by Sometimes first glances can tell you everything you need to know and sometimes you really must dig deeper. Such is the case with the Form 990 reported compensation for 2024 for certain former executives of the NRA.
When I first saw the reported compensation for Wayne LaPierre in the Form 990 I was shocked. How can the NRA be paying Wayne $1.15 million for just one month’s worth of work. WTF? Is this the rumored “golden parachute”? Was it some sort of payoff to make him resign just before the trial portion of the New York AG’s trial of the NRA and the various individual defendants?
The answer to all my questions above is a resolute and absolute no.
Compensation for executives, directors, key employees, and highest compensated employees is reported in Part VII of the Form 990. It gives the aggregate amount of reportable compensation for each named employee along with an estimated amount of other compensation such as non-taxable health benefits and NRA retirement contributions.
However, to understand how these numbers were derived you must dig further. The Form 990’s Schedule J, Part II and Part III, contain the information that allows you to break apart the reportable compensation figures.
Below is a spreadsheet I compiled on the compensation for five former NRA executives who left either in 2024 or 2023. They were Wayne LaPierre, EVP; Tyler Schropp, Executive Director of Advancement; Randy Kozuch, Executive Director of NRA-ILA; Joe DeBergalis, Executive Director of General Operations; and Andrew Arulanandam, Interim EVP.
Prior to my retirement, I worked for 25 years as a financial and retirement planner. In addition, I held the Certified Financial Planner designation for 20 of those years until I relinquished after retirement. I also taught a class on retirement planning for 10 years as part of Western Carolina University’s BSBA in Finance program. I give this background as the basis for explaining what the numbers above actually mean.
Let’s take things in order. First, a payout of accrued vacation or PTO is normal when a person leaves an organization. This is lumped in with base pay to give total base pay. In Wayne’s case, it appears he had over a month’s worth of accrued vacation that was paid out.
Moving down to group life insurance. Under IRS rules, the cost of the first $50,000 of coverage is exempt from taxation. However, the premium for benefit amounts above $50,000 is taxable and is considered income for the employee. Given most group life insurance plans pay at least one year’s salary, the premium for all of these five former employees is certainly going to have a taxable element.
A 457(b) non-governmental or “Top Hat” plan is a supplemental retirement plan for executives or key employees. Unlike a typical 401(k) plan, it must discriminate. In retirement-plan speak, this means it can only be offered to a select number of employees and is not available to the rank and file employee. By contrast, a 401(k) must be available to all employees and is tested such that the highly compensated or key employee does not get a bigger benefit than the non-highly compensated. This often results in the highly compensated or key employee not being allowed to make a full contribution to their 401(k) plan.
Contributions to the 457(b) Top Hat plan have limits. In 2024 the contribution limit was $23,000 and was lower in earlier years. The amounts in the 457(b) plan and their earnings are deferred until such time as the executive withdraws it on termination of employment. These amounts cannot be rolled over to an IRA so as to defer taxation until a later date. Further, this plan remains unfunded meaning it remains an asset of the organization and it is available to creditors in the event of a bankruptcy. Even if a “rabbi trust” was established meaning it couldn’t be used for general expenses of the NRA, it would be at risk in case of a bankruptcy. One wonders if the Brewer law firm told this little tidbit to Wayne when he authorized the abortive bankruptcy filing.
When looking at the taxable compensation of the former executives in question, you can tell a significant portion of the total compensation for both Wayne and Joe DeBergalis came from monies that they had previously set aside for retirement. In Wayne’s case, it was over 70% of his taxable compensation.
457(f) plans are another type of non-qualified, deferred compensation plan intended to attract and retain highly compensated employees. It is meant for executives in tax exempt and govenrmental entitites. Unlike the 457(b) Top Hat plan, it has no limit on the amount that can be deferred into it and an executive could defer almost 100% of his or her salary. Like the 457(b) plan, assets in these plans remain the property of the employer and are subject to the claims of general creditors. However, the biggest difference is when amounts in these plans become taxable as ordinary income. Unlike the 457(b) where taxation occurs upon withdrawal from the plan, the 457(f) plan uses the substantial risk of forfeiture rule. This means that until the executive meets a certain threshold of service such as 5-10 years of service or other requirements they remain unvested in the plan. Thus, if they leave before then, the monies revert back to the employer. However, once an executive vests in the 457(f) plan, the balance becomes taxable even if it remains in the plan. Only Wayne and Tyler Schropp had any payouts from the 457(f) plan. Schropp seems to have made extensive use of it as it compromised 40% of his taxable compensation.
Taxable personal expenses are just that. Personal expenses paid by the NRA for the executive for which the NRA could not take a deduction. This could be a gym or country club membership, personal use of a car owned by the NRA, or something similar. These expenses are included in taxable compensation of the employee.
The non-taxable benefits included in the total compensations (taxable and non-taxable) would be employer paid amounts for such things as health and dental plans as well as short and long term disability plans. I am not sure what influences the disparity in the numbers.
The final item that I’d like to cover is the severance payout to Joe DeBergalis. Most contracts hold a severance clause requiring a payout amount based upon years of service or something similar. Given he was summarily replaced with Andrew Arulanandam as Executive Director of General Operations towards the end of 2023 and forced out of the NRA, I will assume his severance agreement covered that. I would also guess it had a non-disclosure agreement attached. The severance payout and 457(b) payout occurred in 2024 so it would be considered 2024 taxable income and not for 2023 when he actually left the NRA.
As I said in the headline, first glances can be wrong. When one digs down through the numbers, you find that especially in the case of Wayne, Schropp, and DeBergalis that their total compensation amounts were greatly impacted by things other than a high salary. Wayne didn’t get a golden parachute, Schropp got almost half of his compensation from retirement payouts, and DeBergalis’ compensation was a combination of severance and retirement payouts.