Incentive Compensation - Bundled Services Exception

Description

In 2011, the U.S. Department of Education issued guidance interpreting the HEA Title IV incentive compensation ban and established the limited Bundled Services Exception. Under this exception, a third party, such as an Online Program Manager (OPM), may receive tuition-based payment for providing a bundled set of services—like recruitment, marketing, counseling, and student support—but may not offer incentive-based pay to its own employees performing these activities.

Actions to Take

When contracting with an Online Program Manager (OPM) to expand distance learning programs, institutions should:

1. Select a payment model – Choose between a fee-for-service arrangement or a revenue-share model.
2. Review for compliance – If using a revenue-share model, confirm that the agreement complies with the federal incentive compensation ban, ensuring the OPM provides a broad range of services beyond just recruitment.
3. Engage in contract development – Actively participate in drafting and negotiating the contract to protect institutional interests.

Publication Date

• March 11, 2011

Resources

• (GEN-11-05) Subject: Implementation of Program Integrity Regulations. This guidance webpage includes an attached pdf.  The Incentive Compensation Guidance begins on page 8 of the document.  The specific guidance for the Bundled Services Exception is on page 12 in Example 2-B.
• OPM and Third-Party Servicers Update; Your Turn to Inform the Department of Ed; WCET Frontiers, March 14, 2023.