More Smaller Employers Jumping on NQDC Bandwagon

August 5, 2009 ( - A new Principal Financial Group research project has found that non-qualified deferred compensation (NQDC) plans are apparently moving down market.

A Principal news release said an increasing number of mid-sized and small employers are now offering NQDC plans, in addition to their large firm brethren – the traditional home of NQDC offerings. Principal is a NQDC plan provider.

Principal, which polled both plan sponsors and participants in conjunction with the Boston Research Group, found that 87% of NQDC sponsors are generally satisfied with their recordkeeper, but only half responded that they are “very satisfied.” The NQDC sponsors want recordkeeping providers to offer the latest and best technology to help plans keep up with “administrative challenges,” according to the news release.

Most NQDC sponsors indicated their plan is informally financed using some combination of COLI, mutual funds, other corporate assets, and/or bond or bond funds.

The Principal researchers said trends making the plans more mainstream could translate into more plan sponsor pressure for higher quality offerings so employers won’t be left behind in efforts to attract and retain key employees.

For example, the Principal indicated 64% of employees in NQDC plans say the offering is important to their decision to stay with their current employer. Nine out of 10 (92%) view the plan as important in reaching their retirement goals.

“Employers understand the importance and need for these types of benefits to help key employees prepare for retirement,” Principal wrote in the research report. “As more employers consider nonqualified deferred compensation to be a ‘mainstream’ benefit for their key employees, employers who do not offer these benefits may lose the ability to attract and retain management talent.”

An 11-minute telephone interview was conducted with 221 plan sponsors while a 10-minute Internet-based survey was completed by 303 participants.

The research report is available here .