Using Executive Benefits Network’s database of 111 current clients, focused mainly on Banks in the Midwest region, Executive Benefits Network compiled, analyzed and organized the data to produce a meaningful report to the banking community. This information is intended to provide information and guidance for management to make decisions on Executive Compensation.
Nonqualified Benefit Plans increase in prevalence and variety the higher up the employee is in the organization. For example, the President and CEO role tends to offer more types of benefit plans, although the most common benefit is in the form of a SERP. Overall, Associate Vice Presidents are rarely offered a Nonqualified Benefit Plan outside of Split Dollar. However, in the Vice President role, that number doubles. That number doubles once again as you move from Vice President/Executive Vice President to the President/CEO role.
SERP is the most common form of Nonqualified Benefit Plan offered among Executive Benefits Network’s client base. However, we are seeing an uptick in Defined Contribution Plans, because they offer more flexibility to incentivize based on the results of the employee and/or the success of the Bank. They are also easier to administer than a Phantom Stock Plan, which also correlates company performance to employee benefit. In future iterations of this study, we would expect to see this benefit gradually taking up a larger piece of that pie.
A Split Dollar Plan is similarly prevalent among all executive roles. This makes sense as it is a relatively inexpensive way to offer a benefit for the employee in the form of life insurance protection. The amount of benefit is also very flexible and requires minimal upkeep once the plan is in place.
Keeping and attracting key talent is of the utmost importance in an organization. In addition, providing appropriate retirement benefits to key management is a critical way to recruit and retain. Nonqualified Benefit Plans allow flexibility in offering different benefits for each role in the organization and allows the employer to make decisions based on their specific needs and goals.
Executive Benefits Network describes these findings in their Bank Compensation and Nonqualified Executive Benefit Plan Study, and will further expand upon these findings and recommendations in their May 21 webinar. Materials will be helpful for Presidents, Chief Officers and Board Members to review as compensation and benefit questions arise. There will be a Q&A portion at the end, so please come with questions and comments or send them in advance toNikki Kook at Executive Benefits Network.