More senior-level executives jumped at the chance to participate in nonqualified deferred compensation plans in 2023 than they did in 2022, according to the Plan Sponsor Council of America's 2023 NQDC Plan Survey released on Feb. 6.
In 2023, almost 2 in 3 eligible employees (63%) contributed to the NQDC plans offered by their employers, up from 61.1% in 2022, the survey found.
Employers typically use the plans to recruit and retain senior-level employees, as is reflected in the survey findings. Almost half of employers (44.7%) said the primary reason for offering the plans is to "have a competitive benefits package."
The plans allow senior executives to sock away retirement money on a tax-deferred basis beyond what they're allowed to with their 401(k) accounts.
Apart from wanting to offer a competitive benefits package, some employers also reported wanting to "allow their highly compensated employees to defer the same proportion of their income as other employees," a desire cited by 19.4% of employers. About 1 in 10 (10.7%) indicated wanting to "help eligible employees accumulate assets," the survey found.
Eligible employees are deferring an average of 9.8% of their base salary, down from 11.6% in 2022. They're also contributing an average of 29.5% of their bonus, up slightly from 28.4% the previous year.
Employers are ramping up education around the plans. In 2023, nearly 3 in 4 employers (73.2%) provided NQDC-specific plan education to eligible employees, up from 55.9% in 2018.
"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," said Will Hansen, PSCA's executive director and chief government affairs officer for the American Retirement Association, in a news release.
The survey was conducted in October and reflects the responses from 135 organizations that offer an NQDC plan.
