Defined contribution plans are having an effect on the compensation schedules of pension plan sponsors, and employee benefits specialists are adding higher bonuses to their compensation than fund managers, according to a Pensions & Investments survey.
The survey polled 366 fund executives on their total earnings as shown on their 1994 W-2 forms, as well as their base salary, and bonus or incentives and other compensation. Respondents included 30 chief executive officers or executive vice presidents, 102 chief financial officers or treasurers, 183 chief investment officers or fund managers and 32 employee benefit managers.
CEOs and CFOs were the highest paid plan executives, but fund managers and employee benefit managers were neck-and-neck. CEOs reported mean and median W-2 earnings of $156,000, followed by CFOs, who reported mean earnings of $136,000 and median earnings of $130,000. CIOs and fund managers reported $100,000 in mean earnings and $84,000 median earnings, while employee benefit managers reported mean earnings of $110,000 and a median $118,000.
Predictably, base salaries for CEOs were the highest, with a mean salary of $115,000 and a median of $146,000; followed by CFO salaries, with a mean of $111,000 and median of $102,000. Fund managers and employee benefit managers were almost even, with a mean of $90,000 and $92,000, respectively, and medians of $92,000 and $88,000.
The survey also found plan size affects compensation packages, but some salaries and bonuses fluctuated regardless of the asset base.
Earnings and bonuses for fund managers and employee benefit managers rose along with assets, but the climb was not as linear for CEOs and CFOs.
W-2 earnings rose from a mean of $124,000 and median of $100,000 annually among CEOs at plans with less than $300 million in assets, to a mean of $231,000 and median of $205,000 among CEOs at plans with $300 million to $1 billion in assets. But they dropped to $138,000 and $175,000 for CEOs with $1 billion to $3 billion under management, and fell further to $120,000 and $175,000 among CEOs at plans with more than $3 billion in assets under management.
W-2 earnings among CFOs were similar. They rose from a mean of $132,000 and median of $117,000 among plans with less than $300 million, to a mean of $144,000 and median of $141,000 for plans from $300 million to $1 billion, before dropping to a mean of $133,000 and median of $125,000 among plans with $1 billion to $3 billion. W-2 earnings rose again among CFOs in plans with more than $3 billion, to a mean of $164,000 and median of $175,000.
W-2 earnings for fund managers and employee benefits managers showed more steady growth. Earnings for fund managers rose from a mean of $72,000 and median of $73,000 at plans of less than $300 million, to a mean of $86,000 and median of $80,000 for plans with $300 million to $1 billion. A mean of $107,000 and median of $92,000 was found for managers of plans $1 billion to $3 billion, while a mean of $126,000 and median of $92,000 was seen for managers of funds with more than $3 billion.
Earnings of benefits managers rose from a mean of $81,000 and median of $87,000 for plans of less than $300 million, to a mean of $96,000 and median of $94,000 at plans $300 million to $1 billion; the mean was $115,000 and median, $130,000 for plans from $1 billion to $3 billion, while the mean of $186,000 and median of $250,000 was received by managers at plans with more than $3 billion.
The growth and increasing sophistication of the defined contribution market has a lot to do with the similarities in compensation for fund and benefit managers, say observers. With more defined contribution plans replacing defined benefit plans, benefit managers are overseeing more complicated duties and larger departments that could include actuaries, investment managers and administrators.
"As more of that (trend) happens, it wouldn't surprise me that the benefits manager would come up in the compensation ranks," said Suzanne Currie, an associate at Crispi, Wagner & Co., a New York executive search firm.
"The defined contribution market has grown markedly, so benefits managers are having a lot of influence today," said Michael Martinolich, managing director of Smith Hanley Associates, a New York executive recruiting firm.
"The DC people are being paid more in correlation with their growing responsibilities and challenges....It's not that fund managers have dropped to match benefits managers, its that benefits managers have moved up to meet fund managers."
Just to attract the talent necessary to run a defined contribution plan, employers have to bid up their offers, said Ms. Currie, adding there is great demand for qualified defined contribution plan executives. It's not just a typical administrative situation, but it requires personnel savvy regarding regulations, investments, actuarial services and other subjects, she added.
On top of the W-2 earnings reported by survey respondents, bonuses and incentive compensation introduced a wild card into the total compensation package.
Bonuses for CFOs rose steadily from a mean of $39,000 and median of $15,000 at plans of less than $300 million to $45,000 and $30,000 for plans $300 million to $1 billion, and $125,000 and $100,000 for plans $1 billion to $3 billion. But they dropped precipitously, to a mean of $25,000 and median of $13,000, at plans of more than $3 billion.
Conversely, bonuses for benefits managers doubled from a mean of $7,000 at plans with less than $300 million to a mean of $15,000 at plans with $300 million to $1 billion. They rose further, from a mean of $19,000 and median of $18,000 at plans of $1 billion to $3 billion in size, to $60,000 and $75,000 at plans with more than $3 billion.
Bonuses for fund managers generally were smaller than bonuses for benefits managers. Fund managers at plans with less than $300 million received a mean of $7,000; the same as their peers at plans with $300 million to $1 billion. Fund managers at plans with $1 billion to $3 billion fared slightly better, earning a mean bonus of $16,000; and managers at funds of more than $3 billion got mean bonuses of $48,000.
Observers noted there are a number of potential reasons that could account for the anomaly in bonuses, such as statistical aberrations or an increasing outsourcing of money management functions that reduces the amount of assets under internal management.
Earnings and bonuses for sponsors followed a similar regional trend as those for money managers.
Bonuses for CEOs based in the Northeast were the highest, with a mean of $140,000, compared with a mean bonus of $15,000 for CEOs in the North Central region. CEOs in the Southeast region reported a mean bonus of $50,000.
The nature of the pension plan also influenced paychecks, with corporate plan executives overall better paid on average than the rest of their colleagues, and public plan executives being the lowest paid.
Corporate executives reported mean W-2 earnings of $151,000 and median earnings of $147,000, compared with a mean of $73,000 and median of $75,000 for public plan sponsors. The mean and median earnings of Taft-Hartley plan sponsors were $92,000 and $85,000, respectively, and foundation and endowment executives earned a mean of $103,000 and median of $106,000.
"Corporations, by virtue of who they are, by virtue of being profitable entities can (pay better) and can justify it," said Mr. Martinolich.
Among public funds, pay tends to become a political issue, said Ms. Currie. "It's taxpayer dollars; it's a bit more difficult to justify those superstar dollars."