A Supplemental Executive Retirement Plan (SERP) in its simplest form is a written agreement between an employer and a key executive that stipulates that the employer will continue to pay the executive in retirement. This promise is typically based on a formula agreed upon during his/her working years. The plan is fully funded by the employer to attract, retain, and reward the executive until retirement, and it can be done under a defined contribution or a defined benefit arrangement. In order to help protect the employer's interests in retaining the executive's services until retirement, a vesting schedule can be applied

Plan Advantages

• The plan participant can better plan for retirement.
• The plan participant does not incur taxation until retirement payments begin.
• The employer is able to retain the services of a key executive until retirement.
• There is little or no ongoing administration of these plans.

Plan Disadvantages

• Depending on the complexities of the design of the SERP, administration could become necessary and will increase costs.
• Any designated SERP assets are not creditor proof.