NFP Advisor PEO. Legal Update. Affordable Care Act. Imagine Awards. Medicaid Incentive Program

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1 NFP Advisor vol 8 Cerini & Associates, Certified Public Accountants, bringing a unique understanding of key issues facing not-for-profit organizations. PEO Legal Update Affordable Care Act Imagine Awards Copyright 2013 by All rights reserved. Please request permission to reprint or copy any part of The NFP Advisor. Medicaid Incentive Program - NFP Advisor 1

2 A Word from the Editor, Ken Cerini Welcome to another issue of the NFP Advisor, a newsletter that we have been producing for 20 years now. Much has occurred in the nonprofit sector over that time, but it seems that the level of recent change has been tremendous: Executive order 38, which went into effect July 1, 2013, has put certain limits on executive compensation and administrative costs. Two new bills have passed the NY State Legislature: the Nonprofit Revitalization Act and the Executive Compensation Reform Act (see article on page 5). The Healthcare Reform Act effective date was postponed until January 2014, however, it will still have a significant impact on the sector (see article on page 6). The Office of the Medicaid Inspector General (OMIG) was somewhat quiet last year, which resulted in an audit by the Office of the State Comptroller ( OSC ). Expect a significant level of activity from the OMIG and other government auditors (i.e. OSC) as well as funders. Donor attitude has changed, whereby donors are becoming increasingly concerned with impact, outcomes, and return on investment. Social entrepreneurism is beginning to pick up traction in the nonprofit sector. There has been an increase in combinations/mergers in the nonprofit sector Veterans Memorial Hwy Bohemia, N.Y Nonprofits need to keep abreast of these and other changes. We will do our best to keep you informed. Also, let us know of any issues you are grappling with. We want to be a resource. Finally, the application for the 2014 Imagine Awards is now available. We would like to thank our 2014 platinum sponsors to date; Nixon Peabody, Capital One, and Pilot Benefits Group. The application is available on line at ceriniandassociates.com/imagine-awards. Remember, this is a unique program. Show-off your innovation, your impact, and your entrepreneurial spirit as these attributes will get you to the judges. We look forward to hearing from you and working with you. Contributors Editor Ken Cerini, CPA, CFP, DABFA Managing Partner Associate Editors Chris Scheben Marketing Coordinator 2 - NFP Advisor Writers John R. Klimchak, CFP Economic Evaluation Group, Inc. Marni Ehrlich TechLeaders Consulting LLC Senior Partner Ken Cerini, CPA, CFP, DABFA Managing Partner Chris Scheben Marketing Coordinator Jacob Lutz Staff Accountant Page Layout & Design April St. Angelo Marketing Assistant

3 P ROFESSIONAL E MPLOYER O RGANIZATION By John R. Klimchak ith the increasing costs of doing business, health insurance premiums spiking, increases in workers compensation premiums, and uncertainty regarding compliance with the Affordable Health Care Act, it may be time for your organization to think about working with a Professional Employer Organization (PEO). There are currently more than 700 PEOs operating in the United States, covering 2-3 million workers. PEOs provide services such as: payroll, tax deposits, state disability benefits, workers compensation insurance, health insurance, employment practice s liability insurance, and compliance management, all under one umbrella. Partnering with a PEO often enables employers to purchase products and services at more aggressive pricing than they could on their own, while shifting employer related liabilities to the PEO. By outsourcing non-revenue generating tasks, nonprofit organizations have been able to focus solely on carrying out their mission without the worry of staying compliant. PEO s differentiate in terms of pricing, insurance plan offerings, technology portal capabilities, reporting capabilities, customer service support, and HR infrastructure. When shopping around for a PEO it s important to ask a number of questions, such as: In light of new compliance rules brought forth by the Affordable Care Act, it can be beneficial for organizations to allow a PEO to secure workers compensation insurance and health insurance coverage. PEOs are capable of gaining coverage at a lower cost than client companies can obtain them on an individual basis. A PEO is able to obtain coverage for its clients by negotiating insurance coverage that covers not just the PEO, but also the client companies. This negotiation is allowed because the PEO is legally considered the co-employer of the workers at the client organizations. Use of a PEO saves time and staff that would be used to prepare payroll and administer benefits plans. Furthermore, they can reduce legal liabilities and obligations to employees that an organization would otherwise have. Utilizing a PEO enables certain client organizations to offer a better overall package of benefits, allowing it to attract more skilled and experienced employees. This is a huge advantage for small to mid-sized organizations that wouldn t normally be able to afford offering the employee benefits packages of larger organizations. These are just some questions that you should be asking. If you are unsure about PEO s, there are brokers that specialize in this area that can help you navigate through the world of PEOs, determine if the PEO route is the best fit for your organization, and help you choose which one is the best option for a long-term solution. - NFP Advisor 3

4 LEGAL UPDATE 4 - NFP Advisor

5 n the past few months, New York nonprofit law has seen its largest overhaul since Pushed heavily by New York Attorney General Eric Schneiderman, The Nonprofit Revitalization Act and the Executive Compensation Reform Act bring major reform to the statutory requirements for governance of nonprofit organizations both not-for-profit corporations and wholly charitable trusts. The bills expand the Attorney General s enforcement powers and modernize and clarify some of the more mechanical New York rules applicable to nonprofit organizations. Furthermore, the bills provide foresight into regulators increasingly high expectations for nonprofit governance and are likely a harbinger of things to come both in New York and elsewhere across the country. The Nonprofit Revitalization Act is the longer of the two bills and calls for the greatest level of reform. Some changes are straightforward and focus on simplifying compliance. For instance, organizations are finally allowed to send notices and consents required under the New York Notfor-Profit Corporation Law via or fax. The bill also ends the requirement for board approval when leasing real property from a third party, and ends the requirement that private foundations publish notice of availability for public inspection on Form-990. Additionally, the bill simplifes the categories of non-for-profit corporations into charitable corporations and non-charitable corporations. The current classification system, which has consistently bedeviled lawyers and nonprofit boards alike, labels not-for-profit corporations as either A-B-C or D. The bill assigns all notfor-profit corporations to one category or the other, with former Type-A corporations becoming non-charitable and all others becoming charitable. The already existing New York Executive Law requires certified audits for any organization registered to solicit and collect funds to be distributed for charitable purposes. The Nonprofit Revitalization Act would raise the gross revenue thresholds for such audits. According to the bill, starting on July 1, 2014, certified audits will be required for organizations with revenue and funding in excess of $500,000. Accounting reviews will be required for organizations with between $250,000 and $500,000 in such receipts. Starting July 1, 2017, certified audits will be required for organizations with revenue and funding in excess of $750,000, and accounting reviews will be required for organizations with between $250,000 and $750,000 in such receipts. Finally, starting July 1, 2021, certified audits will be required for organizations with revenue and funding in excess of $1 million and accounting reviews will be required for organizations with $250,000 to $1 million in such receipts. Much of the new oversight set-forth by the Nonprofit Revitalization Act seeks to ensure a heightened level of corporate integrity. One way in which the bill seeks to restore said integrity is by tightening the related-party transaction rules. The bill states that every interested party that has a financial interest in a related party transaction must disclose the nature of their interest to their respective Board. The Board or authorized committee must consider all alternative transactions before entering, approve the transaction by not less than majority vote of the directors or committee members present at the meeting, and document in writing the basis for its approval of the transaction. Furthermore, the Attorney General now has the power to commence proceedings to enjoin, void, or rescind a related party transaction if the transaction violates any law or is otherwise not fair, reasonable, or in the best interests of the not-for-profit. Moreover, all not-for-profit corporations and wholly charitable trusts must develop a conflict of interest policy. Said policy must define what creates a conflict of interest, state how to disclose and document the conflict, and not allow the conflicted person to participate in or influence any deliberations or votes on the matter. Lastly, the Nonprofit Revitalization Act puts a mandatory whistleblower protection policy in place for all charitable corporations and wholly charitable trusts with 20 or more employees and annual revenue exceeding $1 million. It states that the policy must protect directors, officers, employees, or volunteers who report violations within the organization from retaliation, harassment, intimidation, and adverse employment consequences. The policy must be made available to all members of the organization and must lay out how to go about reporting a violation. Organizations must also designate an employee or volunteer to administer the policy and report to the Audit Committee or Board. The Executive Compensation Reform Act tackles, not surprisingly, executive compensation. The Act states that all boards of nonprofits must review compensation and deem it fair, reasonable, and justified. All organizations will have to review and approve CEO compensation. Organizations with annual revenue of over $2 million will also be required to review the compensation of the top five highest earning officers or key employees and compare them to the pay rates of similar organizations. Furthermore, total compensation paid to any employee must be reasonable and reflect the services provided to the organization by that employee. Both laws are set to go into effect on January 1, While the bills only effect New York based organizations, it s likely that they will catalyze similar legislation throughout the country. For the official press release from the Office of the Attorney General, please visit: - NFP Advisor 5

6 Affordable Care Act Employer Mandate Delayed Until 2015 n Wednesday, July 3, the IRS confirmed that the implementation of the Affordable Care Act s (ACA) employer mandate has been delayed until The mandate requires all employers with more than 50 full-time workers to provide health insurance to employees. The extension comes in response to criticism from numerous business groups that claimed the employer mandate requirements were too complicated to be accurately interpreted by most business owners. The ACA s Health Insurance Marketplace, a web-based tool that will allow individuals and businesses to compare insurance plans, is still set to launch on October 1. Despite the delay in the employer mandates implementation, the Department of Labor is upholding their requirement that all businesses (including nonprofit organizations) subject to the Fair Labor Standards Act submit written exchange notices to employees by October 1, 2013, informing them of new health coverage options afforded by the Health Insurance Marketplace. The notice must be distributed to all new hires, continuing employees, and even some contracted staff. The notice provided by the employer must be written so that the average employee can understand it. There is no restriction on sending the notice with other documents, so employers will have the option to include it with new hire packages or other types of communications. The notice itself should: Inform the employee about the existence of the Marketplace (or Exchange ) Outline the services provided by the Marketplace Include information about how to contact the Marketplace for help Explain that employees may lose the employee contribution from any employer provided health plan if they elect to buy a plan from the Marketplace Explain that employees may no longer be able to exclude employer and employee contributions from their federally taxable income if they buy a plan from the Marketplace Explain whether employees may be eligible for a tax credit on premiums paid if they purchase a qualified health plan from the Marketplace To assist employers with this new requirement, the Department of Labor has posted two notice templates on their website that employers can modify to meet their needs. The first notice is applicable to employers who offer health coverage and the second is applicable to employers who do not offer health coverage. If employers do not wish to use a template, they may also create their own notice that includes the mandatory information listed above. If you have any questions regarding the Affordable Care Act, please feel free to get in contact with Cerini & Associates Tim McHale at x NFP Advisor

7 The 2nd Annual Long Island Imagine Awards The 2nd Annual Long Island Imagine Awards, Scheduled for Tuesday May 6, 2014 at the Crest Hollow Country Club, offers acknowledgement to some of Long Island s most effective and innovative nonprofit organizations. Cerini & Associates is now accepting nominations for the Second Annual Long Island Imagine Awards. Nominations will be accepted for the following awards: The Cerini & Associates Social Impact Award This award will be given to a nonprofit that measures success not just by meeting its mission, but by affecting the surrounding community. Impact goes beyond the number of children served, shelters provided, and mouths fed. Impact looks at how the organization impacted the Long Island community as a whole, and how the results have been measured. The Pilot Benefits Group Innovation Award This nonprofit has been innovative in adopting new platforms that have led to a significant increase in the organization s ability to meet its mission. This could include the implementation of technology that enables the organization to achieve cost savings and better communication; a strategic approach to fundraising; a unique and effective public relations campaign; etc. Social Entrepreneurism Award This award will be given to an organization that achieves its primary social or environmental mission using business methods. The organization will exhibit original ideas brought to fruition with predominantly private support, rather than in response to government funding. Rising Star Award This award will recognize a nonprofit generating under $2 million in revenue for its outstanding innovation, impact, and achievements in meeting its mission. The award will be given to an organization who demonstrates an outstanding record of sustained achievement, has successfully demonstrated successful financial performance, and has built a reputation for excellence within the community. The Nixon Peabody Leadership Excellence Award This award recognizes an exemplary nonprofit leader (who may be an Executive Director, board member, staff member, volunteer, etc.) whose accomplishments have advanced his/ her organization. The leader must work in and reside in either Nassau or Suffolk Counties. This is not about traditional volunteering, directors, or funding, but focuses on innovation in driving organizational change and social impact. To nominate an individual or organization for the Long Island Imagine Awards, go to and click on Imagine Awards. Deadline for nominations is October 18, For more information on applications and sponsorship opportunities, contact Hillary@HillaryNeedleEvents.com, Why All BH Providers that are Eligible Should Always Choose Medicaid Incentive Program. By Marni Ehrlich TechLeaders Consulting LLC mehrlich@jemsconsult.com ehavioral Health Providers, Clinics, Community Health Centers, and Eligible Professionals (EPs) that accept Medicaid for 30% of their encounters have a great opportunity to participate in New York State s Medicaid EHR Incentive Program. Unbeknownst to most, this program has some significant benefits for nonprofit agencies. The program pays each provider up to $63,750 over 6 years in incentive payments and $21,250 in the first year for just making a financial commitment to install Certified EHR Systems. This payment can be assigned to the agency. The following chart outlines the difference in incentive benefits between the Medicaid and Medicare programs: Beyond the financial benefits, the Medicaid EHR Incentive Program provides an incentive for EPs to just implement a Certified EHR System without having to implement Meaningful Use (MU) in the first year of attestation. This is called the Adopt, Implement or Upgrade (AIU) option of the Medicaid EHR Incentive Program. By implementing this option, EPs can receive $21,250 for just adopting, implementing, or upgrading to a Certified EHR system. In most cases, the program allows for more than a full year to begin the attestation for MU. This program also offers a group assignment option that allows EPs to pool their Medicaid encounters for both EPs and non EPs that provide services in a practice/clinic environment to meet the 30% Medicaid threshold of patient volume for a 90 day period. The EPs or non EPs can be employees or consultants. It can take many months to complete the requirements and credentialing criteria so that you can receive payment this year, so its advised to take advantage of the program sooner rather than later. - NFP Advisor 7

8 3340 Veterans Memorial Hwy Bohemia, NY MAKING A DIFFERENCE, ONE CLIENT AT A TIME Veterans Memorial Hwy., Bohemia, N.Y (631)