2019
Recordkeeping Survey

Nonqualified DC Plan Snapshot

Although the average nonqualified deferred compensation (NQDC) plan is small—63% have fewer than 25 participants, and 75% have less than $5 million in assets/liabilities—this vehicle can be an important benefit for high-income employees and executives. Therefore, finding the right provider is no less important than when making similar decisions for other plan types.

The first question sponsors may face is whether to outsource administration to a specialist, which offers deep NQDC-specific expertise, or a generalist, which offers administration of the plans as a convenient add-on to other services. Yet, the line between these types of providers continues to blur as acquisitions and improvements in technology and integration have forged hybrid organizations capable of delivering on both value propositions. Today, only 23% of the overall market bundles NQDC plans with other services.

Regardless of service strategy, leading NQDC service providers possess the knowledge and systems necessary to manage the complexity of these plans. Nonstandardized vesting schedules, informal funding vehicles—used in almost 20% of NQDCs—and a wide range of permissible distribution options represent just a few of the many challenges NQDC plan sponsors and participants face, so having access to the resources to monitor and prevent potential regulatory violations is of critical importance. —BOK