Executive retirement benefits

Tailored retirement benefits for your executives

For many business owners, there is a lot of investment that goes into key executives. As an incentive to encourage the executive to stay long-term with your company, many business owners enhance executive benefits with a supplemental executive retirement plan (SERP).

A SERP lets the executive know they are a valuable part of your team while also encouraging them to stay with your company.

How does a SERP work?

You promise to pay the employee a retirement income stream or lump sum benefit if he or she stays with the company until retirement. You also may provide disability and/or death benefits under the plan.

A SERP is often called a "golden handcuff" plan. When structured as a forfeitable plan, the employee generally forfeits all business if he/she leaves your business early.

Funding a SERP

For many business owners, life insurance is the ideal informal funding mechanism for many SERP agreements.

As a business-owned policy, the company has total control over the policy and flexible, tax-advantaged* access to its cash value and income tax-free** death benefit. The company can then use the policy to help meet its obligations under the SERP.

Flexible and selective

SERPs are flexible and allow you to pick and choose participants. A SERP has only minimal reporting requirements, and there are no contribution limits.

Comparison of SERPs vs. qualified plans 

SERP Qualified plan
Contributions are currently deductible by employer No Yes
Contributions are currently taxable to executive No No
Employer deducts payment of retirement income Yes No
Executive taxed on retirement income Yes Yes
ERISA reporting requirements Minimal All
Employer control Yes Yes
Employer cost recovery Yes No
Ability to select participants Yes No

Get started today!

If you have key executives you hope to retain long-term, a SERP is a very useful method of doing so. For more information, contact your Ohio National financial professional.

*If tax-free loans are taken and the policy lapses, a taxable event may occur. Withdrawals (partial surrenders) and loans from life insurance policies classified as modified endowment contracts may be subject to tax at the time the withdrawal or loan is taken and, if taken prior to age 59½, a 10% federal tax penalty may apply. Withdrawals and loans reduce the death benefit and cash surrender value.

**Assuming compliance with IRS rules, including applicable notice and consent requirements under Internal Revenue Code Section 101(j).

A supplemental executive retirement plan offers:

A golden handcuff

The employee only receives a benefit if he or she stays with the company until retirement.

A future tax deduction

The executive is taxed and the employer takes an income tax deduction when the benefits are paid to employees.

Control for your business

Your business maintains maximum control over life insurance policy cash values.

Plan design flexibility and selective participation

SERPs generally offer more flexibility over plan design and participant selection than qualified retirement plans (such as 401(k) plans).

A bit of guidance can help

For more information, contact your Ohio National financial professional.

Here are some additional considerations:

  • Because a SERP is a legal contract, consult an attorney to draft the agreement. You may also need to consult a third-party administrator or qualified tax advisor to manage the tax and accounting procedures applicable to SERPs.
  • SERPs should only be offered to a select group of management or highly compensated employees.
  • In order to ensure tax deferral, assets informally funding a SERP agreement must be subject to the employer's creditors.

Products issued by The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation. Registered products distributed by Ohio National Equities, Inc., Member FINRA. Product, product features and rider availability vary by state. Guarantees are based upon the claims-paying ability of the issuer. Issuers not licensed to conduct business in New York. Withdrawals and loans may reduce the death benefit, cash surrender value and any living benefit amount.