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IRS Issues Training Tools for Completing New 990

In a very forward-thinking move, the IRS has issued a set of training materials for completing the new Form 990, including a case study and a series of videos. We applaud this initiative as there is no such thing as too much information when it comes to dealing with the new form. Recently, we did some research for a client on where to report particular items such as split dollar insurance and 457(f) plan contributions; in doing so, we discovered that even the very extensive matrix in the 990 instructions (see page 25) doesn't cover everything but we received excellent service from the group at the IRS responsible for the Form 990 instructions. The IRS indicated to us that the instructions are necessarily a work in progress and will be improved and enhanced over time based on user feedback.

Biggest hospitals in Mass. face labor suits - The Boston Globe

Biggest hospitals in Mass. face labor suits: The Boston Globe reported today that a Rochester, NY law firm says it has signed up about 500 hourly employees for a suit against 5 of Massachusetts' largest hospital chains, alleging that the workers, who are not paid for 30 minute lunch breaks, are being expected to work for at least part of those breaks. The article notes that despite the small amount of time involved on a per-employee per-day basis, the total unpaid compensations claims could be in the tens of millions.
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Are NonProfit Salaries Too High - or Too Low?

While the Massachusetts Attorney General is questioning the entire process by which nonprofit executive compensation is set under the IRS Intermediate Sanctions rules, Dan Pallotta, in his blog at Harvard Business Publishing, argues that there is a "culture of martyrdom" around nonprofit salaries that may work against getting the best talent, and calls for "open[ing] the gates of financial incentive" at nonprofits so that data can be obtained on how this would affect the "quality of talent" of nonprofit leadership and workers. Thought-provoking whether or not one agrees.

Massachusetts Attorney General Office Announces Major New Initiatives on NonProfit Healthcare Executive Compensation

The Massachusetts Attorney General's office has announced a very significant increase in its oversight of the compensation of executives and directors of healthcare organizations. Read the press release here and the full memo here. Among the important points are:

* The AG will move from annual "after the fact" data collection to "broader, more timely and proactive examination of executive compensation on an organization and industry-wide basis."

* Echoing concerns recently expressed by certain officials of the IRS (see our earlier posts on this subject), the AG suggests that the focus of the IRS Intermediate Sanctions rules on using "comparables" for setting executive compensation may lead to boards regularly setting their own organization's executives pay to be above average - i.e. what is "comparable" may not be "reasonable."

* The AG intends to institute new reporting requirements to create standardization in format, methodology and timing, to facilitate comparison among organizations and between hospitals and health insurance companies, with the goal of being able to analyze the healthcare industry in Massachusetts as a whole.

* The AG noted that 2 major organizations compensate their directors; and referring to Principles for Good Governance of charities issued by the Panel on the Nonprofit Sector, indicated that the AG would be looking into the rationale for this compensation.

The AG is starting its review with Blue Cross, Harvard Pilgrim, Fallon and Tufts, but clearly intends to expand its scope, and the new reporting requirements will apply accross the board. We'll keep you posted as the AG's office releases new information.

University Presidents' Housing in the Spotlight

We continue to remark on how press reports of nonprofit CEO compensation can focus on the sensational. Any prominent nonprofit should be prepared for at least local press coverage of its CEO's compensation when its 990 is filed. A recent variation is a story in the Boston Globe about the housing for Boston-area university presidents; the web version of the story comes complete with a slide show of the various houses and estimates of their market value. Lost in the fine print, or not covered at all, are some key issues: The university, not the President, owns the house, and while some money might be raised by selling the house, this is hardly the best market for that. Second, as the story acknowledges, the Presidents have significant social obligations best met in a home setting, not a conference room. And third, until the recent downturn in the housing market (which in some regions, including Boston, seems to have only a limited effect on the value of high-end houses), living in employer-provided housing could have some negative effects, because it meant the President was not participating in the run-up in real-esate prices, making it much harder to buy a new house when done with the presidency post.

Associations and Anti-Trust Perils

The FTC's action against a major trade association serves as a reminder of the perils of exchanges of information among members of associations. The FTC announced a consent order regarding the National Association of Music Merchants (NAMM) due to discussions of pricing policies that took place at NAMM meetings. In its announcement, the FTC noticed that associations "may find it appropriate to update and bolster their antitrust compliance practices and, in particular, ensure that any meetings at which sensitive discussions are discussed are properly planned and monitored." Since the FTC and the Justice Department have issued detailed guidelines about the conducting of salary surveys because of the potential for exchange of competitive information, the FTC's concerns about the exchange of pricing information at association meetings should apply equally strongly to compensation information.