Supplemental Executive Retirement Plan (SERP)



Traditional retirement plans have limits based on contributions and income level that leave highly paid executives and business owners unable to qualify for those tax advantaged vehicles.  A Supplemental Executive Retirement Plan (SERP) uses life insurance to provide tax advantaged bonuses and retirement packages with much more flexibility towards contributions with no income qualifications.

With all the tax advantages and flexibility these plans provide, it is no wonder 68% of Fortune 1000 companies fund their SERPs with Corporate Owned Life Insurance.*




Key Points

Tax Free Distributions in Retirement

SERPs utilize life insurance as a tax advantaged vehicle for an executive or business owners deferred compensation.  The company funds a life insurance policy on the insured (executive or business owner), and decides when to transfer ownership of the policy to the insured…usually at retirement.  If the company has elected to use after-tax dollars to fund the policy, the insured will be able to take tax free distributions from the policy in retirement.

No Contribution Limits

Most retirement accounts have contribution limits, as the IRS doesn’t want to give away too much of a good thing.  There are no contribution limits set forth by the IRS on SERPs utilizing life insurance.  Therefore, employers can contribute in excess of the annual retirement contribution limits on behalf of the employee.


Supplemental Executive Retirement Plans (SERPs) are very flexible, allowing the company to structure the strategy to best suit their needs.  The company can pay for all the premiums, or split the cost with the insured employess.  The company can split the death benefit, placing itself as a beneficiary along with the insureds loved ones to help offset the costs of providing executive benefit.  The company can choose to claim a deduction on the premiums paid, or use after tax dollars to fund the life insurance policy.  Using life insurance in a SERP gives the greatest amount of flexibility and tax advantaged benefits for the company and the executive.

Salary Continuation Strategy

A salary continuation plan is a company-sponsored benefit generally designed to replace an executive’s income in the event of his or her death, retirement or disability.  With proper policy design and funding, an executive can have 100% or more of their income replaced during retirement.

Recruit, Retain, & Reward

Business owners want to recruit and retain top executives who can grow their business.  Life insurance provides an excellent benefit for not only the executive and their family, but also providing the company with the means and the flexibility to design a benefit structure to fit their needs.

Frequently Asked Questions


Who owns the policy in a Supplemental Executive Retirement Plan?

Traditionally, the life insurance policy is owned by the executive, while the employing company pays the premiums as a form of bonus strucutre.


Why is this better than a traditional retirement benefit package?

Though a traditional retirement account, like a 401(k) does provide tax deferred growth, money is fully taxable at withdrawal.  Life insurance provides ability to access tax free distributions in retirement.  Also, there are no contribution limits as with other retirement plans regulated by ERISA laws.


How are these policies expensed?

Traditionally, premiums paid to the SERP’s life insurance policy are expensed as an executive bonus.  If a deduction is taken by the company, the executive may not be able to receive tax free distibutions at retirement.  Working with a CPA experienced in this field is highly encouraged to maximize executive benefits and tax advantages.


Can the company recoup any of the costs?

Yes.  In a split-dollar life insurance COLI strategy, premiums and economic benefit are “split” between the executives and the employer in various scenarios.  A portion of the death benefit is payable back to the company, tax free, to recoup benefit costs.

Get Started Today

The first step is to schedule a 15 minute phone consultation.  The purpose of this call is to discuss suitability, and options for a more in-depth discussion at a later date.

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* – Barry James Dyke, The Pirates of Manhattan: Systematically Plundering The American Consumer & How To Protect Against It.  2008.  555 Publishing Inc.