A copy of the Total Compensation Considerations for Nonprofits presentation given at the CBIZ MHM Annual Business Update Seminar in Bethesda, MD.

1. Total Compensation
Considerations for Nonprofits
Presented by
Zack Pace, SVP, CBIZ Benefits Consulting
Email: zpace@cbiz.com | Phone: (443) 259-3240
linkedin.com/in/zackpace
Priya Kapila, Compensation Consultant
CBIZ Human Capital Services
Email: pkapila@cbiz.com | Phone: (314) 692-2249
linkedin.com/in/priyakapila

2. Historic Total Compensation Outlook,
Nonprofits vs. For Profits:
 NONPROFIT STAFF:
Cash compensation is lower, while benefits
compensation is higher
 NONPROFIT EXECUTIVES:
Compensation and benefits are lower
2

3. What’s Changing?
 Nonprofits are increasingly competing with for profits
for talent
 The delta between cash compensation for similarly
situated employees at nonprofits and for profits has
narrowed
 The benefits compensation delta is also narrowing,
spurred on by competition and the Affordable Care Act
3

4. Increased Employee Mobility
 Employees and executives are moving between
nonprofits and for profits at an increasing rate
– Economic Influences
• Staff: non-profits became an alternative when for profits weren’t hiring
• Execs: non-profits have started “thinking like a business”
– Generational Influences
• Staff: younger workers are inherently more transient and desire to do
meaningful work – differs from prior generations
• Execs: baby boomers who’ve fared well are looking to give back or transition to
a valued cause
4
 This development puts upward pressure on
nonprofit wages

5. Nonprofit Cash Compensation Trends
 Average nonprofit
salaries remain below
for profit salaries
among staff positions
 There are also
notable pay
differences
depending on
nonprofit organization
type
5
Accountant
Median DC Metro Salary
$63,300
$61,100
$56,700
$54,600
$51,300
Source: ASAE Association Compensation & Benefits Survey, PRM Consulting Group Management Compensation
Report for Not-For-Profit Organizations, Total Compensation Not For Profit Compensation Survey
Associations
Foundations
Health Care
Education
Social Services

6. Nonprofit Cash Compensation Trends
 Today, relevant labor markets should be defined more
broadly than in the past
 Key considerations when determining labor markets:
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– Location
o Local
o Regional
o National
– Industry
o NTEE Code
o Broad Spectrum of
Employers
– Size
o Revenue/Operating
Budget
o Number of
Employees

7. Nonprofit Executive Compensation Trends
 IRS Compliance
– Effective in 1996, rules finalized in 2002 and clarified in 2008
under IRS regulations starting at 26 CFR 53.4958
– Non-profit organizations must pay “Fair Market Value” to
disqualified persons
– Fair market value is the price agreed to by a willing buyer and
a willing seller, assuming neither is under any compulsion to
act
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8. Nonprofit Executive Compensation Trends
8
Factors Decreasing
Compensation
Factors Increasing
Compensation
• Regulatory scrutiny
(federal and state)
• Public outcry
• For-profit executives moving
into tax-exempt world
• Transparency ("me too"
effect)
• Inclusion of for profit data in
comparisons

9. Nonprofit Executive Compensation Trends
 Base salary convergence
 Nonprofit total compensation continues to lag
– Annual incentives are increasingly prevalent (>50%), but often
have significantly smaller payouts
– Deferred compensation and long-term incentive programs remain
less common and yield smaller payouts
9
CEO/Executive Director – Average Annual Incentive/Bonus
Nonprofits For Profits
10.0% 40.0%
Source: Economic Research Institute, WorldatWork Incentive Pay Practices Survey:
Non-Profit/Government Organizations

10. Benefit Benchmarks, 50 or more employees
Average Monthly Health Plan Premiums
For profit,
incorporated
Nonprofit Difference
Single $ 448 $ 530 18%
Family $ 1,325 $ 1,491 13%
Average Monthly Employee Contributions
For profit,
incorporated
Nonprofit Difference
Single $ 101 $ 95 -6%
Family $ 361 $ 404 12%
10
Source: Agency for Healthcare Research and Quality, Center for Financing, Access and Cost
Trends, 2013 Medical Expenditure Panel Survey – Insurance Component

11. Benefit Benchmarks, 50 or more employees
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Source: Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends,
2013 Medical Expenditure Panel Survey – Insurance Component
Average Deductibles
(of Plans Offering Deductibles)
For profit,
incorporated
Nonprofit Difference
Single $ 1,168 $ 1,082 -7%
Family $ 2,326 $ 1,969 -15%

12. High Deductible Health Plans (HDHPs)
 27% of employers and 22% of nonprofits offer
HDHPs1, 2
 20% of covered workers and 11% of nonprofits
workers are enrolled in a HDHP1, 3
 While DC area nonprofit HDHP adoption growth has
lagged, cost increases and the ACA impact is
increasing demand
12
1. Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2014
2. Grant Thornton Nonprofit Compensation Survey
3. 2014 ERI Benefits in Nonprofit Organizations Survey

13. HDHP Introduction Best Practices
 Keep your Traditional Plan
 Use a Defined Contribution approach, AKA a “Buy-up”
Example:
 In lieu of making employer contributions to a Health
Savings Account, increase the Defined Contribution 13
Employer Contribution
HDHP Single $450
HDHP Family $1,500
Platinum Single $450
Platinum Family $1,500

14. Affordable Care Act Impact
 Eligibility provisions improve at for profits
– For profits lowered eligibility waiting period to First of the
Month Following 60 days in 2014
– Most for profits will reduce hours requirement down to 30
hours in 2015
 Employee contributions for single coverage will fall at
certain for profits to meet ACA affordability
requirements. 9.5% of FPL Safe Harbor is about $92
per month, for example.
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15. Retirement Benefits
 86% of for profits & 90% of nonprofit organizations offer a defined
contribution retirement plan
 19% of for profits & 10% of nonprofits provide a defined benefit
plan. Many are frozen.
 The average 401(k) match remains 50% to 6%
 On average, nonprofit employers contribute 4% of base salary to
retirement plans
 Nonprofits are more likely than for profits to make a nonelective
contribution
15
Sources: PLANSPONSOR 2014 Industry Reports, PRM Consulting Group Management Compensation
Report for Not-For-Profit Organizations, Total Compensation Not For Profit Compensation Survey

16. Executive Benefits
 Deferred compensation plans have become increasingly
common for nonprofit executives
– More than half of nonprofit organizations provide a qualified plan
– Approximately 10% provide a non-qualified plan
 Qualified deferred compensation plans allow for
enhanced retirement contributions and the same limits as
those of 401(k) and 403(b) plans
 A non-qualified deferred compensation plan provides
greater flexibility for deferred amounts, but requires
“substantial risk of forfeiture” for deferred taxation
16Source: ASAE Association Compensation & Benefits Survey, Grant Thornton Nonprofit Compensation Survey

17. Executive Benefits
 Other Considerations
– Life & Long Term Disability Insurance
– Charitable Gift Annuity
– Severance
– Post-retirement Consulting
– Perquisites
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18. Plan of Action
1. Benchmark your benefit programs
2. Benchmark your salary levels and executive pay
3. Evaluate how much your organization is competing
against for profits for talent
4. Make any prudent adjustments
5. Develop a 3-year evergreen plan
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19. You may also be interested in the
Retirement Plans for Nonprofits
by Mike Kasecamp
Retirement Consultant, CBIZ Retirement Services