Wednesday, July 29, 2009


Our seven-year old grandson, Daniel, is autistic. We are blessed that he lives only a few blocks from my wife and me. This close proximity allows us to spend time with him on almost a daily basis. When Daniel was diagnosed with autism at age four, it was especially traumatic for our daughter and her husband. Their dreams for Daniel—the dreams all parents have for their children—seemed to vanish. That was based on their perspective at the time. Hundreds of hours in hyperbaric chambers, myriad therapy sessions, and a multitude of prayers later he was ready for his first tee-ball experience this summer—playing with other autistic boys and girls, some several years older than he. The first game was not enough fun and he nearly opted for early retirement after opening day. But he tried another game and then another. And in a short time-span, he went from not sharing the ball to fielding balls and running over towards first base, handing the ball to Bob who plays first base (Bob’s disabilities prevent him from catching a thrown ball) and Bob completes the play. They are quite the teammates. From our perspective today (and that of his parents), Daniel is a terrific boy—the delight of our lives! God has the unfailing power to bring good from all circumstances that come our way. But what we see as “good” often depends on our perspective. There are times when it is difficult to understand how “all things work together for good to them that love God” (Romans 8:28). Yet, with proper perspective we can “consider it pure joy...whenever you face trials of many kinds” (James 1:2). What is your perspective of where you are right now? Feeling overwhelmed by the challenges of fewer resources and increasing expenses for the ministry in which you are involved? Having difficulty coping with the realities of cutting programs—perhaps even laying off staff? Or perhaps God has helped you gain a proper perspective—gaining a grasp of the cur­rent realities for your organization and realizing the future will not be like the past. This may be a good time for you to take a blank sheet of paper and draw a horizontal line in the middle. Remember the good things that God has done for your church or ministry and note them above the line. Then, recall the dark, deep, troublesome times that threatened to engulf your organization across the years—perhaps including some current challenges. All of the items on the page can be committed to Him. He is the God of the top list and the God of the bottom list. He is just as much the God of our challenges as He is the God of our successes. Listen to what God is saying to you and your organization through the experiences of this economic decline. He wants to help you with perspective!

Wednesday, July 8, 2009

Health Care Reform May Impact Fringe Benefits for Nonprofits

“Cap and Trade” will be a focus on Capitol Hill for 2009…but it will pale in comparison to the debate on health care reform. It appears Congress realizes the revenue sources must be identified to fund health care reform. It is not something to be funded by the federal government like another stimulus package. The 10-year cost for revamping the health care system is estimated to exceed $1 trillion. With health care cost savings expected to pick up about 40% of the tab for overhaul, that leaves Congress needing to find more than $600 billion in revenues. You will hear a lot about a possible new consumption tax as a way to foot the bill for health care reform. After carving out exemptions for food, prescription drugs, and maybe housing and utilities, a value added tax (VAT) of perhaps 6% would be required. This is high enough to prompt most officials who want to be reelected to beat a hasty retreat. So, a VAT on top of the income tax does not appear to be in our near future. Another option being considered by taxwriters is to charge a surtax of 2% or more on upper income bracket taxpayers—the same taxpayers targeted by the Administration, letting the 33% and 35% top marginal rates rise to 36% and 39.6%, respectively. Many of the other options under discussion by the Senate and the House would impact the taxability of employer-provided health insurance, the reimbursement of out-of-pocket medical expenses, or the deductibility of unreimbursed medical expenses. Here a few of the options:
  • Limiting employer provided health coverage that is excludible form gross income. The limit could be based on the value of the plan or the income of the insured, or the limit could be a combination of both.
  • Repealing the tax exclusion for employer-provided health coverage. In exchange for repealing the tax-free benefit for employer provided health insurance, employees would get an extra standard deduction. (For employees who have no income tax liability, such as many pastors, the extra standard deduction would provide no benefit to the taxpayer.)
  • Modify or repeal the itemized deduction for medical expenses. The 7.5 percent AGI threshold for the itemized deduction for medical expenses could be raised or eliminated.
  • Increasing payroll taxes or levy on employers. This could include raising the Medicare tax from its current 1.45% rate to 1.8% or higher (for the self-employed, this would mean an increase from 2.9% to 3.6%). Another option under discussion is imposing a new payroll tax on employers of 3% or so of the amounts they spend on health care for employees. For employers that do not provide health benefits, one option is to impose a levy of 8% of payroll.
  • Modify health savings accounts. HSA contributions could be limited to the lesser of the individual’s deductible under the high deductible health plan or the dollar amount of the maximum allowable aggregate HSA contributions. The additional tax on distributions from an HSA that are not used for qualified medical expenses would be increased to 20 percent. Distributions from an HSA would only be excludible from gross income as an amount used for qualified medical expenses if the expenses are substantiated by the employer or an independent third party.
  • Modify or repeal the exclusion for employer-provided reimbursement of medical expenses under flexible spending arrangements and health reimbursement arrangements. A limit would be placed on the amount of salary reduction contributions that may be made to a health FSA that would be excludible from gross income. Alternatively, the exclusion for salary reduction contributions to a health FSA could be eliminated. Similar changes could be made to the exclusion for reimbursements for medical expense under an HRA.
  • Limit the qualified medical expense definition. With respect to medicines, the definition of medical expense for purpose of employer plans (HRA’s and FSA’s) and health savings accounts could be conformed to the definition for purposes of the itemized deduction for medical expenses. Thus, for example, the cost of nonprescription medicines would not be reimbursed through a flexible spending arrangement.

The political struggle will probably take months to play out but if some of these options are enacted into law it will bring increased pressure on churches and other Christ-centered organizations…and their staff. Reductions in tax-free benefits means employees have less take-home pay in their pockets. Because of the economic trough we may be in for several years, many churches and other nonprofit organizations will find it difficult to raise salaries to offset benefit reductions. Stay tuned!

Monday, July 6, 2009

The Trust Factor

There is a crisis of trust and confidence in our the world. 

Trust in Wall Street has been shattered. Major portions of retirement accounts are gone. Investment portfolios of nonprofits have experienced staggering losses. The largest Ponzi scheme in history has been revealed. The unemployment rate continues to spiral.  

Trust in government and its officials has been diminished as the national debt rockets into the stratosphere.

Our trust is not heightened by ominous proposals which could impose new restrictions on churches and other charities. The combination of higher taxes and potentially increased restrictions on charitable deductions could be significantly burdensome to donors.

Who can we trust? The Bible tells us a lot about trust. “Put your trust in the light” John 12:36. “In God I trust; I will not be afraid” Psalm 56:4. “Trust in the Lord with all your heart and lean not on your own understanding” Proverbs 3:5. “Whoever trusts in riches will fall” Proverbs 11:28. One thing is clear. Deciding in whom and in what we trust is very important.
Olan Hendix, ECFA’s first executive director, once wrote, “Christians are very trusting by nature—looking for the best in other Christians and Christ-centered organizations. Trust is the vital element in the very beginning of the Christian life. We believe in or trust Jesus Christ in order to become a Christian. It is trust that enables us to claim God’s promises.” The trust that is so highly emphasized in our spiritual lives must not be neglected in the life of the organizations we represent.  

Donors decide which churches and charities they can trust. In financially challenging times, donors are asking some fresh and tougher questions. How these questions are answered will impact resources available for ministry.  

Trust is enhanced when leaders do the right thing. There is generally more than one path a leader may take; more than one way to address various opportunities with which we are presented. In his book, Leading Without Power, Max DePree suggests that “trust grows when people see leaders translate their personal integrity into organizational fidelity.”  

Trust increases as churches and other charities meet their obligations. The failure to meet obligations is a poor witness—corporately or personally. The importance of meeting obligations to vendors, lenders, and staff does not diminish during tough economic times. Clear communication with vendors and financial institutions is vital if the timely payment of obligations cannot be made. Meeting our obligations starts with a clear plan to balance resources and expenses—even when hard decisions are required.  

Trust includes keeping commitments to donors. Especially when funds are tight, our word must be our bond with donors. Economic challenges are never an excuse to exercise anything but the highest integrity. The commitments we make to donors, written or verbal, explicit or implicit, must be upheld. The use of donor-restricted funds for operating purposes should rarely occur. 

  Trust in organizations requires an accountability structure. ECFA provides this accountability structure for its members. The initial membership application process is designed to demonstrate accountability, as is the annual membership renewal. ECFA’s field review program provides on-site accountability as trained reviewers look over the shoulder of its members. Our compliance process provides a communication channel for those who are concerned about Standards-related practices of members.  

Final thoughts. History suggests that during times of uncertainty, leaders communicate less to constituents with the rationale that waiting for more definitive answers will better assure people. However, waiting lowers trust levels among constituents.  

Donors are looking for trust­worthy organizations. Trust will either be enhanced or diminished during the current economic valley. It is up to each one of us as Christian leaders to take the high roads that enhance trust.