what is a supplemental executive retirement plan serp 
a supplemental executive retirement plan serp is a set of benefits that may be made available to top level employees in addition to those covered in the company s standard retirement savings plan a serp is a form of a deferred compensation plan it is not a qualified retirement plan that is there is no special tax treatment for the company or the employee such as is available through a 401 k plan understanding serpscompanies use serps as a way to reward and retain key executives because these plans are non qualified they can be offered selectively to key executives whose contributions to the company s qualified plan such as a 401 k must follow the maximum contributions rule set annually by the internal revenue service irs in tax year 2024 the most an employee can contribute to a 401 k is 23 000 unless they are 59 years old or older in which case they are able to make up to 7 500 in additional catch up contributions for tax year 2023 it s 22 500 and 7 500 respectively 1typically the company and the executive sign an agreement that promises the executive a certain amount of supplemental retirement income based on various eligibility conditions that the executive must meet the company funds the plan out of its current cash flows or through the funding of a cash value life insurance policy the money and the taxes on it are deferred after retiring the executive can withdraw the money they must pay state and federal taxes on it as ordinary income advantages of a serpsupplemental executive retirement plans are options for companies seeking to incentivize key executives as they are non qualified they require no irs approval and minimal reporting the company controls the plan and is able to book an annual expense equal to the present value of the stream of future benefit payments much like an annuity when the benefits are paid the company is able to deduct them as an expense 