Please check back soon for our newest White Paper - The Pillars of Financial Sustainability.
IRS Announces Cost-of-Living Adjustments for 2017
The Emerging Leadership Challenge
Since 1997, Executive Compensation Concepts, Ltd. has had a primary focus within the independent school community. We have discovered that the “changing of the guard” (e.g., Head of School/Headmaster) leads to difficult challenges in attracting and retaining highly performing Heads of School.
Many independent schools face a serious recruiting challenge as members of their leadership team depart for various reasons (i.e. retirement of the baby boomer generation, involuntary or voluntary termination of heads, etc.). A school’s ability to attract, grow, and retain the leadership talent required to be successful has become more difficult as the talent pool dwindles. The current applicant pool for new headships consist of two-thirds first-time Heads (“Rising Stars”) with limited operational experience and one-third sitting Heads with multiple years of experience. In addition, in a 2012-2013 Study, NAIS states that 72% of current Head's of School are between ages 50 to 69, which is quite a staggering statistic. As this trend continues, search committees will be looking at first time candidates for a headship that may or may not have practical, demonstrated skills on the operational side of school leadership, in addition to a strong educational background.
During this period, ECC has continually commented that succession planning “is not just an event; but a well-crafted process” which leads to a successful appointment of an in-coming Head of School.
Historically, search firms primarily assist the school’s search committee in locating viable candidates and orchestrate the steps in presenting each potential candidate to the committee on a favorable basis, aiding in the selection. What has been missing however that is most, if not all, search firms fail to offer any service in the design of the total all-in compensation package or in preparing the offer to be presented to the final candidates?
Executive Compensation Concepts, Ltd. (“ECC”) has been quietly joining forces with many independent school search committees in the past few years to assist in the final steps of the search process in crafting the terms for the financial and employment offer. ECC announces a new initiative for 2016 and beyond - Compensation Planning for the in-coming Head of School/Headmaster, which involves:
(i) Establishing the financial guidelines (“Compensation Policy Statement”) in regards to the offer;
(ii) Preparing a market analysis of comparable schools’ (size, type, operating revenue and expenses and experience as Head of School) Total All-In Compensation Packages;
(iii) Preparing a sample executive offer of the employment agreement’s key provisions to the final candidate;
(iv) Illustrating the cash flow of the Total All-In Compensation Package during the term of the employment agreement to highlight the magnitude of the overall offer; and
(v) Preparing a compliance letter to the school, required by IRC section 4958, that the offer is both competitive and reasonable.
For more information or a quote for our services, please contact us at 410-561-5157 or 410-215-3879.
ECC’s staff continually enhances the value-added experience for our clientele in order to provide the highest quality compliance services. ECC recently engaged well-known lawyers, specializing in non-profit administration and compliance under IRC 4958 Intermediate Sanctions and the Rebuttable Presumption Process, in order to review and update ECC’s compliance approach on behalf of boards of trustees (Head of School Comparability Study and Report) and the related compliance letter of reasonableness required under the Internal Revenue Code section 4958 regulations. With this in mind, the comparability compliance process and report, as well as the compliance letter of reasonableness, were updated. These enhancements consequently strengthened the previous guarantees under IRC Section 4958 – Intermediate Sanctions and the Rebuttable Presumption Process. Currently, our comparability process and compliance letter leave no room for error in determining whether the Head of School’s total compensation is both reasonable and in compliance with 4958 regulations. Based on these changes, ECC currently provides the strongest guarantee in the market. As a result, in the event of an Internal Revenue Service audit, our clients are not asked to demonstrate to the IRS they are in the right; rather the IRS is required to prove that the school’s comparability study, report and compliance letter are insufficient. ECC's process has never exposed any of our clients to an IRS audit!
Tax season generally approaches faster than expected leaving tax-exempt organizations scrambling to prepare the Schedule J for Highly Compensated Employees.
For tax-exempt organizations on a calendar year recording compensation is more straightforward. However, for those on a fiscal year the process is more complicated and is often prone to error (i.e. failure to record the appropriate total compensation components in the correct column). Reporting for a non-calendar year requires you to take parts from two different years and combine them to calculate the year-long compensation.
At ECC, we would like to make this process easier. Please contact us and for a nominal fee, we will provide you with a break down the filing components in a sample Form 990 - Schedule J. This will ensure that you are filing properly and allow for better transparency between you and the IRS. We will also provide you with a Power Point presentation that shows all of the elements in each category to aid you in future filing.
Each year in October, the IRS releases the Retirement Plan Contributions for the following year. Below, you will find the updated numbers for 2016, as well as the numbers from last year, 2015.
To schedule an appointment or find out more about the services we offer, contact Hugh Mallon directly at 410-215-3879 or our staff at 410-561-5157.
You may access our contact form with the button below.