In addition to reviewing compensation for competitiveness, it is critical for health care organizations to take the necessary steps to ensure compliance with the Taxpayer Bill of Rights 2.
Retroactively, effective as of Sept. 14, 1996, the Taxpayer Bill of Rights 2 substantially increased the power of the Internal Revenue Service (IRS) to penalize tax-exempt organizations, directors and disqualified persons [definition of disqualified persons below] that do not comply with tax laws regarding excess benefit, private inurement and compensation.
Taxpayer Bill of Rights 2 authorizes the IRS to apply intermediate sanctions to any excess benefit transaction.
Intermediate sanctions include taxes and penalties on individuals receiving the excess benefits and on anyone who knowingly approves any excess benefit transaction.
- An excess benefit transaction arises when a tax-exempt organization provides an economic benefit to a "disqualified person" if the value of the benefit provided exceeds the value of the consideration the tax-exempt organization receives in return.
- A "disqualified person" is any person who is (or was in the preceding five years) in a position to exercise substantial influence over the affairs of the organization ("Disqualified persons" are likely to include directors, trustees, top management and key physicians without any management status.)
Independent, External Review
The Executive Committee engaged a third-party compensation expert, Sullivan, Cotter and Associates of Chicago to review all compensation programs as they apply to senior executives throughout UnityPoint Health. Sullivan, Cotter and Associates studies hospital and health system executive positions throughout the nation and issues an annual executive compensation report in Modern Healthcare magazine.
All aspects of compensation and benefits were reviewed including, but not limited to, the following:
- Base salaries
- Business allowance
- Short-term and long-term incentive compensation plans, including review of eligible participants, opportunity levels, performance indicators and award history
- Benefit plans, including both quantitative and qualitative analysis
- Benefits offered to the executive group
- Severance plans or polices as they apply to the positions in the study
- Other benefits, including Social Security, health, life and disability insurance
In accordance with UnityPoint Health's compensation philosophy, executive base salaries for good performance are provided at the 50th percentile of the market. This information is verified annually by Sullivan, Cotter and Associates, an independent executive compensation consultant.