Supplemental Executive Retirement Plan (SERP)

This article explains the benefits of a Supplemental Executive Retirement Plan (SERP). It is not about the other SERP (Search Engine Results Page). The latter describes a principle in the IT world of web design. Here we will discuss the benefits of a financial bonus package an employer can provide for his/her key employee. It is a way to reward and maintain employee loyalty over a long period of time.

Why Should You Consider SERP For Your Executives?

Bonuses paid

If you’re an employer with a long term focus, then this article is for you. What do executives in your company look for? Stability and bonuses, correct? Well, this gives them both plus you you can it is tax deductible. Normally, you provide your top performing employees a sales bonus, market share bonus, Christmas bonus, and so on. As nice as these types of bonuses are, they are one time bonuses. Goal is achieved and you pay. But say you are working on a 10 year project. This project is headed by your best performing executives. SERP is an excellent way for you to make sure that your team is around to see the project through.

How it works

Rather than a one time cash bonus, you set up a 20 Pay life policy for your executive employee. You pay the annual premiums, which are tax deductible. Your employee is the owner of the policy, meaning has full control over the cash value. Death benefit beneficiaries are members of the executive’s family. This is no way a method to avoid income taxes. The employee pays income tax upon distribution of the funds. However, like most retirement plans, the funds here grow tax deferred.

The exact numbers are always different, but let us give you a rough idea on them. If you start this plan for a 45 year old male, then a $10,000 annual premium after 5 years will provide him with a cash value of $73,000, and a death benefit of $448,000. And at the age of 65, the policy’s cash value is $300,000, with a death benefit of $681,000.

Sounds like a good idea to you?

Let’s explore your specific options together then. You can start by filling out our form below. We will then get back to you shortly and gladly answer all your other questions you may have. No need to even meet in person if you’d prefer. We can set up everything online.

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