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Principal: Small Employers Hungry For Nonqualified Plans

By Staff Writer

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NU Online News Service, March 22, 2004, 5:25 p.m. EST – More than 39% of established small employers already offer nonqualified retirement plans, and another 7% hope to set up nonqualified plans this year.[@@]

Principal Financial Group Inc., Des Moines, Iowa., comes to that conclusion in a report on a survey conducted by Harris Interactive Inc., Rochester, N.Y.

Harris researchers surveyed 1,005 companies with 5 to 999 employees for Principal in mid-2003. All of the businesses were at least 5 years old, and 70% were at least 15 years old.

Nonqualified retirement plans are plans for executives and others who want to set aside more income than they normally could contribute to 401(k) plans and other plans that qualify for special federal tax breaks.

The nonqualified plans included in the Principal study were defined contribution plans, defined benefit plans, executive bonus plans, split-dollar life plans, stock appreciation rights programs and stock option programs.

When Harris researchers interviewed owners and benefits managers at small businesses with at least one nonqualified plan, they found that:

- 49% offered defined compensation plans, and 36% offered defined benefit plans.

- Only 18% of companies with 5 to 99 employees offered executive bonus plans, but 30% of companies with 500 to 999 employees offered such plans.

- Cash flow was the most popular vehicle for funding the nonqualified plans.