A supplemental executive retirement plan is a deferred compensation agreement between the company and the key executive whereby the company agrees to provide supplemental retirement income to the executive and his family if certain pre-agreed eligibility and vesting conditions are met by the executive.
In this way, how does a supplemental retirement plan work?
The employer buys the insurance policy, pays the premiums, and has access to its cash value. The employee receives supplemental retirement income paid for through the insurance policy. Once the employee receives income in retirement, that benefit is taxable. At that point, the employer receives a tax deduction.
Likewise, people ask, are SERP benefits vested?
An employer-funded retirement benefit to reward and retain highly compensated key executives. A supplemental executive retirement plan (SERP) is an employer-sponsored non-qualified deferred compensation plan. … A SERP is financed solely through employer contributions – the employee does not contribute to the plan.