Mandatory Employer Notice for Health Care – Upcoming Deadline

While most small nonprofit organizations (less than 50 employees) are not required to offer health care coverage to employees under the Patient Protection and Affordable Health Care Act (“the Act”) all employers are required to comply with the Act’s notice requirements.  The deadline is October 1, 2013 – right around the corner! 

Nonprofit organizations may satisfy the Act’s notice requirements simply by distributing one of the two model notices on the United States Department of Labor’s website.  One version is for employers who do not offer any health care plan, and the second version is for employers who offer a health care plan to some or all employees.

Notices must be provided to all current employees, as well as to all later hired employees.  Failure to comply with the notice requirement could result in fines as much as $100 per employee, per day of noncompliance. 

“Reasonable Compensation”: Lessons From IRS’ 2013 College and University Report

Last week, the IRS released its final 37-page compensation report (“Report”), based on its five-year compliance review of 400 randomly selected colleges and universities.   The Report reflects the IRS’ increasing willingness to scrutinize public charities, particularly their comparability data used to set executive compensation.  Consequently, even though colleges and hospitals generally represent the largest and most complex of tax-exempt organizations under IRC Section 501(c)(3), the legal compliance concerns raised are worth a careful review by all tax-exempt public charities with employees.

IRC Section 4958 requires public charities to pay no more than reasonable compensation to their officers, directors, trustees, and key employees.  In the event an organization provides unreasonable compensation, significant excise taxes can be imposed on the recipients of the compensation and potentially on the board members and others who approved it.

What is reasonable or unreasonable compensation? Section 4958 provides a “safe harbor” margin for organizations that follow a three-step process: