Low Participation Rates Linked to Lack of Understanding

More than half of nonqualified deferred compensation plan sponsors are considering changes to communication and education efforts.

A growing number of employers are adopting nonqualified deferred compensation plans, and the plans have become a core component of executive compensation strategy for many companies.

According to findings from the 2026 PLANSPONSOR / Newport NQDC Plan Trends Survey, 87.9% of employers found their NQDC plans to be moderately to extremely effective in helping participants achieve long-term financial wellness.

“We are seeing that … people are thinking more about [NQDC] plans as a part of a broader wellness program,” said Clay Kennedy, vice president of insurance and NQDC retirement plan sales at Newport, an Ascensus company, during a presentation at the 2026 PLANSPONSOR National Conference.

Identifying Barriers

However, most plan sponsors (56.5%) surveyed by PLANSPONSOR and Newport said they experienced NQDC participation rates of 25% or less. The survey found that 38.5% of respondents’ plans had a participation rate of 10% or less.

The barriers to participation that were most cited in the Newport and PLANSPONSOR survey were lack of understanding (45.9%) and irrevocable election rules (27.4%).

Kennedy informally polled his PLANSPONSOR conference audience about barriers to participation, and 76% agreed with the survey findings, saying the top barrier to participation was a lack of understanding.

“This isn’t a big surprise,” responded Kennedy. “Over the last years we’ve been doing this [survey], the lack of understanding, communication [and] education has been a top concern with plan sponsors.”

The 2026 survey found that 57.3% of surveyed sponsors were still looking to make changes or adjustments to their communication and education tactics, according to Kennedy.

Finding Solutions

When PLANSPONSOR/Newport survey respondents were asked if they were satisfied with their communication and education materials, 81.3% of plan sponsors said yes, but 65.2% reported they do not believe participants understand the long-term impact of the NQDC plan elections, highlighting sponsors’ need to rethink their forms of communication.

To do so, Kennedy recommended creating a communication strategy through which participants are engaged and supported in understanding exactly what an NQDC plan is and how it operates.

“You can do that through financial planning support [and] wealth management services,” he said. “When we asked plan sponsors to tell us … what this engagement and what these support services were going to look like, you see an increase in … focus on those decisionmaking pivot moments.”

About four-in-ten survey respondents (40.8%) indicated they offer financial planning and wealth management services to NQDC participants at any time.

Use of AI

This year’s survey also included a section on artificial intelligence tools, which Kennedy said have been useful in communication, education and plan enrollment.

“Every plan has got an administration manual—all the design options that you have inside a deferred comp plan,” he said. “We can put all that information inside of an AI platform.”

Such a platform would then be able to address key questions for participants, such as cost and payment distributions.

“We’re using AI to help distribution modeling for participants,” Kennedy said.

Nearly one-third (32.3%) of employers surveyed said they plan to incorporate artificial intelligence to expand participant communications. More than three-quarters (77.8%) indicated they believe AI can improve NQDC plan effectiveness.

—Valentina Baez

For full research findings with commentary from Newport, visit this site.