U.S. employers are increasingly de-emphasizing the retention of executives as a key priority in making decisions about executive benefits, a new study suggests.
Just two years ago, 84% of respondents to an annual survey by benefits adviser NFP identified retention as a major factor in making such decisions. In 2024, that proportion declined to 71%. This year it plummeted again, to 58% of the 260 participating executives.
Company financials, which 44% cited as a major factor impacting executive benefits decisions in 2023, increased to 58% this year, tying with retention.
NFP characterized this recalibration during a time of economic turmoil as a sign of maturity rather than retreat. “Organizations are aligning executive benefit strategies with today’s realities: tighter budgets, growing demand [for executive talent] and the need to retain top talent without overextending financial resources,” the study report said.
To be sure, most (85%) of those surveyed said their company “can’t afford” to lose top talent.
However, nearly every respondent (97%) said they were at least somewhat concerned about the economy. That’s pushing companies to rebalance their approach to executive compensation, according to the report.
“Although retention remains a priority, financial discipline has regained equal footing in overall strategy,” wrote Tony Greene, president of executive benefits for NFP, in his foreword to the report. “The post-pandemic generosity that once defined these [pay] packages is giving way to a more measured, sustainable model.”
The report put a spotlight on nonqualified deferred compensation plans, which it said offer a “rare combination”: cost-effective design for employers and tax-advantaged flexibility for key employees. A large majority (83%) of survey participants said their companies offer some type of deferred compensation.
While retention remains the top reason companies offer NQDCs, they are also doing so to stay competitive with peer companies, support long-term executive retirement planning and help top talent take greater control of their financial future.
Among survey respondents whose companies offer NQDCs, 82% said they have at least a moderate impact on plan success. Additionally, 63% said bank-owned and corporate-owned life insurance plans have at least such an impact.
Perhaps surprisingly, only 29% of surveyed executives said they completely understand their benefits, while 54% said they mostly understand but still have questions. And 18% said they mostly find their benefits confusing.
The survey found that employees who understand their benefits are significantly more likely than those who lack clarity on their investment options to be extremely committed to their employer (65% vs. 36%).
