Executive Benefits
Executive benefits enable employers to selectively reward key employees and executives. These benefits help to attract key executives who will contribute to a company's growth and profitability. A well-designed executive benefits program provides incentives that help retain key employees and executives.
At Gateway Financial, we design, implement and administer executive benefit plans that supplement restrictive qualified retirement and group insurance plans. We create executive benefit plans that are cost-efficient and effective. These plans include:
- Salary Continuation Plans
- Split Dollar Insurance Plans
- Deferred Compensation Plans
- Supplemental Executive Retirement Plans (SERP)
- Executive Bonus Plans
- Executive Group Term Carve Out Plans
- Executive Disability Income and Long Term Care Plans
Our programs are designed to meet the personal needs and goals of executives within the context of a business's overall corporate financial goals.
Employee stock options and programs like 401(k) plans are a good start, but they may not meet the financial expectations of the most talented executives. Executives want to enjoy a rewarding, worry-free retirement, pay for their children's college education, and establish sound financial security. They participate in retirement programs to make these dreams realities, however, due to government limitations, executives may not be able to achieve these lifestyle goals through current benefit programs.
Beyond the 401(k)
As more and more Americans have become responsible for their own retirement, 401(k) plans have addressed an important need. For many executives, however, the yearly investment limit is far too restrictive to fulfill their needs. Deferring compensation can be a solution to limitations in traditional qualified plans. Nonqualified deferred compensation plans can be designed to mirror familiar features of basic 401(k) plans, but without the cap on the dollar amount saved or contributed. These plans allow deferral of various forms of pay, including base, bonus, commissions, and special incentives. More flexible payout schedules can be arranged as well.
Retirement-focused planning is only one feature of today's nonqualified deferred compensation plan design. A plan that allows for payouts before retirement can attract the younger executive who is planning for tuition payments. Nonqualified deferred compensation programs can be constructed to make it easier for executives to handle other important expenses, such as a retirement home or other anticipated future expenses. For example, a nonqualified plan could allow an executive to elect distribution of four annual payments beginning in a future year to finance tuition and expenses for a child entering college that year.
Including Performance Pay and Incentives in Disability Programs
In an era that has emphasized stock options and bonus compensation, executives may find that their performance pay is not part of their current supplemental disability equation. Executives may be shocked to find that they would receive only a portion of what they anticipated in the event of a long-term disability. Often, this is not the intent of the company, but rather an oversight. With today's compensation mix for top employees comprising perhaps 20% to 30% salary (and 70% to 80% incentive bonus and stock options), an executive would receive only about 15% of total compensation if disabled, while suffering a significant lifestyle change. Many long-term disability plans were designed and implemented at a time when executive compensation was more heavily comprised of base salary. These plans were designed to meet corporate clients’ goals: providing basic benefits for the average covered employee, usually through a group plan, encouraging a return to work and doing so at the lowest possible cost. Highly compensated employees usually fall far short in plans designed to deliver a percentage of base pay "only" as disability benefits, even if income tax free. This is simply because of the disproportionate amount of total compensation arising from incentives, bonus, stock options, and other forms of contingent compensation. Supplemental plans can be designed to give executives the opportunity to cover these other sources of compensation.
Supplemental Executive Retirement Plans (SERPs)
Supplemental Executive Retirement Plans solve retention and motivation problems, helping to retain executives who are needed for the continuity of a company's success.
SERPs must be limited to a top group of executives and/or directors due to the penalties that could arise through ERISA-based claims if a plan covers more than a top group.
These types of plans are commonly called "nonqualified" because they cannot meet the broad coverage rules that are necessary to secure the special tax treatment afforded to tax-qualified retirement plans.
For some executives, a significant portion of their anticipated retirement income will be derived from employee stock ownership plans. SERPs are a viable and popular alternative for top long-term executives concerned about the concentration of their post-retirement wealth in stock options. However, executives who have benefited from the bull market or an IPO and no longer need their SERP benefits for worry-free retirement living may prefer exchanging or "swapping" their SERP values for more efficient estate planning tools.