Clark Consulting Survey Reveals Growing Trends in Executive Benefits; Among Fortune 1000, Nonqualified Deferred Compensation Plans Remain Popular And COLI Informal Funding Continues Steady Growth

Business Wire, Nov 7, 2005

LOS ANGELES -- Clark Consulting, Inc. (NYSE:CLK), a national firm dedicated to helping companies keep their best people, released the results of its twelfth annual survey of executive benefits. Nearly 20 percent of the Fortune 1000 participated in Clark Consulting's Executive Benefits--A Survey of Current Trends, which examines data and trends that affect executive benefit plans, including nonqualified deferred compensation (NQDC) plans and supplemental executive retirement plans (SERP)--tools often used by top corporations to attract and retain sought-after executive talent. This year's survey found that NQDC plans continue to be widely used and that informally funding these programs with Company Owned Life Insurance (COLI) is on the rise. These results are of significant importance, as 2005 is the first year survey responses were influenced by Internal Revenue Code section 409A - the new requirements governing nonqualified plans.

Key highlights from the 2005 survey:

    --  NQDC plans hold relatively steady

        --  91 percent of responding companies reported having NQDC
            plans

        --  NQDC plan prevalence remained high, although the number
            dipped slightly from last year's 94 percent

        --  Among financial institutions, NQDC plan prevalence dropped
            to 92 percent, from a full 100 percent in both 2003 and
            2004

    --  SERP prevalence is higher in certain industries

        --  69 percent of responding companies reported having SERPs

        --  This marks a decline from 78 percent in 2004, but is only
            slightly below the 2003 level of 71 percent

        --  However, certain industries showed strong growth in SERPs
            with a very high prevalence in certain sectors:

            --  Utilities--100 percent

            --  Diversified financial services--92 percent

            --  Energy--85 percent

            --  Healthcare--83 percent

    --  Many companies continue to informally fund plans

        --  85 percent of the tech sector respondents informally fund
            plans

        --  82 percent of the retail sector respondents informally
            fund plans

        --  75 percent of the diversified financial services sector
            informally fund plans

        Of those companies that do informally fund plans

    --  70 percent fund NQDC plans using Corporate Owned Life
        Insurance ("COLI")

    --  74 percent of respondents fund SERPs with COLI

    --  Use of COLI for funding NQDC plans is up from 63 percent in
        2004, and up 10 percent (from 64) for SERPs

"We continue to see growth in the use of COLI for informally funding both SERPs and NQDC plans," said Les Brockhurst, President of Clark Consulting's Executive Benefits Practice. "Companies understand that this is often the best funding tool available for these executive programs," Brockhurst added.

The survey found that 38 percent of respondents permit their executives to defer long-term cash incentive compensation awards into NQDC plans, a continuation of the upward trend seen last year when 34 percent of companies allowed deferral of this compensation. Permitting the deferral of long-term stock incentive awards into NQDC plans dropped slightly from 20 percent to 18 percent this year. Other types of compensation eligible for deferral into NQDC plans include stock option gains and restricted stock at 9 and 15 percent, respectively.

Due to the complexity of NQDC and SERP plan administration, many companies indicated that they utilize third-party administrators. Nearly half (47 percent) of plan administrators for NQDCs continue to favor third party administrators, with a third (32 percent) using a blend of in-house and outsourced administration. Conversely, 44 percent of respondents administer their SERPs in-house, with 24 percent and 31 percent, respectively using third-party or a combination of in-house and third party administrators. Three percent have no administration function whatsoever.

The results of this year's survey indicate that, even as the transition to 409A continues, NQDC plans and SERPs remain valuable tools for companies seeking to attract and retain executives.

Clark Consulting is hosting a webinar on November 10 at 1:00 PM (EST) to detail the results of Executive Benefits--A Survey of Current Trends. Those interested in attending the webinar may do so by registering at www.HR.com and following the registration information or e-mailing Melissa.smith@clarkconsulting.com to join the Clark Consulting survey results' webcast.

For more than a decade, Clark Consulting's Executive Benefits Survey has tracked and measured important benefit benchmarks, such as changes in plan prevalence; options selected for financing and security; types of compensation eligible for deferral into NQDC plans; and perquisites provided to executives by companies. Survey respondents were broadly based geographically--with the highest concentration located in the Northeast (37%) followed by the West (25%)--and more than 24 percent of respondents represented the manufacturing sector, followed by utilities and financial services at 10 and 8 percent respectively.