Supplemental Executive Retirement Plan (SERP)

What is a SERP?

A supplemental executive retirement plan (SERP) is a deferred compensation agreement between the company and the key executive whereby if the executive meets certain pre-agreed eligibility and vesting conditions, the company agrees to provide supplemental retirement income to the executive and the executive’s family.

The plan is funded by the company out of cash flows, investment funds, or cash value life insurance.  Any deferred benefits are not currently taxable to the key executive. When paid, the benefits become taxable to the executive as income and tax deductible to the company. A typical example of a plan would provide the executive a retirement benefit from all employer provided retirement benefit plans equal to 70 percent of the executives high three-year average compensation.