Employer sponsorship of nonqualified deferred compensation plans are as strong as ever.
Participation rates are higher in plans offering matching contributions.
Over half of companies say an in-person meeting is the best way to drive plan participation.
Findings from the 13th annual Prudential-PLANSPONSOR Executive Benefits Survey show employer sponsorship of nonqualified deferred compensation plans (NQDCPs) to be as strong as ever at 91%—and informal funding, a popular strategy for financing plan liabilities, increasing three percentage points in prevalence to 59% of responding companies. This year’s survey results also saw a modest jump in the overall NQDCP participation rate from 44% in 2018 to 47% in 2019.
And what specific factors help drive participation? Over the years, this survey has collected volumes of data to track myriad factors that influence an eligible individual’s decision whether to enroll in a company-sponsored NQDCP. And while employers’ top reasons for offering a plan have been consistent over time, what is most important to potential NQDCP plan participants can vary with the economic climate, tax rates, and inclusion or exclusion of certain plan design features.
PARTICIPATION 1. Once again, average participation rates were effectively flat, reflecting little change over the last few years - 47%. 2. Participation rates continue to be higher in plans offering matching contributions - 60%. 3. Plans NOT offering a company match had a much lower participation rate - 34%. 4. As in 2018, whether a plan was informally funded (49%) or not (44%) made little impact on participation rates.
Ultimately, most plan sponsors hold education and communication in high regard as a key component to an NQDCP’s success. Among survey respondents who rated this factor as “extremely important” to potential NQDCP plan participants, it is, by far, considered their most important driver, even outranking company match (65% vs. 53%, respectively). What’s interesting, however, is that plan sponsors still don’t prioritize communication and education capabilities when ranking the most important attributes to consider when choosing a full-service recordkeeper. In fact, “participant communication/education program” consistently ties for dead last with “price,” behind “quality of service team,” “online user experience” and “consultative expertise.” Providing a compelling participant engagement program that presents financial and retirement planning information in a relatable and relevant way is crucial to creating positive outcomes for plan sponsors and participants alike.
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