Supplemental Executive Retirement Plans (SERPs) allow employers to replace lost qualified retirement benefits and correct reverse discrimination. 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. Companies have flexibility in determining the type of SERP they offer.
Flat Dollar SERP
Benefits can be a flat dollar amount such as $25,000 per year for life after retirement
Excess SERP
Replaces the retirement benefits executives lose due to qualified plan limits
Provides a benefit equal to the full amount under a company’s pension formula, regardless of the limits, offset by a qualified pension and Social Security benefits
Target SERP
Not only replaces lost retirement benefits but also helps correct benefit discrimination
Employer promises executives a specified percentage of final pay, often 60% to 70% (helps bring executive retirement income percentages in line with those of the average company employee)
Benefit is offset by other retirement income