competitive job market realize that attracting and retaining top
talent is not simply a matter of paying high salaries,” observes
Jamie Kalamarides, head of Full Service Solutions at Prudential. “To
stand apart from competitors, employers need to show they truly
value and recognize high-level managers, by designing executive
benefit programs that increase their deferral opportunities and at
the same time reduce their taxable income,” he adds.
In general, it appears that companies are moving away from
linking their NQDCPs to company stock and company performance,
particularly among large employers. For instance, in 2015 more
than 52% of large employers offered stock option plans in addition
to the NQDCP; this year less than 46% do so. Only about 7% of
NQDCPs this year tie their investment or crediting rate to company
stock—whereas a year ago more than 11% did. More than 84% tie
their crediting rate to market-based investments instead. Matching
contributions, offered by 47% of NQDCPs, are now very rarely tied
to company performance: less than 8% do so.
The incidence of companies setting aside assets to finance
NQDCP benefits (also known as “informal funding”) has remained
steady at about 57% for the past few years. Of those, more than
55% this year are funding with corporate-owned life insurance
(COLI) (up from 47% last year). Mutual funds were the second most
prevalent informal funding option at 35%, down from 45% last year.
“Informal funding essentially secures the incentive value of the plan,
so it is advantageous to both participants and employers. Also,
many organizations opt for COLI as the informal funding vehicle
because of its tax advantages and the ability for an employer to
recover the benefit costs,” Kalamarides concludes.
Are you considering changes
to your NQDCP?
To what is the investment or crediting rate(s)
in the NQDCP tied?
planned 86.9% 86.4% 87.9%
features) 10.8% 12.7% 6.9%
features) 1.7% 0.0% 5.2%
plan) 0.6% 0.8% 0.0%
Outside index* 15.8% 13.3% 20.6%
units 7.1% 8.6% 4.4%
investments 84.2% 85.9% 80.9%
Other 6.6% 7.0% 5.9%
What is your criteria for eligibility?
All Respondents 12.9% 21.6% 16.4% 14.6% 21.6% 12.9%
Base + Bonus Title Salary + Title Job Grade Other
Revenues >$1b 12.3% 25.4% 10.5% 14.9% 22.8% 14.0%
Revenues <$1b 14.0% 14.0% 28.1% 14.0% 19.3% 10.5%
* Outside index (e.g., Moody’s bond index) fixed rate or company performance rate