The Number That Stopped Me

There's a new PLANSPONSOR/Newport survey out on Non-qualified deferred compensation plans (NQDC).

One line in it made me stop scrolling:

• 82% of plan sponsors(your company) say they're satisfied with their NQDC communication and education.

• 70% of participants (you) say they still don't understand the plan.

Information was delivered. Confidence was not.

That gap, the space between "we sent the email" and "I actually know what to do", is where seven-figure executives quietly make expensive mistakes.

I've spent the past few weeks on a listening tour with people who administer these plans for a living. The conversations sharpened what the survey is really saying.

A lot of plan sponsors still think of NQDC as "401(k), but for executives." 

So it is no wonder that support for NQDC participants falls short. It is nothing at all like a 401(k). 

The size of contribution, almost irrevocable elections, state sourcing of deferrals versus payments, and redeferral mechanics are immensely complex with cash flow and personal income tax ramifications. 

For obvious reasons, plan sponsors don’t want to get into providing personal tax advice to their employees, so most support is window dressing at best, and absolute avoidance at worst.  

One thing that surprised me - 409A violations are not rare, and almost all of them are the record keeper's fault. 

A bonus deferral keyed against the wrong year, a lump sum entered where installments were elected. Even at shops that manually review every redeferral, errors get through.

When they do make a mistake, they are incredibly inconvenient for the participant.

So when the survey reports that 46% of sponsors cite "lack of understanding" as the top participation barrier, I read that differently than a plan sponsor does.

The reason that eligible executives don't enroll is that they don’t have time to understand a very complex plan with significant financial outcomes.

And for the participants that do enroll,  they are making seven-figure decisions — deferral amounts and distribution schedules — with promotional materials written by ERISA lawyers, in a two-week November window, without anyone modeling what the decision does to their household cash flow and tax bill.

A few things I keep coming back to:

1. Lump sum is almost never the right answer, but it's what most participants pick. That isn't a preference. That's a default choice made under uncertainty. Show someone their before-and-after tax picture on $300K vs. $500K deferred, across installment schedules versus lump sum, and the best is in the minority.

2. The election window is the wrong time to educate. The article's answer — AI-driven distribution modeling and financial-planning support — is directionally right, but nobody should be uploading their personal tax return to an AI chatbot to run the numbers. It also assumes you know what to ask the chatbot to analyze. "Office hours with professionals during open enrollment" has shown significant participant participation yet companies rarely offer this service.

3. The millionaire tax is quietly rewriting the math. Massachusetts' 4% surtax over $1M and California's Prop 63 surtax means deferring below the threshold has become a state-tax play, not just a federal one. Plan sponsors are already tracking state sourcing — deferring in California, recapturing in Texas as one idea — and most participants have no idea this optimization could exist.

Here's what the survey doesn't say and what my calls made obvious: this isn't a communication problem. It's an advice problem. 

Executives at public companies have variable, lumpy pay (STIP, LTIP, RSUs), a short election window, and one shot per year to make a choice that compounds for a decade.

They don't need better brochures; they need personalized advice with someone who understands personal taxation intimately. 

If you're a seven-figure W2 earner and your NQDC election is coming up this fall, three questions worth asking now — not in November:

1. What does my household cash flow look like if I defer $X?

2. What does the after-tax picture look like across the next five years?

3. Is my current distribution election still the right one, and if I want to change it, does the redeferral meet the 12-month and 5-year rules?

4. Who is actually checking the record keeper's data entry against what I elected?

   
   

The plans work.

The survey is right about that.

What's underused isn't the plan — it's the participant support around it.

If NQDC is part of your compensation and you'd like a second set of eyes on your election before this year's window, my inbox is open.

Who We Are

Deferred compensation decisions can affect your cash flow, taxes, and retirement income for years. Yet many executives are expected to make them during a brief enrollment window, armed with a plan document and a few generic illustrations.

That is the gap we help close.

MyBluePages acts as an Executive Decision Coach—helping high-earning employees understand their choices, see the potential consequences, and make decisions that fit their lives with greater confidence.