PLANSPONSOR - April/May 2019 - 54

PLANSPONSOR/Prudential Co-Sponsored NQDCP Research
Changing, for the Better
This year's survey of nonqualified plans indicates a marked focus on improving
and expanding these executive benefits, even among smaller employers.
N
onqualified executive compensation plans (NQDCPs)
can be structured for just those employees at the
upper echelons of the corporate ladder-often a small
percentage of employees have access to these programs, based on
various levels of eligibility criteria. Certainly not all organizations
choose to offer NCDCPs, but those that do seem to be doubling
down on improving them, as well as expanding them to include
more eligible employees, our survey says.
Now in its 13th year, the annual PLANSPONSOR/Prudential
survey of nonqualified plans collected data on executive benefit
plan design, investments, funding, and intentions from 211 plan
sponsors in February through March. Of the total, 91.5% offer
NQDCPs, down slightly from last year's 93%.
Although most NQDCP sponsors are not considering any
changes to their plans (82% have no changes planned), it should
be noted that none, not one, of the plans in this year's survey
are considering eliminating the NQDCP, and a mere 3.3% are
considering reducing features in the existing plan. That leaves 15%
of current NQDCP sponsors looking at improving the plan in the
future, up from 14% last year and 11% the year before. The survey
indicates that NQDCPs are becoming not just a tax-deferral and
retirement savings solution, but a recruitment and retention tool
as well. In terms of the purpose of the NQDCP, large companies
are increasingly using plans to " attract and retain executive
talent " , increasing from 71% in 2018 to nearly 80% in 2019.
When we asked our follow-up question on how NQDCPs will
be improved, more than half of respondents (57%) said that they
intend to add or enhance distribution options. This is much higher
than last year, when just 35% indicated the same. As a point of
reference, in terms of payment options for the NQDCP, nearly
86% this year offer a combination of lump sum and installment
payments, comparable to 83% last year. Large employers notably
seem to be moving away from only offering lump sum payments
for the NQDCP.
Deferred Compensation Snapshot (211 total respondents)
Do you offer an NQDCP? What type of NQDCP do you offer?
Yes, offer
a NQDCP
All Respondents
Annual Sales/
Revenues >$1b
Annual Sales/
Revenues <$1b
91.5%
98.4%
81.6%
Voluntary
DCP
401(k) Mirror
(also known
as 401(k)
Restoration)
67.5% 25.8%
71.3% 28.7%
61.1% 20.8%
Section 457(b)
or 457(f)
DC Supplemental
Executive
Retirement Plan
(DC SERP)
9.8% 27.8%
7.4% 32.8%
13.9% 19.4%
What other types of nonqualified arrangements does your company sponsor?
Phantom
stock
All Respondents
Annual Sales/
Revenues >$1b
Annual Sales/
Revenues <$1b
17.0%
17.5%
Restricted
stock/RSU
57.4%
14.3% 28.6%
Stock options
Incentive
program
After-tax
benefit plans
(162 Bonus, etc.)
62.5% 42.5%
38.3% 34.0% 0.0%
35.0% 0.0%
0.0%
14.3% 28.6%
Other
27.7%
30.0%
14.3%
DB Supplemental
Executive
Retirement Plan
(DB SERP)
Other
18.6% 6.2%
25.4%
3.3%
6.9% 11.1%
PLANSPONSOR - April/May 2019

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