2012 MullinTBG/PLANSPONSOR report reaffirms significance of nonqualified deferred compensation plans in helping executives meet retirement savings goals
NEWARK, N.J.--(BUSINESS WIRE)-- The seventh annual MullinTBG/PLANSPONSOR Executive Benefits Survey reveals that executives now more than ever need options like nonqualified deferred compensation plans (NQDCPs) to help them achieve their savings goals. Higher tax rates and historically low interest rates present potentially greater challenges for highly compensated employees trying to save for retirement and meet other financial goals, making deferring compensation into a nonqualified plan especially attractive. For example, the survey shows a vast majority of companies (91%) are now offering nonqualified deferred compensation plans (NQDCPs). MullinTBG is a Prudential Financial, Inc. company (NYS: PRU) .
The survey, the longest-running of its kind, also highlights that more companies are offering executives financial planners to help create effective retirement planning strategies. In 2012, 52.7 percent of firms state they now offer financial planning benefits, compared to 34 percent in 2009.
"This year's survey results have once again confirmed the enduring appeal of nonqualified plans in both helping high income earners achieve a secure retirement and meeting an important need in the marketplace," said George Castineiras, Prudential Retirement's senior vice president of Total Retirement Solutions. "I believe that NQDCPs have the potential to become even more relevant for high-income earners looking to increase their savings power and lessen tax impacts in the coming years."
A new category was added to the NQDCP Recordkeeping section in 2012, allowing survey respondents to choose "online user experience" as an important factor when selecting a nonqualified recordkeeping provider. This new category ranked second overall after perennial leader "quality of service team."
"The trend of providing additional Web-based resources to help plan participants make the most of their NQDCP is an important one," notes Yong Lee, Chief Operating Officer at MullinTBG. "More companies are utilizing new media tools to connect with their eligible population and educate them about plan features and new investment alternatives. For example, providing options that generate guaranteed income in retirement - previously only seen in qualified plan investment menus - are now being offered inside NQDCPs. Interest in these options and their importance to key employees continues to surge among plan sponsors."
Other survey highlights include:
Criteria used for determining NQDCP eligibility varied amongst categories, with job grade cited most often (28%), and salary and title coming in second (16.5%).
General plan participation rates declined overall to 43.9%, but were highest (54.2%) for firms that offered both a company match and informally funded their plan liabilities.
Of the 47 percent of companies providing a company match, most calculate according to a fixed percent, or to replace a lost 401(k) match.
Informal funding continues to be a popular strategy for managing NQDCP asset-to-liabilities (58.9%), with companies primarily utilizing corporate-owned life insurance (44.3%) and mutual funds (40.5%).
Rabbi trusts maintain their position as the top choice for a security vehicle, employed by 79.1% of all respondents.
The vast majority of companies (92.9%) 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 820 customized plans and over $24 billion in total assets as of December 31, 2012, representing 79,000+ corporate executives. The firm is headquartered in Los Angeles (El Segundo) and has regional offices in Chicago, Dallas, Irvine, New York and Orlando. For more information, please go to www.mullintbg.com. MullinTBG Advisors is a Registered Investment Adviser and a subsidiary of MullinTBG, a Prudential Financial company. Insurance products offered through MullinTBG Insurance Agency Services, LLC ("MullinTBG"). Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. MullinTBG and MullinTBG Advisors are owned and operated independently from M Holdings Securities, Inc. MullinTBG is a member of the M Financial Group, a financial services producer group of independently owned and managed Member Firms. M Financial provides product design and marketing assistance, but does not control the activities of its Member Firms, which are not required to offer financial service products designed or promoted by M Financial. M Financial does not issue insurance policies or financial service products to purchasers.
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 expertise, Prudential Retirement helps meet the needs of over 3.6 million participants and annuitants. Prudential Retirement has $289.8 billion in retirement account values as of December 31, 2012.
Prudential Financial, Inc. (NYS: PRU) , a financial services leader with approximately $1.060 trillion of assets under management as of December 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/.
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