"Improving the financial strength of the organization's balance sheet and ensuring the long-term success."
Miser Wealth Partners, LLC, specializes in converting most organizations’ largest expenses (i.e., benefits and payroll) into income-producing assets and locking down their most talented executives. In many cases, we are successful in reducing excise tax exposure and impacting positive morale among top-tier talent. Once the CFO becomes aware of our techniques, he or she will immediately see how our team is improving the financial strength of their organization’s balance sheet and ensuring its long-term success.
Why should nonprofit organizations with executive(s) earning in excess of $1 million annually call us?
Most nonprofit organizations with employee executives earning more than $1million annually or have excess parachute payments apart of their employment agreements could be affected by new tax regulations that were included in the Tax Cuts and Jobs Act (TCJA) of 2017. TCJA adds a new Section 4960 to the IRC to impose an excise tax equal to 21% (the current corporate income tax rate) of the sum of any remuneration paid by applicable tax-exempt organization for a taxable year with respect to employment of any covered employee in excess of $1 million, plus any excess parachute payments paid by such organization to any covered employee. The excise tax applies as a result of an excess parachute payment, even if the covered employee’s remuneration does not exceed $1 million.
We have designed a solution that can mitigate this new excise tax for these organizations. By clicking this link, one of our top experts in your area will meet with you and walk you through how to mitigate this new tax and significantly reduce your future executive retention expenses.
Why should Power Five conference athletic department CFOs or significant donors call us?
In today’s competitive college sports environment, coaches have become the highest paid employees in their respective states. Compensation packages have become more lucrative despite the new tax imposed by the TCJA in 2017. Why is this, and what does it mean for donors who fund many of these athletic programs?
First and foremost, we have found that change isn’t easy for many of these administrations when it comes to mitigating this new tax. The first million of remunerations are exempt, and the 21% then applies to any excess. Therefore, for every million dollars of excess remunerations paid to an executive or coach, the institution is responsible for paying the IRS 21% (or roughly $210,000) for every $1 million of remunerations paid to the five top highest-paid executives or coaches.
For example, consider a coach who’s earning $11 million annually. The first million of remunerations is exempt from the tax, but the next $10 million is taxed at 21%. In this case, the institution (not the coach) is responsible to pay an additional $2.1 million to the IRS. This means the actual cost to have that coach or executive leading their athletic program is actually $13.1 million not $11 million annually.
Miser Wealth Partners has discovered a proven means to mitigate the majority of this new excise tax on behalf of these organizations. If you’re a donor or staff at one of these schools, we’d be happy to discuss how we can help. Simply click here to schedule a call with our experts on this subject.
Derek Miser was interviewed on the WNML 99.1 “The Sports Animal” with Jimmy Hyams regarding this subject. Click here to read the article.
What should I consider when determining non-qualified executive benefits?
When considering non-qualified executive benefits to offer executives, it’s important to tailor the benefits to align with the organization’s goals and the needs of the executives. Here are some commonly offered non-qualified executive benefits along with their pros and cons:
Deferred Compensation Plans
| Pros | Cons |
|---|---|
| Provides executives with the ability to defer a portion of their salary and bonuses to a later date, typically retirement. | Requires careful plan design and compliance with IRS Code Section 409A to avoid tax penalties. |
| Offers tax advantages as contributions to the plan that are not taxed until withdrawal. | The deferred compensation may not be accessible to the executive until retirement, termination, or specified triggering events. |
| Designed to include employer-matching contributions or performance-based incentives. | In the event of bankruptcy or financial instability of the organization, the executive may face risks associated with the plan’s funding and payout. |
| Can help retain and incentivize executives by providing a substantial long-term payout. | Supplemental Executive Retirement Plans (SERPs) |
Supplemental Executive Retirement Plans (SERPs)
| Pros | Cons |
|---|---|
| Offers additional retirement benefits beyond what is provided by qualified retirement plans. | Funding the SERP may involve a financial burden on the organization, requiring careful consideration of cash flow and long-term financial stability. |
| Allows for customization in benefit design, such as fixed payments, percentage of final compensation, or indexed to inflation. | In the case of organizational bankruptcy or financial distress, the executive’s SERP benefits may be at risk. |
| Provides flexibility in eligibility and vesting criteria. | SERPs may be subject to additional scrutiny and regulation, especially for tax-exempt organizations. |
| Can enhance recruitment and retention efforts by providing an attractive retirement package. |
Executive Life Insurance
| Pros | Cons |
|---|---|
| Premium costs can be substantial, particularly for older executives or those with health issues. | Premium costs can be substantial, particularly for older executives or those with health issues. |
| May face tax implications depending on the structure and funding of the policy. | May face tax implications depending on the structure and funding of the policy. |
| Cash value accumulation may be subject to market risks and policy performance. | Cash value accumulation may be subject to market risks and policy performance. |
Executive Perquisites
| Pros | Cons |
|---|---|
| Perquisites, or “perks,” can include benefits like company cars, club memberships, personal use of company aircraft, or executive health services. | Perks can be expensive and may not directly align with the organization’s goals or shareholder interests. |
| Enhances executive compensation packages and can be attractive for recruitment and retention. | They may be subject to increased scrutiny from shareholders, proxy advisory firms, and regulatory bodies. |
| Provide convenience and lifestyle benefits for executives. | If not properly structured, perquisites can create tax and reporting issues. |
It’s important to note that the pros and cons of these benefits can vary depending on factors such as the organization’s financial situation, the executive’s specific needs, and the legal and regulatory environment. Therefore, it’s advisable to consult with legal, tax, and financial professionals to ensure the chosen benefits align with the organization’s objectives and comply with applicable laws and regulations.
How can I get help with executive compensation in East Tennessee?
Just give Miser Wealth Partners a call today at (865) 281-1616 or click here to schedule a time to talk with us. Our financial experts will help every step of the way.
