Executive Benefit Programs

Supplemental Executive Retirement Plans (SERPs)

SERPs are intended to supplement retirement income that executives will receive from other sources, such as qualified plans, social security and personal savings. SERPs are usually designed as defined benefit plans, with retirement payments calculated according to a predetermined formula. Annual retirement payments often are based on the employee’s compensation and years of service with the company.

Retirement payments in defined contribution plans are based on the accumulated value of contributions to the plan while the employee is actively at work. Contributions often are tied to annual compensation and company performance. An executive’s retirement benefit is based on the balance in that individual’s account when he or she retires.

NYLEX Benefits’ SERP·PLUS™ Model is uniquely designed to structure these programs and help companies assess their benefits and cost.

For more information on NYLEX Benefits SERP Plus specialized program, click here.

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Deferred Compensation Plans

Deferred compensation plans allow executives to save for retirement and defer paying taxes on these amounts until the cash is actually received. Generally elective, the executive decides on the amount of compensation to defer and often can choose how these deferred amounts will grow.

Some deferred compensation plans are funded with employer contributions, with deferred bonuses or other compensation added to the employee’s account for distribution at a later date.

Although deferred compensation plans generally provide for distribution at retirement or other separation from service, some plans permit “in service” distributions, with executives electing to receive distributions at pre-selected dates. When structured correctly, these distributions can be timed to coincide with events such as children beginning college or the desire to purchase a second or vacation home.

NYLEX Benefits’ 501K™ Program can help a company determine the advantages of implementing a deferred compensation arrangement.

For more information on NYLEX Benefits 501K customized program, click here.

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Survivor Benefit Plans

These plans provide for the payment of a survivor benefit to the executive’s beneficiary in the event of the executive’s death while employed by the company. These payments, which often continue for three to five years, generally are based on the executive’s compensation at the time of his or her death.

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Executive Group-term Life Insurance “Carve-Out” Programs

Group term life insurance has historically been among the most common benefits provided by employers to their employees. Coverage is usually tied to compensation, so employees get more insurance with every raise. Also, most basic group term life insurance plans are fully paid for by employer contributions – they are free to the covered employees. For older employees or those with health problems, group term is often cheaper than buying individual life insurance.

Yet, in many companies, enthusiasm for group term life insurance is tapering off – dramatically. For all its apparent benefits, group term life insurance plans for executives can be costly to employers and can create unexpected and unwanted problems for participating employees.

Companies where executives have large amounts of coverage are finding there may be a better alternative to group term life insurance, offering executives significant advantages, including:

• Higher benefits for potentially lower costs;
• Benefits that can continue after retirement;
• Tax deferred equity accumulation that may be used to enhance retirement benefits;
• Portability.

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Additional Information About Group-term Life Insurance Plans

• Pre-retirement coverage is tax-free to the covered participant to a maximum amount of $50,000;
• The amount of pre-retirement coverage in excess of $50,000 is taxable to the covered participant based on the IRS published “Table-I” rates;
• The employer’s ongoing group term rates may be negatively impacted by mortality experience charges assessed when a covered participant dies;
• The employer may be assessed a “conversion charge” if a terminating or retiring participant converts his or her group term coverage to an individual, permanent policy.

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Executive Group Long-term Disability Income Insurance “Carve-Out” Programs

Group term disability insurance is another common benefit provided by employers to their employees. Coverage is usually designed to replace a percentage of base compensation, up to specific dollar limits.

Supplemental programs can be designed to provide highly compensated executives with additional coverage, based on a percentage of total compensation in excess of the basic plan limits. This can be important in providing sufficient replacement income to disabled executives. These supplemental coverages can significantly enhance the basic coverage, providing several benefits, including:

• Higher, more liberal and more flexible benefits;
• Guaranteed level premium rates;
• Portability.

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Long-Term Care Insurance

Long-term care insurance (LTCI) provides benefits when the covered individual needs substantial (standby or hands-on) assistance with daily living activities, such as eating, bathing or getting dressed. With the cost of such assistance continuing to grow and individuals living longer and more likely to need such help, this benefit can ease the concern of executives who face the possibility of incurring such expense for themselves or their family.

Company provided LTCI is becoming more prevalent for executives and their spouses. These programs often continue LTCI coverage into retirement. Company programs can give executives the option of paying for coverage for additional family members.

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Director Benefits

How can your company...

• Offer meaningful benefits to your directors for the important role they play?
• Provide flexibility to your directors on how – and when – they receive their fees?
• Allow your directors to shelter fee income and defer taxes on the fees?
• Create orderly transition of board membership?

For more information, click here to download our Director Benefits document.