The Stonewall Inn Gives Back Initiative, based in Manhattan, extends the legacy of the historic Stonewall Inn by supporting LGBTQIA+ communities nationwide. Led by CEO Stacy Lentz, the organization tirelessly promotes social justice and equality through advocacy and support programs.
Like many non-profits, the Initiative struggles to balance competitive compensation with IRS regulations on "reasonable" compensation to maintain tax-exempt status. This balancing act is crucial for small non-profits, where losing key personnel can significantly impact operations and mission delivery.
Stacy and her team needed a solution that provided adequate health benefits without inflating compensation figures. Failing to offer competitive benefits risked losing valuable team members to higher-paying private sector jobs, while overcompensation could jeopardize the organization's financial health and compliance.
The Initiative’s journey to resolve this issue highlights the broader challenges faced by non-profits and demonstrates a solution that ensures both compliance and the well-being of its leadership.
Balancing Compensation and Benefits: The Stonewall Inn Gives Back Initiative's Challenge
Balancing compensation and benefits was a significant hurdle for Stacy Lentz and her team at the Stonewall Inn Gives Back Initiative. As CEO, Stacy needed to keep her salary and benefits within IRS "reasonable" limits while offering a competitive package to attract and retain talent essential to the non-profit's mission.
The lack of comprehensive employee benefits meant Stacy had to bear the escalating costs of individual health insurance. This financial strain was a personal challenge and a risk to the organization. Excessive financial stress could lead to her departure, disrupting the Initiative's progress and stability.
Without competitive benefits, the organization risked losing critical team members to higher-paying private sector jobs, where comprehensive benefits are standard. Replacing these employees would be costly, potentially 1.5 to 2 times their salary, and could set back the non-profit's mission.
The challenge was twofold: providing essential health benefits without inflating total compensation figures and retaining critical talent without compromising financial health or IRS compliance. Addressing this challenge was crucial for sustaining the non-profit’s operations and continuing its impactful work in supporting LGBTQIA+ communities.
The Search for a Solution
Facing the challenge of providing health benefits while complying with IRS regulations, Stacy Lentz sought a viable solution. She needed an option that supported her needs and fit the financial and regulatory constraints of the Stonewall Inn Gives Back Initiative.
Stacy first considered healthcare stipends, which offer simplicity but count as taxable income, increasing total compensation and potentially jeopardizing IRS compliance. Next, she explored group health plans, but their high costs and administrative complexity made them impractical for a small non-profit.
Determined to find a suitable solution, Stacy discovered Health Reimbursement Arrangements (HRAs). HRAs allow employers to reimburse employees for health insurance premiums and medical expenses tax-free, without adding to total compensation. This tax-advantaged nature made HRAs ideal for the Initiative.
Impressed by their simplicity and flexibility, Stacy saw that HRAs were financially manageable and administratively straightforward. With an HRA, the non-profit could budget for healthcare reimbursements, helping Stacy and her team cover their healthcare costs without affecting total compensation.
Convinced that HRAs were the right choice, Stacy prepared to present this solution to the board.
Implementing the HRA Solution
Stacy Lentz prepared to present the HRA solution to the board of the Stonewall Inn Gives Back Initiative, illustrating how it could address compensation challenges while complying with IRS regulations.
Presentation to the Board
During the board meeting, Stacy outlined the drawbacks of other health benefit options, highlighting the financial strain of individual health insurance and the impracticality of healthcare stipends and group health plans. She introduced the HRA as a cost-effective, compliant, and flexible solution.
Stacy explained that an HRA allows tax-free reimbursements for individual health insurance premiums and qualified medical expenses without adding to taxable income or total compensation figures. This ensures compliance with IRS guidelines for "reasonable" compensation, crucial for maintaining the non-profit’s tax-exempt status.
How the HRA Works
Stacy detailed the mechanics of the HRA, emphasizing its simplicity and ease of administration. The non-profit would set a budget for the HRA, which employees could use for reimbursements. This straightforward process requires minimal administrative effort.
The tax-advantaged nature of HRAs means reimbursements do not count as taxable income, providing significant benefits to employees without affecting the non-profit's compensation structure. This allows employees like Stacy to cover healthcare costs without exceeding IRS compensation limits.
Compliance with IRS Guidelines
Stacy reassured the board that the HRA was in compliance with IRS regulations. By keeping reimbursements tax-free and separate from total compensation calculations, the HRA avoids "excessive" compensation pitfalls, protecting the non-profit’s tax-exempt status and aligning with its financial and ethical obligations.
The board unanimously approved its implementation because of Stacy’s thorough research and the HRA's clear advantages.
Approval and Implementation
With board approval, the Stonewall Inn Gives Back Initiative swiftly implemented the HRA, setting up the reimbursement system and informing employees about the process. The HRA's simplicity allowed the non-profit to provide this benefit efficiently.
The HRA's implementation marked a turning point for Stacy and her team. They now had access to essential health benefits without inflating compensation figures, alleviating financial stress for Stacy and reinforcing the non-profit’s ability to attract and retain talent, ensuring continued progress toward supporting LGBTQIA+ communities.
The successful implementation of the HRA demonstrated that with the right approach, non-profits could effectively navigate the complexities of compensation and benefits, maintaining compliance and staff well-being.
Results and Impact
Implementing the HRA provided immediate and long-term benefits to Stacy Lentz and the Stonewall Inn Gives Back Initiative, effectively resolving their compensation and benefits challenges.
Immediate Benefits
The HRA offered immediate financial relief for Stacy, reimbursing her for individual health insurance premiums and medical expenses tax-free. This eased her financial burden, enabling her to focus on her leadership role without healthcare cost concerns. The reimbursement process was simple and efficient, providing peace of mind and financial stability.
Balancing Compensation
The HRA allowed the non-profit to offer valuable health benefits without inflating compensation figures. Since HRA reimbursements do not count towards total compensation, the Initiative remained compliant with IRS guidelines, essential for maintaining its tax-exempt status and effectively supporting staff.
Retaining Talent
The Stonewall Inn Gives Back Initiative's ability to offer comprehensive health benefits without increasing compensation gave it a competitive edge in retaining critical team members. Tax-free reimbursements for health expenses motivated staff to stay, enhancing job satisfaction and commitment to the mission.
Long-term Benefits
In the long term, the HRA established a sustainable and compliant benefits solution, reinforcing the organization's financial stability and positioning it as an attractive employer in the non-profit sector. The HRA's administrative ease allowed leadership to focus more on their core mission and less on benefits administration, efficiently advancing the organization's goals.
Enhanced Mission Focus
With reduced financial and administrative burdens, Stacy and her team could concentrate more on advocacy and support programs for LGBTQIA+ communities. Improved staff morale and retention fostered a cohesive and dedicated team, driving the Initiative’s mission forward with renewed vigor.
Successful Transition to HRA
The successful implementation of the HRA at the Stonewall Inn Gives Back Initiative highlights the transformative potential of innovative benefits solutions in the non-profit sector. By providing a tax-advantaged, compliant, and efficient way to manage health expenses, the HRA improved financial well-being and strengthened the organization’s ability to attract and retain talent. This balanced approach to compensation and benefits has ensured the continued success and stability of the Stonewall Inn Gives Back Initiative, enabling them to focus on supporting and advocating for LGBTQIA+ communities.
Key Takeaways
How to Roll Out Generous Benefits Without "Overcompensating" per the IRS
Consider implementing a Health Reimbursement Arrangement (HRA) to provide generous benefits without overstepping IRS guidelines. HRAs allow non-profits to offer tax-free reimbursements for health insurance premiums and medical expenses without increasing total compensation figures. This approach helps maintain compliance with IRS regulations while supporting employee well-being.
How to Pitch an HRA to Your Board
When presenting an HRA to your board, emphasize its cost-effectiveness, simplicity, and compliance with IRS guidelines. Highlight the financial relief it offers employees and the administrative ease of managing reimbursements. Use examples of successful implementations, like the Stonewall Inn Gives Back Initiative, to illustrate the benefits and reassure the board of its viability.
How to Assess if an HRA is Right for Your Non-Profit
To determine if an HRA suits your non-profit, evaluate your organization's size, budget, and healthcare needs. HRAs are particularly beneficial for small to mid-sized non-profits seeking a flexible and compliant benefits solution. Consider the administrative capacity to manage reimbursements and ensure the HRA aligns with your overall compensation strategy.
