Friday, March 30, 2012

Recology Ballot Measure

A measure is going to be on the June ballot which will decide if the City’s contract with Recology should be put out to bid. Recology has had the garbage contract with the City since 1932. By most accounts they have done a good job but there is a belief by the proponents of the measure that the City can do better and receive more revenues. I am curious what you think about this measure. How do you feel about Recology as a company. Do you know the arguments for and against this? Would there be an interest for people on this email tree to get information about this measure.

Scott Hauge


CAL Insurance and Associates, Inc.

2311 Taraval Street

San Francisco, CA 94116

Phone: (415) 680-2109

Fax: (415) 680-2137

License #0A32315

Thursday, March 29, 2012

Cyber Liability/Bill Zachry's comments

I know some of you will think I am sending too many emails about the risk to small businesses from a security breach but if only a few of you take steps to protect your business I will accept the criticism. Please see below an email I received from Bill Zachary VP of Risk Management for Safeway. He makes a great comment about looking at an insurance companies application for cyber liability coverage. Even if you are not interested in purchasing coverage this is as Bill says it's “an excellent template for small employers to explore their own exposure”

Thank you Bill for sending this.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116



I have a good friend who had a small business that used to do permanent disability evaluations. His company took data and medical reports from workers compensation claims administrators and did the analysis to determine the final workers compensation Permanent Disability rating. In December, some thieves broke into his offices and stole a couple of desk top computers and a laptop. I believe that information in the computers was backed up. However the information in the laptops includes social security numbers and other personal identifying information of injured workers. The lack of his financial ability to do the needed credit monitoring and the lack of crisis skills needed to respond to such a data breech, sunk his company. His reputation was severely damaged. He is now looking at personal bankruptcy.

I know that small businesses can not afford extra expenses. This economy has been a very difficult time for all small businesses. However if the small business owner does not look into this issue, it is a decision by omission rather than a decision made on facts. It is better for all business owners to make decisions based on rational facts than to assume they have no exposure or that cyber insurance is too costly for them. Many cyber insurance policies respond to a data breech with both financial and crisis management processes.

I would suggest the following:

When filling out an application for cyber insurance coverage, the information that is required for underwriting usually also provides an excellent template for small employers to explore their own exposure. The keys to exposure are cyber points of weakness and personal and financial information, (such as web usage, website management, social security numbers, bank numbers, addresses, birthdates, credit card numbers etc.) If the small business owner cannot eliminate or mitigate the points of weakness or all of the private or financial information from their internal systems, then they seriously have to consider what protection they can get from an insurance policy.

By going through the exercise of applying for the insurance, and knowing the cost of the insurance, the small business owner will then be able to make a conscious and informed decision of his/her exposure and the cost of insurance. Failure to act may result in the loss of their business and livelihood just as my friend who had his business wiped out through no real fault of his own.


Bill Zachry

VP Risk Management

Safeway Inc.

Wednesday, March 28, 2012

update! Cyber Liability

Yesterday I sent an email to all of you about cyber liability. Please see response I got from one person. I think they express the thinking of many of you. I want to address the insurance issues they raise. First most general liability policies do not cover cyber liability. Depending on the company they may by endorsement add coverage for first party[ you] and third part[ a claimant]. Very few companies provide this.

As far as Errors and Omissions cyber liability is usually not covered. There may be some exceptions to this if you area tech company where they wrap in this coverage Most of you of course do not have Errors and Omissions coverage. The writer does give some good recommendations on risk management practices you should consider.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116



I don't ususally weigh-in on the emails I read, but I just can't let this one go. Cyber Liability Insurance? Isn't it difficult enough for a small business to manage their cash flow. It sounds to me like another money-grab aimed at driving small business out of California.Doesn't your general liability insurance already cover these kinds of fraud or theft? I would imagine retail business pay a higher premium because of fraud risk. And what about those of us who carry E&O insurance? Existing insurance policies should already cover those things, shouldn't they?

As a accounting professional I have guidelines I have to follow in order to ensure my clients' sensitive information is protected. The labor board requires all personnel records be stored in locked cabinets. Or at least a locked room, and are not unattended.The merchant services regulartory boards require software which only display the last 4 digits of credit cards on receipts. Accounting programs like QuickBooks and MAS90 protect employee information by printing only the last 4 digits of the social security numbers.

You asked about processes and procedures for handling this kind of information:

I carry E&O insurance for myself and any employees I have. When working on a client file, all information stays in my office. When we are finished with a file it goes back in the locked cabinet.I would be out of business if my clients didn't think I was protecting their information.

Small retail outlets, should be aware that their merchant service provider must be compliant with the confidentiality regulations. They should also require their staff be bondable. While you can't predict the creditabity of some people, this would be a good first indicator of the reputation of the prospective employee. Background checks are also an available tool for hiring new employees.Having set procedures in place, like they do in the banks, would go along way to minimize the risk. When handling cash/credit or personal information, two people must be present. This removes the temptation for most people.

Not allowing sensitive company information to leave the office is another.

Not allowing employees to take that kind of work home are two rules which will help miminize the risk.

If we are talking specifically about the risk of computer theft, there are security levles that can be set for certain groups of employees. Those employees who have access to sensitive information, should be required to hold a bond.

It is up to the merchant providor or accounting professional to protect their clients.

It is up to the business owner to ensure they have taken the necessary steps.

If you are putting together a list of questions, here are a few you might want to consider passing on to small business owners.

Do you require staff to be bondable when working with money?

Do you conduct background checks on all employees who handle money, or sensitive information?

Is your merchant machine SSN compliant?

Do you have secure storage for your employee records?

Do you have a process in place for staff when handling money merhcant services or peronal documents.

Do you have the correct security setting on your software to protect your clients/employees?

Do you require password reset's every 90 days?

I enjoy receiving the emails you send, as they keep me informed.

Thank you for keeping us up to date.

Tuesday, March 27, 2012

Cyber Liability

Computers are integral to most of our businesses. While this allows us to do business more efficiently it also comes with unique risk. Hackers,worms,employee sabotage can literally shut down our businesses. We also have liabilities for private information getting out. This information includes social security numbers, credit card numbers, drivers license information and medical records that get released to the public.

I recently had a client who owns a restaurant where credit card information got released to the public. As a result Master Card is looking to collect $200000 in fines and he is also looking at numerous credit card holders bringing action against him. Visa has recently stated that 95% of the credit card thefts are from small businesses.

Do you have procedures in place to protect yourself from these mishaps? I am currently setting up a list of questions small businesses should be addressing to properly protect themselves. I should have this completed in the next week but if you have any thoughts on what are procedures small businesses should put in place please let me know.
You also might be interested to know that you can also purchase cyber liability insurance coverage. Talk to your insurance broker about this.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Thursday, March 22, 2012

Breaking News from Washington

Today the Senate passed with amendments HR3606. This is the bill that included the crowdfunding amendments I talked about in a previous email. This will significantly help small business raise capitol. The vote was 73 yes, 26 nay and 1 not voting. Senator Feinstein and Boxer both voted nay.

It now goes back to the House

Yesterday the vote continued the discussion of crowd funding but the provisions to extend 504 loans and the Ex IM bank were dropped. We need to get these two pieces of legislation passed.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Tuesday, March 20, 2012

SF Tax/ SF Made

I talked to Ben Rosenfield on Friday and he and Ted Egan would like to put together a meeting of small businesses that will be impacted by the discussions on the change of SF payroll tax to a gross receipts tax. Especially people who are not paying the payroll tax and those paying $25 for the license fee.

The proposed gross receipts tax would be for all businesses than have gross receipts of $250000 or more. If your payroll is less than $250000 you currently do not pay the payroll tax however your gross receipts could be $250000 or more so you would be impacted by this new proposal.

If you are currently paying $25 for the business registration your fee would increase to $150.

Those of you that are paying the payroll tax would be welcome to attend to discuss how these changes effect you.

If such a meeting were put together would you attend?

I recently joined an organization called SF Made. This is a dynamic organization run by Kate Sofis. Their Mission is to build a vibrant manufacturing sector in SF. They have over 300 members and they are doing some incredible things.

On Saturday I took a tour of 3 of three companies who are members. First Heath Ceramics who has taken over a building with about 60000 square feet. They are developing a new manufacturing, retail and showroom facility which will open this summer.

Second we visited Ohio Design studio, makers of innovative and modern furnishings. Third Southern Pacific Brewing SFs newest brewery.

We all know SF is an expensive place to do business but in spite of this there is tremendous opportunities for locally owned manufacturers.

I encourage all of you to take a look at SF Made website

Scott Hauge
CAL Insurance & Associates, Inc.
2311 Taraval Street
San Francisco, CA 94116-2253
(415) 680-2109
(415) 680-2137 fax

License #0A3231

"Always looking out for you."

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Employee Benefits and
Homeowners & Auto Insurance?

Workers Compensation/ Survey

I am giving a speech today on workers compensation today at 2. What are you seeing on your workers compensation renewals. My sense is that rates are going up and in some cases dramatically. What are you seeing.

Our survey is almost complete. We have about 1000 responses. Right now the top issues are:

Access and Cost of Health Insurance

Quality of Public Education

Regulation and Infrastructure are even

Awarding state contracts to small business

Access to Capital

Interestingly workers compensation came in 11th out of 12 issues stated. When we started the survey in 2005 it was at the top with health issue. I think over the next few years this is going to move back up

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Small Business Tax Credit

In the survey we are doing 75% of the over 1000 respondents did not know about this tax credit. Time is running short and this could mean a lot of money to eligible small businesses. See below

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Deadline Approaching to Claim Small Business Health Care Tax Credit

(March 7, 2012) As the March 15 corporate tax filing deadline approaches, the California Chamber of Commerce is reminding small businesses to take advantage of the small business health care tax credit. The tax credit is part of the federal 2010 Affordable Care Act.

California small businesses can review the Internal Revenue Service (IRS) guidelines to determine eligibility for the tax credit on the new business-oriented website,

The website offers a “tax credit calculator” that helps employers estimate savings available under the law.

About the Credit

The small business health care tax credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees. According to the IRS, small employers that pay at least half of the premium for employee health insurance coverage may be eligible for the small business health care tax credit. Small tax-exempt organizations also may qualify.

The IRS reports that since April 2010, it has sent millions of postcards to small employers to let them know about the new small business health care tax credit and encourage them to check their eligibility. Even a business that didn't receive a postcard still may be eligible.

The credit is worth up to 35% of a small business's premium costs (25% for tax-exempt employers). In 2014, this rate increases to 50% (35% for tax-exempt employers).


To qualify, an employer must have fewer than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible). A qualifying employer also must pay average annual wages below $50,000.

The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

To determine if they qualify, businesses may use this three-step fact sheet from the IRS. Eligible small employers will use Form 8941 to calculate the credit.

Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of

Monday, March 05, 2012

SB 1234 (De Leon-Steinberg) memo

You all received my email on the Retirement Benefit for Small Business employers and SB 1234.For those of you that responded I passed the comments on to the Senator. As a result he put together this outline per my request. This is your chance to affect public policy. Please review this and give me your comments. Also advise if you think Small Business California should support, oppose or take no position on this legislation.

Scott Hauge
Small Business California


TO: Members of Small Business California

FROM: Senator Kevin de León

RE: Retirement Benefit for Small Business Employees—

SB1234 (De Len-Steinberg) California Retirement Savings Plan

DATE: March 1, 2012

If you are like most small businesses I know these days, just making ends meet is a challenge. And you witness first-hand the financial struggles endured by many of your employees. Just making payroll is a challenge, much less either contemplating offering benefits of any kind or, if you do, keeping up with the premiums.

It is not likely you can or have taken the time to comprehend that there is a looming retirement savings catastrophe for your employees on the horizon that, if not dealt with, will mean more seniors in the workforce, fewer jobs for younger workers and an over-reliance on public assistance creating skyrocketing state debts that no amount of entitlement reform or cuts will cure.

I know that offering an employer-sponsored retirement benefit for your employees is very difficult right now. For those of you already benefiting as the economy begins a very slow recovery, the costs and burdens associated with establishing a retirement benefit for your employees can be overwhelming.

That is why I authored Senate Bill 1234 (SB1234), the California Retirement Savings Act. It allows your employees to set aside a very small portion of their income pre-tax into a safe, reliable and portable retirement savings plan so they can have something to supplement their social security when they are seniors. The alternative is frightening to consider.

The benefit to you is that this comes with little hassle nor would you have fiduciary responsibility. All that would be required is to assist employees by merely permitting them to use your payroll-deduction system to make their regular fund contributions. And if you happen to be one of the fortunate businesses seeing better times, you are welcome to make a contribution if you choose all without the hassle or costs of setting up an individual plan.

Another significant benefit of this plan is that it comes at no risk to taxpayers. Not only does California’s Constitution prohibit such liability (Art. XVI, Sec. 1), but the measure will explicitly insure that financial liability rests exclusively with the private sector underwriter that guarantees the conservative rate of return.

Following is a description of how this program would roll out over the next few years. I encourage you to read and learn more. If you have questions, please don’t hesitate to call my office.

Implementation of SB 1234 would be a multi-step, multi-year process:

(1) The Board initially conducts a market analysis to assess participation rates, contribution levels, and the feasibility of investment vehicles.

(2) Based on the market analysis, if the Board determines that the California Retirement Savings Plan would be self-sustaining, the Board notifies the Department of Finance that the program is viable and can move forward with implementation.

(3) The next step is developing the retirement investment products—the Board would contract with CalPERS/private vendor(s) to manage the fund, handle the day-to-day administration of the fund, and secure private underwriting to guarantee the rate of return.

(4) Once the Board opens the program for enrollment, participation would be phased-in for the employees of employers that do not offer an employer-sponsored plan (such as a 401(k)):

Within 3 months: employers with 100 or more employees;

Within 6 months: employers with 50 or more employees;

Within 9 months: employers with 5 or more employees;

Employees with less than 5 employees (and those self-employed) can voluntarily enroll into the program at any time.

(5) Employers would never be obligated to create their own retirement plan. If employers decide not to offer their own plan, their only obligation would be the ministerial duty of allowing their employees to use their payroll system for automatic deductions to the California Retirement Savings Plan. (Note: the mechanics of this piece are a work in

progress, we will be talking to EDD in the coming weeks to see if the department can facilitate the processing of employee contributions similar to other line-item deductions.)

(6) Employers would be able to make voluntary contributions on their employees’ behalf or match their employees’ contributions.

(7) Employers would retain the option at all times to set up a 401(k) or other type of retirement plan instead of allowing their employees to use their payroll system to access the California Retirement Savings Plan.

(8) Unlike an employer-sponsored plan, employers that make the plan available so their employees can enter into the California Retirement Savings Plan would not bear any fiduciary responsibility and there would be no burdensome reporting requirements.

(9) If an employer already offers or newly opens an employer-sponsored retirement plan, they can voluntarily participate in the California Retirement Savings Plan (as a supplement to their own plan).

(10) If an employee works for an employer that already offers an employer-sponsored plan, that employee can voluntarily open their own account with the California Retirement Savings Plan. However, the employer would not be obligated to allow that employee to utilize their payroll system for automatic deductions.