Paying Health Insurance and Bonuses to Management Co. Employees

Typically the contract with a management company is to to pay $X for Y services. Bonuses, benefits, etc. are not part of it.

The vendors we hire in our HOA pay their employees' health insurance.

To be sure, we're paying it one or another, but our MC, security officers, custodians and landscapers provide health insurance for their employees.

We don't pay holiday bonuses. Our CC&Rs state that owners' dues only to protect our common areas & association property. I can find the exact wording if anyone wants it.

Rob,

Sounds like you need to ask for a copy of the contract with the MC and see what the terms are.

Whether $45k/ann is a lot is relative. How many units are you, Rob? Condos, detached homes, what? How many mgmt. staff work on your premises and how many hours per week?

Rob
it would be helpful if you provided more details including a breakdown of these costs if you have them.

How many units are there in your community?
How many employees work on your property from this MC?

What is the annual cost of property management?

The $45,000 number is broken down how? How much for insurance? How much for bonuses?

Are you a board member? Where did you get these numbers from?

Have you enquired about this with the board?
And have they confirmed your HOA is in fact covering these costs?

Are these people employees of your HOA OR THE MC?

IF they are employed by the MC it would be unusual for the board to then directly pay for their insurancece coverage.

Are there copies of invoices for this coverage having been paid with HOA funds?

Please provide more details.

Could it be that the individuals are actually employees of the Association but managed by the PM/MC, thereby creating the impression that the individuals are employees of the MC?

Hi,

Allow me to provide some background and additional information. I am not currently on the BoD. However, I am going to run for a position when elections come around. For the last 3 years, I considered running but thought it better for me to sit back, observe, and learn.

The information I've presented has come from a number of conversations with current board members, as well as, my own review of association documentation (mostly financials).

Our community consists of approx. 400 units (3 mid-rise buildings). Each building has it's own association and there is also a Master association that handles things that are not building specific. The issues I am addressing fall under the Master association. The President of the Master has a "my way or no way" method of management and, unfortunately, there are enough votes on the board that will go with whatever the strongest personalty wants that he often does get his way. I am one of several that are running for board positions so we can hopefully make some positive change.

Our associations do NOT have any employees. We have a management company that handles all things including subcontracting for services. Just guessing, but I think we have about 5-6 people onsite. This includes a Property Manager that is onsite M-F 9-5 and handles whatever might come up off-hours. There is also an assistant that is there during normal working hours. The rest are security and maintenance types.

The two items I've mentioned have the following dollars associated with them. Holiday Bonus is $20K and the Health Insurance Reimbursement is budgeted at $24K. The combined amounts equal approx. 15% of the amount we pay to the management company.

My understanding is that the Healthcare Insurance money dates back to when there was a different management company that was not doing a good job. This was prior to my owning so I cannot speak to my personal experience. When the decision was made to switch to the current company, a decision was made to offer the healthcare insurance money to encourage some of the key/better employees to switch to the new company and stay at our complex. My understanding is that this was offered to a limited number of people. I do not know there were and if they are still at our complex. I communicated with our current Treasurer and he said the money is offered to all employees at our complex that work for the management company but that all do not take advantage of it. I also understand that some of these folks make so little, that they are getting govt insurance (Medicaid?). I don't wish to appear heartless, but I just don't feel our association should be spending owner money on this type of thing. Those that wish to be charitable, can do that on their own.

The year-end bonus money has a different story. A while ago, year-end/holiday tipping was left to the discretion of individual owners. Apparently people were rather "tight" and someone on the BOD at the time decided it wasn't fair for the employees. I believe they also tried sending envelopes for people to use and maybe some other ways to encourage folks to tip that also did not work out too well for the employees. Again, I don't want to seem heartless because these folks do a great job. I handle tipping on my own. Anyway, at some point the BOD decided to take money out of our monthly fees to pay these year end bonuses. For a while, it was not even a line item on the budget and was hidden in other categories. Because of one of our BOD members on one of the individual buildings did some digging, he exposed this practice along with the amounts. That resulted in the item being listed in the budget.

Hopefully I've answered all your questions. I really appreciate all your input and welcome further questions.

The Master BOD is made up from representatives of the individual BODs and some Member at Large positions. I do not remember the exact numbers, but with regard to the bonuses, the amounts were based on a number of factors including years of service at the community with percentage caps. I found that how they dolled out the amounts to be fair but the whole idea of giving bonuses to begin with is where I had issues. I don't know if the health insurance was meant to cover their entire premiums or just a portion. Based on the amount and the number of people, I would think it's a portion. I was told by the Treasurer that not everyone that can, does take advantage because some of them have Govt paid insurance (Medicaid?). Unfortunately, we have a BOD President that is not forthcoming with information and ignores requests. I have reached out to other BOD members to get the information I've gotten so far. There are some other expenses, minor when it comes to these, that they also approved I have some issues with. Little things like paying for lunches on Fridays for the office staff and a holiday party at the end of the year. Maybe only a couple thousand total, but it's coming out of my pocket and the other owners pockets. They also paid for an additional P/T office worker for a few weeks to help the PM and her assistant get caught up on the mess the prior PM left. I've been vocal about that also. My feeling is that we have a contract with the MC to get X things done and if they cannot get it done with the current staffing level, it's on them to supplement. There is a group of 3 of us running for positions. If a couple of us get in, we'll be able to change things. If we don't get in, we'll have to look at other avenues to attack these issues. Thanks for reading all this.

Were the payments made to individuals and reported to the IRS, or were they additional checks to the PM company? Either way, sounds like you've got a handle on it now so good luck going forward.

The documents do give a great deal of leeway on how the BOD spends money. I thank everyone for their responses. I've learned a lot. I think we may be in good shape. We have a plan in place to address these issues with the BOD.

I am just wondering what your accountant says about it and how it impacts your Association's taxes as a not for profit entity (is there some additional tax benefit for providing health insurance for another contracted business). I am not a financial person but as a layperson, it sounds kind of fishy. It almost sounds like the management company employees are like independent contractors.

Qualifying for government health insurance could include VA benefits, Medicare so I wouldn't necessarily say that those employees qualify for Medicaid. I have yet to meet a Medicaid recipient who enjoys generous bonuses.