One way for employers to replace lost qualified retirement benefits and correct reverse discrimination is to implement a supplemental executive retirement plan (SERP) The employer selects the key personnel who participate, pays retirement or survivor benefits from general assets and takes a tax deduction for the benefit payments.

Flat Dollar SERP
Companies have flexibility in determining the type of SERP they offer. Benefits can be a flat dollar amount such as $25,000 per year for life after retirement.

Excess SERP
Companies use another type of plan, called an excess SERP to replace the retirement benefits executives lose due to qualified plan limits. An excess SERP provides a benefit equal to the full amount under a company's pension formula, regardless of the limits, offset by qualified pension and Social Security benefits.

Target SERP
Another widely used supplemental retirement plan, the Target SERP not only replaces lost retirement benefits, but also helps correct benefit discrimination. The company promises executives a specified percentage of final pay, often 60 percent to 70 percent. This helps bring executive retirement income percentages in line with those of the average company employee. As with the excess plan, the Target SERP benefit is offset by other retirement income.