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© 2014 Grant Thornton LLP. All rights reserved.
Hot Topics Hot Topics
Compensation and Benefits for
Not-for-Profit Entities
IncentiveCompensation
Regulatory and Reporting Considerations
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Hot topics in compensation and benefits
Replay the Hot Topics in Compensation and Benefits for Not-for-Profit Entities webcast for a focus on latest developments and pressing concerns.
Read The Grant Thornton 2014 Nonprofit Compensation Survey, for up-to-date, critical compensation and benefits data, trends and insights to assist in your planning.
Find webcast and survey info at www.grantthornton.com/comp-benefitssvy2014
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Incentive compensation question on Form 990, Schedule JDid the organization provide incentive compensation:
– Based on the revenues or net earnings of the organization and any related organization?
Did the organization provide any other type of non-fixed compensation?
Column (B)(iii) – Bonus and incentive compensation amount
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Incentive compensation issuesAddressed in prior proposed regulationsNot included in final regulations
Inurement concernsExcess benefit transaction can occur even if amount is reasonable
‒ Occurs if disqualified person can receive additional compensation without providing proportional benefits that contribute to the organization's accomplishment of its exempt purpose
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Acceptable incentive compensation in prior proposed regulationsPortfolio manager receives a bonus equal to percentage of increase in portfolio value
Faculty member receives a percentage of royalties received by university for his/her invention
Examples
Learn more about compensation incentives from
our NFP leaders.
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Grant Thornton perspectives on governance
New era in executive compensation
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Florida Senate committee approved a measure to cap executive salaries at slightly less than $130,000 a year if a charity received more than 2/3 of its budget from the state
New Hampshire attorney general publically criticizes high salaries earned by hospital executives and has meetings scheduled to “encourage a new approach to compensation”
Illinois announces plans to introduce a measure that would make it easier to spot high salaries for leaders of charities who earn most of their income from for-profit subsidiaries
Examples
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Don't limit the governance for compensation decision-makingC-suite, key employees, disqualified persons, critical employees, etc.
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Adopt formal compensation decision-making processesCompensation philosophy, incentive plan designs, “intermediate sanctions” expectations
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Knowledge based decision-makingDirector training, board communication and integration, comparable market data, comparable market development
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Getting to root causes of unique issues and challenges
Intended UnintendedIncreased transparency for stakeholders Heightened competition for executive talent
Mine-able regulatory compliance data Internal retention issues for key leadership positions
Increased data on governance practicesIncreased demand for new compensation designs
Expose perceived misuse of IRC provisions Increase fixed costs of employment
Ties to W-2 Box 5
As “accrued” or “earned” and includes actuarial increases in DB plan
Is this an “apples to apples” comparison
across different organizations?
Everyone ok with that?
Name Title BaseSalary Bonus Other
CompensationDeferred
CompensationNon-taxable
benefitsTotal
CompensationPreviously reported
CEO
"Key EeTitle"
Compensation reporting…more information for more people
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Compensation governance
Best practices, trends and insights
Learn more about compensation governance for NFP leaders
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Meet with all key employees and report that you meet the requirements
Know who is a “disqualified person”Understand your comparable market data (survey, peer group, etc.)
Rebuttable presumption of reasonableness
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Consider an HR committee with broader responsibility for benefit program requirements:
– Robust conflict of interest policy for all members of the compensation committee
– A formal compensation committee charter– A formal compensation philosophy – Ask questions
Independent compensation committee
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Ken CameronDirectorCompensation and Benefits Consulting practiceNational Not-for-Profit & Higher Education CBC Co-Practice [email protected]
Eddie AdkinsPartnerWashington National Tax [email protected]
Mike MonahanAssistant Managing Principal, New York/New England TerritoryCBC and PWS Tax Practices – Principal-in-ChargeNational Not-for-Profit & Higher Education CBC Co-Practice [email protected]
Contact Information Learn more from our
NFP leaders
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Interested in learning more?
Play back the Hot Topics in Compensation and Benefits for Not-for-Profit Entities webcast
Read The Grant Thornton 2014 Nonprofit Compensation Survey executive summarywww.grantthornton.com/comp-benefitssvy2014
Visit www.grantthornton.com/nfp for further information and thought leadership
