NQDC Plans Needed to Reach Savings Goals

The seventh annual MullinTBG/PLANSPONSOR Executive Benefits Survey shows a vast majority of companies (91%) are now offering NQDCPs. Higher tax rates and historically low interest rates present potentially greater challenges for highly compensated employees trying to save for retirement and meet other financial goals, making deferring compensation into a nonqualified plan especially attractive.  

The survey also highlights that more companies are offering executives financial planners to help create effective retirement planning strategies. In 2012, 52.7% of firms offered financial planning benefits, compared to 34% in 2009.   

A new category was added 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 overall after perennial leader “quality of service team.”   

Criteria used for determining NQDCP eligibility varied among categories, with job grade cited most often (28%), and salary and title coming in second (16.5%). General plan participation rates declined overall to 43.9%, but were highest (54.2%) for firms that offered both a company match and informally funded their plan liabilities.   

Of the 47% 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%), with companies primarily utilizing corporate-owned life insurance (44.3%) and mutual funds (40.5%). Rabbi trusts maintain their position as the top choice for a security vehicle, employed by 79.1% of all respondents.