Use of NQDC Plans At All-Time High

June 14, 2012 ( - Findings from the sixth annual MullinTBG/PLANSPONSOR Executive Benefit Survey show employer sponsorship of nonqualified deferred compensation plans (NQDCPs) reached an all-time high of nearly 94%.

In addition, the number of companies offering financial planning benefits to executives continues to rise. Nearly 45% of companies offered this benefit in 2011.  

Plan participation remained steady at 46.4% of the eligible population, with the highest levels of participation (58%) seen in plans that both offer a company match and are informally funded.  

For the first time, respondents were asked to describe their criteria for determining plan eligibility. The question was asked to find out whether a strong prevalence exists for tying eligibility to compensation, title, job grade or some combination of all three. While sponsors’ responses varied according to their distinct corporate philosophies, title (24.6%) and job grade (23%) emerged as the most prevalent criteria for determining eligibility.  

Also new to the survey, respondents were asked whether or not they were considering any changes to their NQDCP. The vast majority (87%) reported they are not planning to make changes in 2012. Additions or enhancements in distribution and investment options were the top priorities for sponsors who are considering plan changes in the coming year. 

As the economy continues to improve and executives begin to rebuild savings lost during the financial turmoil of the past few years, more NQDCP participants are re-allocating their savings to market-based investments from more conservative fixed-rate options.   

Other highlights from the survey include: 

  • Companies continue to reduce or eliminate traditional defined benefit (DB) pension and cash balance plans. 
  • Of the 44.7% of companies providing a company match, most calculate according to a fixed percent, or to replace a lost 401(k) match. 
  • More than half of companies informally fund their NQDCPs, and the popularity of using mutual funds or corporate-owned life insurance (COLI) as primary informal funding vehicles increased in 2011. Once again, respondents ranked managing NQDCP asset-to-liability ratios and improving employee benefit security as their top reasons for informally funding their plans. 
  • Rabbi trusts remain the security vehicle of choice, used by 80.3% of all respondents. 
  • The vast majority of companies (90.7%) rely either exclusively or in part on a third-party recordkeeper to administer their NQDCPs.