Use of Non-Qualified Plans Remains Steady
This is just a slight dip from last year’s 94%, according to a CCI press release. Nearly 20% of the Fortune 1000 participated in Clark Consulting’s Executive Benefits–A Survey of Current Trends, which found that supplemental executive retirement plans (SERP) were still somewhat popular, and the use of Company Owned Life Insurance (COLI) to fund non-qualified plans is on the rise.
Sixty-nine percent of responding companies have SERPs. The majority of companies maintaining this type of non-qualified plan were in the utilities (100%) and diversified financial services (92%) sectors, with energy (85%) and health care (83%) following not too far behind.
Of those companies that informally fund their plans, 70% fund NQDC plans with COLI, according to the release. This compares to 63% of NQDC plans funded with COLI last year. Seventy-four percent fund SERPs with COLI, compared with 64% last year.
The survey found that 38% of respondents permit their executives to defer long-term cash incentive compensation awards into NQDC plans, up from 34% allowing this type of deferral last year. Permitting the deferral of long-term stock incentive awards into NQDC plans dropped slightly from 20% in 2004 to 18% this year. Stock option gains (9%) and restricted stock (15%) are other types of compensation eligible for deferral.
In addition, the survey found that many companies use third-party administrators for their NQDC and SERP plans. Forty-seven percent of plan administrators for NQDCs continue to favor third party administrators, with 32% using a blend of in-house and outsourced administration. Forty-four percent of respondents administer their SERPs in-house, with 24% using a third party administrator and 31% respectively using a combination of in-house and third party administrators. Three percent have no administration function whatsoever.
This year’s survey responses are influenced by the new 409(a) requirements in the American Jobs Creation Act of 2004 (See UpFront: Election Year Form ). A copy of the full results of the survey can be purchased at www.clarkconsulting.com .
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