Pub. 4 2014-2015 Issue 3

14 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S T o attract and retain key executives, banks have implemented nonqualified benefit plans as part of their overall compensation strate- gy. One of the challenges of bank board members is to understand what is or is not included in these agreements and how the agreement terms affect other agreements such as change-in-control, employment contracts, equity plans and others. Prevalence of Nonqualified Plans Such plans are common in the banking industry. According to the American Bankers Association 2013 Compensation and Benefits Survey, 64 percent of banks surveyed offer some kind of nonqualified deferred compensation plan for top management (CEO, C-Level, EVP), and 45 percent of respondents offer a Supplemental Executive Retirement Plan (SERP). Types include performance-driven benefit plans, director re - tirement plans, death benefit or survivor income plans, and phantom stock or stock appreciation rights (SARS) plans. To avoid violating the U.S. Department of Labor rules concerning plan eligibility, partici- pants in nonqualified plans should be limited to a “select group of management or highly compen - sated employees,” which taking a conservative approach, is typically no more than 10 percent FEATURE ARTICLE “To avoid violating the U.S. Department of Labor rules concerning plan eligibility, participants in nonqualified plans should be limited to a “select group of management or highly compensated employees.” DAVID SHOEMAKER KEN DERKS Making Benefit Plans Work: It’s All in the Contract