt from the requirement to account for inventories, and exempt them from the UNICAP rules for tax years beginning after December 31, 2017. Each requires a separate accounting method change and some planning to ensure the change in method of accounting is done properly.

    IRC §199A flow-through deduction

    The Qualified Business Income Deduction in IRC §199A, which was enacted as part of Tax Reform, allows finishers a 20% deduction of Qualified Business Income to all non-corporate taxpayers (i.e., flow-through entities, such as S Corporations, Partnerships, and LLCs).

    Proper planning is important to be sure that finishers and their owners take full advantage of the new law. For instance, many finishers own their building in a separate entity and rent the plant to the operating business. Real estate entities may qualify for the deduction, but only if they are operating like a trade or business. That means no triple net leases, separate checking accounts, etc. Companies not operating like a trade or business may be considered an investment, and therefore, not eligible for the new deduction.

    While the aforementioned ideas are likely to be the most impactful for finishers, companies should evaluate what incentives, methods and structure are best for them, given their goals and fact patterns.

    Michael J. Devereux II, CPA, CMP, is a partner and director of Manufacturing, Distribution & Plastics Industry Services for Mueller Prost. Devereux’s primary focus is on tax incentives and succession planning for the manufacturing sector. He regularly speaks at manufacturing conferences around the country on tax issues facing the manufacturing sector. Devereux will be speaking at the FSEA•IADD Conference in April of 2020.

    Can You Help Employees Save (Or Save More)?

    By Joseph P. Trybula, CFP®, AIF®
    Printers 401K

    How realistic are employees about the true state of their retirement savings? While many among the three primary generations – millennials, Generation X and baby boomers – that make up today’s workforce are feeling pretty good about the future, all three may be seeing things a little optimistically.

    Even if their vision is a little rosy, there are things employers can do that may make a difference in retirement savings for Millennials, Generation Xers and Baby Boomers alike. Recently, Natixis Investment Managers checked in on about 1,000 US workers spread across the three generations to find out how they are feeling about their savings habits and their future financial prospects. These workers also were asked what incentives would help them start saving – or to save more.

    A quick summary, by generation:

    Millennials, the eldest of whom are now 38 and the youngest 23, have a great start on saving for the future. Forty-three percent of them express cautious optimism about being comfortable in retirement, although they admit they will need to be careful with their money. On average, millennials began saving at age 25 and have saved about $80,000 already. They estimate they will need a little over $980,000 to fund retirement, a figure the report says is a little low. And they should factor in their targeted retirement age of 61 to make sure their savings last long enough. Many among this group have already taken money out of their plan balances: 30% have taken a loan, and 26% took a withdrawal.

    Generation X is more financially worried than their younger coworkers. This group now ranges from 39-54, and just 18% of them believe they will have saved enough money to fund the retirement they want. Almost one-quarter (23%) of them believe they will never be able to retire. This group appreciates auto-escalation in their 401(k) plans, taking advantage of it at higher rates than their older and younger coworkers do. But, their belief that they will need $988,000 to retire is likely too low, especially considering they have fewer years to increase their current average savings of a little over $166,000.

    Baby boomers have a more realistic retirement savings goal, at $1,018,488 — but they have much less time to reach it from their current point of under $307,000. Currently 55 to 73 years old, their average contribution rate is 8.5%, and they are targeting, on average, a retirement age of 69. It will take about $142,000 in annual savings to reach their goal, on average. Among the 1,000 people participating in the 2019 Defined Contribution Plan Participant Survey, 700 participated in the plan available to them. When asked why they aren’t saving more, daily expenses were cited by 65% as the major barrier, followed by general debt at 43%. One sobering response to the question was “I’d rather spend money to enjoy life now,” cited by 25%.

    Of the 300 respondents who are not participating in their available plan, about one-third said their employer doesn’t offer a match or that the match isn’t enough. The match seems to be an important factor for those who are participating, too. Overall, 56% of respondents report that their employer’s matching contribution is the top reason they are saving in the plan.

    Learn more about the actions employers can take that employees say would encourage them to join the plan or save more by viewing the full report at https://tinyurl.com/Natixis-2019-DC.

    Contact Joseph Trybula at joe@printers401k.com or 800.307.0376.

    Evaluate Your Company’s 401(k) for Optimal Success

    by Joseph P. Trybula, CFP®, AIF
    Printers 401k

    Employers face a daunting challenge: attracting and retaining the right talent necessary to drive their businesses forward. At the same time, they likely feel a responsibility to help employees reach retirement financially prepared. A 401(k) plan can help manage both of these goals.

    Keeping an eye on the latest trends and tactics in the 401(k) arena is one way that employers can offer a competitive plan. Below is insight across a wide variety of companies and industries on contributions, investments, fees and fiduciary responsibilities that can help in evaluating individual companies’ plans.

    Contributions

    How many employees are contributing?

    • In 2017, 79.3% of participants made contributions to their plans, up from 78.5% in the prior year. If their plan participation rate is less than overall or similar industry benchmarks, then companies should review their plan design options and develop a strategy to increase participation. If your plan exceeds benchmarks, consider what features might drive even higher participation.
    • 74% of organizations offer a matching contribution to participant accounts – with an average contribution/deferral rate among active participants of 7%. Plans that offer an employer contribution are more attractive to both prospective and existing employees, which helps recruiting and retention efforts. Matching Benchmarks: Based on first 6% of salary contributed:
      • More than 100% match: 7.9%
      • 100% match: 12.1%
      • 51-99% match: 33.8%
      • 50% match: 22.1%
      • Less than 50% match: 17.5%
    • 41% of plans now automatically enroll eligible employees. Automatic enrollment may be the most direct way to increase plan participation. It also may help extend participation among more junior employees that might otherwise fail to enroll.
    • Why is plan participation important? Each year, 401(k) plans must pass a series of compliance tests to ensure that the company owners and key personnel are not benefitting disproportionately compared to lower-paid employees. To pass these tests, plan metrics must fall within certain mathematical limits.

    If a company happens to receive failing results, they may need to act quickly to take corrective action to maintain the tax-qualified status of their plan. These actions may include making taxable distributions to highly compensated employees (HCEs) or making additional employer contributions for other employees.

    Investments

    Just where is the money going?

    • Plans offered an average of 22.8 investment options to participants, with participants holding an average of 5.7 investment options within their plans. This number has remained relatively steady over the past three years.
    • 92% of plans offered mutual funds, and 71% of plans offered domestic equity index options.

    Fees

    What are participants actually paying in fees?

    • 82% of plans annually review administrative costs and fees
    • 63% calculated the actual fees the plan paid to its adviser
    • 39% of companies have between 76 and 150 basis points as the average asset-weighted expense ratio of all investment options in the plan.
    • The average plan is wasting 25 basis points of participants’ money per year and some are wasting in excess of 1%.

    As a plan fiduciary, employers have a responsibility to ensure that the services provided to the plan are necessary and that the cost of those services is reasonable. To fulfill that important duty, employers need to make sure they understand the types of fees charged for their plan.

    Fiduciary

    • 37% of plans state their plan adviser is a fiduciary to their plan.

    Selecting an investment professional to help with retirement plans is an important fiduciary matter – it’s crucial to understand the types of professionals available and how to choose the best one.

    • 28% of plans did not have an investment committee.

    No one likes to go it alone, especially when “it” is the oversight of an employer-sponsored retirement plan.

    The fiduciary rules, regulations and the responsibilities to employees can be enormous burdens. Employers want to be in compliance, and they want to provide a plan that meets the goals and objectives set forth so employees can adequately prepare for the future.

    Keep in mind the Employee Retirement Income Security Act’s (ERISA) original intent for retirement plans was for plans to be run by experts. Delegating administration and investment responsibility to outside experts insulates a plan sponsor from both liability and responsibility. The delegation of administrative and investment fiduciary duties to fiduciaries that accept them in writing can offer real value and peace of mind for plan sponsors.

    The Printers 401k® Success by Design Program is a collaboration of 401(k) specialists who assume specific fiduciary duties for plans. The solution is designed to fulfill fiduciary obligations, allowing employers to continue serving as the plan sponsor without the liability and responsibility. Participants see reduced risk and work, lowered liability and plan cost, and improved plan operations and investments. Learn more at www.printers401k.com.

    Five Money Rules to Live By

    by Joseph P. Trybula, CFP®, AIF®, Diversified Financial Advisors

    It’s not simply a matter of working harder; it’s much more about using your non-financial skills and talents in new ways to bring you prosperity and a greater sense of personal satisfaction. Here are five tips to follow when seeking balance in your finances.

    1. Access to money is not evenly distributed. Take the time to understand credit scoring and how it can affect your ability to get lower-cost money – in terms of lower credit card rates, auto financing and more. Credit scores are driven off your payment history. If you pay off your credit cards and other bills on time, you will benefit from a higher credit score. But paying late has a negative effect on your score that could result in your paying more for mortgages and other big-ticket items. Home ownership has long been a way for people to build a nest egg. Even if the tax incentives may not be as compelling as they once were, owning a home is a form of forced savings that can build significantly over time.

    2. Think like a business owner. Your greatest asset is your ability to make an income from your unique talents. Thinking like an entrepreneur – even if you have a regular job — is a critical way to survive in the 21st century, when the only certainty is change. At work, do you routinely look for new problems to solve? Are you willing to take on new challenges? As you find opportunities to apply your unique talent and skills, you are reinforcing your value to the organization. Goodwill and flexibility go a long way to creating a career path that you may never have imagined for yourself.

    3. Build work and non-work relationships. Your ability to be successful depends on how well you build relationships with others. These are the folks who can refer you to the next great career opportunity, or a volunteer gig that can bring you great personal satisfaction and happiness. Remember, relationship-building is different from networking. Networking is mostly about what you can get from others. Relationship building is based on what you have to give others. And don’t forget mentoring as a positive way to give back to your work and non-work communities.

    4. Be positive. “Once you replace negative thoughts with positive ones,” said Willie Nelson, “you’ll start having positive results.” Low self-esteem or lack of confidence are two major reasons why people don’t achieve their goals. Being positive is a self-reinforcing feedback loop. If you catch yourself getting discouraged about a financial or personal setback, turn it around.

    5. Don’t neglect health and happiness! There’s nothing more important than your good health. Having lots of possessions is not wealth. The ancient philosophers have long argued that true wealth and happiness stem from an abundance of the spiritual, not the material. Be sure to take time each day for good diet and exercise, and learn to appreciate that your total well-being depends just as much on these two pillars as it does on your financial security.

    Contact Joe Trybula at joe@printers401k.com or 800.307.0376 for more details.

     

    When an Employee Retires Matters to Them and to Employers

    by Joseph P. Trybula, CFP®, AIF®, Diversified Financial Advisors

    Americans pride themselves on making their own decisions, and when to retire is an important one. But it takes money to retire, and the shift away from traditional pension plans leaves many Americans ill-prepared to retire when they want to. Employees who struggle with their finances find it challenging to save enough to retire on their own terms.

    But saving for retirement through 401(k) or other defined contributions plans has become an individual responsibility. Some would like to retire at 55 or 60 but must delay retirement until age 65 when they become eligible for Medicare. Others may want to retire at 65 – the traditional age of retirement – but because of financial concerns have to wait to take the plunge until they reach full Social Security retirement age.

    Without adequate resources, employees have less choice about when to retire.

    Timing of retirement important for employers, too

    Employers have a stake in the timing of employee retirements. They, too, may suffer financially when employees are unprepared to leave the workforce on time. Of course, there are positive aspects to keeping older employees – experience, institutional knowledge and a broader perspective, to name a few – but employing older people who wish they were retired can have serious financial consequences. They may be distracted by financial concerns, less engaged in the company and their job, and less motivated than those who are happy to be working. They also reduce the company’s ability to hire new talent because of a lack of open jobs.

    The cost of delay: significant

    A recent study found that a one-year delay in retirement for an individual can cost an employer $50,000. At that figure, it wouldn’t take long for a 100-person company with two or three expected but delayed retirements per year to reach a significant level of expense. To address the issue of delayed retirements, the study suggests adopting retirement programs with features that encourage appropriate financial behaviors. For example:

    • Saving: Include an employer match to encourage more saving, as well as automatic enrollment and auto escalation to remove barriers to entry and increases in contributions.
    • Investing: Offer quality investment alternatives for participants who prefer professional management of their account and for those who fail to make an investment choice.
    • Withdrawing: Including guaranteed lifetime income products among distribution options in a DC plan can reduce the level of assets needed for an individual to retire at age 65 by 36 percent, according to the study.

    Education is critical to helping employees retire on time. Participants who are informed and confident often make better financial decisions, which can lead toward long-term security. How much do employees know about saving for college while at the same time staying on track for retirement? Do participants know how much of their retiree medical expenses will be paid by Medicare? And do they understand how to maximize their Social Security benefits? Offering education on these and other important topics can get employees – and their employers – closer to the goal of on-time retirements.

    Contact Joe Trybula at joe@printers401k.com or 800.307.0376 for more details.

     

    Top 5 Reasons to Invest in New Machinery

    by Brittany Willes, contributing editor, PostPress

    You may know the saying “Time Wounds All” – and that especially includes equipment. Even machines that are well-maintained and cared for are subject to the ravages of time and eventually need to be replaced. As inconvenient – and often expensive – as it can be to invest in new machinery, there are several very good reasons for doing so.

    1. Increase Speed and Productivity

    It’s no secret that advances in technology have made everything faster, and this includes manufacturing equipment. Operators are now able to do in a few short hours what used to take an entire day – or longer. By investing in newer, faster equipment, businesses get more for their money. Increased speed leads to increased productivity, which, in turn, leads to greater profits.

    2. Improve Efficiency

    Let’s be honest. Some older machines are not necessarily the most efficient in today’s fast-paced, ever-evolving marketplace. Success demands efficiency, which means responding to the changing market as smoothly as possible. New equipment often can serve to streamline the production process and produce better quality products. Newer equipment also is likely to be more energy efficient, leading to greater savings for the company while minimizing environmental impact. This is especially important given that more and more, consumers are looking to companies that incorporate environmentally-friendly and sustainable practices.

    3. Greater Business Opportunities

    With improved productivity comes the option to expand. Being able to produce more of a product in a shorter amount of time can allow businesses to expand their customer base, as well as possibly expanding into all new markets.

    4. Safety

    In addition to greater speed and productivity, technology has led to better safety features than what has typically been available in the past. Automation has led to decreased risk to human operators at nearly every point of the production process. With the addition of video monitoring systems, sensor systems and automatic shut-down features – just to name a few – the potential for harm to employees has been dramatically reduced. Investing in equipment with enhanced safety features just makes sense from any legal, ethical or good business standpoint. A safer work environment is a more productive one.

    5. Investing for the Future

    Death and taxes may be the only guarantees in life, but that doesn’t mean business owners can’t take steps to guard against an uncertain market. Investing in the right equipment can go a long way to helping companies cut down on unnecessary costs, reduce the margin for human error and streamline the production process – all of which can help when it comes to weathering economic downturns.

    Change is rarely easy, but it is often for the better. Replacing outdated, inefficient machinery may be an expensive and time-consuming process, but it will almost always be worth it in the end.

     

    Job Costing – Using Data Collection to Determine Estimated vs. Actual Profits

    by Mark Porter, president, Dienamic MIS Software, Inc.

    In any business, knowing costs is important. After all, isn’t the mathematical formula Profit = Sales – Costs? If companies don’t know their costs, how can they know their profits? Sure, at the end of the year anyone can say “I made money” or “I lost money,” but when businesses control costs and use cost data to make better business decisions they may not lose any money. Better yet, they may be able to say, “I made more money.”

    Data collection

    Whether done via time sheets or shop floor data collection, job costing is the process of tracking every minute of every day of each machine and employee. This not only allows us to get accurate costing of how much each job cost to produce but also allows us to analyze all aspects of our operations.

    Job costing involves several different aspects, one of which is data collection. Data collection, particularly when it comes to the shop floor, is one of the most valuable resources for determining exactly how much a single job costs. For instance, how much of employee John Smith’s time last quarter was chargeable (rebilled), and how much was nonchargeable? How many hours did the company spend repairing that old Kluge press last year?

    Collecting shop floor data allows companies to easily find this information. Furthermore, this type of information can allow companies to control their labor costs and make more informed decisions regarding the company’s machines.

    It is possible to extend this further by tracking characteristics of jobs. For example, what was the average running speed on 28×40 sheets of 10pt coated stock run 2-up on the Bobst press? How much time was spent waiting for customer ABC to do press oks?

    This type of information can help with providing more accurate estimates. This is important because, if a job is quoted at 3000 per hour but only achieves 2500 on the shop floor the company is losing money as soon as it gets the order. Conversely, if quoting at 2500 per hour and achieving 3000 on the shop floor, the company is losing jobs it could be producing profitably.

    Companies do not have to be limited by software analysis. All this data can be sent to software such as Excel, where it can be sorted and analyzed in ways that answer questions that are specific to individual companies.

    A wealth of information is available on the shop floor every day. Companies simply need to start collecting and analyzing it to help improve productivity and profitability.

    Purchasing for profit

    Another piece of the job costing puzzle involves purchasing. All companies must purchase both materials and services in their day-to-day activities. The levels of those purchases can vary from industry to industry and from company to company. Certainly, the industries of print finishing, trade binding and diemaking are more labor-based than material-based, but purchases must still be made.

    Whenever money leaves the company, accountability for that money is vital, as is confirmation of the expected value received for those funds. Purchase orders should be generated for all purchases. This includes items for specific jobs, materials for inventory, any outside labor services and general office purchases, such as supplies.

    Whether written or verbal, issuing purchase orders is the same as writing a check from the company to the vendor. Whether the company makes many purchases or only a few, each purchase represents money leaving the company that should be controlled. A purchasing system should record every purchase order issued. This provides accountability of who is issuing purchase orders and where they are being sent. By making people accountable for the purchase orders they issue, companies will ensure employees are more careful with the purchases they make.

    When goods or services are received they should be matched to the original purchase order. This helps ensure the full order has been received and serves to check if more was received than originally ordered. The print and finishing industries are so job-based, it is often a good idea to take a step back and view purchases by vendor and employees issuing POs.

    By ensuring employees follow these procedures, companies can tighten their financial control of the business to ensure maximum success.

    Job closing routines

    Another valuable step in collecting job costing data is to establish a strong job closing routine. When a job is complete, is it simply passed to invoicing so that the customer can be billed based on the estimated amount? If so, a lot of valuable information is probably getting missed. Closing a job in an automated system should generate several useful reports and functions.

    Close the job to prevent additional charges

    When creating the invoice, the last thing companies want is to have employees still incurring costs against the job. Trying to get a customer to pay additional charges after the original invoice has been sent is, at the very least, embarrassing.

    Once the billing process starts, part of the closing procedure should prevent additional time, materials and purchases from being placed against a job without a supervisor OK.

    Full listing of all costs incurred

    The job closing process should generate a report that lists all labor hours and costs – material costs and purchases that went into producing that job. The company should be aware of all funds that went into the job. The closing report should offer the option to view the data by department, cost center, operation or transaction level.

    Generally, these reports are viewed at a cost center level. This means there should be a total hours and total dollars report for each machine used on the job. If a cost center looks unusually high or low, drill down to an operation level to see if the cause was the makeready or run time. Identifying the source means being able to evaluate even further to a transaction level to see which employees worked on a job.

    Actual vs. estimate report

    This report provides a comparison of the estimated hours and costs for all labor, material and purchases for the specific job to the actual costs. This is a valuable report that can quickly identify actual costs that are not in line with the estimated costs. This could prove to be a onetime exception that nothing could prevent, or maybe it is a process that needs to be evaluated. If a machine is estimated to run at 5000 per hour and it is actually running at 4000 per hour, the company is losing money every time it wins a quote. Conversely, if it is running at 5000 per hour and with a quote of 4000 per hour, the company is losing jobs it should be winning.

    Changes report

    When a job is complete, it should be possible to get a listing of all changes made to the job from the time it was agreed to produce the job to the final product that was shipped to the customer. It is important to track these changes, as they are needed to explain time and cost variances and, also, to help correct legitimate extra charges.

    Collecting extra charges can be a great source of additional revenue, and having a complete backup of information about the extra charge – i.e. who, what, where, why and when a change was made – allows for recovering that extra charge without damaging the relationship with that customer.

    Problem history

    Provide employees with a problem history system they can use to enter problems with jobs as they happen. When closing a job, a list of its problems can be viewed. These problems may help explain some of the variations and issues on that job. This saves the time of office staff to track down employees and ask what happened two or three days ago. Problem history is also valuable when quoting or running the same job in the future.

    By following good closing procedures, companies can ensure that all costs are captured, all legitimate extra charges are recovered, all production variances are accounted for and all processes are running as efficiently as possible. Furthermore, by collecting data regarding the shop floor itself, as well as purchasing information, companies maximize their profits while gaining a better understanding of all aspects of the business.

    Mark Porter serves as president of Dienamic MIS Software, Inc. He can be contacted at 800.461.8114 or by email at sales@dienamicmis.com.

    Choosing Investments in Your 401(k)

    By Joseph P. Trybula, CFP®, AIF®, Diversified Financial Advisors

    When you participate in a 401(k) plan at work, you are typically responsible for choosing investments in your plan from a range of stocks, bonds and mutual funds selected by your employer. Here are five helpful tips to do that:

    Pay attention to investment returns.

    Most plans only offer funds that have a five-year track record. This can allow you to easily compare each fund’s performance to its stated investment benchmark over a reasonably long time-period. A fund that consistently lags its index – usually the S&P 500® Index for US stock funds, or the Bloomberg Barclays US Aggregate Bond Index for US fixed income funds – may not have enough giddy up to help get you to your long-term retirement goals.

    Diversify.

    Consider spreading your investment funds across various types of assets (such as stocks, bonds and cash), geographic regions (such as the US, European and Asian developed and emerging markets) and risk levels (spanning riskier small cap stocks to more conservative Treasury bonds). Diversification may help reduce the risk of having all your eggs in one basket. When one type of investment in your portfolio is doing poorly, odds are that another investment is doing better, thereby potentially offsetting those losses.

    Limit employer stock.

    Owning company stock can be a good thing if the company does well. But if you have too much of your savings concentrated in your company stock, you run the risk that if the company hits a road bump or goes bankrupt, it could wreck your savings (remember Enron). As with any investment, you should consider your risk tolerance for devastating losses, your time horizon and your goals to determine whether your company stock position is appropriate.

    Consider a target date or lifecycle fund based on your estimated retirement date.

    These “set-it-and-mostly-forget-it” options take much of the decision-making out of which asset classes to own and automatically adjusts those allocations to reduce your market risk as you approach retirement. That said, you should look at performance at least once a year to make sure it is meeting your expectations.

    Consider low-cost index funds.

    A portfolio with an initial value of $100,000 that delivers a 4 percent annual return over 20 years and that has an ongoing fee of 1 percent will be valued nearly $30,000 less compared to a portfolio with a 0.25 of a percent annual fee. Low-cost index funds, which are designed to simply track – but not beat – the performance of a basket of stocks or bonds, may be an appropriate option to look at depending on your goals and circumstances. Some retirement plans offer access to a financial advisor, a trained professional who can offer you advice, for a fee, on your investments. If you don’t have the time or interest, having someone do your investing for you could be a practical alternative to doing it on your own.

    Contact Joe Trybula at joe@printers401k.com or 800.307.0376 for more details.