NQDC

Executive Benefits: Is Your Organization Conspicuous By Its Absence?

Executive Benefits: Is Your Organization Conspicuous By Its Absence?

Author Executive Benefits Team
Date September 14, 2022
Share

New executive benefits survey shows the use of NQDC plans is considered to be more important than ever for retaining key employees and top talent.

For most business leaders, there is an ah-ha moment when they realize that their organization is both defined by what it does and by what it fails to do. 

This reality has never resonated more clearly than it does in today’s economy when few companies can afford to be complacent about retaining the talented management that has made the business successful. While historic data* has shown that more than 90 percent of Fortune 1000 companies offer a nonqualified deferred compensation (NQDC) plan as part of their benefits package, the current Newport/PLANSPONSOR Executive Benefits Survey reveals further insights about the use of nonqualified plans. The in-depth report identifies what it describes as a “fundamental shift” among survey participants in how companies are putting nonqualified plans to work to help them both recruit and retain employees.

Executive Benefits By the Numbers

The Newport/PLANSPONSOR NQDC survey collected data between March and April 2022 from 350 companies. While company size based on annual sales or revenues ranged from under $250 million to greater than $50 billion, companies with annual revenues between $1 billion and $5 billion made up the largest sector of survey participants. Additionally, 54 percent of companies participating in the survey were publicly traded, 46 percent were privately held, and only 7 percent qualified as tax-exempt.

Ninety-eight percent of the companies surveyed this year identified that they currently offer an NQDC Plan. Noteworthy, however, is that 42 percent of the companies that offer a nonqualified plan either now have or plan to add a discretionary company contribution to it.

As the report explained, “…many companies have decided to take a harder look at plan design features, with a particular emphasis on making their NQDC plans more participant friendly. Of the companies contemplating changes to their plans over the next 24 months, 29 percent responded that they would like to improve the distribution choices available to participants, including in-service and retirement payout options and review and enhance the investment menu.”

Survey Reveals Changing Objectives for Use of NQDC Plans as Part of Executive Benefits Strategy

Rank how important each of the following goals are for your deferred compensation program.

  • To have a compensation program that is competitive with peer companies
  • To retain executives
  • To allow executives to accumulate assets for their financial planning needs
  • To attract executives
  • To compensate executives in a more tax-efficient manner
  • To increase stock/equity/phantom stock ownership of the film by eligible executives
Chart

Survey Findings

“Retain/attract executives was the most important goal in this year’s survey, with a weighted score 12% greater than the next highest category “Compensation program that is competitive with peers.”

Marketplace Insights

“Retain/attract executives” has been the important theme in the corporate marketplace over the past 12 months, and we continue to see that play out here. When we look at the effectiveness of the NQDC, we suspect that some of the ways these plans can be used to attract and retain executives are being underutilized.

All survey data included in this post was developed by and is the property of Newport an ASCENSUS Company in conjunction with PLANSPONSORER. Newport Group, Inc. 2022.

*PLANSPONSOR & Prudential report and Aon Hewitt Retirement Income Adequacy at Large Companies

Share

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through Lion Street Advisors, LLC (LSA) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI and LSF/LSA are non-affiliated entities and separate entities from OneDigital.

Unless otherwise noted, VAI/VSI, LSF/LSA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

Lion Street Advisors // Lion Street Financial

Subscribe to Get Executive Benefits News in Your Inbox

How would you like to subscribe?(Required)
Get news as it's published, or get our newsletter with key updates 2-3 times per month.
This field is for validation purposes and should be left unchanged.