A. A SERP is an arrangement where an employer adopts a plan to provide retirement benefits to an executive, or a select group of executives, and opts to purchases cash value life insurance on the executive's life to assist the employer in meeting future plan obligations.
A SERP is a non-qualified plan, the executive receives custom tailored benefits while the owner of the business can recover the cost of its participation in the program (tax deductible).
The company controls the cash value during the lifetime of the executive. The cash value can help pay premium in down years, can be used in the event of an emergency, and can be used to pay benefits to executives.
The most popular cash value life used is whole life, especially with 10-pay schedule which means the policy is paid up in 10 years and there is no more obligations, and the policy could achieve maximum cash value quickly.
If you own a small or medium business and want to know how SERP could work for you, please contact us for more details.