Employees and employers agree that nonqualified deferred compensation (NQDC) plans are a valuable tool in retirement savings, according to a survey released Thursday by Principal.
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The company surveyed nearly 1,200 plan participants and 137 plan sponsors in two phases between June and August. Results show that NQDCs are a popular tool for meeting several challenges faced by participants and employers alike.
Retirement Saving
Ninety-two percent of participants said a NQDC plan was important to help them reach their retirement goals, and the same percentage said they were confident they’d have enough to live comfortably in retirement.
Participants are making the most of their plans. Ninety-three percent contribute enough to get their employer’s maximum match, and almost a third plan to increase the amount they’re deferring to an NQDC plan.
Plan sponsors offer the plans to help participants save more than they could in qualified plans (96%) and replace benefits that are reduced by IRS restrictions on qualified plans (88%).
Over three-quarters of plan sponsors say they are considering offering different investment options in the plan, while 55% are considering redesigning the plan to bring it in line with new objectives. Almost half will increase the amount that participants are allowed to defer into the plan.
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Recruiting
Eight out of 10 employers cited NQDC plans as a valuable recruiting and retention tool, according to the survey. Meanwhile, 81% of participants consider a NQDC an important factor in their decision to take a new job, and 77% stayed with their current employer for the plan.
“Competition is exacerbated by a more global workforce and the recent forced move of many industries to work from home. The idea of a mobile workforce that can operate from almost anywhere makes the company’s efforts at attracting and retaining even more imperative,” John Baergen, vice president of executive benefits consulting at Principal, said in a statement. “In the era of companies needing to squeeze every drop of productivity out of their leadership, losing a top employee or candidate due to an insufficient benefits package is just unnecessary.”
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