Minnesota Supplemental Executive Retirement Plan - SERP
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How to fill out Supplemental Executive Retirement Plan - SERP?
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FAQ
A supplemental executive retirement plan (SERP) is a set of benefits that may be made available to top-level employees in addition to those covered in the company's standard retirement savings plan. A SERP is a form of a deferred-compensation plan. It is not a qualified plan.
SERPs are paid out as either one lump sum or as a series of set payments from an annuity, with different tax implications for each method, so choose carefully.
SERP withdrawals are taxed as regular income, but taxes on that income are deferred until you start making withdrawals. Much like other tax-deferred retirement plans, SERP funds grow tax-free until retirement. If you withdraw your SERP funds in a lump sum, you'll pay the taxes at all once.
An employee enrolled in the Supplemental Retirement Plan (SRP) is required to make contributions to the Plan through payroll deduction. Deductions are taken at a rate of 5% on gross compensation in excess of $6,000 but limited to the maximum set by the employee's bargaining unit or personnel policy.
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.
Risk of forfeiture. Forfeiture can occur if the employee has not met the requirements to ?earn? or ?vest? in the future SERP payout. This usually occurs when the employee leaves the company prior to retirement. This also can happen when leaving the company prior to vesting or not achieving performance thresholds.
The funds can be withdrawn, without penalty, before you turn 59½, nor do you need to begin required minimum distributions at age 73. Although most employers require distributions to begin at retirement or when you are no longer employed. SERPs can be designed with many different options or configurations.
