Deferred Compensation Administration
You have invested time, money and energy into your deferred compensation program. Whether it is solely participant funded or has employer contributions is of little consequence if participants cannot get instant information about their plan’s terms, benefits and most of all, their account balances.
Without an efficient and effective deferred compensation administration system, the investment and goodwill generated by a well-intentioned deferred compensation plan can quickly be for naught.
If the participants cannot quickly enter a secure and password protected system to see amounts deferred and earned, investment allocations, distribution provisions and beneficiary designations, the path to the Human Resources Department will become well-worn. The plan will become a cause for irritation rather than a positive in the workplace.
Conversely, if the Human Resources and Finance Departments cannot easily get current and historical information, important time and energy is wasted.
The first requirement for a deferred compensation administration system is to be user friendly. Although an over-worked term, if participants and administrators cannot get on the system quickly, easily find what they are looking for, and rapidly exit the system, the plan sponsor is at a disadvantage from the outset.
The second major requirement is flexibility. Does the employer have to modify its goals and objectives to fit the system, or is the system broad enough to easily fit its needs?
Does it have class year ability – each year can be treated for compliance purposes as a separate “plan” unto itself for investment and distribution decisions. This capability should operate behind the scenes so that information is provided in a cumulative summary.
Is the system provider independent? Often it is tied to a mutual fund provider or insurance carrier. This may create a “captive” situation where funding capabilities are limited and updates and important market design changes are not made until demanded for competitive reasons.
The process of planning and implementing a deferred compensation program for executive compensation programs, post retirement plan enhancement as well as employee recruitment, retention and reward is complex. Solid experience and advice is needed to develop a program that meets stated goals and objectives.
Securities offered through Advisory Group Equity Services, Ltd. Member FINRA/SIPC. 444 Washington Street, Woburn, MA 01801. (781) 933-6100.
