NQDC Plans: Key Recruitment Tools

PSCA’s 2023 Non-Qualified Plan Survey is now available. 

Arlington, VA (February 6, 2024) – Non-qualified plans are often offered by employers alongside the qualified plan to recruit and retain top talent. PSCA’s annual survey of NQDC plans shows the flexibility in design used by employers to create a competitive benefits package for executives.

The 2023 NQDC Plan Survey, sponsored by Lincoln Financial and Principal Financial Group®, shows an increased focus on education and retirement readiness, though these plans are still primarily used to differentiate the compensation package for top talent.

Eighty percent 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 by more than half of respondents, “helping employees accumulate assets” jumped to the second most common plan goal, cited by 61.2 percent of respondents and up from 43.5 percent the year before. This goal shift is coupled with an increased percentage of companies provided NQDC plan specific education and an increased percentage of companies including that education as part of a comprehensive financial wellness program.

“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,” said 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, 7.0 percent of total employees are eligible to participate NQDC plans. Position/job title remains the most common eligibility criteria, relied upon in more than three-quarters of plans.
2. Participation Profile: Sixty-three percent of eligible employees participate in the NQDC plan, deferring an average of 10 percent of base pay and 30 percent of bonus pay.
3. Employer Match: Three-fourths of employers make contributions to the NQDC plan – most commonly a “restoration match” (48.4 percent 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 percent in 2022.
5. Education Emphasis: Nearly three-quarters of organizations provide NQDC-specific plan education to eligible employees, up from 60 percent the year before.

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. For more information, contact Hattie Greenan at [email protected]