New York State agencies have recently adopted final regulations to implement the new restrictions on executive compensation and administrative costs at state-funded not-for-profit and for-profit service providers, effective July 1, 2013. In general, the final rules make no significant changes in the regulatory framework proposed earlier this year. The limits will apply to reporting periods commencing on or after the effective date. In other words, for organizations that report on a calendar-year basis, the rules become effective January 1, 2014.
Among other provisions, the rules bar covered service providers from using more than $199,000 in state funds to pay executive compensation, with certain exceptions. Providers can pay executives more than $199,000 in total compensation from a combination of New York State and other funding sources if they meet conditions such as ensuring that the executive’s compensation doesn’t exceed the 75th percentile of that provided to comparable executives in comparable organizations, based on approved compensation surveys.
The final rules specify that guidance regarding acceptable compensation surveys and comparability factors that must be taken into account in applying this exception will be provided prior to the July 1 effective date. (For more on the rules, see “New York Postpones and Refines Its New Limits on Executive Pay at State-Funded Organizations,” Executive Compensation Bulletin, March 27, 2013.)
Russ Hall is an executive compensation expert in Towers Watson’s Research and Innovation team in White Plains, New York, and Lisa Perlmutter is a senior executive compensation consultant in the firm’s New York office. Email firstname.lastname@example.org, email@example.com or firstname.lastname@example.org.