A supplemental retirement plan may be offered to a broad range of employees. But supplemental executive retirement plans (SERPs) are reserved for the company’s elite.
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Click here to read the full article at SmartAsset.com
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A SERP is a non-qualified deferred compensation plan offered to a company’s key employees, including CEOs, CFOs and high-ranking officials. They are typically used to retain talent, but are tied to both employee and company performance. When taking a job, it’s important to understand the complete compensation package and may even be a good idea to discuss with your financial advisor.
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Supplemental Retirement Plan Basics
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A SERP is additional compensation offered to qualified employees as part of their benefits. It is typically packaged with health insurance, life insurance, or stock options.
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While the value this supplemental retirement plan varies by company, it often represents a percentage of an employee’s three-year average compensation. Performance reviews, metrics, time employed by the company, and other benchmarks may affects the amount of a SERP offered. Those metrics also determine if an employee can cash out their SERP upon retirement.
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A company will fund a SERP either through cash flow or by taking out a life insurance policy in an employee’s name. If the employee is eligible to withdraw funds once they retire, they can do so either in a lump sum or through monthly disbursements.
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