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May we pay achievement bonus?

Your Legal Questions Answered

May we pay achievement bonus?

I've been the executive director of my organization about 20 years. We had a good year this year and my board wants to give me a one-time "achievement bonus" of a few thousand dollars. Is this okay?

Yes. Performance bonuses which are not based on a percentage of the "profits" or surplus of the organization, and which do not raise total compensation beyond the range of reasonableness (so that you do not face excess benefit taxes), are perfectly legitimate. The Board should be sure to follow the safe harbor provisions to give you a rebuttable presumption that the total is reasonable. (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions.”)

Monday, January 1, 2007
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