For non-profit hospital and health system executives, Form 990s are a great tool to offer transparency to their communities.
Form 990s also give detailed information about executive pay, and according to an article from Integrated Healthcare Strategies, hospitals need to be prepared to handle all inquiries from the Internal Revenue Service if executive compensation appears to be too high.
Executive compensation typically elicits surprise most often when CEOs and others report large retirement benefits. The article mentions there are three things hospitals can do to protect their executives from having the IRS challenge compensation figures.
1. Include a detailed explanation on Schedule J, Part III of Form 990s. In this area of the Form 990, hospitals should explain why compensation figures are what they are. For example, a supplemental executive retirement plan may have just vested, but an explanation to say it was earned "over many years of service" can provide more perspective, according to the article.
2. Ensure the compensation committee records all information. Within compensation committee meeting minutes, all compensation amounts and rationales should be outlined.
3. Ask your compensation consultant to write a brief letter. The consultants who help hospitals set executive pay must be part of the process to explain why all figures are reasonable.
Form 990s also give detailed information about executive pay, and according to an article from Integrated Healthcare Strategies, hospitals need to be prepared to handle all inquiries from the Internal Revenue Service if executive compensation appears to be too high.
Executive compensation typically elicits surprise most often when CEOs and others report large retirement benefits. The article mentions there are three things hospitals can do to protect their executives from having the IRS challenge compensation figures.
1. Include a detailed explanation on Schedule J, Part III of Form 990s. In this area of the Form 990, hospitals should explain why compensation figures are what they are. For example, a supplemental executive retirement plan may have just vested, but an explanation to say it was earned "over many years of service" can provide more perspective, according to the article.
2. Ensure the compensation committee records all information. Within compensation committee meeting minutes, all compensation amounts and rationales should be outlined.
3. Ask your compensation consultant to write a brief letter. The consultants who help hospitals set executive pay must be part of the process to explain why all figures are reasonable.
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