501(r)… Just What is a Plain Language Summary?

Janet Hodgdon, Healthcare Consulting Director
February 2016

First released in final form on December 29, 2014 (published in the Federal Register on December 31, 2014), the final 501(r) Treasury regulations are effective for taxable years beginning on/after December 29, 2015. Compliance is mandatory for all 501(c)(3) hospital facilities. Penalties for noncompliance are varied but could include substantial fines and revocation of nonprofit status.

Although an IRS regulation, these rules are truly operational in nature and may directly affect your financial assistance policies. One of the requirements is to have a plain language summary of your financial assistance policies made available. But just what is plain language? Simply put, it is writing for your audience. If your intended reader is a “rocket scientist,” then language used may be far different than that used when addressing the average reading level of any given community. In this case, a much simpler language approach is required and is generally considered to be that of an 8th grade level.

President Obama signed Public Law 111-274, The Plain Writing Act of 2010, on October 13, 2010, requiring all federal agencies to comply with the plain language guidelines. As a follow up to that legislation, Federal Plain Language Guidelines were first published in March, 2011. The Federal Government definition is:

    Plain language is communication your audience can understand the first time they read or hear it. Language that is plain to one set of readers may not be plain to others. Written material is in plain language if your audience can:
    • Find what they need;
    • Understand what they find; and
    • Use what they find to meet their needs.

On the surface, this appears fairly straightforward, but it actually can be a complex process. So much so that the guidelines referenced above are 112 pages in length. Written in plain language and extremely straightforward, this guide provides advice on clear communication and it may be a helpful tool as you start to prepare your own plain language summaries. As examples from that document:

  • Don’t say “involuntarily undomiciled” when you can say “homeless.”
  • Use “How do I apply?” as opposed to “Submission of applications.”

The most important thing to do is know who your audience is, what they might know about the subject (in this case, your financial assistance policies) and what they need to know. Ultimately, the writer should focus on the intended audience and, by doing so, help ensure clear writing that allows readers to gain the knowledge they need.

At a minimum, plain language summaries of your financial assistance policies as required under 501(r) must include:

  • Summary of the policy itself
  • Website address and physical location where copies of policy and application can be obtained
  • Information on how and when to apply for financial assistance
  • Details on how to get help completing the documents

Summarizing complex and sometimes lengthy policies into a plain language summary that an average 8th grader can understand may prove to be a daunting process for nonprofit hospitals as they work toward compliance with the 501(r) regulations. The IRS expects clear communication with members of your community and this plain language summary is only one part of the overall regulations. Hospitals should pay close attention to these in order to retain their 501(c)(3) status as a nonprofit organization.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.