Hot Topics

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Hot Topics Hot Topics Compensation and Benefits for Not-for-Profit Entities  Incentive Compensation Regulatory and Reporting Considerations

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Hot topics in compensation and benefits Replay the webcast, Hot Topics in Compensation and Benefits for Not-for-Profit Entities, for a focus on latest developments and pressing concerns. Webcast insights originate in The Grant Thornton 2014 Nonprofit Compensation Survey, where you’ll find up-to-date critical compensation and benefits data, trends and insights to assist in your compensation and benefits planning. Find webcast info and read about the survey at www.grantthornton.com/comp-benefitssvy2014

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Incentive compensation question on Form 990, Schedule J Did 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 nonfixed compensation? Column (B)(iii) – Bonus and incentive compensation amount

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Incentive compensation issues addressed in prior proposed regulations Inurement concerns Excess 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 Not included in final regulations

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Acceptable incentive compensation in prior proposed regulations Portfolio manager receives 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 Intensifies"

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Grant Thornton perspective Florida Senate committee approved a measure to cap executive salaries at slightly less than $130,000 a year if a charity received more than two-thirds of its budget from the state The 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 paid to leaders of charities who earn most of their income from for-profit subsidiaries “New Era in Executive Compensation Intensifies"

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Don't limit the governance for compensation decision-making C-suite, key employees, disqualified persons, critical employees, etc. Governance

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Adopt formal compensation decision-making processes Compensation Philosophy, Incentive Plan Designs, "Intermediate Sanctions" Expectations Governance

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Knowledge based decision-making Director Training, Board Communication and Integration, Comparable Market Data, Comparable Market Development Governance

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Getting to the "root causes" of some "unique" issues and challenges for NFP's today Ties to W-2 Box 5 As "accrued" or "earned" & includes actuarial increases in DB plan Is this an "apples to apples" comparison across different organizations? Everyone ok with that? 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 rebuttable presumption of reasonableness Know who is a "disqualified person" at your organization Understand your organization's comparable market data (e.g., survey data, peer group) 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 Establish a formal compensation committee charter Adopt a formal compensation philosophy for your organization, and follow it Ask, Why? Have an independent compensation committee?

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Ken Cameron Director Compensation and Benefits Consulting practice National Not-for-Profit & Higher Education CBC Co-Practice Leader Atlanta, GA ken.cameron@us.gt.com +1 404 704 0136 Eddie Adkins Partner Washington National Tax Office Washington, DC eddie.adkins@us.gt.com +1 202 521 1565 Mike Monahan Assistant Managing Principal, New York/New England Territory CBC and PWS Tax Practices – Principal-in-Charge National Not-for-Profit & Higher Education CBC Co-Practice Leader New York, NY michael.monahan@us.gt.comhan@us.gt.com +1 212 542 9860 Learn more from our NFP leaders Contact information

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Interested in learning more? Play back the full webcast, Hot Topics in Compensation and Benefits for Not-for-Profit Entities Read the executive summary of The Grant Thornton 2014 Nonprofit Compensation Survey www.grantthornton.com/comp-benefitssvy2014