More than nine in 10 companies now offer nonqualified deferred compensation plans to their key executives, new research shows.
MullinTBG, a Prudential Financial, Inc. company (NYSE: PRU), discloses this finding in the seventh annual MullinTBG/PlanSponsor Executive Benefits Survey. An El Segundo, Calif.-based company, MullinTBG is a provider nonqualified executive benefits, with 820 customized plans.
The report reveals that 91 percent of businesses offer nonqualified deferred compensation plans. And more than half of firms (52.7 percent) state they offer financial planning benefits, compared to 34 percent in 2009.
“This year’s survey results have once again confirmed the enduring appeal of nonqualified plans in both helping high income earners achieve a secure retirement and meeting an important need in the marketplace,” said George Castineiras, Prudential Retirement’s senior vice president of Total Retirement Solutions. “I believe that NQDCPs have the potential to become even more relevant for high-income earners looking to increase their savings power and lessen tax impacts in the coming years.”
MullinTBG added a new category to the NQDCP Recordkeeping section in 2012, allowing survey respondents to choose “online user experience” as an important factor when selecting a nonqualified recordkeeping provider. This new category ranked second after perennial leader “quality of service team.”
Other survey highlights include:
- Criteria used for determining NQDCP eligibility varies among categories, with job grade cited most often (28 percent), and salary and title coming in second (16.5 percent).
- General plan participation rates declined overall to 43.9 percent, but were highest (54.2 percent) for firms that offer both a company match and informally funded their plan liabilities.
- Of the 47 percent of companies providing a company match, most calculate according to a fixed percent, or to replace a lost 401(k) match.
- Informal funding continues to be a popular strategy for managing NQDCP asset-to-liabilities (58.9 percent), with companies primarily using corporate-owned life insurance (44.3 percent) and mutual funds (40.5 percent).
- Rabbi trusts maintain their position as the top choice for a security vehicle, employed by 79.1 percent of all respondents.
- The vast majority of companies (92.9 percent) rely either exclusively or in part on a third-party record-keeper to administer their NQDCPs.