NQDC Plans Have Similar Designs As Qualified Plans

Seventy-one percent of plans allowing employer contributions make a match, and more than half of plan sponsors offer the same investment menu as offered in their qualified DC plans, PSCA’s benchmarking report found.

The most common reason employers offer a nonqualified deferred compensation (NQDC) plan is to offer a competitive benefit package to key employees (58%) followed by retaining eligible employees (38%), according to the Plan Sponsor Council of America (PSCA) 2016 Non-Qualified Deferred Compensation Plan Survey.

Nearly half of plans (48%) allow both employee and employer contributions, while 29% allow only employee contributions, and 23% allow only employer contributions. Half allow their participants to “re-defer” distribution elections as permitted by Section 409A. Seventy-one percent of plans allowing employer contributions make a match, the most common being a fixed match.

The survey found 42% of NQDC plan sponsors offer participants the opportunity to make “in-service” distribution elections. Two in three allow participants to choose installment payments in addition to lump-sum distributions.

Most plans offer participants a menu of investment options, with more than half (57%) offering the same menu as offered in their qualified defined contribution (DC) plan.

The survey of non-qualified deferred compensation plan sponsors, conducted earlier this year, generated 303 responses from employers who either offer a non-qualified plan now or intend to do so within the next year. Respondents were employers of all sizes and industries (ex. manufacturing, services, distribution, retail, technology, financial services and health care).

The full survey is available for purchase at www.psca.org/research.