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Retaining Key Employees as Job Market Improves

White paper from The Principal studies nonqualified deferred compensation plans

March 23, 2011 (Des Moines, Iowa) – As the economic outlook improves for employers, so does the job market, while the risk of losing key employees increases. This shift makes benefits designed to attract and retain key employees, such as nonqualified deferred compensation plans, an important part of an employer’s retention strategy.

A new white paper from the Principal Financial Group® examines trends among employers and employees using nonqualified deferred compensation plans. The findings are based on an in-depth study of nonqualified deferred compensation plan sponsors and plan participants conducted with Boston Research Group. Key findings include:

  • Nearly one in five employers report nonqualified benefits have become more valuable to recruitment and retention efforts in the past year.
  • Almost all employers (97 percent) with nonqualified plans in place say they will continue offering these benefits next year.
  • Employees participating in nonqualified plans also say they value the plans to help reach their retirement goals. Nine out of 10 participants (91 percent) expect to maintain or increase deferrals in the coming year.

“An improving job market means valuable employees may be evaluating new employment options. Now is the time for employers to review their employee benefits, which offer a powerful bargaining chip when convincing employees to stay put,” said Gary Dorton, vice president of nonqualified benefits for the Principal Financial Group®. “As the economy continues to gain speed, employers who fail to consider nonqualified deferred compensation plans as part of a comprehensive benefit package may also be at a disadvantage in attracting new employees.”

The report, How to Recruit, Retain & Retire Key Employees, offers insight on why employers are turning to deferred compensation plans. The top reasons include:

  • Allow participants to save for retirement beyond their qualified retirement plan
  • Use nonqualified plans as a retention tool
  • Round out a competitive benefits package
  • Help motivate employees to reach performance goals

This year’s study also noted a significant increase in the number of mid-level managers participating in these plans (36 percent, up from 17 percent), suggesting nonqualified plans may be becoming a more mainstream benefit and no longer just for executives.

To view additional research and insight from The Principal, visit our Principal Research Center

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About the Principal Financial Group

The Principal Financial Group® (The Principal ®)[1] is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $318.8 billion in assets under management[2] and serves some 19.1 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG.

"The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
As of Dec. 31, 2010.

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