Will the New Tax Law Change Perks?

The tax law approved by Congress and signed by the president late last year has an impact on association CEO pay: Executive compensation above $1 million at tax-exempt organizations now faces a 21 percent excise tax  (opens in a new tab). To avoid that tax, says David Goch, partner at Webster, Chamberlain and Bean, many of the large trade associations that pay executives more than or close to that amount may try to emphasize nonfinancial compensation to avoid the tax.

“Now the organization is faced with the challenge of, ‘Hey, are we going to pay 21 percent, or are there other ways to acknowledge and recognize the CEO’s wellness?’” Goch says.

That may have an impact even on associations where executive pay doesn’t hit $1 million, he says, because new approaches to compensation at the high end may create a norm that trickles down to organizations with smaller budgets. “My guess with boards is that they’ll try not to increase the bottom line through income or other benefits but find other ways—and that’s time, that’s vacation,” he says. “It’s still compensation, but the shift is that you’re getting paid to not be there.”