A growing number of employers report that their nonqualified deferred compensation plans are offered “to provide a vehicle for retirement savings.”
The ninth annual MullinTBG/PLANSPONSOR Executive Benefits Survey notes that the percentage of respondents who reported that their NQDC plan was offered “to provide a vehicle for retirement savings” in 2014 rose to 85% from 77.8% the year before.
The survey also noted that plan participation rates (as reported by 232 responding companies) dropped slightly, from 46% in 2013 to 43% in 2014. Perhaps as a result, survey respondents ranked plan education and communication as the most important to potential plan participants in deciding to enroll in a nonqualified program.
The survey also found that:
- The criteria used for determining NQDC plan eligibility varied among categories, with job grade (28%) and salary and title (20.8%) cited most often.
- Informal funding continues to be a common strategy for managing NQDC plan asset-to-liabilities, increasing in prevalence this year, cited by 62% compared with 57.2% in last year’s survey.
- Companies are primarily using corporate-owned life insurance (54%), along with taxable securities (42%) and cash (19%), as their informal funding vehicle of choice.
- Just over 4-in-10 (41%) respondents offer a company match, which is predominantly calculated according to a fixed percentage.
- Nearly three-quarters (74%) of responding plan sponsors rate their plan as either “effective” or “extremely effective” (up from 70% in 2013).
- Fifty-eight percent of respondents that provide financial planning benefits do so at no cost to the participant.
NQDC Plan Recordkeeping
Most survey respondents (75%) say they rely exclusively on a third-party record keeper to administer the plan. The top three criteria in choosing that record keeper were:
- quality of service team;
- consultative in NQDC plans; and
- online user experience.