--- title: What is a SERP Retirement Plan? description: A SERP retirement plan, or supplement executive retirement plan, is a non-qualified deferred compensation retirement plan. image: https://www.realized1031.com/hubfs/Images/photo/abstract/serp-notebook-man-IS-1226797787.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # What is a SERP Retirement Plan? Posted Jan 18, 2021 ![serp-notebook-man-IS-1226797787](https://www.realized1031.com/hs-fs/hubfs/Images/photo/abstract/serp-notebook-man-IS-1226797787.jpg?width=749&name=serp-notebook-man-IS-1226797787.jpg) A SERP retirement plan, or supplement executive retirement plan, is a non-qualified deferred compensation retirement plan offered by companies in addition to the company standard retirement plan to highly paid employees. Because standard retirement plans such as the [401(k) ](https://www.realized1031.com/glossary/401k)have limited annual contributions, SERP retirement plans are used to reward top executives with supplemental retirement contributions.  Let’s go over how SERP retirement plans work: ### How SERP Retirement Plans Work SERP retirement plans are usually funded through cash flows or by taking out a cash-value life insurance policy in the name of the employee. Taxes on the funds that go into the SERP retirement plan are deferred. When the employee retires and withdraws funds either in a lump sum or through disbursements, this money is treated as ordinary income, and the employee must pay state and federal taxes.  Because executives and other highly compensated employees (HCEs) are more difficult to replace, some companies offer a SERP plan to these HCEs as an added incentive to stay with the company for a longer period of time.  SERP plans vary from company to company. In a defined-benefit arrangement, the amount is calculated either by a flat amount or a percentage of the employee’s average salary. That amount is then distributed over time when the employee reaches retirement age. Another arrangement is the defined-contribution plan. The employer makes regular contributions to the employee’s account until retirement.  ### Requirements for SERP Retirement Plans Companies do not have to offer SERP plans to all employees and are usually only offered to HCEs. The [IRS defines an HCE](https://www.irs.gov/retirement-plans/identifying-highly-compensated-employees-in-an-initial-or-short-plan-year) as someone who owns at least 5% of the company during the present or previous year or earns at least $130,000 in the preceding year (if that year was 2020 or 2021). One major benefit over traditional retirement plans is that SERP retirement plans have no contribution or benefit limits. ### Advantages and Disadvantages Here are some benefits of SERP retirement plans for executives of HCEs: - Plans can be customized and negotiated based on the needs of the employee.   - There’s no upfront tax. If the plan is structured as a life insurance policy, no taxes are paid by either the employer or the employee until retirement.  - There are no limits on contributions. There are potential drawbacks and risks to SERP plans: - The employee’s compensation could be affected by company performance. For example, if the company files for bankruptcy before payment to the SERP, funds could be subject to creditors.  - There can be certain stipulations in the SERP agreement, such as the employee must work for the company for a certain number of years. If conditions are not met, the employee may not qualify for benefits.  - Although [taxes are deferred](https://www.realized1031.com/glossary/tax-deferred), this could create problems with [tax liability](https://www.realized1031.com/glossary/tax-liability) in retirement if you’re in a higher tax bracket.  A SERP retirement plan can be beneficial, especially if you are at a high-level position within a company. This could be part of your negotiating package with a new or current employer. A SERP plan can also be beneficial if you plan to be in a lower tax bracket upon retirement, as this might lower your tax liability when SERP funds are distributed. Your SERP plan can potentially add to your retirement nest egg but it shouldn’t be your only option.  This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Find Ways To Diversify Your Retirement Income [![Learn Alternate Ways To Potentially Earn Retirement Income](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Income-ebook-250.png?width=250&height=250&name=IPWM-Income-ebook-250.png "Discover Potential Passive ...") ](https://www.realized1031.com/blog/what-is-a-serp-retirement-plan#blogform) Download eBook ---   --- ### Learn Alternate Ways To Potentially Earn Retirement Income ![Find Ways To Diversify Your Retirement Income](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Income-ebook-550.jpg?width=550&height=650&name=IPWM-Income-ebook-550.jpg) Discover Potential Passive Income Generation Opportunities To Consider For Retirement. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "A SERP retirement plan, or supplement executive retirement plan, is a non-qualified deferred compensation retirement plan offered by companies in addition to the company standard retirement plan to highly paid employees. Because standard retirement plans such as the 401(k) have limited annual contributions, SERP retirement plans are used to reward top executives with supplemental retirement contributions. Let’s go over how SERP retirement plans work: How SERP Retirement Plans Work SERP retirement plans are usually funded through cash flows or by taking out a cash-value life insurance policy in the name of the employee. Taxes on the funds that go into the SERP retirement plan are deferred. When the employee retires and withdraws funds either in a lump sum or through disbursements, this money is treated as ordinary income, and the employee must pay state and federal taxes. Because executives and other highly compensated employees (HCEs) are more difficult to replace, some companies offer a SERP plan to these HCEs as an added incentive to stay with the company for a longer period of time. SERP plans vary from company to company. In a defined-benefit arrangement, the amount is calculated either by a flat amount or a percentage of the employee’s average salary. That amount is then distributed over time when the employee reaches retirement age. Another arrangement is the defined-contribution plan. The employer makes regular contributions to the employee’s account until retirement. Requirements for SERP Retirement Plans Companies do not have to offer SERP plans to all employees and are usually only offered to HCEs. The IRS defines an HCE as someone who owns at least 5% of the company during the present or previous year or earns at least $130,000 in the preceding year (if that year was 2020 or 2021). One major benefit over traditional retirement plans is that SERP retirement plans have no contribution or benefit limits. Advantages and Disadvantages Here are some benefits of SERP retirement plans for executives of HCEs: Plans can be customized and negotiated based on the needs of the employee. There’s no upfront tax. If the plan is structured as a life insurance policy, no taxes are paid by either the employer or the employee until retirement. There are no limits on contributions. There are potential drawbacks and risks to SERP plans: The employee’s compensation could be affected by company performance. For example, if the company files for bankruptcy before payment to the SERP, funds could be subject to creditors. There can be certain stipulations in the SERP agreement, such as the employee must work for the company for a certain number of years. If conditions are not met, the employee may not qualify for benefits. Although taxes are deferred, this could create problems with tax liability in retirement if you’re in a higher tax bracket. A SERP retirement plan can be beneficial, especially if you are at a high-level position within a company. This could be part of your negotiating package with a new or current employer. A SERP plan can also be beneficial if you plan to be in a lower tax bracket upon retirement, as this might lower your tax liability when SERP funds are distributed. Your SERP plan can potentially add to your retirement nest egg but it shouldn’t be your only option. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.", "articleSection" : [ "Retirement Income" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2021-01-19T01:41:31+0000", "datePublished" : "2021-01-19T01:41:31+0000", "description" : "A SERP retirement plan, or supplement executive retirement plan, is a non-qualified deferred compensation retirement plan.", "headline" : "What is a SERP Retirement Plan?", "image" : { "@type" : "ImageObject", "height" : 565, "url" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/serp-notebook-man-IS-1226797787.jpg", "width" : 749 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/what-is-a-serp-retirement-plan", "name" : "What is a SERP Retirement Plan?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/serp-notebook-man-IS-1226797787.jpg" } ```