What are Supplemental Executive Retirement Plans (SERPs), and How Do They Work?

Shawn Plummer

CEO, The Annuity Expert

What is a Supplemental Executive Retirement Plan (SERP)?

Definition and Purpose

A Supplemental Executive Retirement Plan (SERP) is a deferred compensation agreement between a company and its executive. It is designed to provide retirement benefits beyond those covered by traditional retirement plans like 401(k) or pension plans.

How It Works

  • Funding: The company funds the plan; no contributions are required from the executive.
  • Payout: Benefits are paid out at retirement, or as per the agreement, often as a supplement to other retirement income.
  • Taxation: Taxes on SERP benefits are deferred until the executive receives the payout.


  1. Attracts and Retains Key Executives: By offering enhanced retirement benefits.
  2. Flexible Design: This can be tailored to meet the specific needs of both the company and the executive.
  3. Tax Benefits: For the company, contributions to a SERP are tax-deductible when paid out.


  • Risk to Executives: Benefits are subject to the company’s credit risk.
  • Cost: Can be expensive for companies to fund and maintain.
  • Regulatory Compliance: Must adhere to IRS rules and regulations.
Supplemental Executive Retirement Plans

Key Differences Between SERP and Traditional Retirement Plans

FeatureSERPTraditional Retirement Plan
Funding SourceEmployer onlyEmployer and employee
Contribution LimitsNo legal limitSubject to IRS limits
EligibilitySelect executivesAll eligible employees
Payout TimingTypically at retirementVaries (e.g., 401(k) at 59½)
RiskDependent on company’s financial healthGenerally lower risk
Taxation of ContributionsDeferred for employee, tax-deductible for companyPre-tax for employee
Supplemental Executive Retirement Plan


A SERP offers unique benefits and considerations, making it an important tool for companies to attract and retain top executive talent while providing executives with a substantial retirement benefit. It’s a strategic plan that requires careful consideration of its features and implications.

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Frequently Asked Questions

Are SERPs only for large corporations?

While large corporations typically offer SERPs, smaller companies can offer similar retirement plans to their top executives.

Do all executives receive the same benefits through a SERP?

No, the benefits offered through a SERP can be customized for each executive based on their individual needs and circumstances.

Are SERPs subject to the same IRS regulations as traditional retirement plans?

No, SERPs are not subject to the same IRS regulations as traditional retirement plans, which gives companies more flexibility in designing these plans.

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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