Small Business Insurance Feed

Cyber Breach Prevention Ethical Duty for Law Firms

Shutterstock_254824216Hackers are executing sophisticated data breaches on large and small companies all over the world, making the need to protect your law firm from the dangers of cyber breach more important than ever.

Although many lawyers prefer to believe that their firm is unlikely to be the target of a hack, such thinking often proves to be naïve. Cyber criminals are continually adapting looking for easy targets and sources of potentially valuable data. Because law firms are essentially warehouses of client and employee data, they should acknowledge that they are not immune to such attacks.

Personally Identifiable Information

Law firms are often considered to be perfect targets by cyber criminals looking to hack into businesses that keep lots of data containing personally identifiable information (PII) but lack protective security. Some examples of PII include:

  • Names, identifying numbers, symbols, or other identifiers assigned to particular individuals
  • Information that describes anything about a person
  • Information that indicates actions done by or to a person
  • Information that indicates a person possesses certain characteristics

Most, if not all, law firms possess a great deal of PII. This information was historically kept in paper files, but is not stored electronically for the most part. The most commonly reported cyber breach reported by law firms is related to the loss or theft of a laptop, thumb drive, smart phone, tablet, or some other mobile device. If the information on the lost or stolen device was not encrypted and contained PII, a breach likely occurred. With access to office email and other law office networks, cyber criminals can gain access to and steal confidential information.

This is an ethical dilemma for attorneys for several reasons. Besides the common law duty owed by attorneys to protect the confidential information entrusted to them by clients, the ABA Rules of Professional Conduct requires an attorney to maintain the confidentiality of information related to the representation of current and former clients, and state and federal law also imposes a duty upon attorneys to protect PII for clients.

To learn more about data breach and cyber liability coverage, Jeremy Del Priore at USI Affinity today.


The Four Part Disability Income Review for Attorneys

One of the exposures not often accounted for by small firms is the possibility of a key player suffering a disability. In a firm of 4 or 5, our experience tells us that one of you is likely to suffer a disability. If you’re ready to tackle this issue, we’ve outlined our Four Part Disability Income Review for Attorneys below:

  1. Determine the Scope of the Exposure:  Review your income, not simply for the past year, but determine a rolling average for the past three years, along with partner distributions or other sources which could be impacted by a disability.  In addition, for partners in the early stages of their career, thought should be given to anticipated increases in income in the future.  Considerations should also be given to retirement contributions the partner is making, which also would be impacted by a disability.
  1. Assess Existing Resources: Typically, individuals do not have enough savings to cover an extended disability.  However, a careful review of existing disability coverage along with social security can provide a benefit baseline and define the income protection gap which needs to be addressed. 
  1. Develop a Disability Protection Solution: Once the income protection gap is defined, there are a number of vehicles that can be utilized to solve the gap, including individual disability policies, association disability plans, even upgrading the existing employee group plan. Plus, if three or more partners are interested in securing disability protection at the same time, additional benefits can be obtained such as premium discounts or guaranteed benefit levels.  This phase also involves ensuring that there is an “own-occupation” definition of disability for which one receives benefits when they are unable to perform the duties of their occupation (as opposed to any occupation), and evaluating the scope of residual or partial benefits, COLA riders (which protect the purchasing power of your benefits), Future Purchase Options riders (which guarantee your insurability when you want to increase your benefits as your income increases), Retirement Contribution riders and other riders to maximize your protection. Shutterstock_270042584 
  1. Integrate your solution with the Partnership or Corporate agreements. An important step is to make sure that you understand how your firm’s agreements treat partner / principal disability.  In certain situations, it might be appropriate to evaluate Buy/Sell Disability protection which can assist the firm in buying out a partner’s interest in the case of a disability.

If you’d like help with this process, please fill out the form on this blog or call 1-855-874-0816.


Can an Employer Reimburse an Employee’s Individual Insurance Premiums on a Tax-Free Basis?

Employers frequently ask us if they’re allowed to help pay for an employee’s individual health insurance policy on a pre-tax basis. This article should help shed some light on the topic and opinions within the industry.

The IRS recently issued a FAQ addressing what could happen if an employer reimburses employees for the purchase of individual health insurance premiums on a tax-favored basis (referred to as an “employer payment plan”). For this purpose, individual health insurance premiums includes individual coverage purchased either inside or outside of the Health Insurance Marketplace. The FAQ follows up on earlier guidance describing these types of arrangements (Notice 2013-54).

Employer payment plans include arrangements that reimburse some or all of an employee’s individual health insurance premiums on a tax-free basis (including reimbursement through an HRA or a direct payment by the employer to an insurance company).

Under the Affordable Care Act (ACA), an employer payment plan is considered a group health plan subject to the market reforms. These reforms prohibit annual dollar limits for essential health benefits, as well as the requirement to provide certain preventative care without cost sharing. These arrangements cannot be integrated with individual policies to satisfy the ACA’s requirements. Consequently, employer payment plans will not satisfy the market reforms under the ACA and employers offering such a program may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee).

Typically, an employer payment plan does not include an arrangement in which:

  • an employee may have an after-tax amount applied toward health coverage, or
  • is allowed to take that amount in cash compensation.

But some have argued that there actually is a way to reimburse an employee’s individual health plan premiums on a pre-tax basis through a health reimbursement arrangement. From the New York Times[i]:

“The issue, at least on the surface, is language in the health law meant to make sure there are no dollar limits on the coverage for a person’s basic medical needs, which the law calls essential health benefits. The IRS asserts that a plan reimbursing employees for insurance they buy on their own cannot comply with this prohibition on annual limits because the company’s contribution is by definition limited — even though the health insurance the employee ends up buying would have no annual limits.”

The argument is that since the ACA does not specifically list insurance premiums as an “essential health benefit”, reimbursing for them does not violate the law. 

However, many experts and attorneys disagree and believe this approach is very risky. “In a technical guidance issued last year and reiterated in May, the Internal Revenue Service issued a clear warning about such health reimbursement arrangements, according to eight health and tax lawyers as well a half-dozen lobbyists and analysts who have followed the Affordable Care Act’s adoption. The guidance “makes it very difficult, if not impossible, for an employer to pay for an employee’s individual insurance with tax-free dollars,” said Seth Perretta, a health and tax lawyer with the Groom Law Group in Washington.i

Another issue of offering employees tax-free reimbursements for individual health insurance plans is that it could potentially disqualify employees from receiving premium tax credits in state or federal exchanges. The ACA states that employees who are offered health insurance coverage by their employers are not eligible to receive tax credits or subsidies in state or federal exchanges, even if their income is below the acceptable threshold. Since a health reimbursement arrangement (HRA) is considered a group health plan, many attorneys believe that employees who receive contributions into an HRA would be disqualified from receiving subsidies. Employees who receive a subsidy and fail to disclose the reimbursement from their employer (into the HRA) could be required to repay the subsidy at tax time. 

The Treasury Department stated that the government does plan to offer additional guidance on the topic, but final determination may ultimately be decided in the courts. For now, most industry experts and attorneys agree that reimbursing an employee on a tax-free basis for their individual insurance premiums is not permitted by the law.

For the FAQ, visit: http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements

For Notice 2013-54, visit: http://www.irs.gov/pub/irs-drop/n-13-54.pdf

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Sean Ireland (sean.ireland@usiaffinity.com) is the Senior Account Relations Manager of USI Affinity’s Benefit Solutions Group. For more information about insurance, visit the Philadelphia Bar Association Insurance Exchange at www.usiaffinityex.com/PhiladelphiaBar. For Lawyers’ Professional Liability and other business coverage, you can continue to visit  the regular Philadelphia Bar Association Insurance Program website at www.mybarinsurance.com/PhiladelphiaBar. If you’d like to speak with someone about insurance and benefits options for Philadelphia Bar Association members, call USI Affinity Benefit Specialists at 1-855-874-0267.

For over 75 years, the divisions of USI Affinity have developed, marketed and administered insurance and financial programs that offer affinity clients and their members unique advantages in coverage, price and service. As the endorsed broker of the Philadelphia Bar Association and more than 30 other state and local bar associations, and with more than 30,000 attorneys insured, USI Affinity has the experience and know-how to navigate the marketplace and design the most comprehensive and innovative insurance and benefits packages to fit a firm’s individual needs.



[i] http://www.nytimes.com/2014/06/05/business/smallbusiness/taking-a-chance-on-a-health-insurance-strategy-the-irs-may-not-approve.html


USI Announces Combination of Regional PA Group Employee Benefits Offices

August 17, 2010 Philadelphia, PA -  USI Holdings Corporation ("USI"), announced the combination of its USI Retail Group Employee Benefits with USI Affinity Benefit Solutions Group effective immediately.  Under the leadership of Paul Tyer, President and COO of USI Affinity, this newly united group will have well over $300 million in benefit plan premiums, 25 Benefit Consultants and a team of 35 account management, service and enrollment specialists. USI Affinity will now be one of the leading benefits brokers in the Pennsylvania/New Jersey/Delaware marketplace. 

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