Eight in 10 (80%) respondents in a new survey say they offer a non-qualified deferred compensation plan (NQDC) to make their benefits package more competitive when recruiting key employees.
Non-qualified plans are often provided by employers alongside the qualified plan to recruit and retain top talent. The Plan Sponsor Council of America’s (PSCA) just-released latest annual survey of NQDC plans shows the flexibility in design used by employers to create a competitive benefits package for executives.
While retaining employees remains a top goal of a NQDC plan, cited by more than half of respondents, “helping employees accumulate assets” jumped to the second most common plan goal, cited by 61.2%, which is up significantly from 43.5% in the 2022 survey. The 2023 survey found this goal shift is coupled with an increased percentage of companies providing NQDC plan-specific education and an increased percentage of companies including that education as part of a comprehensive financial wellness program.
The 2023 NQDC Plan Survey, sponsored by Lincoln Financial and Principal Financial Group, shows an increased focus on education and retirement readiness, though these plans are still primarily used to differentiate the compensation package for top talent.
“Companies have long offered NQDC plans to enhance the benefits package to recruit top talent, but increasing the education around these plans and including them as part of a holistic financial plan can increase the value of these programs to employees, thereby increasing their effectiveness as a retention tool as well,” said Will Hansen, PSCA’s executive director and chief government affairs officer for the American Retirement Association.
Other data highlights include:
• Plan Eligibility: On average, 7% of total employees are eligible to participate NQDC plans. Position/job title remains the most common eligibility criteria, relied upon in more than three-quarters of plans.
• Participation Profile: 63% of eligible employees participate in a NQDC plan when offered, deferring an average of 10% of base pay and 30% of bonus pay.
• Employer Match: Three-fourths of employers make contributions to the NQDC plan – most commonly a “restoration match” (48.4% of plans), designed to fill the gap from the match excluded from the 401(k) plan due to IRS limits.
• Financial Wellness: A third of organizations include NQDC education as part of their financial wellness program, up from 19% in 2022.
• Education Emphasis: Nearly three-quarters of organizations provide NQDC-specific plan education to eligible employees, up from 60% the year before.
PSCA’s 2023 NQDC Plan Survey was conducted in October 2023 and reflects the responses from 135 organizations that offer a NQDC plan to employees. The full survey is available for purchase at https://www.psca.org/research/nqdc/2023AR. For more information, contact Hattie Greenan at hgreenan@usaretirement.org.
SEE ALSO:
• Ohtani’s ‘Retirement’ Strategy, NQDC Plans and 2024 Stock Trends with ‘401(k) Lady’ Jeanne Sutton
• Offering NQDC Plans to Retain Top Talent
• Why Employers Wanting to Attract and Retain Key Talent Look to NQDC Plans
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
