According to The Newport Group’s “Executive Benefits: A Survey of Current Trends,” the prevalence of these plans in the large corporate marketplace remains stable in spite of the recent economic downturn.
The Newport Group survey focuses on two main types of non-qualified plans: non-qualified deferred compensation (NQDC) plans and defined benefit supplemental executive retirement plans (DB SERPs)—as well as supplemental long-term disability benefits and other executive perquisites.
According to the survey, 51% of responding companies report having DB SERPs. These plans have seen a modest decrease in utilization over the past few years, primarily due to the expense often associated with offering these plans.
Forty-seven percent of those employees eligible for an NQDC plan elected to participate in their plan. Participation has returned to previous levels, despite a brief decline reflecting the market turmoil of recent years.
The survey results also show there is a continued popularity of diversified investment options (401(k)-type menus). However, a noteworthy trend is the increased popularity of fixed-rate options that likely reflect participant interest in investments that offer reasonable rates of return with lower volatility and risk.
Seventy-five percent of respondents report funding their NQDC plans. There are a variety of reasons plan sponsors make this choice, including establishing an asset that matches and “hedges” the NQDC benefit liability; creating income to offset plan expenses; providing a source of liquid funds from which to pay future benefits; and providing participants with an enhanced level of benefit security.
Sixty-one percent of respondents report they administer their NQDC plans through a third-party. The prevalence of third-party administrators for non-qualified plans is due to the complexities of non-qualified plan administration and the increased risks associated with 409A compliance for plans that are administered in-house.
Forty-four percent of respondents report they administer their DB SERPs through a third-party. While 34% of companies continue to administer their DB SERPs in-house, DB SERPs that require benefit calculation and offsets are generally administered by a third-party actuarial/retirement benefits administrator.
The “Executive Benefits: A Survey of Current Trends” tracked issues and outlooks regarding the rewards programs of Fortune 1000 firms.
To obtain a copy of the survey, contact