How advisors can increase nonqualified deferred compensation (NQDC) plan participation during enrollment

Employer-specific rules affect NQDC plan participation 

Many executives and highly compensated employees max out contributions to their 401(k) or other qualified plans relatively early in the calendar year. Eligibility to participate in the company’s NQDC plan provides these employees a chance to continue saving on a pre-tax and tax-deferred basis.

But unlike 401(k) plans, NQDC plans offer more flexibility and options to higher earners that can help meet their savings needs and goals, but they have different rules than qualified plans, which many employees are either unaware of or don’t understand. 

Advisor strategies that can help increase NQDC plan participation rates 

This is where a plan sponsor’s advisor can play a crucial role. By partnering with the NQDC recordkeeper and the employer’s HR department, advisors can help demystify the NQDC plan for employees and drive increased plan participation, which starts with one simple principle: education drives engagement.

Here are four effective approaches advisors and sponsors can take to improve employee education and encourage more participation in the NQDC plan: 

1. Collaborate with the plan provider—Most NQDC providers produce participant education materials, but those resources are only effective if used properly. Advisors should work closely with the provider to ensure there is a robust, tailored communications plan integrated into broader benefits enrollment activities. 
2. Host onsite or virtual educational sessions—Holding meetings at the employer's office or virtually can be a vital educational tool. This allows employees to ask questions in a comfortable, familiar environment and receive real-time answers about the plan.  As noted earlier, getting in front of the client is vital. 
3. Offer online scheduling for personalized consultations—Virtual one-on-one meetings between the advisor, the company’s HR representatives, and employees can be a game-changer and allow you to add considerable value as an advisor. Online availability offers flexible scheduling and confidentiality, while making it easier for employees to learn more about the NQDC plan. 
4. Encourage C-suite advocacy—If C-suite employees participate in the plan and even advocate for it, that sets a tone throughout the organization. Encourage executives who are participating in the plan to share their stories with eligible employees who’ve yet to enroll. This validates the plan’s benefits far more persuasively than the word of an external advisor or any HR communication. 

Common employee questions that affect NQDC enrollment decisions

NQDC plans are unique and often designed for each employer’s specific needs or requirements. However, there are certain questions that are likely to be asked by employees interested in enrolling in any plan. These include:

• What happens to my money if I leave the company?
• How will this affect my taxes, both short and long term? 
• Is my money secure if I enroll? 
• Will I have multiple investment choices? 
• When can I make withdrawals?

Without knowing the answers to these questions, employees may simply opt out, so it’s important for advisors to become familiar with the terms of each specific plan before holding educational sessions.

Aligning with existing organizational norms, practices, and programs to educate successfully on the NQDC plan is also crucial. 

How Newport supports advisors in boosting NQDC plan participation 

A plan provider that focuses solely on recordkeeping without robust educational support leaves a gap that must be filled by advisors and HR. Choosing a provider that offers comprehensive communications, responsive service, and a strong participant-facing platform can significantly improve the overall success of the plan.

Newport, an Ascensus company, has been a leader in NQDC plans for over four decades. Our experts work with advisors and sponsors to create tailored communications with a full spectrum of personalized messages to effectively promote the key benefits of NQDC plans and maximize participation.

Our key features include:

• Education, information, and motivation: Our communications aim to educate, inform, and inspire participants to take action. We start by providing materials that generate interest and awareness in the plan, followed by easy-to-understand enrollment kits that outline the plan’s details and investment options. 
• Participant service center: Our team assists plan sponsors with inquiries, transactions, and investment information. Once participants are enrolled, they also have easy, convenient access to their accounts through our secure website and our toll-free call center.
• Online access: Our dynamic website provides plan participants with quick and easy account management tools, accessible from any device, and enables them to manage their accounts and distributions through our intuitive Participant Dashboard and Distribution experience.

For more information about Newport’s NQDC plan educational resources, please contact us.

*Source: Newport/PLANSPONSOR NQDC Trends Survey Report (employer survey on NQDC plans); https://www.ascensus.com/solutions/nonqualified/nqdc-survey-report/