Findings from the sixth annual MullinTBG/PLANSPONSOR Executive Benefit Survey show employer sponsorship of nonqualified deferred compensation plans reached an all-time high of nearly 94%, indicating that plan sponsors continue to view nonqualified deferred compensation plans (NQDCPs) as an essential component of any competitively structured executive benefits package.
Nearly 45% of companies offered financial planning benefits to executives in 2011, demonstrating that plan sponsors recognize the need to help participants meet their retirement savings goals by providing access to expert advice and guidance.
Although retirement confidence remains at near-record lows, NQDCPs have fared well the past four years. Plan participation remained steady at 46.4% of the eligible population, with the highest levels of participation (58.0%) seen in plans that both offer a company match and are informally funded.
Respondents were asked to describe their criteria for determining plan eligibility—title, job grade or some combination of all three. Sponsors’ responses varied according to their distinct corporate philosophies, title (24.6%) and job grade (23.0%) emerged as the most prevalent criteria for determining eligibility.
The vast majority–87%–reported they are not planning on making changes their NQDCP in 2012. The results were consistent across the board, regardless of company ownership type, revenue or tax status, demonstrating sponsors’ overall satisfaction with their NQDCPs. Further, additions or enhancements in distribution and investment options were the top priorities for sponsors who are considering plan changes in the coming year.
“Plan changes that include benefit enhancements like the strengthening of distribution and investment offerings are a positive sign,” said George Castineiras, senior vice president, Total Retirement Solutions. “Plan sponsors’ willingness to embrace the unique, built-in flexibility of nonqualified plan design to offer a more robust benefit further supports the prevailing belief that NQDCPs are a valuable and appreciated benefit.”
Other highlights from the survey include:
- Companies continue to reduce or eliminate traditional defined benefit pension and cash balance plans.
- Of the 44.7% of companies providing a company match, most calculate according to a fixed percent, or to replace a lost 401(k) match.
- More than half of companies informally fund their NQDCPs, and the popularity of using mutual funds or corporate-owned life insurance (COLI) as primary informal funding vehicles increased in 2011. Once again, respondents ranked managing NQDCP asset-to-liability ratios and improving employee benefit security as their top reasons for informally funding their plans.
- Rabbi trusts remain the security vehicle of choice, employed by 80.3% of all respondents.
- The vast majority of companies (90.7%) rely either exclusively or in part on a third-party recordkeeper to administer their NQDCPs.