Filed Under:Markets, Employee Benefits

Executives eyeing bigger contributions to NQDC plans

Over half of survey respondents expect to maintain current contribution levels, while 37 percent plan to increase deferrals.
Over half of survey respondents expect to maintain current contribution levels, while 37 percent plan to increase deferrals.

Relative to 2012, more executives participating last year in non-qualified deferred compensation plans say they intend to increase their deferrals in such plans. Among the reasons for the planned increases: an ability to defer more and expected increases in income tax rates.

So reports Principal Financial Group in a new survey, “2013 Trends in Nonqualified Deferred Compensation.” The mid-year 2014 report polled 266 non-qualified deferred compensation (NQDC) plan participants who have a plan balance of at least $10,000, are 35-plus years old, have an individual income of $115,000 or more, hold an executive job title and are not working for a government agency, school district, community hospital or public university.

The research indicates that more than half of survey respondents (55 percent) expect to maintain current contribution levels, while 37 percent plan to increase deferrals. The reasons for those planning to increase deferrals include the following:

Reasons for increasing deferrals

2013

2012

Can afford to defer more

86%

77%

Expect increase in tax rates

66%

64%

Can’t save enough in qualified plan

63%

49%

Belief in the success of their employers

63%

61%

The Principal report indicates that more than three-quarters of NQDC plan participants (77 percent) are likely to recommend their plan to another eligible employee. And more than 9 in 10 participants say the plans are important in reaching retirement goals.

In deciding on a deferral amount, survey respondents identify the following:

  • Progress towards saving goals (24 percent, up from 17 percent in 2012)
  • Estimated salary or bonus changes (19 percent)
  • Overall investment portfolio (17 percent)
  • Current income needs (15 percent)

On average, the report shows, survey respondents expect their NQDC plan will provide 26 percent of targeted retirement income. And nearly one-quarter estimate their plan will furnish 40 percent or more of retirement income.

While most (89 percent) of participants are somewhat confident about their retirement readiness, just over a third (36 percent) are very confident. Additionally, half of participants (up from 41 percent in 2012) have a written financial plan detailing goals and sources of retirement income.

According to the research, NQDC plans provide on average 26 percent of survey respondents’ retirement income. The largest percentage of respondents (31 percent) flag 40 percent or more of retirement income.

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