Recruitment, Asset Growth Key Priorities for Offering NQDC Plans: PSCA
Feb 28, 2024
BUSINESS GROWTH
STRATEGIES
An
industry-leading benchmark study of non-qualified deferred compensation (NQDC)
plans finds that, while recruitment and retention continue to be the top goal
for offering NQDC plans, other reasons for doing so are rising quickly in the
ranks.
Though
these plans are still primarily used to differentiate the compensation package
for top talent, plan sponsors are showing an increased focus on education and retirement
readiness, according to the Plan Sponsor Council of America’s (PSCA) 2023 NQDC Plan Survey,
sponsored by Lincoln Financial and Principal Financial Group.
In
fact, 80% of respondents stated they offer a NQDC plan to make their benefits
package more competitive when recruiting key employees. And, while retaining
employees remains a top goal of the NQDC plan, “helping employees accumulate
assets” jumped to the second most common plan goal, cited by 61.2% of
respondents and up from 43.5% the year before.
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 survey
found.
“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,”
stated Will Hansen, PSCA’s executive director and chief government affairs
officer for the American Retirement Association.
Other
data highlights include:
1.
Plan Eligibility: On average, 7% of total employees are eligible to
participate in NQDC plans. Position/job title remains the most common
eligibility criteria, relied upon in more than three-quarters of plans.
2.
Participation Profile: 63% of eligible employees participate in the NQDC
plan, deferring an average of 10% of base pay and 30% of bonus pay.
3.
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.
4.
Financial Wellness: A third of organizations include NQDC education as part of
their financial wellness program, up from 19% in 2022.
5.
Education Emphasis: Nearly three-quarters of organizations provide
NQDC-specific plan education to eligible employees, up from half of plans four
years ago.
PSCA's 2023
NQDC Plan Survey was conducted in October 2023 and reflects the responses
from 159 organizations that offer a NQDC plan to employees.
The
full survey is available for purchase at https://www.psca.org/research/nqdc/2023AR
Source: NAPA