The New Nonprofit Pay Tax: Starting the Client Conversation

National Association of Plan Advisors [NAPA]

A recent law significantly expanded the Section 4960 excise tax on executive compensation at tax-exempt organizations. Beginning with tax years starting after December 31, 2025, the tax may apply to any employee earning more than $1 million, not just an organization's five highest-paid employees.

For advisors serving hospitals, universities, foundations, and large charities, this change creates an important client conversation. This session explains the new rules in plain English and highlights why retirement plan advisors should understand the role that qualified and nonqualified benefits can play in executive compensation strategies.

Using real-world case studies, we'll examine how employer contributions, cash balance plans, the medical-services exception for physicians, and deferred compensation timing can affect compensation subject to the tax. You'll leave better prepared to identify nonprofit clients who may be affected, ask the right questions, and engage the appropriate specialists when a deeper review is warranted.

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