COLI, TOLI, NQDCs & SERPs

Eighty-five percent of U.S. companies offer nonqualified deferred compensation plans (NQDC), and 67% offer supplemental executive retirement plans (SERPs), according to Executive Benefits – A Survey of Current Trends, a study completed by Dallas, TX-based Clark Consulting, a subsidiary of The Hague-based AEGON. While the number of companies that informally fund their NQDC plans has climbed to 71%, up from 62% in 2007, the number informally funding their SERPs has dropped to 39%, down from 48% in 2007. Corporate-owned Life Insurance (COLI) and Trust-owned Life Insurance (TOLI) remain the most commonly used funding vehicles for both NQDCs (61%) and SERPs (68%). Increasingly, companies are turning to third party administrators or a combination of in-house/third party administrators to manage NQDC plans, leaving only 3% relying on in-house administrators, compared to 15% in 2007. In contrast, 32% administer their SERPs in house, up from 30% in 2007, but down from 44% in 2005. Turning to outside administrators, Clark Consulting said, “may reflect a need for more sophisticated administration in light of the requirements of the Internal Revenue Code section 409A.