Nonqualified Plans Helping to Meet the Needs of Participants and Plan Sponsors Amid COVID-19
December 10, 2020 at 12:43 PM EST
Despite a challenging year for workers and businesses alike, new research conducted by Principal® indicated that nonqualified deferred compensation (NQDC) plans - employer-sponsored benefits plans for key employees – continued to be valuable in helping employers and key talent achieve their goals. Principal gathered and analyzed data from nearly 1,200 plan participants and 137 plan sponsors nationwide1 to dive into their thoughts about NQDC plans and how their perspectives may have changed this year due to the pandemic.
The survey measured the sentiments of both employers and employees who have NQDC plans in an attempt to understand how the ever-changing pandemic economy may have changed how they view this benefit. Results revealed minimal impact as plan sponsors continued to push NQDC plans as a valuable way to recruit, retain and reward key talent.
“Competition is exacerbated by a more global workforce and the recent forced move of many industries to work from home. The idea of a mobile workforce that can operate from almost anywhere makes the company’s efforts at attracting and retaining even more imperative,” explains John Baergen, vice president of executive benefits consulting at Principal. “In the era of companies needing to squeeze every drop of productivity out of their leadership, losing a top employee or candidate due to an insufficient benefits package is just unnecessary.”
Plan participants reportedly valued communication and participation during the pandemic, and largely stayed the course on their contributions. As the use of digital technologies for employer-sponsored plans continues to increase, accessibility, communication and easy-to-use resources could have a significant impact on participation and the perceived value of the plans.
Forty-one percent of plan participants ranked personalized plan related information as the most important type of content they are expecting to receive. Meanwhile, plan sponsors considered the role of financial professionals critical when sharing information about regulatory changes (72%), assisting with annual review (71%) and handling the initial set up (70%).
Kathleen Souhrada, vice president of nonqualified and life administration at Principal, cites innovation as a key element of ongoing efforts at Principal to expand access to products and services. The company’s focus on creative plan design and administration allows them to customize the experience for clients, to the situations they find themselves in.
“Our consulting team has been constantly engaged with plan sponsors to provide input on design and customization of plan features to keep pace with current and unexpected market situations,” said Souhrada. “We also continue to develop our comprehensive package of Principal® Total Retirement Solutions to provide enhanced access and ease for participants when managing their accounts.”
Amidst the pandemic effects, plan participants and sponsors are largely staying the course with their employment and contribution decisions.
The survey revealed low impact on plan participants:
Plan sponsors reported:
To see more survey results, view the summary of 2020 key research findings (PDF).
About nonqualified plan participant and plan sponsor satisfaction survey
Between June 15 – July 6 and August 17-18, 2020, Principal conducted two online survey with employers who have nonqualified defined contribution plans. And between August 17-28, 2020 with key employees who were currently deferring into a nonqualified plan with Principal®. A total of 137 completed surveys were received from employers and 1,161 from key employees. This marks the 13th year Principal has conducted this research and the results provide statistics and trends to help financial professionals and employers benchmark their key employee benefit offering against peers.
Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals–offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.
©2020 Principal Financial Services, Inc. Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392. Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
1 Current plan participants with a minimum of 100 employees
2 21% increase from June.
3 Rating between 5-10.