We are a small tech start up, Delaware C Corp. Our CEO would like to increase her compensation without increasing her salary. One item would be offering health benefits. Does anyone have other ideas? We don't want to have her salary increase any further so as to upset any potential future investors. Also, if we were to reimburse her for any medical expenses that are not covered by our health insurance plan, are those expenses taxable to her?
Enhance CEO compensation
Answers
As a startup, (depending on your stage and funding), you should be conserving your cash in developing the product/service or for those expenses that give you clients/traction. Investors will actually NOT look kindly on team compensation that consumes too much cash. Second, if you are offering something to the CEO (especially health benefits), you should be offering it to everyone. It just does NOT look right. Your potential investors might even question the fact that the CEO has "extra" benefits that the rest of the team is not receiving. In an era where CEOs "sacrifice" for the company and the team, this reflects on the CEO.
For me, you have 3 options, (1) increase her pay, (2) NOT giving her anything at all and (3) giving her a small number of stocks.
I appreciate your input. However, assuming we want to move forward, does anyone know if we can reimburse her for unreimbursed medical expenses and what the tax implications of that are for the company and for her?
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If you offer employees reimbursement for medical expenses without a formal plan, reimbursements are treated as taxable income. Look into Section 105 plans...
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Human Capital