Executive Benefit Program Usage Dipped in 2014

U.S. companies reported a slight 3% drop in non-qualified deferred compensation plan participation rates from 2013 to 2014, according to the MullinTBG/PLANSPONSOR Executive Benefits Survey.

Survey respondents ranked quality plan education and communication as the most important feature when deciding to enroll in a non-qualified program.

“Clear communication of plan features and education about the benefits of deferring compensation to meet financial planning goals are key drivers of plan participation and satisfaction for both participants and plan sponsors,” says James McInnes, senior vice president for total retirement solutions at Prudential Retirement.

Consistent with previous years, the survey revealed a large majority (84%) of companies offer non-qualified deferred compensation plans (NQDCP) to their highly compensated employees, putting it at the top of the list as the most common executive benefit among survey respondents. Among companies offering these plans, three-quarters rely exclusively on a third-party recordkeeper to administer the plan and rank quality of service team, willingness to be consultative in NQDCP services, and ease of online user experience as the top three factors they use to choose a recordkeeper.

“As more companies offer and improve their non-qualified programs, recordkeepers need to understand each plan sponsor’s needs and help ensure the plans are designed in a way that keeps participants engaged and increases deferral rates,” explains  Yong Lee, chief operating officer at MullinTBG. “Whether that’s by coupling these plans with financial planning benefits, which 48% of survey respondents already provide, or other offerings, companies must work with their providers to design executive benefits that will attract and retain valued employees and most importantly, help them realize successful outcomes for their financial future.”

Research shows the criteria for determining NQDCP eligibility varied among categories. For a strong majority (85%), the NQDCP is offered “to provide a vehicle for retirement savings,” up from 77.8% in 2013. The strategy of accessing informal funding to manage NQDCP asset-to-liabilities is on the rise as well, used by 62%, up from 57.2% in 2013.

Nearly three-quarters (74%) of plan sponsors rate their plan as either “effective” or “extremely effective,” with 58% that provide financial planning benefits doing so at no cost to the participant. However, McInnes explains that executive benefits will not accomplish their stated goals without the engagement of participants.

The survey includes 232 responses from plan sponsors sharing insights about their executive benefits offerings.