Clark Consulting Reviews NQDCs and SERPs in the Manufacturing Sector

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Deferred Compensation remains popular. NQDC and SERPs are the favored plans. Corporate-owned life insurance (COLI) and trust-owned life insurance (TOLI) are used more frequently for NQDC plans and less frequently for SERPs. Third-party administration stats may reflect concerns over the requirements of Internal Revenue Code section 409A. Informal funding of plans using COLI remains popular.

Clark Consulting, LLC, today released 2009 Manufacturing Results, the third of four companion pieces to the fourteenth edition of Executive Benefits – A Survey of Current Trends. Each piece in the series provides a more in-depth look at the survey results for specific industries, including financial services and insurance, energy and utility, and retail.

In general, findings for the manufacturing sector show the widespread use of certain nonqualified benefit programs, implying that employers in the space recognize their value.

“Future success for the US manufacturing sector has some key drivers: smart, targeted capital investments, innovation, efficiency and a level regulatory playing field with global competitors,” said Kurt Laning, President of Clark Consulting. “The leaders and talented employees who can make this happen will be highly prized.”

“The manufacturing sector has recently been experiencing what appears to be a resurgence; some have even said that it’s leading the economic recovery,” Laning continued.

“But the picture becomes less clear if we exclude the impact of short-term drivers like the weak dollar, government incentives and the need to replenish drawn-down inventories,” Mr. Laning added.

”Manufacturing remains a significant force in the US economy. There are persuasive arguments that rebuilding America’s industrial base is crucial to its long-term prosperity,” he said.    

The goal of the survey is to identify how corporate America is providing certain nonqualified benefits to its executives. It focuses on plan prevalence, design features, financing and administration within the two main types of nonqualified plans: nonqualified deferred compensation (NQDC) plans and supplemental executive retirement plans (SERPs). Below are the 2009 survey highlights for the manufacturing sector.

2009 SURVEY HIGHLIGHTS: MANUFACTURING SECTOR

  • The majority of respondents report sponsoring NQDC plans (81%). SERPs are almost as widespread – 76% of respondents report sponsoring SERPs.
  • NQDC plans are more likely to be informally funded than SERPs. Just over half of the respondents (53%) report informally funding their NQDC plans, with an additional 14% considering informal funding. The corresponding numbers for SERPs are lower – 16% of the respondents report informally funding their SERPs, with an additional 5% considering informal funding.
  • Mutual funds (64%) and corporate-owned or trust-owned life insurance (COLI/TOLI) (45%) are the most commonly reported informal funding vehicles for NQDC plans. Mutual funds (50%) are also the most commonly reported vehicle for informal SERP funding.
  • Respondents prefer exclusive third-party or combined in-house and third-party administration, especially for NQDC plans (none administered exclusively in-house). 57% of SERPs are administered by a third-party or through a combined arrangement. These preferences may reflect a need for more sophisticated administration in light of the requirements of Internal Revenue Code section 409A.

For more information about Clark Consulting’s 2009 Manufacturing Results or Clark Consulting’s 14th Edition of Executive Benefits – A Survey of Current Trends, visit our website at http://www.clarkconsulting.com/execbenefitssurvey or contact us at requests (at) clarkconsulting (dot) com. Our experienced consultants can help you dissect the information and put it into the context of your business.

Clark Consulting, LLC, headquartered in Dallas, is an AEGON company. AEGON N.V. is an international life insurance, pension and investment group based in The Hague, The Netherlands, with businesses in over twenty markets in the Americas, Europe and Asia.

Clark Consulting is a leading source of strategic financing solutions such as bank-owned life insurance (BOLI) and corporate-owned life insurance (COLI) for inefficiently funded and unfunded liabilities that result from executive and employee benefit programs.

Since 1967, Clark Consulting has helped place thousands of benefit plans and serves as the record keeper for billions in assets for leading American corporations and banks. More general information at http://www.clarkconsulting.com

Media Contact: 214-661-9852

Securities products and services are offered through Clark Securities, Inc., DBA CCFS, Inc., in Texas: 2100 Ross Avenue, Suite 2200, Dallas, TX 75201-7906. Phone: 800.999.3125. Member FINRA and SIPC.

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