Title: Section 1002.3 - Limits on Executive Compensation
1002.3 Limits on Executive Compensation
(a) Limits on Executive Compensation. Except if a covered provider has obtained a waiver pursuant to section 1002.4 of this Part, a covered provider as defined in this regulation shall not use State funds or State-authorized payments for executive compensation given directly or indirectly to a covered executive in an amount greater than $199,000 per annum, provided, however, that the department shall review this figure annually to determine whether adjustment is necessary based on appropriate factors and subject to the approval of the Director of the Division of the Budget. Commencing on July 1, 2013, the limits on executive compensation pursuant to this Part shall be effective and applicable to each covered provider on the first day of each covered provider's respective covered reporting period.
(b) Except if a covered provider has obtained a waiver pursuant to section 1002.4 of this Part, where a covered
provider's executive compensation given to a covered executive is greater than $199,000 per annum (including not
only State funds and State-authorized payments but also any other sources of funding), and either:
(1) greater than the 75th percentile of that compensation provided to comparable executives in other providers of the
same size and within the same program service sector and the same or comparable geographic area as established
by a compensation survey identified, provided, or recognized by the department and the Director of the Division of the
(2) was not reviewed and approved by the covered provider's board of directors or equivalent governing body (if
such a board or body exists) including at least two independent directors or voting members (or, where a duly
authorized compensation committee including at least two independent directors or voting members conducted such
review on behalf of the full board, such actions were not reviewed and ratified by such board), or such review did not
include an assessment of appropriate comparability data
then such covered provider shall be subject to the penalties set forth in section 1002.6 of this Part. To determine
whether a covered provider or related organization may be subject to penalties, such provider shall provide, upon
request by the department or its designee, contemporaneous documentation in a form and level of detail sufficient to
allow such determination to be made.
(c) Program Services Rendered by Covered Executives. The limit on executive compensation pursuant to this
Section shall not be applied to limit reimbursement with State funds or State-authorized payments for reasonable
compensation paid to a covered executive for program services, including but not limited to supervisory services
performed to facilitate the covered provider's program services, rendered by the executive outside of his or her
managerial or policy-making duties. Documentation of such program services rendered shall be used by the covered
provider to determine that percentage, if any, of the covered executive's compensation that is attributable to program
services and that compensation shall not be considered in the calculation of his or her executive compensation. Such
documentation shall be maintained and provided to the department or its designee upon request. Clinical and program
personnel in a hospital or other entity providing program services, including chairs of departments, heads of service,
chief medical officers, directors of nursing, or similar types of personnel fulfilling administrative functions that are
nevertheless directly attributable to and comprise program services shall not be considered covered executives for
purposes of limiting the use of State funds or State-authorized payments to compensate them.
(d) Covered Providers with Multiple Sources of State Funds or State-Authorized Payments. If a covered provider
receives State funds or State-authorized payments from multiple sources, the provider's compliance with the limits on
executive compensation in subdivision (a) shall be determined based upon the total amount of such funding received
and the reimbursements received from all sources of State funds or State-authorized payments. As set forth in section
1002.5 of this Part, the covered provider shall report all of such State funds and State-authorized payments in the form
specified by the department or its designee.
(e) Subcontractors and Agents of Covered Providers. The limits on executive compensation in subdivision (a) and (b)
of this section and the reporting requirements in section 1002.5 shall apply to subcontractors and agents of covered
providers if and to the extent that such a subcontractor or agent has received State funds or State-authorized payments
from the covered provider to provide program or administrative services during the reporting period and would
otherwise meet the definition of a covered provider but for the fact that it has received State funds or State-authorized
payments from the covered provider rather than directly from a governmental agency. A covered provider shall
incorporate into its agreement with such a subcontractor or agent the terms of these regulations by reference to require
and facilitate compliance. Upon request, covered providers shall promptly report to the funding or authorizing agency
the identity of such subcontractors and agents, along with any other information requested by that agency or by the
department or its designee.
A covered provider shall not be held responsible for a subcontractor's or agent's failure to
comply with these regulations.
(f) Covered Providers receiving State Funds or State-Authorized Payments from county or local government or an
entity contracting on its behalf. The department or its designee, rather than the county or local unit of government or an
entity contracting on behalf of such government, shall be responsible for obtaining the necessary reporting from and
compliance by such covered providers, and shall issue guidance to affected county and local governments to set forth
the procedures by which the department or it designee shall do so.
(g) Other Limits on Executive Compensation. If the contract, grant, or other agreement is subject to more stringent limits
on executive compensation, whether through law or contract, such limits shall control and shall not be affected by the
less stringent limits imposed by these regulations. However, the definition and interpretation of terms in this Part shall
not be affected or limited by the definition or interpretation of terms in other regulations or agreements.
(h) A covered provider's contract or other agreement with a covered executive agreed to prior to July 1, 2012 shall not
be subject to the limits in this section during the term of the contract, except that:
a. Covered providers must apply for a waiver for any contracts or agreements with covered executives for executive
compensation that exceeds or otherwise fails to comply with these regulations if such contracts or agreements extend
beyond April 1, 2015; and
b. renewals of such contracts or agreements after the completion of their term must comply with these regulations.
VOLUME E (Title 10)