Plan sponsors are looking beyond traditional voluntary deferral arrangements and towards designs that provide greater flexibility, support retention and give participants more ways to incorporate deferred compensation into their broader planning and financial health.
Plan Design is Expanding
Some employers are expanding eligibility to a wider population of management and highly compensated employees, while participants are showing greater interest in deferring equity-based compensation, including restricted stock units (RSUs) and performance stock units (PSUs). Employers are also exploring matching contributions on voluntary deferrals as a form of enhancing retention.
Plan distribution design is evolving as well. Separate-payment structures, for example, can allow individual scheduled payments to be treated independently rather than one inseparable payment stream. When properly designed under Section 409A, this can provide additional flexibility and optionality to modify the timing of certain future distributions as an executive's financial circumstances evolve.
As plan design becomes more sophisticated, employers are also placing greater emphasis on working with administrators that specialize specifically in NQDC plans rather than treating nonqualified administration as a natural extension of qualified-plan recordkeeping. There is nothing inherently natural about bundling a qualified plan, whose assets are generally held outside the balance sheet, with a nonqualified plan, whose obligations remain on the balance sheet and impacts tax, accounting, finance and requires thoughtful balance sheet management. A 2026 National Association of Plan Advisors (NAPA) article similarly noted that purpose-built NQDC recordkeeping technology can provide greater flexibility in designing customized plans than systems originally developed for qualified-plan administration.
Retention is becoming More Intentional
NQDC plans are also increasingly being evaluated as retention tools rather than simply vehicles for voluntary deferrals.
A recurring question from employers and advisors is how an NQDC plan can be structured to retain key employees. That is leading to greater interest in employer contributions, matching arrangements, deferred signing bonuses, performance-based awards, customized vesting schedules and benefits tied to specific service milestones.
For example, an employer may provide a contribution to a newly hired executive that becomes fully vested after three to five years of service that withstanding that each year’s contribution could run on its own vesting schedule. Other designs may stagger company-contribution payouts over an executive's career with a percentage of the contributions being paid while employed and the balance being paid at normal retirement age
The result is a shift from simply making a plan available to deliberately designing the plan’s benefits around workforce and talent objectives. These plans can also drive culture alignment around corporate goals and objectives and executive performance.
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The shift is from simply making a plan available to deliberately designing its benefits around workforce and talent objectives.
Participation and Education Remain Challenges
Eligible employees do not always participate in NQDC plans, and a lack of education and communication continues to be one of the most persistent challenges. A 2025 Plan Sponsor Council of America (PSCA) survey, reported by NAPA, found that 70 percent of eligible executives participated in NQDC plans, while more than 75 percent of organizations provided NQDC-specific education. Despite these encouraging figures, opportunities remain to improve participant understanding and engagement. A 2026 NQDC plan trends survey found that 46 percent of plan sponsors identified a lack of understanding as the top barrier to NQDC plan participation. The same survey, conducted in connection with PLANSPONSOR, found that 22 percent of employers not offering an NQDC plan were unfamiliar with deferred compensation plans.
These findings reinforce the importance of year-round education, clear communications, modeling tools, and access to information beyond annual enrollment materials. Participants need to understand not only that a plan exists, but also how deferral elections, distributions, investment choices, and long-term financial considerations work together.
From Recordkeeping to Financial Planning
Plan sponsors are asking for more frequent reporting and better visibility into future distributions, including monthly reporting and projections of future-year payouts. Administrative technology platforms that provide the executives and plan sponsors with control over the modeling projections themselves will be embraced more than models that require requested projections from an administrator which may result in waiting days or even weeks before a result is delivered.
Participants increasingly expect to understand how deferred compensation fits alongside their broader retirement and financial picture. Participant portals are evolving beyond basic recordkeeping toward broader financial planning and modeling experiences.
Greater use of account aggregation and open-finance technology could eventually bring NQDC balances together with 401(k), IRA, brokerage and other financial information in a more integrated experience. More financial data and administrative processes are also becoming API-driven and automated.
New Opportunities are Emerging
The next phase of NQDC is also creating opportunities to rethink existing plans.
One area attracting greater interest is access to private-market investment options, giving participants another way to diversify the investment choices associated with their deferred compensation. Traditionally, private markets have been accessible primarily to accredited investors and qualified purchasers. However, deferred compensation plans can provide participants with an opportunity to gain economic exposure to private markets through investment options that might otherwise be unavailable to them
Plans are also becoming more sophisticated in how investments are structured, including the potential to offer different investment options for vested and unvested company-contribution balances.
Many existing plans have operated for years without a comprehensive diagnostic review or plan audit, potentially overlooking opportunities to improve eligibility, contributions, distributions, investment options, participant experience and administrative efficiency. Periodic evaluations can help employers determine whether their plans continue to align with evolving business objectives and participant needs. AI-enabled plan audits are being developed that could provide plan sponsors with valuable insight into where their plan is falling short and where opportunities to improve the plan exist.
Another developing area is shorter-duration deferred compensation design, particularly in industries with large populations of highly compensated employees. Rather than viewing deferred compensation exclusively as a retirement-oriented benefit, shorter-term structures can create additional flexibility around when compensation is received and how the benefit supports an employee's financial objectives, further enhancing the value of NQDC plans as a retention vehicle.
AI-assisted search, support and analytics represent another emerging opportunity, particularly as a way to make complex plans and financial information easier for participants, sponsors, advisors and administrators to understand. The further inclusion of real-time information, mobile access, distribution projections, automated workflows and stronger integrations can also make sophisticated plan features easier to administer and easier for participants to understand.
The next evolution of NQDC will be defined not by any single feature, but by how effectively plan design, specialized administration, technology and participant education work together. For employers, the opportunity lies in evaluating existing plans, identifying areas for improvement, and ensuring their deferred compensation programs continue to meet evolving business objectives and participant expectations. Turning one’s deferred compensation plan into a competitive advantage is the focus and essential in today's business environment when attracting and retaining executive and management talent.
