Retirement Planning > Saving for Retirement

Non-qualified deferred compensation plan business improving

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MullinTBG, a unit of Prudential Retirement, has launched a new website for participants in non-qualified deferred compensation plans (NQDC).

MullinTBG’s web presence is vital to how participants interact with our systems and experience overall satisfaction with their plans,” said Yong Lee, MullinTBG chief operating officer.

“Enhancing the participant website supports our strong commitment to providing participants with easy access to their account information and the resources they need to prepare for retirement and meet other financial goals,” Lee said.

Lee is responsible for MullinTBG’s overall corporate strategy, and reports to George Castineiras, Prudential Retirement senior vice president, Total Retirement Solutions.

“The new participant website has been updated to improve the “overall user experience” with redesigned account information displays, homepage customization options and navigation enhancements that make accessing NQDC plan online account details easier than ever,” Lee said.

The announcement shone a much-needed spotlight on a large if obscure life insurance product line whose fortunes have recently improved as the economy has stabilized and restarted on a growth path.

MullinTBG, based in Los Angeles, is one of the nation’s largest providers of NQDC plans, managing $22.9 billion in total assets as of June. MullinTBG offers more than 855 customized plans, company officials said.

Industry numbers are hard to come by, but industry officials acknowledge it is a large and profitable business, both for underwriters and the agents who sell the plans.

For example, SNL Financial, which tracks financial data through statutory insurance company filings, said that Corporate-Owned Life Insurance data, which is what companies use to fund these plans, is not readily broken out in the statutory financials.

The industry began experiencing a downturn in 2008 after a strong 2007, according to Lee said.

Lee said that 2010 “saw an uptick in participant appetites for market-based investment options and companies starting bringing back matching contributions.”

He said the trend continued in 2011, indicating a return of investor confidence and renewed faith in the strength of the economy resulting in a bounce back in revenue for 2011 and 2012 to date.

NQDC continues to be attractive for company executives, Lee said.

“With traditional pensions and defined benefit plans waning in prevalence year after year, company-sponsored savings vehicles that offer enhanced deferral opportunities are still fulfilling most company’s objectives to add value by serving as an effective retention tool, making up for qualified plan restrictions, and rewarding outstanding performance that contributes to their and their executives’ bottom lines,” Lee said.

He said the recent economic crisis has actually increased the need for efficient retirement savings vehicles and company-sponsored NQDC plans “offer an opportunity for executives to accumulate sufficient tax-advantaged savings to maintain their desired standard of living in retirement.”

As for investment trends, Lee said that in 2008, more companies that offered NQDC plans started using an investment or crediting rate tied to an outside index or fixed rate in order to offer participants more stable options in which to direct their deferrals. 

He said participants are also being provided with increasingly personalized NQDCP investment options, including actively managed or model portfolios that leave asset allocation decisions to investment professionals as well as access to financial planning benefits.

Finally, Lee said, the executive benefits industry has developed products and services to address executives’ need to restore savings without incurring undue risk, utilizing investment offerings that include market upside participation and downside protection with a guaranteed retirement income stream.

“So, while the purpose of NQDCPs hasn’t changed, the plan design options have evolved to help participants make the most of their deferrals in a challenging economic environment,” Lee said.

According to Lee, NQDC plan participation “stood steady” during the severe economic down that started in 2007.

But, he said, as firms limited or restricted discretionary compensation pending more robust economic times, many executives deferred at lower levels, or didn’t defer at all.

But, during the recession, other eligible employees declined to participate in their company-sponsored plans in order to invest their dollars where there was less perceived risk, “most often because they were concerned about their company’s overall financial stability or worried about the prospect of future personal income tax increases,” Lee said

Whatever the reasons affecting participants’ ability to defer compensation, revenue-generating opportunities for NQDC compensation plan administrators were therefore affected as well, Lee said.

Plan administrators collect fees in a number of ways that may be asset-based, he said.

But, “belt-tightening measures across the board in companies hit hard by the economic downturn resulted in sluggish new sales,” which started to end in 2010, he said.