How to Increase NQDC Plan Participation: What the Surveys Say Moves Executives

To increase NQDC plan participation, treat low enrollment as a decision problem rather than an awareness problem: most eligible executives know the plan exists, but they can't see what deferring would do for them and they hesitate before an election they can't undo. The levers with the most support are meaningful plan design (employer credits, flexible payout dates, visible informal funding), communication aimed at the decision rather than the plan, and a private way for each person to model their own election before the window closes.

This guide reconciles the participation figures that seem to conflict, summarizes what recent surveys say holds executives back, and sets out a playbook and an ROI framework your benefits team can take to finance. It is written for sponsors of private-employer, 409A-governed top-hat plans.

What a normal NQDC participation rate looks like

Two widely quoted surveys appear to disagree, but they measure different things.

PSCA's 2025 survey, as reported by PLANADVISER, produced an aggregate rate: it pools eligible executives across organizations, so large plans with high participation weigh heavily. The 2026 Newport/PLANSPONSOR survey counts plans, not people, and shows how many sponsors sit in low bands. Newport is part of Ascensus, an NQDC provider, and Morgan Stanley at Work is also a provider. Neither figure is "the" benchmark. The useful takeaway is that participation varies widely from plan to plan, and many plans are well below the aggregate. For more on choosing a comparison point, see NQDC participation benchmarks.

Why eligible employees don't defer

The reasons executives give are consistent across sources, and most are about the decision, not the plan's existence.

• They don't understand it. Lack of understanding (46%) was the most cited barrier in the 2026 Newport/PLANSPONSOR survey, followed by irrevocable election rules (27%).
• They fear locking in. Morgan Stanley at Work's research, as reported by PLANADVISER in June 2026, found the top barriers were competing financial priorities (44%), lack of familiarity with NQDC plans (35%) and the risk of deferrals being locked in for the year (34%).
• Communication misses the decision. PLANADVISER's coverage of the 2026 Newport/PLANSPONSOR survey reported that 82% of sponsors were satisfied with their NQDC communication and education, yet 70% of participants said they still did not understand the plan.
• Education is aimed at awareness. In PSCA's 2025 survey, more than 75% of organizations provide NQDC-specific education, but of those, 65.7% aim to increase awareness and only 16.8% aim to increase participation.

An executive who knows the plan exists still has to answer, "What would deferring 15% of my bonus actually do for me, after federal and state tax, given when I'd be paid and what happens if I move?" Brochures can't answer that. The 409A rules make the stakes feel higher: elections for a year's salary generally must be made by December 31 of the year before, and later changes to timing or form must push payment back at least five years (409A election rules).

The levers that move participation

Surveys show what sponsors do and what executives say, not proven cause and effect, but several levers recur.

Employer contributions

A match or other employer credit gives executives a reason to engage that doesn't depend on a tax-rate forecast. A 2025 survey by Principal, a plan provider, found 43% of sponsors offer employer contributions; Principal describes its sample as small and its results as directional. If your 401(k) match is reduced when salary is deferred, a restoration credit removes a common objection. See deferred compensation employer match.

Flexible payout dates

Executives are more willing to defer when the money isn't locked up until retirement. In PSCA's 2025 survey, 64.3% of employers permit distributions on a specified date chosen by the participant, and 72.9% allow distributions at separation. Scheduled in-service accounts let people defer toward a known goal, such as tuition years, rather than an abstract retirement date.

Visible informal funding

Credit risk is a real concern for participants: deferrals are an unsecured promise. In PSCA's 2025 survey, two-thirds of respondents set assets aside to meet future obligations, and 90.6% of those use a rabbi trust. Explaining what your plan does, and what a rabbi trust does not protect against, builds trust. The NQDC risks and rabbi trust guide is a useful link to share.

Sensible eligibility

Eligibility set too low brings in people who can't yet use the plan; set too high, it misses those squeezed by qualified-plan limits. For 2026, the 401(k) elective deferral limit is $24,500, the compensation limit is $360,000 and the HCE threshold is $160,000 (IRS Notice 2025-67). The 2027 figures are expected in November. Employees who are capped in the 401(k) are the natural audience; see NQDC for highly compensated employees.

Decision-focused education

Shift education from "here is the plan" to "here is what it would do for you." In the Morgan Stanley at Work research, 96% of decision-makers said they could do a better job educating employees, and 96% cited better personalized guidance as a potential solution.

How to make it personal without seeing anyone's data

Personalized help raises two sponsor concerns: crossing from education into advice, and HR handling sensitive financial data. A private modeling tool addresses both: each executive enters their own numbers, sees the trade-offs and decides, and the sponsor never sees any of it.

That is how NQDC Calculator's employer license works. Eligible employees sign in with a work email on your company's domains and get full access. They can model federal and state tax for both paths every year, compare payout schedules, test a state move, see a break-even employer default risk, run sensitivity scenarios and print a report. Your plan's terms are set as starting values, configured with you. The tool never recommends an election, and you never receive individual inputs, results or elections. For the compliance framing, see investment education vs. investment advice.

The ROI of higher, better-informed participation

Finance will ask what a stronger NQDC program returns. The honest answer is that most of the value is protective: it keeps a benefit you already fund working as intended. Frame the case around five drivers, and use your own numbers.

What the surveys say about the stakes

• Retention. In Principal's 2025 report (directional, vendor-sourced), 76% of employers cite retention as a top reason for offering a plan, and 53% of employees say the plan matters when deciding whether to stay. In NFP's 2025 executive benefits report, a survey of 260 executive-benefits decision makers who work with NFP, a benefits consultant, 85% said they cannot afford to lose top talent.
• Fixed costs. The 2024 Newport/PLANSPONSOR survey found 94% of sponsors outsource NQDC administration, so you are paying for infrastructure whether 10% or 70% of eligible employees use it.
• Refunds. In the same 2024 survey, 15% of businesses had seen 401(k) contributions returned to executives in the past three years. A failed ADP test is commonly corrected by refunding excess HCE contributions (IRS Fix-It Guide). Some NQDC designs can absorb refunded amounts, within limits set by Treas. Reg. 1.409A-2(a)(9); involve counsel.

An illustrative break-even

These numbers are assumptions for illustration only, not data or a price quote. Replace them with your own.

• Assume 150 eligible employees, 30 of whom participate today, and fixed plan administration costs of $60,000 a year. Cost per participant is $2,000. If better-informed enrollment brings participation to 60, cost per participant falls to $1,000 with no change in spend.
• Assume your benefits team fields 40 individual NQDC questions each enrollment, averaging 45 minutes. That's 30 hours of specialist time that self-service modeling could partly absorb.
• Assume replacing one senior employee costs your business $250,000 in search, onboarding and lost productivity. If a decision-support tool and rollout cost a hypothetical $20,000 a year, it would cover its cost if it contributed to keeping one such person roughly once every 12 years.

The point is that the cost is small and known while the costs it protects against are large and lumpy. Better-informed participation also matters on its own: an executive who elects a lump sum without seeing how it stacks on top of severance, or who misses a state-tax angle, is more likely to regret the plan than appreciate it.

What to measure each enrollment cycle

Track plan-level results from your recordkeeper, not individual choices.

• Participation rate: participants divided by eligible employees, overall and by band
• First-time enrollees, including newly eligible employees using the 30-day window
• Average deferral percentage of salary and of bonus (PSCA's 2025 averages were 10% and 23%, as context only)
• Mix of distribution elections: lump sum, installments, in-service dates
• Election changes and drop-outs from the prior year
• Volume of enrollment-season questions to HR
• Pulse-survey score on "I understand what deferring would mean for me"

Your plan document governs eligibility, elections and payouts, so involve counsel and your recordkeeper or advisers before changing design or communications. To plan the messages themselves, see NQDC enrollment communication.

Frequently asked questions

What is a normal NQDC participation rate?

It depends on how you measure it. PSCA's 2025 survey found 69.8% of all eligible executives across responding plans participated, while the 2026 Newport/PLANSPONSOR survey found 58% of plans had participation below 25%. The first is an aggregate across people, the second a distribution of plans, so compare your plan with the measure that matches how you calculate yours.

Why don't eligible employees participate in deferred compensation?

The most cited reasons are not understanding the plan, worry about irrevocable elections, competing financial priorities and concern about locking up money. Most of these are about the decision rather than awareness, which is why personal modeling tends to help more than another overview.

Does an employer match increase NQDC participation?

Surveys show many sponsors use employer contributions, and they give executives a reason to engage that doesn't depend on predicting tax rates. A restoration credit also removes the objection that deferring salary reduces the 401(k) match. No survey isolates the match as the sole cause of higher participation.

How can we help executives decide without giving advice?

Offer education and tools that work from each person's own inputs, show every assumption and don't recommend a specific election. A private calculator does this while keeping individual data away from HR. Have counsel review your materials.

How do we show ROI on NQDC participation efforts?

Compare a small, known cost with what it protects: retention of key people, lower cost per participant on fixed administration, fewer HR hours during enrollment and fewer 401(k) refund problems. Use your own turnover and cost figures, and label projections as assumptions.