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Offering Benefits, Saving Taxes. Considered Win-Win for Grain, Feed Companies.
by Lynn Grooms

Imagine saving an average of $330 per employee per year at the same time you are gaining tools to better attract and keep good employees. Members of the Grain & Feed Association of Illinois (GFAI) now have this opportunity with a new member benefit being offered by GFAI and Total Administrative Services Corporation (TASC). Based in Madison, Wis., TASC provides financial tools designed to help owners of small- to mid-sized companies address the rising costs of employee benefits while reducing taxes and improving profitability.
Earlier this year, GFAI and TASC announced they would be offering several TASC programs: FlexSystem Section 125 Cafeteria Plans, Maximum Advantage Pension Planning (MAPP), AgriPlan/BizPlan Section 105 Medical Reimbursement Plans, COBRA Administration, Health Reimbursement Plans and Health Savings Plans.
Conversations with GFAI members was one of the driving forces behind the benefits program collaboration. Jeff Adkisson, GFAI’s executive vice president, explains that members have increasingly mentioned the challenges of attracting and keeping good employees while keeping healthcare and other benefit costs in line. As a result, GFAI contacted the Illinois Agricultural Auditing Association (IAAA) asking if they could recommend a firm specializing in employee benefits administration. The association suggested TASC.
After discussions with a few other benefit service firms, evaluating the particular services offered and the various fee structures, GFAI decided to work with TASC, says Adkisson. The collaboration, he adds, is a “win-win” for GFAI member companies and their employees.
Health insurance costs are continuing to rise, and companies in rural communities must continue to compete against other employers when it comes to good benefits packages. In addition, it is tough to find employees who will work the grain and feed industry’s long hours, says Adkisson.
Already working with agricultural organizations, such as the Illinois Farm Bureau and the Indiana Farm Bureau, TASC understands the particular needs of agricultural employers. It also works in several other industries, doing business with about 150 trade associations, says Rob Sickler, TASC’s regional sales director in Rantoul, Ill.
No matter what the business, everyone talks about recent double-digit rate increases for health insurance, says Sickler. “Employers are looking for some financial relief,” he says, noting that TASC has programs that enable small employers to offer competitive employee benefits.
FlexSystem Section 125 Cafeteria Plan
TASC’s FlexSystem Section 125 Cafeteria Plan has been particularly popular with smaller companies, and a couple of GFAI members are just now getting enrolled, says Sickler. The FlexSystem plan allows employees to pay for certain medical expenses on a pre-tax basis. “By paying for these expenses before being taxed, employees lower their taxable income, pay less in taxes and increase their take-home pay,” states the TASC Web site (www.tasconline.com). These expenses include:

• Employee contributions toward medical-related insurance premiums
• Medical-related expenses such as deductibles, co-insurance or uninsured medical expenses
• Dependent care expenses

Employers benefit because their payroll taxes are reduced. For every dollar an employee runs through a cafeteria plan, the employer saves on FICA tax. “The employer saves an average of $330 per employee participating in the plan,” says Sickler. “At the very least the employer will save more than enough to cover the administration fee and, in most cases, it becomes a profit center for the employer.”
About a year ago, Bethany Grain merged with the Farmers Co-op Grain Company to form Heritage Grain Cooperative, Dalton City, Ill. Bethany Grain already had been using TASC’s FlexSystem program before the merger. After reviewing the program and talking with IAAA about it, Heritage Grain decided to continue with the FlexSystem. “It’s another service we can offer employees. With enough participation, the program can essentially be self funding because it reduces a company’s tax burden,” says Jerry Rowe, general manager, Heritage Grain. About 80 percent of the company’s employees are currently enrolled in the program.
Employers also may be interested in TASC’s third party administration of the FlexSystem. This can free up the company’s staff time for other tasks. TASC handles plan documentation and forms, account maintenance and check cutting.
“We take a complicated scenario and make it simpler for both employers and employees,” says TASC’s Sickler, adding that TASC enables users to check their balances online. “This is a turnkey system,” he says.
“TASC has been very helpful and a lot of the work can be done on the Internet,” says Rowe. He encourages fellow grain and feed company managers to take a look at the program. “The more employees you have participating, the more the program can be self-funding through saved taxes.”
Health Savings Accounts
Within the FlexSystem, TASC administers Health Savings Accounts (HSAs). An HSA allows each qualified individual employee to reduce health insurance costs and create tax savings. TASC reports that HSAs are federally-approved savings accounts that are offered only in conjunction with high deductible plans. HSAs enable employers and employees to make tax-free payroll contributions to pay for certain out-of-pocket medical expenses. Funds are received tax-free by employees and the contributions are tax deductible for employers.
HSAs reduce health insurance costs for employers due to the use of higher deductible plans. Employees benefit by increasing their take-home pay. Their tax-deductible deposits also grow tax-free in the HSA account. The individual also retains account deposits and interest regardless of employment status, reports TASC.
Health Reimbursement Arrangements
Also within the FlexSystem, TASC offers DirectPay, a third-party administration service for employers who implement a Health Reimbursement Arrangement (HRA). HRAs allow employers to set aside a specific amount annually for employees to use to pay for health care expenses. Employer contributions to the plan are tax-deductible to the employer and tax-free to the employee.
Depending on the plan design and adjusted premium payments, DirectPay can generate savings in overall health benefits, reports TASC. The funding arrangement means that DirectPay fronts reimbursements, not the employer, the company adds.
For employees, the benefit is that the plan is 100 percent employer-paid, and all contributions are received tax-free. In addition, unused dollars may be carried over from year to year.
COBRA Administration
TASC also offers COBRA administration through its COBRAToday services. It takes care of the necessary communications, notices, forms and record keeping, and provides for the collection of premium payments connected with COBRA.
For employers, COBRAToday assumes liability for all required administrative procedures and regulations. The program provides employers account reports so employers can monitor COBRA activities. It also provides proof of qualifying event notification and establishes election and payment receipt deadlines.
Medical Reimbursement Plans
Self-employed business owners may be interested in a provision in the Internal Revenue Code (Section 105) that allows qualifying self-employed business owners a 100 percent tax deduction of family health care expenses. Those who qualify are self-employed, have a spouse who helps with the business (even on a part-time basis) and who have fewer than three employees. Family health insurance premiums as well as non-insured medical, dental and vision care expenses are 100 percent deductible on federal, state and self-employment taxes.
TASC’s AgriPlan/BizPlan is based on the provision in the tax code. The program includes plan documentation and forms, account maintenance and expense verification. TASC reports that last year, the average AgriPlan/BizPlan participant saved $2,450.
Pension Planning
In addition to the flexible healthcare plan, TASC offers Maximum Advantage Pension Planning (MAPP). Retirement Plans available through MAPP include Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE-IRA) and qualified plans, such as profit sharing, money purchase pension and 401(k). TASC also offers consulting to determine which plan is the most appropriate for an employee. MAPP offers flexible plan documents, IRS compliance and plan operation support.

For more information, please contact Rob Sickler, TASC, 877-283-3883 or visit the TASC Web site at www.tasconline.com; or Jeff Adkisson, GFAI, 217-787-2417.

1. Examine and verify the integrity of accounting records and internal control procedures.
2. Serve as a control instrument over the record keeping for which management and administrative personnel are responsible.
3. Examine, verify and report the financial condition (balance sheet), results of operations (operating statement) and statement of cash flows for a given time period.
4. Facilitate obtaining credit from banks, third party creditors or meet regulatory requirements.
5. Identify the need for financial consultation and guidance when appropriate.
6. Satisfy members and stockholders that their interests are being adequately safeguarded by the board and management.

Audits should be conducted annually at a minimum. But under certain circumstances, a company may want to have more than one audit per year. A small company with a minimum accounting staff, for example, may want to rely on an outside auditor to help with regular financial statements. Or, a company that has had past problems with financial statements may want to have an outside firm do a review every six months, says Lee.
Hiring an Auditor
Say that a company is looking to hire an outside audit firm. Should the auditor have specific experience in grain elevator and/or feed mill management? One of the benefits of hiring an auditor who has been involved with several similar operations is that he or she will likely have a better overall picture about how this type of business operates, says Lee. This auditor also will likely be better able to identify trends (in operating costs, margins or trading practices, for example). Or, a company may be more interested in convenience or lower cost and hire a local auditing firm, for example.
Before hiring an auditor, the board should determine several qualifications. The interview process, says Lee, should reveal:

• Professional competence
• Ability to maintain independence and a high degree of integrity
• Understanding of your particular business and industry
• Ability to conduct an efficient audit program
• Ability to communicate with the board and management
• Ability to provide competent suggestions for improving financial accounting practices
• Understanding of their reporting responsibility directly to the board
• Willingness to correct any oversights occurring during the audit program
• Does the audit firm have an active peer review process
• Trusted advisor status

Once an auditor is selected, the board should then ask some questions about the auditor’s engagement letter. This is the formal contract between the board and the audit firm, says Lee. These questions might include: What else will you bring to the table other than the audit? What specific services are you going to perform? What will this audit include? How will we be billed? Will the audit include tax preparation? What tax expertise does the audit firm have? If it does not have this expertise, what provision will it make to provide such expertise? How are you going to measure quantity and quality of inventory at year end?
“One of the audit firm’s responsibilities is to make sure management is within the policy guidelines established by the board,” says Lee. The more specific these guidelines are, the easier it is for the auditor to see if the company is in compliance with them. Take a company’s credit policy, for example. The terms of sale should be clearly indicated. If an invoice is not paid within 30 days, then a service charge should be added if that is their policy. The audit process will go more smoothly if policies are well documented.
Once the auditor is hired, how frequently should the board request progress reports? There really is no ideal number, although a larger company might request them more frequently. Management should inform the board when the auditor will be on site and the board also may want to be involved when inventory is being taken, says Lee. After that, a meeting of the auditor, board and management should be scheduled.
It is at this meeting where thought-provoking questions can really help the company’s short-term and long-term financial performance. As Lee pointed out in his presentation at the Grain & Feed Association of Illinois meeting, the following questions can yield some very good answers at the audit board meeting:

• What are the trends (for the following): sales, margins, expenses, earnings, assets, working capital, net fixed assets, long term debt and net worth?
• How do these compare to similar companies?
• Do we have adequate internal controls in place?
• Are we operating within the parameters of our risk management policy?
• Do we have adequate policies in place?
• Are there any concerns relative to the quantity or quality of our inventory?
• Based upon our current cash flow requirements, are we generating adequate earnings to service our debt and maintain our plant and equipment?
• Are accounts receivable current and do we have an adequate allowance?
• Are payables being met within terms?
• Have assets and liabilities been properly safeguarded?
• Do our internal financial statements accurately reflect the “true” position of our company on an ongoing basis?
• Are we following the policies established by the board (e.g., drying, storage, grain contracts, etc.)?
Further, Lee encourages companies to have four or five key financial ratios to measure performance. These could include working capital to sales, operating expense/bushel, return on invested capital, return on equity, EBITDA divided by interest, long-term debt to equity and more.
Finally, as in any business relationship, good communication is key. As Lee says, “If everyone knows what is expected up front and that everything is on the table, there can be a free exchange of information.”

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