The New Form 990 Executive Compensation

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The New Form 990Executive Compensation
What the IRS Wants to Know
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Executive Compensation Overview

• Tax exempt organizations must not pay employees
  more than reasonable compensation for their
  services.
• IRS and some members of Congress are particularly
  interested in levels of compensation paid to
  exempt hospital executives.

The New Form 990, Executive Compensation
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Executive Compensation Overview(cont.)

• Senator Charles Grassley the top Republican on
  the Senate
• Finance Committee has expressed concern with
  the amounts
• paid to non profit hospital executives and
  whether hospitals
• boards are taking full responsibility for
  approving them.
• In addition, paying reasonable compensation is
  consistent with
• the core Catholic values of responsible
  stewardship and treating
• employees fairly and justly.

The New Form 990, Executive Compensation
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Executive Compensation Overview(cont.)

• An organization can qualify for a rebuttable
  presumption of reasonableness if, when setting
  executive compensation, there is
• Approval of the compensation by independent
  persons
• Review of appropriate comparability data and
• Preparation of contemporaneous documentation,
  such as minutes, that reflect the deliberations
  and decisions made regarding the compensation
  setting.

The New Form 990, Executive Compensation
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New Form 990 and Executive Compensation

• The IRS is now requiring increased disclosure
  about
• compensation levels and processes.
• Changes from the previous Form 990 include
• - Broader group of persons covered
• - Expanded types of compensation covered
• - More detailed questions about compensation
  setting practices
• - Specific questions about the types of perks
  provided

The New Form 990, Executive Compensation
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New Form 990 and Executive Compensation (cont.)

• All exempt organizations must answer
  compensation questions
• on the Core Form, Part VII.
• In addition, if one or more persons listed on
  the Core Form
• received compensation in excess of 150,000,
  the organization
• must complete Schedule J.

The New Form 990, Executive Compensation
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990 Core Form, Part VII

• Must disclose compensation provided to
• Current and former officers, trustees, key
  employees, and 5 highest compensated employees
  who received more than 100,000
• Former trustees who received more than 10,000
  for serving as trustees
• Five highest compensated independent contractors

The New Form 990, Executive Compensation
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990 Core Form, Part VII (cont.)

• New definition of key employee
• - Had reportable compensation exceeding 150,000
  for the calendar
• year, and
• Had or shared responsibilities over the entire
  organization or
• over at least 10 of the organizations
  activities and
• Was one of the 20 employees with the highest
  reportable
• compensation for the calendar year.

The New Form 990, Executive Compensation
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Schedule J Supplemental Compensation Information

• Applies to every officer, director, trustee,
  key employee
• (including former), and top 5 highest
  compensated
• employees with reportable income above 150,000
  or
• reportable plus non-reportable above 250,000.
• Requires full compensation disclosure with
  breakdown by
• type of compensation.
• Requires disclosure of perks such as
  first-class travel, companion travel, tax
  indemnification and gross-ups, discretionary
  spending, housing allowance or personal
  residence, business use of personal residence,
  health or social club dues, personal services.

The New Form 990, Executive Compensation
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Schedule J Supplemental Compensation
Information (cont.)

• Must disclose whether reimbursement of expenses
• subject to written policy and substantiation.
• Must identify CEO compensation review process,
• including whether a compensation consultant was
  used
• to determine comparables.
• Must state whether there are change in control
• payments, severance payments, SERPs,
  equity-based
• compensation, etc.
• Must disclose whether any person on Schedule J
  was
• paid compensation based on net earnings or
  revenues of
• the organization or related organizations.

The New Form 990, Executive Compensation
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Suggestions for Boards Regarding Executive
Compensation

• Review your executive compensation-setting
  processes for consistency with the rebuttable
  presumption requirements, core Catholic values
  and Part I of the Ethical and Religious
  Directives.
• Determine whether the organization has
  appropriate policies on compensation,
  perquisites, and reimbursement of expenses.
• Determine whether there may be compensation
  issues that should be clarified/explained further
  on the Form 990.
• Confirm that your organization has prepared
  responses to inquiries from media and others
  regarding executive compensation.

The New Form 990, Executive Compensation
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Additional Resources
http//www.irs.gov/charities http//www.irs.gov/c
harities/article/0,,id206636,00.html http//www.
990forhospitals.org/
The New Form 990, Executive Compensation
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Thank You!
The New Form 990, Executive Compensation