Executive Benefits Survey Results of the 2011 ... - Hay Group

3 Executive Benefits Survey
Introduction
In July and August 2011, Hay Group conducted a survey of executive retirement benefits and
perquisites. Our primary objective was to obtain current data on the prevalence of practice
regarding executive retirement, deferred compensation and perquisites for employers of all
sizes and across a broad group of industries. Since we last conducted a survey on executive
benefits more than 5 years ago, the struggling national and global economies, declining
share prices and expanded proxy disclosures have created an intense public focus on
executive benefits. This environment is causing boards of both for profit and not for profit
organizations to focus more on the level and composition of executive benefit programs.
Boards also want to structure their programs in a market-competitive manner that serves
shareholders’ and/or public interests.
An electronic survey questionnaire was made available to employees in a position to provide
information on their companies’ executive benefits policies. Hay Group tabulated and sorted
the results from 317 responding employers with median revenue of nearly $1billion. 16% of
the respondents are tax exempt organizations.
Executive Retirement Plans
Nearly half of the participating organizations provide some type of nonqualified retirement
plan, either defined benefit or defined contribution (refer to the bottom of this page for
definitions). The table below shows not only the overall prevalence, but also the eligibility by
executive group.
Executive Retirement Offered
President &
CEO
Executive
and Senior
VPs
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VPs
Division
Heads
Based on
Compensation
Nonqualified Retirement Plan 49% 66% 57% 42% 17% 32%
Defined Benefit 32% 74% 69% 49% 26% 35%
Defined Contribution 31% 73% 72% 60% 37% 39%
Of those organizations that provide this type of benefit, one third provide both a defined
benefit and defined contribution plan, while the remaining two thirds provide only one type of
nonqualified retirement plan.
The trend away from defined benefit plans continues, in both qualified and nonqualified
arrangements. The data may suggest that organizations with both a DB and DC
arrangements have grandfathered executives into the DB program and offer a DC program
to new executives.
Nonqualified
Retirement
Plan
Nonqualified
Defined
Benefit Plan
Nonqualified
Defined
Contribution
Plan
Executive Retirement Plan Definitions
Supplemental executive retirement plans (SERP), such as top-hat plans or excess plans, which
provide certain employees with additional retirement benefits. These plans may be free-standing
plans that cover several executives or they may be part of individual executive employment
contracts.
Retirement plan that provides a fixed benefit at retirement based on a formula or target income
percentage. The plan is not qualified under the Internal Revenue Code (IRC) and is usually in
addition to a qualified defined benefit plan. This type of plan is designed to supplement defined
benefit pensions and/or restore benefits in pension plans that are limited by ERISA.
Retirement plan in which employers make fixed contributions toward retirement. The plan is not
qualified under the IRC and is typically in addition to qualified defined contribution plans (401(k),
403(b), etc.) This type of plan is designed to supplement defined contribution plans and/or restore
benefits that are limited by ERISA.