Health Care Executive & Physician Benefits and Perquisites

Health Care Executive & Physician Benefits and Perquisites

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Mercer’s 2014/2015 Health Care Executive and Physician Benefits and Perquisites Report

  • July 14, 2015
  • United States, New York

Nonqualified retirement plans for executives at tax-exempt organizations still significant component of pay

 

  • Perquisites without a business purpose are a thing of the past
  • Physicians receive same benefits as all other employees

 

Despite continued scrutiny by lawmakers, the Internal Revenue Service (IRS), shareholders, and the media, executive benefits continue to be a strategic component of total rewards programs for health care executives.

According to Mercer’s 2014/2015 Health Care Executive and Physician Benefits and Perquisites Report, nearly two-thirds (63%) of tax-exempt organizations offer top executives an employer-paid nonqualified retirement plan – a plan that does not qualify for tax advantages under the Internal Revenue Code (IRC). For large health care organizations (over $500M of revenue), prevalence jumps to over 75%.The value of these plans can be significant, providing as much as 15% to 20% of annual base salary. However, supplemental executive retirement plans (SERPs) come in many varieties and vest at different rates such that the value is not easily ascertainable from what is disclosed in the Form 990.  

“While executive benefits are an important, strategic component of total rewards programs to retain and reward executives, tax-exempt organizations are carefully considering the impact these benefits have on the level and mix of total compensation,” said LaCinda Glover, Principal with Mercer’s Executive Benefits Group. “When properly designed, executive benefit programs provide a vehicle to make up for equity pay often available to executives at public companies.”

Mercer’s 2014/2015 Health Care Executive and Physician Benefits and Perquisites Report analyzes information about the executive benefits and perquisites to help organizations determine comprehensive executive compensation packages. And since benefits and perquisites are not often itemized on the Form 990, Mercer’s report assimilates information on various retirement and benefit plans enabling comparisons across peer institutions within the context of total pay. The study includes responses from more than 200 health care organizations across the US.

Non-retirement benefits, such as employer-paid executive life insurance and long-term disability (LTD) coverage, continue to be popular among health care organizations. According to Mercer’s study, approximately 50% of organizations offer supplemental employer-paid life insurance to executives with median total coverage of 300% of base salary. Furthermore, more than half (53%) of organizations provide additional employer-paid LTD coverage through a supplemental group plan or an individual policy. Coverage is typically 60-70% of base salary with a total median maximum monthly benefit of $20,000.

Executive perquisites

While executive perquisites are becoming less prevalent in general because of transparent Form 990 reporting and scrutiny from the media, those perquisites treated as a business expense continue to remain popular. Mercer’s study finds the most common perquisite for executives to be a car or car allowance, provided by 35% of organizations. Financial counseling/tax advice and country club memberships, offered by 10% of organizations, are the second most popular followed by a perquisite allowances and in-depth executive physicals (8%). “Perquisites without a valid business purpose are a thing of the past,” said Mrs. Glover. “Whereas perquisites used to be a sweetener added on to executive compensation packages, only those pertaining to the efficiency and well-being of executives are becoming acceptable.”

Physician benefits

While data on physician benefits is scarce, it is highly desired. According to Mercer’s study, physicians typically receive the same benefits as all other employees with limited additional employer-paid retirement benefits, health and welfare benefits, and perquisites. Of the organizations that provided information on their physicians, approximately half (49%) are eligible for additional voluntary employee deferrals through a 457(b) plan. Nonqualified employer-paid plans are much less prevalent; of the 20% of organizations providing them, most restore contributions lost in the qualified plan due to IRS limits on compensation and benefits.

About Mercer

Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

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