Executive Benefits

2005 Executive Benefits – A Survey of Current Trends is Clark Consulting's twelfth annual review of the use of nonqualified executive retirement and welfare programs among approximately 20% Fortune 1000 companies. The report focuses on nonqualified deferred compensation plans (NQDC), supplemental executive retirement plans (SERP) and nonqualified welfare plans, and also includes additional benefit programs such as international executive benefit plans and corporate financial planning benefits.

The report is particularly noteworthy in light of the American Jobs Creation Act of 2004, which created a new Internal Revenue Code section that requires companies to make specific changes in the design and operation of their nonqualified deferred compensation plans. Companies have already begun to revise their SERP and NQDC arrangements in preparation for the compliance deadline of December 31, 2006,  and the statistics and trends contained in the current survey represent the first look at the type of plan changes likely as a result of the legislation. We have flagged those sections of the survey potentially impacted by the new legislation.

Among notable trends revealed in the 2005 report:

• The use of NQDC plans is holding relatively steady in most sectors, offered by 91% of all responding companies.
• Among financial institutions, NQDC plan prevalence dropped to 92%, from 100% in 2003 and 2004.
• 69% of responding companies provide SERPs, a decline from 78% in 2004 but only slightly below the 2003 level of 71%.
• Among companies that informally fund their executive benefit programs, use of COLI to finance NQDC plans rose to 70% from 63% a year earlier, and increased from 64% to 74% for SERPs.
• 47% of survey respondents rely on third-party administrators for their NQDC plans, while 32% utilize a combination of in-house and third-party administration.
• 44% of survey respondents administer their SERPs in-house, with 31% of survey relying on a combination of in-house and third-party administration.