What is a supplement to a powerful pension plan?

Sometimes it is referred to as the Top hats plan, the additional executive pension plan is the type of further preparation for retirement, which is beyond any other plans, such as an individual pension account, individual savings account or plan 401 (K). These plans, sometimes simply referred to as SERP, are usually reserved for key managers. The idea of ​​this additional retirement planning is to ensure that the executive can maintain the same standard of living even after leaving the workforce.

One of the distinguishing characteristics of the additional pension plan is that the employee does not actually contribute. With this type of program, the employer is responsible for regular contributions on the basis of the terms of the contract that exists between the employee and the employer. For example, a contract may invite your employer to contribute to a flat number that the executiveness remains to the company. In other situations, the annual contribution may be based on the percentage of the annual PLAThe employee A is influenced by the cash flow that the undertaking, which has in the period. Many companies also finance the plan using the insurance system.

One of the most common ways of financing the supplementary pension plan of the Executive Executive Pension is in the form of life insurance coverage of monetary value. With this model, the employer owns policy, pays monthly premiums and is able to use the asset, as it considers appropriate. Once the employee leaves, the employer pays the employee in retirement monthly installments and at the same time remains the recipient of the policy. In the event of an employee's death, the company collects the entire monetary value of policy and uses revenues to resolve any benefits caused by the surviving or other beneficiaries of the deceased.

There is some difference in views on the use of additional strategies of a powerful pension plan. Many groups of work are toward the approachHighly critically, as it increases the potential for overpayment of average employees. For the same reason, shareholders are also sometimes uncomfortable with this type of pension plan strategy and prefer to go with some kind of arrangement, which is based more on merit.

In most countries, the additional powerful pension plan is considered to be an unskilled pension program. This means that the employee is responsible for paying taxes from any funds received from the plan. At the same time, these payments are usually counted as a tax deduction for employers at a time when they are issued, a fact that helps to replace the inability to demand tax deduction at the time when premium payments were made to life insurance.

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