Offering nonqualified deferred compensation (NQDC) plans could help employers retain top talent, finds new research released today from benefits consultant NFP.
According to NFP’s Executive Benefits Trends Study, 92% of plan sponsor respondents said providing a NQDC plan to their company’s suite of benefits helped them keep top executive talent, and 82% offer the tools to retain employees while 54% offer the benefits to help participants prepare for retirement.
Despite being a tool for employee retention, NFP’s findings note that participant use of the feature is still underutilized. In the study, respondents reported that NQDC eligibility rates have increased by 45% since 2020, yet respondents say they’ve only seen a 32% increase in participation rates in the past three years.
“Nonqualified deferred compensation is an essential lever in creating executive benefits programs that enhance retention of top talent, but the plans are being underutilized,” said Joe Carpenter, head of Executive Benefits, NFP. “Companies need to tailor their plans to the unique needs of their executives and untangle the complicated plan details for eligible participants. Continuous plan communication and knowledge-sharing also matters as it helps drive how executives perceive the value of the benefit.”
NFP’s research also surveyed respondents on the effectiveness of plan communication to gain a better understanding on whether employees are understanding their workplace benefits. According to the research, 23% say they completely understand the benefits their employer offers, while 61% say they mostly understanding, but still have a few questions. Fifteen percent responded that they understand some of the benefits, but find most elements confusing, and 1% do not understand at all.
When it came to plan satisfaction, 51% said they are somewhat satisfied with their plan communication and education, while 62% are satisfied with their own understanding of the benefits.
Still, even though half of respondents say they are satisfied with their plan’s communication and education, and as more plans offer NQDCs, most respondents continue to believe they lack proper retirement planning and preparation.
Nearly one-third (31%) of respondents said they intend to retire later than expected, while one-quarter anticipate retiring sooner than they had originally planned. This is despite 87% of plan sponsors believing participants are satisfied with the impact of NQDCs on their retirement preparedness, according to NFP.
“With retirement trends shifting in two different directions, companies need to develop benefits plans that fit the varying needs of executives,” Carpenter concluded. “There’s no question employers understand talent drives success and top tier executive benefits packages attract and retain top talent. Their challenge is keeping them within budget in the face of rising costs and an unsettled economy.”
SEE ALSO:
- Why Employers Wanting to Attract and Retain Key Talent Look to NQDC Plans
- NQDC Proves Impactful for Employers and Employees Alike