Tax Exempt Entities | Overview

Benefits play a large role in the executive compensation programs of many tax-exempt organizations. Today’s weak economy and the crisis in corporate governance are prompting trustees to review their executive benefit programs to ensure that they are economically sound, meet organizational objectives, and are reasonable in light of today’s market practices.

Our role is to work with board leadership and senior executives in the design and documentation of the overall retirement benefit package. Our process begins with a thorough analysis of the existing retirement package looking at it from both a current perspective and also with reasonable compensation growth assumptions on a go forward basis to come up with a true expected retirement income replacement ratio. Once we have a clear understanding of current benefits provided we are able to complete internal and external peer analysis to determine appropriate replacement levels based on position and years of service.

All tax exempt organizations must follow both the newly issued 409A regulations that apply to all organizations for executive benefits and also the rules of code section 457, which were issued in 1996.

Additionally, if benefits are deemed to be excessive “intermediate sanctions” rules can come into play, which results in fines to both the executive and potentially board members as well.

Generally, once the plan design is determined the funding of the program is going to fall under either the traditional rules of 457(f) or Split Dollar insurance funding.