Nonqualified deferred compensation plans are being adopted at an increasing rate and have become a core component of an executive compensation strategy. According to findings from the 2026 Newport/PLANSPONSOR NQDC Plan Trends Survey, 88% of employers also found their NQDC plans to be effective in achieving and helping participants achieve long-term financial wellness.
“We are seeing that … people are thinking more about [NQDC] plans as a part of a broader wellness program,” said Clay Kennedy, vice president of insurance and NQDC retirement plan sales at Newport, an Ascensus company, during a Wednesday presentation at the 2026 PLANSPONSOR National Conference in Nashville, Tennessee. PLANSPONSOR is a sister publication of PLANADVISER.
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Identifying Barriers
However, most plan sponsors (58%) surveyed by PLANSPONSOR and Newport said they experienced NQDC participation rates of less than 25%. Similarly, in Morgan Stanley’s report, “Nonqualified Deferred Compensation Trends,” nearly half (44%) of eligible employees were not participating in their company’s NQDC plan. PLANSPONSOR found that nearly 40% of respondents’ plans had a participation rate of 10% or less.
An overwhelming majority of plan sponsors in the Morgan Stanley report (89%) agreed that NQDC plans were critical for senior talent attraction, but the plans remained underleveraged, “and plan sponsors know it,” according to the report.
The most commonly cited participation barriers in the Newport and PLANSPONSOR survey were lack of understanding (46%) and irrevocable election rules (27%).
Kennedy informally polled his PLANSPONSOR conference audience about top barriers to participation, and 76% agreed with the survey findings, saying the top barrier to participation was a lack of understanding.
“This isn’t a big surprise,” responded Kennedy. “Over the last years we’ve been doing this [survey], the lack of understanding, communication [and] education has been a top concern with plan sponsors.”
The findings are also consistent with the preceding 2024 Newport/PLANSPONSOR NQDC Plan Trends Survey. While specific barriers were not identified in that survey, 72% of surveyed employers said they wanted to improve participant communication and education over the following 12 to 18 months.
The 2026 survey found that 58% of surveyed sponsors were still looking to make changes or adjustments to their communication and education tactics, according to Kennedy.
Morgan Stanley’s report also found sponsors eager to improve their communication, with 96% of respondents saying they could do a better job of educating employees about the plans.
When Morgan Stanley asked employers what the barriers to NQDC participation were, the three most common answers were competing financial priorities (44%), lack of familiarity with NQDC plans (35%) and the risk of deferrals being locked in for the year (34%).
Finding Solutions
Flexible plan design options for distribution elections were the top feature sponsors said could impact NQDC plan appeal, according to the Morgan Stanley survey: 94% of responding plan sponsors said plan design flexibility would help their organization meet participant needs.
Another potential solution offered by 96% of Morgan Stanley respondents was improving personalized guidance.
When PLANSPONSOR/Newport survey respondents were asked if they were satisfied with their communication and education, 82% of plan sponsors said yes, but 70% of participants reported still not understanding the plan, highlighting sponsors’ need to rethink their forms of communication.
To do so, Kennedy recommended creating a communication strategy through which participants are engaged and supported in understanding exactly what an NQDC plan is and how it operates.
“You can do that through financial planning support [and] wealth management services,” he said. “When we asked plan sponsors to tell us … what this engagement and what these support services were going to look like, you see an increase in … focus on those decisionmaking pivot moments.”
The Role of AI
This year’s PLANSPONSOR/Newport survey also included a section on artificial intelligence tools, which Kennedy said have been useful in communication, education and plan enrollment.
“Every plan has got an administration manual, all the design options that you have inside a deferred comp plan,” he said. “We can put all that information inside of an AI platform.”
Such an AI platform would then be able to address key questions for participants, such as cost and payment distributions.
“We’re using AI to help distribution modeling for participants,” Kennedy said.
The Newport and PLANSPONSOR survey had more than 200 respondents across 45 industries, according to Kennedy. Respondents represented for-profit and nonprofit employers, ranging from organizations with fewer than 500 employees to ones with more than 10,000 participants.
Morgan Stanley’s study was conducted in January and February in partnership with 8 Acre Perspective, an independent research firm. Two hundred U.S. employer benefit decisionmakers from midsize, large and enterprise organizations were surveyed.
