Employers benefit from these arrangements because:
Supplemental Executive Retirement Plans (SERPs) can be set up flexibly to minimize their impact on the balance sheet and maximize tax efficiency.
Although a SERP represents a future obligation, employers are not required to fund them prior to distributing the compensation to the Highly Compensated Employee/ Executive (HCE).
By structuring SERPs to vest over time, employers can maximize incentives for HCEs to remain with the company, improving retention of top talent.
Businesses can offer retirement benefits as an alternative to incentives such as equity compensation, which may not always be a good fit for a closely held business.
Plans are straightforward to design, implement, and communicate.
SERPs’ administrative costs are typically less than those of a typical elective deferred compensation plan.