Non-Profit wanting to make ER Contribution

[Guest GinaD]

Hi,

I have a non-profit who is wanting to make an non-elective contribution however they are funded by a grant which restricts them from paying bonuses from the grant money. I do not believe Non-Elective contributions are considered bonuses since there is no "achievement of objectives" associated with the contribution as the below grant language indicates. I also believe that Non-Elective contributions are benefits to employees which helps with employee retention.

Does anybody have any good references that I can provide to the client so they can be more at peace with making the non-elective contributions? I have found the DOL's definition of a profit sharing plan and no where does it state bonus plan.

Grant's Exclusion of Executive Compensation

In setting or approving base compensation and benefits, the Board of Directors shall consider the market rate for the role and skill level of the individual to perform in the role as well as the notional projections included in the proposal submitted on behalf of Company A. Executive bonuses shall be awarded by Company A's management or the Board of Directors based on the achievement of objectives as set forth by management or the Board. However, no bonuses paid to Company A's executives will be funded from appropriated funds, but only from Program Income as defined by Circular A-110, e.g., membership fees to Company A.

[david rigby]

You might need a legal opinion from the attorney for the non-profit. Even if not needed, the N-P might want to get one anyway.

[Guest A_Dude]

Yes, I second getting a lawyers approval on this. Using a broad reading of benefits in the first part of the paragraph may grant you this ability. But, it would need the Board of Directors has to approve it.

On the other hand,typically as this is called a "Profit Sharing Contribution" you run into the trouble of it being a "bonus." If it's a non-for profit that is using grant money, and trying to give employees a special contribution do to getting the grant you may have TROUBLE!

Or skip the matter, and try to prove the funds is not grant money ie: get a good accountant