457(f) Supplemental Executive Retirement Plans
Supplemental Executive Retirement Plans (SERP’s): Getting Your Key Employees the Retirement Income They Deserve
Recent studies suggest that you will need 80% to 90% of your pre-retirement income to maintain your current lifestyle in your retirement years.
Benefits provided by Social Security typically only provide approximately 10% of that income. Qualified retirement plans provide some of the necessary income — but with the recent trend of decreasing limits to these benefits, will even the combination of the two be enough for your executives to support their continued lifestyle? Chances are your key employees will not want to be surprised by an underfunded retirement.
Non-qualified plans are becoming increasingly utilized in order to provide the benefits your executives deserve, but may not be able to achieve through qualified plans and Social Security. Because they are not subject to the same limitations and caps, non-qualified plans provide the necessary benefits to not only retain prime talent, but provide the continued incentive for top-notch performance.
Executive Benefit Plans
An executive benefit plan is a contractual commitment that an employer makes to a chosen group of employees to provide supplemental retirement benefits at a future date. They are classified as non-qualified retirement plans that can be arranged exclusively for your key employees.
Advantages to Your Organization
Executive benefit plans provide a secure, flexible solution to your employee benefit needs. Their main features include:
- The plan improves retention by rewarding executives retained for a pre-determined number of years or until retirement
- The existence of an executive benefit plan is imperative when attracting new executive talent
- Ability to structure the plan such that the employer regains its initial contribution after retirement benefits are paid out
- The plan is selective, allowing the company to choose and reward key executives without restrictions on contribution amounts
- The plan’s market value accumulates on a tax-deferred basis to the employee
- The plan allows flexibility in choosing retirement age and desired post-retirement income, making it simple to plan for the retirement you and your key employees expect
Who is Eligible?
Unlike qualified retirement plans, which require non-discriminatory benefits, executive benefit plans can be provided for a hand-picked group of key employees. The Department of Labor requires that the plan be designed to cover a select group of management and/or highly-compensated employees. Within this group, the beneficiaries are chosen at the discretion of the employer.
457(f): Supplemental Executive Retirement Plans
Here at BestVest, we specialize in making your long-term goals financially feasible. Now, with our Supplemental Executive Retirement Plan practice, we are able to go even further for our non-profit clients.
A 457(f) plan is a Deferred Compensation Plan that allows non-profit employers, such as Credit Unions, Educational Institutions and Hospitals, to contribute an unlimited and often refundable amount of income to investment, for the future benefit of key executives.
A contract is formed between the contributing employer and benefitting employee, determining specific terms of the plan. These include the amount of future years’ employment before the employee may receive benefits. After this predetermined date passes, the plan loses "substantial risk of forfeiture" and the benefits are immediately taxable to the employee.
As an employer, offering a SERP is a simple and effective way to attract, retain, and reward key talent. You are able to hand-pick the beneficiaries, and customize your plan. As an employer, the ability to align your capabilities with your employees’ expectations is invaluable. The flexibility of the plan coupled with our team of experienced professionals makes it easy for you to do just that. Furthermore, you have the ability to structure your plan such that you receive your entire contribution back at the investment’s maturity!
As an employee, a SERP is a terrific opportunity to ensure your ability to continue your lifestyle through your retirement years. The plan can be entirely financed by the employer, and your benefits are tax-deferred!
At BestVest, we have the flexibility and expertise to work with you and your executives in order to ensure that your SERP meets your every need. Based on such needs as annual retirement income, retirement age, and desired employer contribution, we can determine the proper investment for you. Furthermore, we will provide continuous and detailed reports on the adequacy of your investment, ensuring that you stay informed from start to finish. With a retirement plan as flexible as a 457(f), it is imperative that you make the right investment decisions to provide the right results. At BestVest, we will work with you and your key executives in order to make both parties better off.
Our services include:
- 457(f) plan documentation including DOL Letter and Board Resolution
- Sample Executive Deferred Compensation Agreement
- Funding computations
- 457(f) funding options
- Annual calculations to determine if the plan, due to performance, is underfunded to meet the original targeted goal
- Annual calculations to determine if the plan is current and underfunded in relationship to the executive’s compensation and actuarial charts
- Detailed Retirement Plans for the covered executives
We make getting your key employees the retirement income they need easy.
So, give our President, Jim O’Connor, a call at 1-800-434-1776 to learn more about what we can offer you!