Washington State Nonprofit Hospitals Subject to New Reporting Requirements in 2013


November 13, 2012
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In June of this year, a bill was signed into law requiring not-for-profit hospitals operating in the State of Washington to report selected employee compensation information to the Washington State Department of Health (“Department”). Effective in the year 2013 (for calendar year 2012 compensation), House Bill 2229 mandates that not-for-profit hospitals licensed under Chapter 70.41 RCW will submit to the Department this employee compensation on an annual basis. The law will affect approximately 87 not-for-profit hospitals and public hospital district hospitals, of the 97 total hospitals currently licensed in Washington.

A hospital will meet the reporting requirement if information is submitted in either of two ways. The first option is to provide Schedule J, relating to compensation, from its federal Form 990, within 135 days following the hospital’s fiscal year-end. The second option is to submit the names and compensation information for the five highest compensated hospital employees who do not have any direct patient responsibilities on Form 422-092, within 135 days following the end of the hospital’s calendar year. If a hospital licensed under 70.41 RCW is part of a healthcare system, the requirements are met by submitting IRS Form 990 Schedule J for the health system; however, the law requires each hospital in a healthcare system to report compensation information on a separate form. In each case, if the schedule provided does not already include compensation of the hospital’s lead administrator, the hospital will need to supply that information to the Department and clearly indicate that the individual is the lead administrator. “Compensation” is defined as base compensation, bonus and incentive compensation, other payments that qualify as reportable compensation, retirement and deferred compensation, and nontaxable benefits. Regardless of an organization’s fiscal year-end, all compensation should be reported on a calendar- year basis.

DOH Form 422-092 is available in Excel format on the Department website. The form closely mirrors the compensation section of Federal Form 990, in both appearance and content.

It appears that the 135-day due date for annual submissions will be strictly construed, since there are currently no provisions for extension of time to provide compensation information to the Department. Conversely, a not-for-profit organization has the opportunity to request up to a six-month extension of time (two separate 3-month extensions) to file Form 990, past the initial due date of 135 days after the organization’s year-end (a total of ten and a half months following the end of the tax year). Compensation information can be delivered to the Department in one of three ways: by mail, by fax, or by e-mail. The intent of the new law is to provide additional transparency in the area of hospital executive compensation, beyond the requirements of federal Form 990. The information will be published by the Department on its website.

As such, hospitals need to be aware of the implications of the reporting for two reasons. First, they will need to gather and provide compensation information earlier than they may have done under extension of time to file Form 990. Second, they must be cognizant that the compensation of the lead administrator is now required to be reported, where, in some cases, disclosure on Form 990 may not otherwise have been required.

For additional information, please contact Brad Johnson at bjohnson@wipfli.com, Terri Rexrode at trexrode@wipfli.com, or your Wipfli relationship executive.

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