To attract and retain qualified candidates, more plan sponsors are expanding their employee benefits programs to include non-qualified deferred compensation (NQDC) plans.
New research conducted by Principal Financial Group indicates that NQDC plans – employer-sponsored plans that enable employees to save more of their earnings for retirement – can help employers recruit and retain key talent, and are essential in helping participants reach their retirement savings goals. The research found that for participants, NQDC plan availability plays an important role in the decision to stay with an employer (53%), take on a new job (60%), and prepare for retirement (80%).
Additionally, eight in 10 participants say an NQDC plan is important in reaching their retirement goals. Of the 27% of participants with an NQDC match from their employer, 93% contribute enough to get the maximum match, and 63% said their main reason for participating in a deferred compensation plan is to save for retirement. Others said it was to reduce current taxable income (21%), add contributions that would otherwise be missed (11%), and save for financial needs while still working (5%).
Even as the labor shortage decreases, employees are still looking for jobs with quality benefits. While businesses say they’re increasing pay to help retain existing key talent, according to Principal research, 27% employees state employers could do more. This is compared to 24% of employees who say increased pay would help retain them on the team, and 13% who want benefits instead.
“Labor has been incredibly mobile this year, as employees have changed jobs or career paths in search of better pay, benefits, and growth opportunities. Our research clearly indicates that a non-qualified deferred compensation plan serves as a valuable benefit to the retention of key employees, and attractive to prospective candidates,” said Nate Schelhaas, senior vice president and head of life protection solutions at Principal.
Employers see value in offering NQDCs
On the employer side, plan sponsors are seeing the value in offering the benefit to workers and candidates. Fifty-nine percent said they view the plan as a valuable recruiting tool, while 66% said the benefit is a vital retention feature for employees.
These employers understand the value in offering such a benefit, too. Eighty-nine percent said they offer a NQDC plan because they want to provide a competitive benefits package for key employees, and 88% want to help participants save for retirement above qualified plan limits.
Eighty percent of plan sponsors said offering a NQDC plan helps key employees manage current taxation, while 75% see the benefit as a retention tool for key employees. Sixty-eight said offering NQDCs replaces benefits that are reduced or lost by Internal Revenue Service (IRS) restrictions on qualified plans. Sixty percent provide the benefit to match benefits offered by competitors.
Just as offering the benefit has proved valuable in recruiting and retaining key employees, plan sponsors are making sure to contribute to these benefits as well. Twenty-four percent of employers contribute to the plan without requiring employees to add too, and 76% have both employer and employee contributions.
A full look at the survey results can be found here.
SEE ALSO:
- NQDC Plans Give 401k Sponsors a Competitive Edge
- Voya Includes Private Equity Investment Option in NQDC Offering
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.