Are We Bonded?
August 24, 2021
Are We Bonded?

The word “bond” often gets muddled in dialogue and when I am asked the question, “do we have a bond?” I answer that question with another question, what kind of bond? Don’t know? Well, who is asking and for what purpose are they asking?  There are three types of bonds, but only two that I will talk about today. I am an insurance nerd, not a financial advisor, so I have little knowledge on the stock market type bonds because, well, that’s not my bag baby! (insert Austin Powers reference here).

 

The types of bonds that I will educate you on today are surety bonds and fidelity bonds. Both are instruments of the insurance world but only one is an insurance policy, and the other is actually a bond--a guarantee of work to be performed that is legally binding (a contract). Confused? You’re not alone. The word Bond has become a misnomer in the insurance world because as the insurance carriers have changed and so have their products. Traditionally a bond underwriter would do both surety work and fidelity policies in a silo, and over time the words “Bond Department” took shape. Then, the work done within that scope became one when in reality they are not the same thing. As the insurance products changed over time, fidelity insurance came to spend more time under the heading of the rest of an insurance policy often being included with other coverages (such as on a business owners policy). It makes more sense to add it on to a package of insurance since it is after all, an insurance product. Bonds cannot be added to an insurance policy because, well, they’re a bond.

 

Surety Bond

In simple terms a surety bond is a guarantee. They can guarantee compliance with laws or contracts, the performance of an act, or can guarantee payments. They can be used to ensure compliance with governmental licensing and permit requirements or may be used to guarantee payment of taxes or other financial obligations. Surety bonds do not protect the buyer of the bond. They protect, indemnify, or provide financial guarantee to third parties such as customers, suppliers or state tax- payers.

 

There are three parties to a bond, the principle, the surety and the obligee. The principle is the party that is required to purchase the bond and takes on the obligation to perform the act as promised. The surety is the company that becomes contractually liable for losses sustained due to the failure of the principle to perform the promised act. The obligee is the party requiring the bond and would receive the benefit of the bond. Usually, a local state or federal government organization.

 

There are all kinds of situations that require bonding. Many people think of construction, but can also be needed by lawyers, auto dealers, insurance adjusters, credit repair services, private investigators, mortgage brokers and financial institutions. Some of the most common bonds are contract bonds, license and permit bonds and fidelity or ERISA bonds. A contract bond provides a guarantee that a contractor will complete a construction project in accordance with specifications laid out in a contract and make all payments to sub-contractors and suppliers. License and permit bonds usually have a statutory amount required by a municipality and their amount varies based on the value of the project, for example, a Right of Way permit may require a bond to guarantee the work is done timely and within budget.

 

Because a bond is a financial instrument the underwriting of bonds does require personal information similar to taking out a loan at a bank. Personal identifiable information will be asked along with personal financial information. An applicant may be required to provide collateral or co-signers. Superior credit or great collateral will bring the cost of the bond down while the inverse will increase the cost or could be denied altogether.

 

Fidelity Bond

A fidelity bond, unlike the previous bonds mentioned, is a product of insurance. It protects an insured party against dishonesty such as theft or fraudulent actions such as forgery. There are both first and third- party bonds within this general product. First party bonds would protect a business from wrongful acts of their employees. Employee dishonesty is often included in many business owners’ policies, and higher limits can be purchased over and above what is offered on a standard policy. A single dishonest employee can gravely impact a business’ bottom line and this type of coverage offers protection to the business’ cash assets.

 

A third -party bond protects companies from these acts by individuals employed on a contract basis, someone that may be in the home of a client, such as a mover, a janitor, or a home health aide. Many businesses wish to purchase a fidelity bond to protect their business’ customers or other parties from financial misconduct by a business’ employees in a good faith effort to provide clients with a financial guarantee of employee conduct. Acts that a fidelity bond can protect against include theft, larceny, embezzlement, forgery, or other financial crimes.

 

ERISA Bond

Another common insurance bond is the ERISA Bond which protects companies against the actions of an employee who breaches a fiduciary responsibility for the company’s retirement fund. An ERISA bond is required if you have a 401k for your employees in the amount of 10% of the plan’s assets. This is available on most standard business insurance policies but can also be purchased as a stand-alone crime policy.

 

Simco HR has a full suite of insurance products and bonding capability for your business. Come and talk to us about your insurance portfolio today to see where we can help you get back to your business!

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Top 5 HR Trends That Will Shape Businesses in 2025

January 7, 2025
As 2025 kicks off, the HR landscape is evolving faster than ever before. Technology, shifting workforce expectations, and the need for businesses to be agile in a dynamic global environment are all driving change. What worked yesterday may not be enough today, and companies must adapt to stay ahead. Here are the top five HR trends you’ll need to watch closely in 2025: 1. AI is Changing the Hiring Game Artificial intelligence is no longer just a buzzword in HR—it’s a game-changer. Tools that can scan resumes, match candidates to roles, and even conduct initial assessments are becoming staples for businesses aiming to save time and improve hiring outcomes. In 2024, many organizations began integrating AI to remove unconscious bias and make their hiring practices more inclusive, and this trend is expected to accelerate. 2. Flexibility Isn’t Just a Perk Anymore Hybrid and remote work models are here to stay, but the conversation has shifted. In 2025, it’s less about offering flexibility and more about making it work effectively. Companies are adopting sophisticated tools for remote collaboration, redefining performance metrics, and ensuring policies address the nuances of managing both in-office and remote teams. The focus is on maintaining productivity without compromising employee well-being. 3. Wellness Goes Beyond Gym Memberships In recent years, wellness programs have evolved beyond basic offerings like gym memberships to address a wider range of employee needs. As companies recognize the link between employee well-being and productivity, they’re broadening their focus to include mental health, financial stability, and holistic support. In 2023 and 2024, for example, Delta expanded its employee wellness initiatives by improving access to mental health care. The airline worked with Spring Health, a new EAP provider, to create a larger and more diverse network of mental health professionals, offering better support for both employees and their household members. Looking ahead to 2025, wellness will become more deeply integrated into company cultures. Expect companies to go beyond providing reactive support to fostering proactive wellness through personalized tools, such as mental health apps, financial coaching, and enhanced benefits like paid leave for caregiving. With these programs, businesses are not just addressing immediate health concerns but also empowering employees to manage their overall well-being in a more holistic way. The focus will be on creating a supportive, sustainable work environment that helps employees thrive both at work and in their personal lives. 4. Upskilling is a Competitive Necessity Technology is evolving faster than ever, and companies are racing to keep up. Upskilling employees in areas like data analysis, AI, and emerging tech became a priority in 2024, and it’s clear that this trend will only grow. Businesses that invest in continuous learning programs—whether through certifications, on-the-job training, or digital learning platforms—are better positioned to stay ahead in their industries. 5. Data is Driving HR Decisions HR is leaning heavily on people analytics to guide decision-making. Instead of relying on intuition, businesses are using data to understand employee engagement, pinpoint reasons for turnover, and improve productivity. The emphasis on metrics like employee sentiment and workforce utilization gained traction last year, and more organizations are embedding analytics into their HR strategies to tackle challenges proactively. Final Thoughts The HR landscape in 2025 will be shaped by these transformative trends. Businesses that embrace innovation and prioritize their people will find themselves not just adapting but thriving in the evolving workplace. As these trends unfold, staying proactive and flexible will be the key to turning challenges into opportunities.

IRS Announces 2025 PCORI Fee Update

January 6, 2025
The IRS has released the 2025 Patient-Centered Outcomes Research Institute (PCORI) fee , which will increase to $3.47 per covered life —a $0.25 increase from 2024. This fee applies to plan years ending on or after October 1, 2024 , and before October 1, 2025 . What is the PCORI Fee? The PCORI fee was introduced as part of the Affordable Care Act (ACA) to help fund the research conducted by the Patient-Centered Outcomes Research Institute (PCORI). This research focuses on improving healthcare outcomes by comparing different medical treatments. The fee is levied on insurers, as well as self-insured and level-funded health plans. The fee is calculated based on the average number of covered lives under a plan and is due once a year, with the filing occurring during the second quarter on Form 720 , the Quarterly Federal Excise Tax Return . The payment is due by July 31 each year. Key Details for Employers and Plan Sponsors Who is Affected? : The fee applies to health insurers, self-insured health plans, and level-funded health plans. When is it Due? : The fee must be reported on Form 720 and paid by July 31 each year. How is it Calculated? : The fee is based on the average number of covered lives during the plan year. The updated $3.47 per covered life fee will be in effect for health plans with policy years ending between October 1, 2024, and October 1, 2025. Employers should be prepared to account for this increase when filing for 2025. For more information on the PCORI fee and its reporting requirements, consult the IRS Bulletin 2024-49 , published on December 2, 2024, or visit the IRS PCORI Fee page . 

Federal DOL Restores Simplified Tip Credit Rule: Employer Guidance

January 6, 2025
In a move welcomed by many employers in the hospitality and service industries, the U.S. Department of Labor (DOL) has officially reinstated the pre-2021 tip credit rule. This change, effective December 17, 2024, follows a recent court of appeals decision that vacated the “80/20/30” tip credit rule that had been implemented under the Trump administration. If you’re wondering what this means for your business, don’t worry—this update doesn’t require any immediate action on your part. What Was the "80/20/30" Rule? Before we dive into the implications of the DOL’s latest rule change, let’s quickly review the "80/20/30" rule. This rule, introduced in 2021, placed specific restrictions on how much time tipped employees (such as waitstaff and bartenders) could spend on non-tip-generating duties (e.g., cleaning, setting up, and other side work). The rule essentially required that tipped workers spend at least 80% of their work hours on tip-generating activities to continue qualifying for the tip credit. Moreover, under the "80/20/30" rule, employers could no longer use the tip credit to offset wages for certain non-tip-producing activities, and they had to ensure that employees spent no more than 30 minutes at a time on side duties. This increased the burden on employers, as it required more careful tracking of employee duties and work hours to remain in compliance. Why Was the Rule Vacated? The court of appeals decision in August 2024 ruled that the "80/20/30" rule was too restrictive and inconsistent with the intent of the Fair Labor Standards Act (FLSA), which allows employers to take a tip credit for workers who perform both tipped and non-tipped duties. The court found that the new rule created unreasonable administrative burdens and restrictions that were not in line with past practices or legal precedents. In response to this ruling, the DOL moved quickly to restore the pre-2021 tip credit rule. What Does the Reinstatement of the Pre-2021 Rule Mean for Employers? With the reinstatement of the pre-2021 tip credit rule, the DOL has effectively simplified the way employers can apply the tip credit to their workers. Under the prior rule, employees who perform a combination of tipped and non-tipped duties can still qualify for the tip credit, as long as their primary job responsibility is related to tipped work. Employers no longer have to track the precise breakdown of time spent on tip-generating vs. non-tip-generating activities in the same way. This returns to the more flexible guidelines where as long as tipped employees perform "related" duties (e.g., cleaning their station, setting up for service), they can still receive the tip credit for those hours, provided those activities don’t dominate their workday. What Action Is Needed from Employers? For most employers, this change will not require any immediate action, as the final rule effectively restores the pre-2021 approach. The main thing to note is that employers should continue to comply with the broader requirements of the Fair Labor Standards Act (FLSA) and ensure they are properly paying employees at least the federal minimum wage (including tips) when they apply the tip credit. Here are a few things to keep in mind: Reassess Timekeeping Systems: While the rule change simplifies some aspects of record-keeping, employers still need to ensure they have a timekeeping system in place that accurately tracks the hours worked by tipped employees. It is essential to ensure that the wages (base pay plus tips) equal at least the federal minimum wage. No Need for Immediate Adjustments: If you were already applying the pre-2021 tip credit rule, no changes are necessary on your part. For those who had adjusted to the "80/20/30" rule, reverting back to the previous method should not require significant changes. State and Local Laws: Employers should still be mindful of any state or local laws that may have stricter requirements than federal law. Always check your state’s labor regulations to ensure full compliance. Why Is This Change Important? The reinstatement of the simplified tip credit rule provides relief to many employers, particularly in industries like restaurants, hotels, and other service-based businesses where tipping is common. The pre-2021 rule is seen as more employer-friendly, offering more flexibility in how tipped employees can spend their time without losing eligibility for the tip credit. For employers, this means less administrative burden, reduced risk of compliance issues, and potentially fewer legal challenges. This shift is a step toward simplifying labor law compliance for businesses already struggling with the complexities of wage and hour rules. Looking Ahead As we move further into 2025, it’s important for employers to stay informed of any future changes in federal labor regulations. While this change restores a previous rule, the DOL’s stance on tip credits and wage issues can continue to evolve. Employers in tip-dependent industries should continue to monitor updates from the Department of Labor and legal rulings to ensure ongoing compliance. The DOL’s restoration of the pre-2021 tip credit rule is a welcome change for many businesses, offering a return to simpler guidelines and less restrictive requirements. For most employers, no immediate action is required, but it’s always a good idea to review your practices to ensure they align with the updated rule. If you need further assistance in navigating these changes, reach out to Simco to ensure your business stays compliant in 2025 and beyond. 

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