Jerry,
First thing to keep in mind is that Directors and Officers are two different positions, even when filled by the same person.
Typically, Directors may not be compensated.
However, it's also typical that Officers may be compensated for their duties.
There is a right way and a wrong way to compensate.
From what you describe, your Association is doing it the wrong way.
The right way would be for everyone to continue to pay assessments and the board issue a check to the individuals for their service (i.e. a pay check).
Note, there are some IRS issues that need to be considered as well.
1) Is the individual acting as an independent contractor or an employee?
If an employee, there are payroll taxes that have to be considered.
Personally, I think the IRS would determine them to be employees of the Association.
2) Was the compensation properly reported?
1099-C for cancellation of debt (waiving of assessments)
1099-misc for independent contractors
W-2 for employees
3) Are the individuals aware that, as paid professionals, they lose some legal protections that volunteers have?
See (all from the IRS):
Independent Contractor (Self-Employed) or Employee? Topic No. 762 Independent Contractor vs. Employee Publication 15 (2022), (Circular E), Employer's Tax Guide About Form W-2, Wage and Tax Statement About Form 1099-MISC, Miscellaneous Income About Form 1099-C, Cancellation of Debt Regarding loss of protections:
VOLUNTEER PROTECTION ACT OF 1997 federal statute
Community association directors beware! Practical and legal issues regarding director compensation from a MN attorney but still has good info
From my point of view, your options are simple:
1) Inform the board of the IRS issues and loss of protection issues and hope they do the right thing.
2) Inform the IRS directly and let the chips fall where they may.
3) Live with the fact that you are aware the Board is in violation of governing documents and statutes