In the past, SERPs referred to Supplementary Executive Retirement Plans. However, it is apparent today that executives are not the only group who are adversely affected by the income tax limitations. Middle managers are also being affected. Today, SERPs are more commonly being referred to as Supplementary Employee Retirement Plans.

SERP Designs
Most plan sponsors who provide defined benefit (DB) pensions continue the DB approach for SERPs. In many cases, the registered plan's DB formula is used to determine the overall pension entitlement of an executive or employee. The registered plan provides benefits up to the limits imposed under the Income Tax Act (Canada) and the SERP picks up the remainder. In some cases, a superior DB formula is used to calculate the SERP benefits. Some companies even have formulas or provisions that vary from individual to individual.

Some organizations that sponsor DB plans establish SERPs on a defined contribution (DC) basis. These organizations typically have indicated they do not wish to see large unfunded liabilities on their financial statements.

Plan sponsors of DC arrangements have also been affected by the Income Tax Act limits for money purchase plans and RRSPs. SERP arrangements can be established to receive excess contributions and to allow them to achieve tax deferred growth.

There are a wide variety of SERP designs and corresponding funding arrangements available to meet an employer's/employee's goals and objectives. Leong & Associates provides comprehensive design, consulting, actuarial, and administrative services for all SERP design types. Please contact us for more information on SERPs or for a customized feasibility assessment.