2025 NFP U.S. Executive Compensation and Benefits Trend Report

Posthauer, Amber   0:05
Thank you for joining us today. We're going to get started in about 60 seconds to allow for everyone to get connected. We'll get started shortly.

Welcome everyone to Navigating Executive Benefits in 2025. Thank you for joining us. Questions have a tendency to get lost in the chat, so please send your questions through the Q&A today. We'll try our best to answer all of your questions, but if for whatever reason we're unable to get to your question today.

Please e-mail learning@nfp.com. At this time, I'd like to hand over the call to Tony Green, President of Executive Benefits, NFP and Aeon Company. Tony, the floor is yours.

Greene, Anthony   1:13
Thanks, Amber. Welcome everybody. We'll spend a little bit of time today talking about the results we've seen in our third annual Executive Compensation and Benefits Trend report. It is getting more and more robust each year we do it.

We had a good response level this year and we're starting to see some change in the trends in terms of how plan sponsors are thinking about how they deliver executive benefits to their highly compensated employees. I do encourage you to use the Q&A if you've got questions, but if for some reason you can't get to it today.

Don't hesitate to reach out, reach out to myself or one of my team. Executive benefits is one of the areas of true uniqueness that NFP brings to the market in the sense that we we do all the things and we own all the platforms that support those things. And so it gives us a a strong competitive differentiating.

In the marketplace. So with that said, I'll get started walking through some of the things we found out based on this year's report. A little bit about us, 320,000 executives covered and now that we are owned by Aon, Aon also has an executive benefits practice.

And we have we we present as a combined set of numbers. Stand-alone NFP was in the top five. Not maybe a little surprisingly, we're a slightly bigger executive benefits practice than Aon's was, but when you combine Aon's.

Numbers with ours, we are now without doubt the largest provider of executive benefits in the industry. I won't bother reading the whole slide, but we are a little proud of this $32 billion of assets under management, 44% of the Fortune 100 companies served. So I know everybody can do the quick math.

But that means we have 44 of the Fortune 100. It's it's a pretty good statistic and though not our core market, I will tell you that 17 of those are actually were NFP Executive benefit clients even before the acquisition.

In general, NFP Executive benefits services, small to mid-size companies, that's where we've always lived. We can scale large, but we're very, very good at working with the majority of the customers and plan sponsors that that we on this call all have.

And this presentation, by the way, will be available to anybody who wants it. So please don't feel like you got to write everything down. Take the notes you want, but we will give you this presentation after the fact. So we reached out to our base. We got 260 respondents, which is a good number.

They are, they are decision makers. They are CHROS, CEOs, CFOs. We have a large penetration in the financial services market. So there's a lot of that represented here. But I will tell you that industry.

Is not as important in executive benefits as the need to service highly comped employee groups. So we we have a we do everything from grocery stores and manufacturing companies to banks, but we do have a strong position in the community bank space and that does skew us a little bit towards.

Financial services. That's why it's primarily added Financial services there.
So key trends, jump right in here. One, we're seeing a shift in compensation models. When we came out of COVID, a lot of cash compensation in terms of base pay was being thrown around simply because the labor market was so tight and that's what it was taking to.

People to move and or stay as we're getting further from that, the labor markets have softened up a little bit. We're seeing a more balanced approach and really what we're seeing is and I'll talk about this in some more detail is more performance based both based on company performance.

And individual performance, we're seeing in this overall survey some concern about economic uncertainty. I think we're all feeling that. I think we're seeing it in all the markets right now that buying decisions are being delayed a little bit.

Major changes are being in in benefit programs and and risk programs are being contemplated a little bit longer because there is some economic uncertainty about where things are going. And then just the strategic rebalancing and I mentioned this there companies are starting to take a longer term view.

Versus a short a short-term view of how they're dealing with their highly comped employees. Let me back up a second because you'll notice that I keep saying highly comped employees instead of executives. The term executive benefits is is a reasonably old one and we believe a little out of date.

Fundamentally, because it was initially coined when most people had a pension and that and most benefits were delivered pretty uniformly to rank and file. And you're really trying to work with your C-suite due to lots of different things that have changed, which I won't go into a lot of detail about today.

Really, we're now dealing with the highly comped group, depending upon where you live in the country that starts as low as $150,000 in compensation and typically even when we're on the coast, the West Coast or say New York.

It's starting in where we're dealing with folks making 175, $200,000 and up. So when we just think about this in terms of executives or C-suite, we are over limiting the group of people that we need to serve. And that's if you think back and many of you've heard me speak before, we break this into three.

Solution sets, retirement completion, benefits equalization and retention and recruiting. Retirement completion and benefits equalization are literally looking at areas where we can tell mathematically where the group programs that we deliver 401 KS 403 BS in the retirement world.

Group, long-term disability, group life in the insurance world just don't reach up for our highly comped employee group and we are accidentally discriminating against them because of the limitations of our group plans. So that's.

That that's just a frame who we're serving and why it's important. In general, we're not asking our plans monsters to do anything unique or or different for our highly comp group. We're just asking them to provide the same benefit or the same savings opportunity.

That they're providing to the majority, typically the 85% of the population is well taken care of by the group plans and we're dealing with the top 15% of wage earners. So that's why you'll hear me say highly comped as opposed to executive because it's it's bigger.

Than just an executive problem.

Economic headwinds are driving strategic decisions. This is, I think we're all again, I mentioned, I think we're all feeling this in the market. Organizations are really when they're talking to us about how they're going to deal with their highly comp employee group are looking at the return on the investment for the spend.

So if they're going to implement a non qual deferred compensation plan, they a want to make sure that people are going to use it and B they want to ensure that it's going to have have a positive impact. Now we know it does and we can demonstrate that to them. In fact this.

This, this survey does a lot to reinforce that. And then we are also seeing that they're with no clear direction on the economy. Leaders are holding compensation steady. I mentioned that earlier. We're not seeing base go up, but we are seeing.

Variable compensation, especially tied to corporate performance, go up. And so you know you're just you're you're you're paying when you know that you've had success and you're working with these benefit programs to create a mutual alignment between the plan sponsor and the plan participant in terms of what is important to the organization.

So as you can see, 52%, about half are saying on the uncertainty is going to lead them to keep employee compensation the same. But that doesn't mean they're paying them less. It just means they're not guaranteeing as much of the payment.

So and with 71% saying the executive benefits are important when they're much watched, the bottom line is leaning back into that. We are clearly out of the hangover from COVID and we're now back into a very careful and thoughtful approach to this, which is really excellent for us at NFP because it's.

It's more consultative and anytime we get an opportunity to consult, we have an opportunity to continue to improve our relationship with the plan sponsor.

The talent gap is growing. Here's here's a startling statistic. Many of you, if you've heard me speak recently, have heard this. But between now and the end of 2030, 10% of the US workforce is going to retire. We are now into the just past the fat part of the baby boom.

They are exiting the workforce very quickly and there's not enough workers behind them. So couple things are going on. One, they're incenting some of them to stay, which you can see is the extended tenure.

But two, the talent behind them is critically important. And so retention programs continue to be a very Strong, topic with our plan sponsors and really everything we do in the Exec Ben practice creates retention.

But there are obviously specific programs, supplemental Executive retirement plans, golden handcuff plans said another way that are focused specifically on identifying those key folks that you want to retain and making sure that you've put something in in place that's going to do that. So you can see the numbers are.

Pretty, pretty startling. 85% can't afford to lose the top talent. 95% say that what we do in Executive benefits is critical to that, and 91% say that that's it's important to their recruiting. So there's no doubt that your plan sponsors, your clients need to hear about executive.

Benefits. And I say this every time I get in front of a group like yourselves. If we're not having the conversation with our clients, somebody else will. And because when you're dealing with the HCE world, you are dealing with the decision makers. You want to be the person having that conversation. Obviously you don't have to have it alone.

We're going to go with you. We're going to have it with you. But this is an important conversation to have and you can see here that they care. This is a is a predominance of the respondents who say this is an important topic to be discussed.

Swinging back towards balance, this is just what we're seeing. I've talked about this a couple times post pandemic adjustments. Right after the pandemic, it was just cash and we were throwing big salaries, big signing bonuses, all those things. Now we're getting a more mature benefit strategy. It's leaning towards balance.

You'll see that we are company financials are an important piece of it, trends to remain competitive important piece of it, but everything is is moving into a more thoughtful approach to how are we going to apply corporate assets in the world of our highly comped employees.

As it relates to retaining them and rewarding them.

Communications this, this was not surprising. I think we find this in every part of our part of our business at NFP. But the better we communicate what we're doing, the better it's appreciated and the better the uptake is. So where we have these programs, we need to make sure that we are in there.

Explaining to people what they are, why they're important and how to use them. I know I still try and do a couple of enrollment meetings a year, and even in places where we've had programs for four and five years, that will still be people who've been eligible.

For the entire time the program's been in existence, you don't truly understand the the benefit that's being put in front of them. And the better they do, the more they enroll, the more they enroll, the more benefit the plan sponsor gets out of it. You guys know how that all works because we are dealing again in the non-qualified world. It is a carve out group.

So, you know, in general, we're not talking much more than about 15% of the total population, so 15 for every 100 employees. But the more we can do to get in and educate them, the better. It's also really good, we found.

In the education process, if there are folks doing financial education for the rank and file that we make sure that that team is aware of the Executive benefits that are being delivered to the highly comp employee group so that they can communicate those are well or at least be fluent enough.

With what's offered to be able to discuss that with a highly comped employee that May ask a question. Sometimes that step gets missed and the folks that are in doing education May not be aware that we have a non qual deferred comp plan or we have a Executive disability plan or an Executive life plan and so we've got to make sure that.

Where we are working on those things jointly that we're we're communicating all the benefits that are being delivered.

Non-qual deferred compensation plans, these are we ask about these very specifically because they are you know really just a straight line extension of the qualified plan, the 401K or the 403B. I think most of us on the phone or on the call are aware that.

If you're a highly comped employee, your ability to save completely for a successful retirement in your qualified plan is mathematically limited. It's beyond limited. It's actually impossible. What is successful retirement plan look like? Well, according to most financial advisors, that's about an 85% replacement.

Replacement ratio, meaning that on the day you retire, your assets that you've accumulated to support your retirement should drive drive for you 85% of your last year's compensation. So keep the math simple if you make $100,000 a year.

In retirement, your assets should generate $85,000 for you to live on. If you only have access to a 401K or a 403B and you're in the HC world, you either have to save all that money on a post-tax, post-tax basis yourself.

Or or you're just not going to get there. We think it's important that people have the option to save in a non qual deferred compensation plan because they get the benefit of a pre-tax savings and it's programmatic. It's it comes out of the paycheck. The the research if you talk to our friends in retirement is pretty clear that.

Most people, 70% plus depends on which which study you're looking at, spend 100% of what makes into their checking account. So it really is important that we give folks a programmatic way to get money out into their savings.

In the non qual world, the nice thing is it can be 0 to 100% of base and bonus and you'll see the types of deferral compensation. You can defer annual bonus, you can defer base salary, performance based compensation, car issues if you're in a company to deliver those.

Director's fees and retainers is a whole different thing, but we do do director's plans. What's important about this is that it gives the the plan participant, as I've mentioned, an opportunity to save a lot in addition to their 401K or 403B.

But equally importantly, with proper planning, they can actually control their tax bracket in an earning year because they can keep money out of their income stream because it's been deferred. So savvy folks, if they they make $400,000 a year, but they only need.

250 to live on, they can keep themselves under a very bright line in the tax code by deferring the under other $150,000. We also see that a lot with bonus deferrals. We can enable conditional bonus deferrals so that they.

Only take as much of the bonus as they want to take and like leave the rest of it so that again, they don't trigger certain tax boundaries. Or just even if they're in the highest tax bracket, the money doesn't get taxed until they actually want it in retirement.

So you can see set say when we talk to our participants, I think inflation's going up and they think tax rates are going to increase. So just part of the questions we ask retention.

We we are also seeing very strongly that that our respondents to the survey believe that what we do in the non qual space is is important to retention. It's the number one reason they do it is Executive retention #2 though remaining competitive with peers.

What that tells us and that number has gone up year over year is, is that more companies are implementing non qual plans. So they they feel like other companies are having to keep up and put them in. The other thing that's driving that dynamic honestly is that we're seeing.

As people move from global Fortune 500, Global 1000 companies where non-qual deferred compensation is really common and move into the mid market, they ask for it when they get there or it's a precondition of their joining is that you know they want similar benefits.

And again, we're almost, I don't know anybody who doesn't work for a government entity or a or or or a state or local government that has a pension anymore. So helping participants save for retirement is becoming increasingly important because they just aren't the avenues to.

Do it. I think this number will continue to go up as we continue to do the survey.

Best in class approach. So how do we do it? What's nice, really nice, and a lot of fun about what we do in the Executive benefits space is that it is absolutely tailored to each plan sponsor. I make the joke all the time that if you've seen one Executive benefits program, you've seen exactly 1.

While the tools we use are the same, each time we start, we're basically laying out drafting paper and picking up the design tools and designing the program for that plan sponsor. Everybody's a little different. Everybody's facts and circumstances are a little different. And it's it's really a lot of fun. It's very.

It's very consultative too. It gets you engaged in a in a very important conversation with your key decision makers at your plan sponsor and it's going to benefit them. So everything about this is very additive to our relationship capital at our organizations.

We we need to close the comprehension gap and that's just continuing to educate. Once we install these plans, we need to make sure that we're regularly going back and communicating with people why we did it, why it's important, who's benefiting, how they're benefiting and what is the value that that drives. And so we're we're working on that.

And then just maximizing the NQDCP value and learning the leaning into the long-term advantages of participation.

Financial services sector, you know this is just one of the places where we're we're seeing a lot of activity. We NFP Executive Benefits have a dominant position in the community banking space. We have about 1200 banks as clients.

It relates to about 37% market share. So it's a market that we dominate, you know, compensation of Earl 77%, that's up from 2024.

90% of these organizations believe it's important for retirement preparedness and we're seeing key employees and this is up. This is a kind of a startling number. It leans into what I was saying earlier about the fact that nobody's got pensions anymore and everybody's got to save for their own retirement, but a 10% jump year over year in the number of key employees.

Employees that are delaying retirement because they need to save a little more money. Now, that's not always a bad thing because you're hanging on to their knowledge, but it's not always a good thing either, because if they wanted to retire and they can't because they didn't save enough, they're probably a little cranky when they're coming to work.

The other issue there is as we age and again for all of my peers on here that are in the employee benefits space, we all know this as as a population gets older, the cost of health benefits goes up because we just need more of that and so.

Getting people retired when they want to retire is is a is a good thing and an important thing, and Knockwell Deferred Comp can really help make that happen.

Partnering with leaders, you know we are. Here's here's why you do it. You know, attract and retain top talent, bridge that retirement gap and and minimizing the replacement cost by smoothing by creating smooth transitions.

And the other there is just equalizing the benefits for everybody. We want to make sure that if you are going to discriminate against your highly comped employees with one of your programs, that you've done that consciously, not accidentally. It's an important reason to have this conversation. A plan sponsor may decide, look, I just don't care.

That our group life program doesn't doesn't serve everybody equally. It's fine the way it is. That's fine. But that that ought to be a conscious decision, not an accident of their plan design.

So that's it. I did it a little faster than even I thought I had. I had told Amber I thought I would do it in about 30 minutes, but I've done it in 24. If there's any questions, please hit the Q&A. We'll give that a minute. And if there aren't any questions, I'm going to give everybody back 35 minutes of their.

A day tell you thank you and please reach out. If you haven't had this conversation about executive benefits, please do. If you don't, somebody else will. You've got a unique opportunity and a unique set of tools and professionals to back those tools up. So thanks very much.

Posthauer, Amber   24:25
All right, Tony. Well, I'm not seeing any questions, so I'm going to go ahead and close it out. Thank you for sharing your valuable time and expertise with us today. In the chat, there is going to be a link to today's survey. Please take a moment to complete the survey as it lets us know what topics are important to our listeners and helps make our education program as current and relevant as.

Greene, Anthony   24:33
Thanks.

Posthauer, Amber   24:45
as possible. That concludes our webinar for today. Thank you everyone for joining us and have a great day.