RBC Deferred Compensation Administration Solutions

RBC Deferred Compensation Administration Solutions

RBC Deferred Compensation Administration Solutions RBC has been active in the deferred compensation (shares and cash) market since 1996. Our clients are from various industry sectors and range from large multinational companies to small privately owned entities. For example, in the financial services sector, in which deferred compensation structures are prevalent, our clients include global banks, asset managers, insurance companies and private equity and hedge funds sponsors. About RBC RBC is one of the world s leading diversified financial services companies; one that is distinguished by a long heritage of financial strength, integrity and unwavering dedication to our clients. RBC is among the top 5 largest banks in North America (1) and top 12 largest banks globally (1). Further information on RBC is available at rbc.com/investorrelations. Deferred Compensation PlanS Deferred compensation plans in cash, shares, or other financial instruments have been common for some time. In the financial services sector, the structure of remuneration has been the subject of detailed scrutiny for many years. Regulation has increased and with it, administration complexity resulting in a drain on HR departments, many of whom are subject to budget freezes. Capital Requirements Directive (CRD) III is set to be quickly succeeded by the forthcoming CRD IV. The view of the EU is succinctly put in a recent European Banking Authority s consultation paper: Inappropriate incentives for management and employees within institutions remuneration frameworks are considered to have been a contributory factor that led institutions to implement short-term oriented and excessively risky strategies, by granting disproportionate rewards on the upside and insufficient penalties on the downside. (2) Other regulators in various countries are also focusing on deferred compensation. Against this backdrop, the number of employees and employers caught by these and similar regulations is set to increase. RBC provides a full outsourced online administration and hedging solution. (1) Market data from Bloomberg as at December 2, 2013. (2) European Banking Authority Consultation Paper on Draft Regulatory Technical Standards on criteria to identify categories of staff whose professional activities have a material impact on an institution s risk profile under Article 90(2) of the proposed Capital Requirements Directive EBA/CP/2013/11 RBC Deferred Compensation Administration Solutions 2

DEFERRED COMPENSATION PLANS Decrease the administrative burden on your HR and Finance teams Often these plans are administered on spreadsheets by both the HR team and the Finance team. By their nature, the administration of these plans is often concentrated in defined peaks of activity associated with grants, vesting and distribution. HR teams often struggle to have sufficient resources to match the peaks and troughs of activity. Outsourcing the administration of your plan to RBC means that the plan records will be maintained on our core system, which is designed to administer deferred compensation plans. Our team approach means that we can match our resources to the busy periods associated with the plan. Our teams are staffed with deferred compensation plan administration experts, who bring a depth of knowledge and experience. Underpinning the service is our ISO 9001 accreditation. Use AN offshore Employee Benefit Trust and/or Rabbi Trust to hedge your liability if needed Provide up-to-date, robust reporting for your finance TEAM A key stakeholder in deferred compensation plans is the Finance team who need to keep track of certain plan activity on an ongoing basis. We can provide tailored reporting for your plan and your Finance team. This should ease the administrative burden on the Finance team. Employee USER EXPERIENCE Employees often under-value their deferred compensation awards, as they do not have regular or easily accessible up-to-date valuations. RBC online allows 24/7 access to a user friendly, secure online website that contains up-todate valuations, viewable in over 100 different currencies. If the plan permits, investment and notional investment elections can be made online at grant and during the deferral period. The website is supported by a helpline (telephone and e-mail), so participants can speak to, or contact, the administration team dedicated to their plan. In addition, we can provide third party data feeds for employer total reward intranet portals. In addition to our administration capability, if the plan is funded, we can manage the hedging arrangement using our employee benefit trust network. As the administration and hedging capabilities are integrated, it means our clients benefit from an efficient collaboration between administration of the individual participant records and the holding of the hedging assets. 3 RBC Deferred Compensation Administration Solutions

CASE STUDY Deferred Compensation The client: n A world wide financial services organisation that operated a deferred compensation plan for over 2,000 employees. Awards vested in two equal tranches on the second and third anniversaries of grant. 50% of the employee s deferred bonus was deferred into employee shares. Employees were given the choice over the remaining 50% to notionally invest their deferred bonus into either employer company shares, or into a choice of up to 60 in-house funds, or a mixture of the two. The issues: n an automated solution to administer the plan was required, with participants having online access including up-to-date valuations. n a special purpose vehicle was implemented in the Channel Islands to operate a hedge for the plan in respect of all non-us employees. n a Rabbi Trust was needed to hedge the liability for US employees. n management accounts were required by Central Finance every month, showing the asset positions held in the hedge and the liability positions. n the hedge was liquidated at vesting with payments to over 50 countries in various different currencies. n Many of the investments in the hedge were difficult to deal in, as they were only available for subscription and redemption on specific dates during the year. The solution: n RBC was able to administer the Rabbi Trust using our Delaware Trust Company and rest of world hedge using a special purpose vehicle in Jersey. Individual participant records were managed online, allowing employees to have online access to view current values of their deferred awards. Tailored reports were generated for the company s Finance team. The result: The client was able to manage this plan with minimal internal resourcing. Different stakeholders were afforded tailored services: for example, the good/bad leaver forfeitures included loss of awards if an employee joined a competitor prior to the normal vesting date. RBC managed the leaver process, putting together packs for the plan committee to opine on. As the plan was fully funded, and since there were bad leaver provisions in place, it was self-funding in terms of administration costs and forfeiture monies were netted off against future grants. RBC Deferred Compensation Administration Solutions 4

5 RBC Deferred Compensation Administration Solutions

How can RBC help you? RBC offers a full trustee, administration, investment and record keeping service. Our processes and procedures are ISO 9001 accredited. We can provide some or all of the following services: n fully outsourced administration service for participant records and the hedging mechanism; n partial outsourcing of the participant record keeping only; or n the hedging of investments only. Employee experience Employees can access plan data online and with the additional benefits of: n Real time valuation n multi-currency reporting n online switching (if permitted by the plan) n pension and savings modelling n access to employer communication n Risk profiling and assistance in investment selection. In addition, employee telephone helplines and e-mail helplines are available. Employer experience Employers can also access plan data online and view individual participants accounts. More importantly, a single relationship manager supported by an administration team is appointed to your account. The relationship manager is responsible for the overall relationship and as he or she has a small number of clients, they work closely with you in supporting the ongoing administration of your plan. A flexible solution We have a flexible approach. We work with you and your advisors to determine the most appropriate plan for your company. We adopt our processes and procedures to fit with your individual plan design. Experience RBC has been active in deferred compensation plan trusteeship and administration for over seventeen years. Our team is stable and has very low turnover. Most of our senior people have worked in employee benefits for over 10 years. Many are professionally qualified, bringing different skill sets for the benefit of clients, including: n lawyers n accountants n chartered secretaries n trust specialists n corporate HR/compensation professionals. We are one of the few providers who have ISO9001 accreditation. Implementation RBC has a robust implementation methodology that includes appointing a dedicated project manager and holding frequent conference calls with the client to ensure timely and efficient implementation. Multi-currency We accept contributions, make investments and pay distributions in a wholly multi-currency environment. As part of our standard service, we can accept and pay away in EUR, GBP, HKD, JPY, SGD and USD. Additional currencies are available on request. Plan investments RBC can deal and hold a wide range of investments, ranging from common fund types, private company shares, hedge funds and structured products. Deferred compensation plans in the asset management industry can sometimes include a complex investment range and we have the ability and experience to handle them. RBC Deferred Compensation Administration Solutions 6

CLAWBACK Using an offshore trust to warehouse vested awards can be an effective mechanism to manage clawback provisions. Alternatively, we can administer nominee arrangements to manage clawback requirements. Strength, stability and security MORE INFORMATION More information is available at www.rbccees.com. Contact us t + 44 (0) 8000 566 550 e cees@rbc.com In addition to the trustee and administrator being part of one of the largest global banks, assets held within deferred compensation plans are usually held in a trust structure. If the assets are held in a trust structure, this means that the assets do not belong to, and are separate from, the sponsoring and contributing employer as well as from RBC. The assets are held in trust for the benefit of the participating employees and their dependants. The security provided by a trust structure is difficult to match using any other vehicle. About RBC Corporate Employee & Executive Services (RBC cees) RBC cees is part of the RBC Wealth Management division. RBC cees was formed in November 2005, following the acquisition of Abacus Financial Services Group. With over 20 years experience, 220 staff and assets under management exceeding US$23bn, RBC cees manages in excess of 1000 participant benefits plans for more than 475 corporate clients.* * Figures quoted as at December 2013. 7 RBC Deferred Compensation Administration Solutions

RBC Deferred Compensation Administration Solutions 8

OFFICES Europe Jersey 19-21 Broad Street St. Helier, Jersey Channel Islands, JE1 8PB t +44 1534 283000 f +44 1534 283801 Guernsey PO Box 48, Canada Court St. Peter Port, Guernsey Channel Islands, GY1 3BQ t +44 1481 744000 f +44 1481 744001 London Riverbank House, 2 Swan Lane, London, EC4R 3BF t +44 (0) 20 7653 4000 f +44 (0) 20 7329 6144 Edinburgh Exchange Tower, 9th Floor 19 Canning Street Edinburgh, Scotland EH3 8EG t +44 131 222 3600 f +44 131 222 3601 Asia and Middle East Singapore 20 Cecil Street #28-01 Equity Plaza Singapore 049705 t +65 6230 1517 f +65 6532 2997 Hong Kong 17/F Cheung Kong Center 2 Queen s Road Central Hong Kong t +852 2848 1388 f +852 2521 2968 Dubai Park Place Tower, Suite 1403 Sheikh Zayed Road, PO Box 3614 Dubai, United Arab Emirates t +971 4 331 3196 f +971 4 331 3960 Geneva 6 Rue François-Diday 1204 Geneva Switzerland t +41 22 819 4242 f +41 22 819 4343 RBC cees Limited ( the Company ) is regulated by the Jersey Financial Services Commission in the conduct of trust company business in Jersey. RBC Corporate Employee & Executive Services ( RBC cees ) comprises a number of companies which are all subsidiaries of RBC. RBC cees terms and conditions are updated from time to time and can be found at http://www.rbccees.com/cees-legal.html. Registered office: 19 21 Broad Street, St. Helier, Jersey, Channel Islands, JE1 3PB, registered company number 65008. / TM Trademark(s) of Royal Bank of Canada. Used under licence CA/Aug 14/551 9 RBC Deferred Compensation Administration Solutions