Every year millions of dollars are withheld from employees’ salaries for their retirement. And employers are required to deposit the employee’s salary deferral contributions to the retirement plan’s trust account “as soon as administratively possible”.

 

As Soon as Administratively Possible

 

“As soon as administratively possible” means what it says. An employer that has a history of remitting employee contributions 2-3 days after payroll, is expected to be able to meet the same transmission time for all employee contributions.

 

There can be several reasons that there is a delay in depositing the funds into the retirement plan trust account; staff shortages, vacations, clerical oversight to name a few. But as in many industries there are always a few bad apples such as employers that use employee contributions for business purposes. Employers justify to themselves that it is only a loan but employees lose earnings from interest and dividends as well as market value increases on their investments if contributions are not timely deposited.

 

“Lending of money or other extension of credit between a plan and a disqualified person” is considered a Prohibited Transaction. The IRS defines a disqualified person as a person who is an “employer any of whose employees are covered by the plan” or “an employee organization any of whose members are covered by the plan.”

 

Failure To Make Timely Deposits

 

What happens if an employer intentionally or inadvertently fails to timely deposit the employee contributions?

 

Internal Revenue Code Section 4975 imposes a 15% excise tax of the amount involved. If the transaction is not corrected within the taxable period, there is an additional tax of 100% of the amount involved. Excise taxes are paid using Form 5330 Return of Excise Taxes Related to Employee Benefit Plans.

 

The Form 5330 instructions define the “amount involved” as “the greater of the amount of money and fair market value of the property given or money and fair market value of the property received.” This is generally the amount of earnings lost for failure to timely deposit the contribution. More later on calculation of amount involved or lost earnings.

 

The taxable period is the period of time beginning with the date of the prohibited transaction and ending on the date the correction is completed. Each prohibited transaction has its own separate taxable period. Meaning that a prohibited transaction not fully corrected in one tax year will incur an additional and separate prohibited transaction the following tax year.

 

Amount Involved

 

The amount involved is based on interest in the elective deferrals. Interest rates are determined using the IRS published underpayment rate for each quarter of the taxable period. The taxable period may extend over several quarters and interest rates may vary. Interest on See IRC 6621 Table of Underpayment Rate, for each quarter. Interest on lost earnings must also be compounded for every quarter if the prohibited transaction is not corrected.

 

The IRS has a voluntary Fiduciary Correction Program (VFCP) online calculator that can assist in the calculation of the lost earnings. However, it does not constitute correction under the VFCP.

 

If any Principal Amount, such as the employee contributions that was not deposited, was used for a specific purpose that generated a profit, you must “Calculate Restoration of Profit”. The VFCP Online calculator will compare such profit to the interest calculation and if it exceeds the Lost Earnings and interest calculation, the Restoration of Profit must be used for the correction.

 

When is the Prohibited Transaction fully corrected?

 

To correct the prohibited transaction, the disqualified person must “undo the transaction without putting the plan in worse financial position than if the transaction never occurred”, such as depositing the employee contributions into the plan as soon as possible. However, the transaction is not fully corrected until not only the employee contributions are deposited but any lost earnings are also deposited into the Plan’s trust.

 

Paying the excise taxes

 

The disqualified person must file Form 5330 and complete Section C, Tax on prohibited Transaction, and pay a 15% excise tax on the amount involved.

 

The Excise taxes will be assessed for every tax year (or partial tax year) when the prohibited transaction is not fully corrected. Additional interest on the lost earnings will be subject to the 15% excise tax as well.

 

Tax on Prohibited Transactions should be reported by the last day of the 7^th month following the end of the tax year for the employer.

 

The Internal Revenue Service (“IRS”) recognizes that when it comes to money there will always be a bit of corruption and such behavior should be discouraged. 

 

Amy Boyd, CPA, CEBS

Why should I use an outsourced IT provider? Many businesses may ask if they should hire an outsourced IT provider to manage their company's information technology. The answer is simple, to save time and money by hiring an expert to manage day to day operations and prevent problems. There are more details in how that actually applies to a business.

 

This is especially true for the legal cannabis industry, which has unique challenges and hefty regulations for growers, distributors, and dispensaries in the cannabis industry. Federal and State regulations requires very specific data to be kept in these operations and failure to mange that data may result in fines or even closures of a business, not to mention insurance rates.

 

We recently spoke with Steve Arndt, President of Cannabis Technology Partners, a Division of Silver Lining's Technology, and Greg Shenefelt, Help Desk Coordinator at Cannabis Technology Partners about why it would make sense for a company to engage an IT Services Provider, especially one in the legal cannabis industry. Below is part of the interview we conducted with them.

 

Why Should I Hire an IT Service Provider?

 

There's a lot of great reasons to use an outsource provider. Number one, it just lets you focus on all the things that you need to do to make your business successful without having to worry about IT day-to-day meltdowns or tasks, even when you do have a deep-vested knowledge in IT practices.

 

One could ask the question, why would you hire an outsource payroll provider or an outsource accounting provider. In either one of those cases, you're doing it number one to buy yourself time, but also, you're trying to hire an expert that can do it a lot faster and in theory, a lot cheaper than in-house. Again, time is money, so faster definitely helps. You want somebody that's there reacting to internet outages and things that are going to affect operations right away. So, having somebody on the hook that's taking care of those problems right away when who knows what you're doing, that's gold.

 

You should hire an outsource firm because these individuals are going to have specialized tools and expertise that you don't have access to in-house. And it's also really nice to know, hey, I have this critical thing happening, and there's somebody on the other end that's already responded to it. We've got the providers involved. We're getting the service restored, which, again, like Steve said, time is money, and that brings your money maker right back up.

 

I've done IT consulting for years and years and years. But what I've found great systems is really for an effective IT department, you need to have four different skill sets in play. A single person doesn't have the capacity to do and handle all of the things that an IT department itself needs to do. When you talk about doing it in-house or you have an IT background, chances are you're doing a chunk of that stuff. There's probably a whole bunch of stuff that you're not doing, maybe compliance, maybe security, who knows, applications, that a team, and especially an outsource team where you've got predictable costs, can handle for you, and quite frankly, supplement. It's not negative that you know how to do it. It's actually a much better team environment.

But I Am Knowledgeable in Information Technology, Why Outsource?

I've run across is just in whatever area you're in is you may have somebody as an expert, but it still doesn't mean you have all the time dedicated to it. Do you find a lot of companies that just don't have the bandwidth to be able to do this, and this helps offset some of those?

A lot of times, you don't know what you don't know. With a good, outsourced IT provider, they're going to fill the gaps and help educate you along the way. The minute you go through a couple of those iterations, you go, Gee, oh, my gosh, of course, I should have done that before.

 

Are All IT Service Providers the Same?

 

I definitely don't think all are the same. Part of it has to do with where did they come from, what's their orientation? A lot of what's called MSPs or IT service providers, grew out of the idea that there was a strong technical person, and they didn't like working for anybody else. So, they start their own company.

 

That’s great but they're very narrowly focused on the tech itself. Other firms, for instance, like ours, for instance have a more comprehensive approach. I have a background in CIO, and you think, Well, CIO is tech. No, it's really business. How does business work? And what do you do with the tech to operate effectively in business and at cost? Those themselves are two different, vastly different perspectives. And quite frankly, there are a number of others. Really, not all firms are the same.

 

You need to look for one that aligns with gaps that you have so that they can supplement those. Obviously, pricing is all across the board, so you need to really understand what the pricing is.

 

Pricing Differences:

 

It may seem like one company is more expensive than another, but perhaps they're offering security and compliance and other things on top of it or 24 by 7 support versus another one that you're getting bare bones, right? And you don't really know until something goes outside of those bounds and you have to pay more for it.

 

Some companies are only focused on the tech, and then they forget about the service aspect here, helping you alleviate pressures that you're feeling in your day-to-day environment or just keeping you ahead of those things. It's great to go to bed at night and not worry, hey, is my email secure or my PC is safe? And to have somebody just, again, get on the phone and have that human one-on-one connection and conversation with and it is not so tech driven.

 

Pro-Active Firms vs. Reactive Firms:

 

There are a lot of firms that are reactive for you, but most businesses, don't you want somebody that's proactive? Don't you want people that are preventing the security flaws from coming in rather than just reacting to them? You have got to do both. I get it, but there's a lot to be said for having a proactive firm as your partner.

 

How Does IT Management Affect the Legal Cannabis Industry?

 

There have been many folks that have posited the cannabis industry as the most regulated industry, even compared to drug companies and such or hospitals and things like that. From my experience, I've seen that. You've got, not even tobacco, you have to track the product, the tobacco product from when it comes out of the ground all the way through to when it's produced as a cigar or a cigarette, alcohol, the same thing. But with cannabis, we've got to track the product all the way through. You're regulated to do that. But not only that, every state's regulations are slightly different. You've got to not just know the general. You have to know Very specific, where are you operating? Every single one of the states mandates some surveillance of the product. So not only do you have to track it in terms of data points and what happens, you also have to show visual proof of what took place with the product itself all the way through your organization. Those two things are huge. And quite frankly, those are the two things that get Most of the cannabis organizations in trouble. I mean, in business, you can get in trouble for a lot of things.

 

From a technological perspective, you got to nail both data points and visual proof. Surveillance is the perfect example where the surveillance industry, as it's been for the last 20 years, really hasn't been positioned well to do that. The traditional surveillance provider is a reseller of equipment, an installer, and then they walk away, hands off, it's done. They also don't typically think of the network as a whole. I mean, yeah, their devices sit on the network, but if it's the network's fault, again, they throw up their hands. Having a full service provider that understands that and isn't just going to, well, I'm sorry, that's not our thing, but literally take ownership of the technology all the way through to this idea of making sure you're fully compliant and responding correctly when there's an outage or something else, that's a huge thing in cannabis and a requirement. Most people don't get that they get burned by fines or theft or something else. It's not a good lesson.

 

When we chose to start a Cannabis IT Services Company, again, it goes back to the strategic side and the big picture side of things, the business things. I love that and figuring that stuff out, but I'm also always about taking ownership. Number one, I don't expect our clients to love, like, or be good at technology. If they were, again, it goes back to the first question, why should you hire us? Well, yeah, I think there's valid reasons, but most of them, these aren't the strengths, and quite frankly, not their focus as well. For us to know what the compliance requirements are and to provide that information, again, that's value to our clients to understand the full life cycle. Cannabis is fascinating, even more so than alcohol and some other stuff, because quite frankly, now with infusion, in manufacturing. I mean, cannabis is in everything, and not just edibles and consumables, but health products. You've got rubs and you've got other things that the product is used for. It's like an ingredient like sugar, which ends up in everything all over. Only now you have to track it. You have to know where it's at, and every state's different

 

Final Thoughts:

 

Any business relationship where you're involving a partner, and again, legal, accounting, IT, whatever it is, construction, I think you want to look for a person or a team that owns the issue and is accountable to the issue, that doesn't shy away and start making excuses about this thing or the other. I want people that are responsible and accountable that work for me, whether they're internal, external vendors or anything like that, and that's going to help you be successful.

 

Man Thanks to Steve Arndt, and Greg Shenefelt for their information.

You can reach them at Cannabis Technology Partners - https://cannabistechnologypartners.com/

 

You can also hear the entire interview on the Podcast : Small Business Talks Podcast

Collagen Native Type 2 Manufacturing

If you have been following us, we recently posted on the Made in America Blog and highlighted why buying products that are made in America today is a smart choice.  Today we would like to highlight the background of SBEDGE® Supplement’s Collagen Native Type 2 and lay out our experience and qualifications.

History

 Sioux Biochemical started in 1995 with the isolation of proteins and hormones for research.  This included ovine, bovine and porcine Follicle Stimulating hormone (FSH), Luteinizing Hormone (LH), Growth Hormone (GH), Adrenocorticotropic Hormone (ACTH), Prolactin (Luteotropic Hormone), and Thyroid Stimulating hormone (TSH).

This also included enzymes and research proteins such as Gonadotropin Releasing Hormone (GnRH), Human Chorionic Gonadotropin (hCG), Pregnant Mare Serum Gonadotropin (PMSG; eCG), Secretin and chogcrystokinin, Trypsin, and Chymotrypsin. 

 Additionally, we have…

·         Developed a process for the extraction and purification of Chondroitin Sulfate (CS) from bovine trachea.  This led to the creation of a secondary sister company called Sioux Pharm which was dedicated to the production of CS.

·         Worked with several clients on the development of extraction of proteins from GMO crops, such as Corn and Rice.  The companies we worked with created a GMO crop with a protein of interest inserted into the genetics of the crop.  The protein(s) were difficult to attain from other methods.  Extraction, purification and stabilizing of the proteins were often required.

·         Developed a process for the manufacture of Biodiesel from sources such as corn oil and other agricultural/plant sources.  This project lasted for 3 years until the sourcing of feed stock became too competitive to continue, but Sioux Bio was considered to have some of the highest quality Bio Diesel available.

Finally, and most recently Sioux Bio has worked on the isolation of an undenatured type 2 collagen from bovine source for the supplement market that it branded under SBEDGE® Supplements name.

Process

Our process starts with raw bovine material that comes 100% from USDA-inspected facilities right here in the United States.  Then our gentle extraction process allows our collagen to retain the characteristics of the Full Molecule in its natural form.  This is important since it becomes bio-active in nature allowing your body to process it naturally, which then triggers other important biological processes in your body.

You can learn more about Dr. Kramer and SBEDGE® Supplements and its Collagen product by visiting their website.  And don’t forget to check out their 90-Day Collagen Challenge.

Many thanks to Dane the Hibma, Plant Engineer at SB EDGE, with over 7 years of experience in Collagen manufacturing.

Inspecting Your Industrial Equipment

A couple of weeks ago, Amanda Clark noticed that a service crew had installed new racking in our warehouse. At first, I was a little confused by this. What's wrong with our current racking? Why did we need to get new racking? Did something happen that I didn't know about? After asking these questions, I found out that we were just upgrading our racking system. But if it isn't broken....why would we need to fix it?

In this day and age, it is a good idea to inspect all of your current equipment, even if it “visually appears to be ok” and consider fixing or replacing it with new equipment. The cost of inspecting or having everything checked is nominal compared to have the equipment break or fail completely. Not just the cost of replacement but the related costs of employee injuries or damage to your building or products is far more expensive that  taking time to see if there is a need to fix and replace.

Everyone’s workplace is different and so equipment is subjected to a variety of environments that can accelerate the life expectancy of equipment. It can also become outdated because newer technology or materials may have made such an improvement the replacement will pay for itself. But you will never know until you check.

We came up with three solid reasons why you should consider this.

 

Safety

Just because equipment looks safe on the outside, it doesn’t mean it’s actually safe to use! Racking in particular often gets dinged up by fork trucks and other equipment. This can really affect the structural integrity of the racking system.

You never want to put your employees in a position where they can get injured. So doing racking inspections and having preventative maintenance performed on doors and truck and loading dock equipment is a must!

Efficiency

Newer racking systems and truck and loading dock equipment are built to be more efficient for the end user. One of the reasons we replaced our racking system in our warehouse was because the loading and unloading from the rack was more efficient than the previous racking system. Efficiency leads to happier employees and higher productivity.

Productivity

It's simple. New equipment that is easier to use will increase your productivity and thus, your profits.

Good and sound advise! Many thanks to Amanda Clark, Marketing Manager, Barron Equipment Company

website: www.barroneq.com

Pack Phase – Judge, Jury and Executioner?

 

Background

You may have heard the old phrase where someone was described as being the “judge, jury and executioner.” Its definition per Wikipedia:

1.    (idiomatic) Someone with the roles of judge, jury and executioner;
someone with full power to judge and punish others unilaterally.

This phrase is used to describe one person or entity as being completely in control over another’s fate – a sole body yielding the power and authority to determine another’s outcome. In injection molding, the PACK portion of plastic injection is often overlooked, but it has the power to control so much – typically more than is often realized.

It has been decades since the injection molding industry underwent a significant and very positive growth in machine and process capabilities. Anymore, at a minimum, two injection stages should be used when molding properly. This 2-stage filling of the mold begins using a constant and typically fast fill rate (FILL) followed by the remainder of fill being completed under constant pressure for a period of time – the very definition of the V►P (velocity to pressure) transfer on your injection molding machines (IMM). Processing this way is called by many names with the most popular being referred to as scientific injection molding or decoupled molding.

Under 2-stage molding, this stage of injection, aside from being called 2^nd stage, is commonly referred to as HOLD, PACK, or PACK and HOLD. Even though multiple things are being accomplished, this PACK and HOLD stage is typically a shared set of machine parameters. After V►P, the 2^nd stage begins with the final filling of the mold cavity and then the pressurization (or compression) of plastic into the mold cavity – these two things equal the PACK only portion of 2^nd stage injection. Next, and without any machine setpoint transition, the true HOLD phase begins. HOLD maintains this 2^nd stage plastic pressure setting to help compensate for some of the plastic shrinkage that occurs from the molten plastic solidifying and cooling in the cavity. This continues for a set period of time until the gate has solidified at which point the screw may then be programmed to rotate to prepare the next shot of plastic. It is important to note that as a single setpoint, the 2^nd stage pressure is only set to what gives the best balance for many items – filling the part without flashing, yielding the best dimensional results, and more.

3-Stage Injection for Immediate Improvements

Flash, short shots, and dimensional repeatability are some of the most common injection molded part quality issues regularly faced by an injection molder and mold maker. From the tooling side, flash can be the result of poor tooling condition, design and construction (i.e., where flash is present even when intentionally molding a short shot); however, the machine process settings play a very important role with regards to flash as well. So how can we better control our process to help improve upon these everyday issues?

PACK is arguably the most critical stage in an injection molding process, yet it is often combined and “along for the ride” with the HOLD stage. As it would be under any 2-stage injection process, PACK and HOLD are set as one occurring after the V►P transfer. With constant pressure (P) being the control for any injection occurring after this transfer, it is performed with far less control what any injection occurring under constant velocity (V) prior to transfer.

Creating a 3-stage injection process from a 2-stage one means separating PACK into its own stage allowing for the three separate stages (FILL, PACK and HOLD) to each have their own distinct and individually optimized machine settings. The PACK stage now accurately performs the final filling of the mold cavity and establishes the amount of plastic to be compressed into the cavity through a slower, more controlled 2^nd injection stage. With PACK moved prior to V►P, its speed (V) and positioning are able to be managed properly. The third stage, HOLD, is now alone after V►P – after the critical quality concerns have been established and managed in process. HOLD is now only a set pressure (P) for a set period of time starting very near to where the final screw forward position will be (i.e., the cushion) doing its job to help maintain the degree of PACK until gate freeze is reached. When implemented properly, significant improvements to scrap, quality, and overall manufacturing efficiencies will be realized throughout your operation.

What’s the Catch?

This change does require another level of processing competency, but it is a much easier jump than making the leap to using in-cavity pressure sensors for control and monitoring of your processes using expensive RJG or Kistler types of technologies. And this change is relatively free. We are heavily invested in the use of in-cavity sensors at Matrix; their merits are well-proven for the high-precision tight-tolerance products we make, but please know you can still make large gains by only investing in the training of your people. This is a “no-brainer” ROI if ever there was one in injection molding, since no large capital expenditure is required.

Matrix received an older, worn transfer mold that had always used a 2-stage injection process. We elected to have this mold serve as our test subject – an imperfect mold to serve as an example to clearly illustrate the differences between 2-stage injection and 3-stage injection. Our experiment on this worn 8-cavity electrical connector mold was performed in our oldest – but still quite capable – 120-ton injection molding machine. I asked our lead process engineer to establish his best 2-stage injection process; as an experienced, degreed plastics engineer who excelled at processing, he set a fundamentally sound process for this tool. We saved shots for evaluation. His process was then adjusted only to separate PACK from HOLD – optimizing each one individually – all of which took between 5-10 minutes. Shots from this 3-stage advanced injection molding process were also saved for evaluation.

Results

The results in our example showed significant improvements from the 3-stage injection process in every measured category. Critical dimensions between circuits in the X and Y directions as well as part flatness were improved by 50%. A limiting factor was that this part had worn steel resulting in excessive flash in the mold’s non-critical void coring areas, something we later rectified in tooling for our customer. As-is, however, parts from the improved process with the highly controlled PACK phase exhibited a flash reduction of nearly 50%. Part weight increased by 0.5%, a significant increase for a thin-walled connector part already exhibiting excessive flash. The increased control allowed for improved pack resulting in a heavier part than before. The denser part shrunk less, and therefore warped less, providing greater dimensional accuracy and stability. Process monitoring over time would have showed the 3-stage process to have less variability and therefore more consistent part quality as well.

Often overlooked, this real-world example shows how the PACK portion of injection holds so much importance and relevance to the quality of molded parts. PACK has the ability to significantly affect the molded product’s outcome with regards to flash, dimensional accuracy and repeatability, and more. Moving forward, this ideological change may be the low hanging fruit that provides immediate and relatively pain-free improvements to your metrics while reducing unnecessary waste in your operation. Your machines are capable, and it isn’t quite the leap you may think it is to implement. I’ve been establishing all processes in this manner for nearly 30 years, and I have yet to find a reason to not start with a 3-stage process and make adjustments from there. Why settle when better is free for the taking and best is a slight process change away?

 

Tom Moyak

Director of Business and Engineering Development

Matrix Tool, Inc.

4976 Franklin Road

Fairview, PA 16415

USA

www.matrixtoolinc.com

814-474-5531

 

About The Author: Tom Moyak is a plastics professional with over 30 years of diverse engineering and manufacturing experience who takes pride in achieving significant increases in quality, efficiency, and profitability through the development of innovative tooling and molding solutions rooted in fundamentals.