SERP: For Key Executive Retention
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.
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.
Supplemental Retirement Plan Basics
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.
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.
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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