Nonqualified Deferred Compensation Plans Play Vital Role In Helping Companies Retain Top Talent, Says NFP's Executive Benefits Trends Study

Replacing a key executive can cost employers up to 400% of their annual salary, which highlights the importance of deploying effective retention strategies

NEW YORK, Aug. 28, 2023 /PRNewswire/ -- NFP, a leading benefits consultant, property and casualty broker, wealth manager and retirement plan advisor, reported findings today from its inaugural Executive Benefits Trends Study. In a notable show of effectiveness, 92% of the study's respondents said offering a nonqualified deferred compensation (NQDC) plan helps them retain their top executive talent, with 93% ranking executive retention as important or critical to their company's success.

The survey also revealed employers have opportunities to improve their NQDC plans, including driving higher usage and better long-term outcomes. Respondents reported their NQDC plan eligibility rates have increased by 45% since 2020, a favorable trend, but have only seen a 32% increase in participation rates over the same period. Most respondents seem content with the status quo of their NQDC plans, as only a limited number (25%) intend to make adjustments in the near-term that could increase their appeal.

"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."

The survey found that even with a demanding marketplace and focus on retention, companies continue to rely on standard benefits that can seem homogeneous and unchanged. For example, 81% of decision makers said they don't plan to select new executive benefits. "Employers need to maximize executive benefits to realize their true value. There are several untapped benefits, such as supplemental executive medical insurance and college tuition for children, that are seldom offered but can set an employer apart. Benefits like these can enhance the attractiveness of compensation packages for current and prospective executives," said Carpenter.

The survey coincides with retirement behaviors of executives evolving in a polarizing way. 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. Regardless of where executives are in their journey, most feel behind in preparation.

"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."

About NFP's Executive Benefits Trends Study
NFP designed its inaugural Executive Benefits Trends study to help businesses develop benefits plans that fit the varying needs of their executives. Insights cited throughout this report were sourced from NFP's database, as well as an online survey conducted from November 14, 2022, to March 8, 2023.

About NFP
NFP is a leading property and casualty broker, benefits consultant, wealth manager, and retirement plan advisor that provides solutions enabling client success through the expertise of over 8,000 global employees, investments in innovative technologies, and enduring relationships with highly rated insurers, vendors, and financial institutions. NFP is the 9th best place to work for large employers in insurance, 7th largest privately-owned broker, 5th largest benefits broker by global revenue and 13th largest broker of US business (all rankings according to Business Insurance).

Visit NFP.com to discover how NFP empowers clients to meet their goals.

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SOURCE NFP Corp.