Prudential Financial Inc : Nonqualified Deferred Compensation Plan Popularity at All-Time High, According to 2011 MullinTBG/PlanSponsor Survey
06/14/2012| 12:20pm US/Eastern
Ninety-four percent of companies view plans as a significant
component of a competitive benefits package
Findings from the sixth annual MullinTBG/PLANSPONSOR Executive Benefit
Survey show employer sponsorship of nonqualified deferred compensation
plans reached an all-time high of nearly 94 percent, indicating that
plan sponsors continue to view nonqualified deferred compensation plans
(NQDCPs) as an essential component of any competitively structured
executive benefits package.
What is more, the number of companies offering financial planning
benefits to executives continues to rise. Nearly 45 percent of companies
offered this benefit in 2011, demonstrating that plan sponsors recognize
the need to help participants meet their retirement savings goals by
providing access to expert advice and guidance.
Although retirement confidence remains at near-record lows and executive
compensation continues to be the subject of public and policymaker
scrutiny, NQDCPs have fared remarkably well throughout the financial
crisis and uneven economic recovery of the past four years. Plan
participation remained steady at 46.4 percent of the eligible
population, with the highest levels of participation (58.0 percent) seen
in plans that both offer a company match and are informally funded.
NQDCPs are company-sponsored savings plans that enable highly
compensated employees to defer more pre-tax compensation than 401(k)
plans and reduce their current taxable income. Income taxes on
investment returns are also deferred until plan benefits are
distributed. NQDCP balances are subject to the employer's creditors in
the event of bankruptcy, making them particularly effective at ensuring
executives have a personal vested interest in a company's financial
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. And
while sponsors' responses varied according to their distinct corporate
philosophies, title (24.6 percent) and job grade (23.0 percent) 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 percent -
reported they are not planning on making changes in 2012. In fact, the
results were consistent across the board, regardless of company
ownership type, revenue or tax status, demonstrating sponsors' overall
satisfaction with their NQDCPs. Further, additions or enhancements in
distribution and investment options were the top priorities for sponsors
who are considering plan changes in the coming year.
"Plan changes that include benefit enhancements like the strengthening
of distribution and investment offerings are a positive sign," said
George Castineiras, senior vice president, Total Retirement Solutions.
"Plan sponsors' willingness to embrace the unique, built-in flexibility
of nonqualified plan design to offer a more robust benefit further
supports the prevailing belief that NQDCPs are a valuable and
Other survey results bring encouraging news: 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. The shift may signal renewed investor
confidence in the markets and the economic recovery.
"Most plans offer a diverse array of investment options - on average,
between 11 and 20," said Yong Lee, chief operating officer at MullinTBG.
"There are a variety of fixed-rate options, and even though more
participants are moving to market-based investments, fixed-rate
alternatives are still smart choices for plan sponsors to include as
part of a well-rounded investment line-up. And during the past few
years, we have seen an increase in the number of companies offering
fixed-rate options in their nonqualified plans to help executives manage
Other highlights from the survey include:
Companies continue to reduce or eliminate traditional defined benefit
pension and cash balance plans.
Of the 44.7 percent of companies providing a company match, most
calculate according to a fixed percent, or to replace a lost 401(k)
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, employed 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.
MullinTBG is a Prudential Financial company and one of the nation's
largest providers of nonqualified executive benefits, with over 824
customized plans and $23 billion in total assets as of March 31, 2011,
representing 70,600 corporate executives. The firm is headquartered in
Los Angeles (El Segundo) and has regional offices in Baltimore, Chicago,
Dallas, New York, Newport Beach and Orlando. For more information,
please go to www.mullintbg.com.
Prudential Retirement delivers retirement plan solutions for public,
private, and non-profit organizations. Services include state-of-the-art
record keeping, administrative services, investment management,
comprehensive employee investment education and communications, and
trustee services. With over 85 years of retirement experience,
Prudential Retirement helps meet the needs of over 3.6 million
participants and annuitants. Prudential Retirement has $239.8 billion in
retirement account values as of March 31, 2012. Retirement products and
services are provided by Prudential Retirement Insurance and Annuity
Company (PRIAC), Hartford, CT, or its affiliates.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with
approximately $943 billion of assets under management as of March 31,
2012, has operations in the United States, Asia, Europe, and Latin
America. Prudential's diverse and talented employees are committed to
helping individual and institutional customers grow and protect their
wealth through a variety of products and services, including life
insurance, annuities, retirement-related services, mutual funds and
investment management. In the U.S., Prudential's iconic Rock symbol has
stood for strength, stability, expertise and innovation for more than a
century. For more information, please visit http://www.news.prudential.com.
Prudential Financial, Inc.
Dawn Kelly, 973-802-7134
© Business Wire 2012