Supplemental executive retirement plan, commonly abbreviated SERP, is a nonqualified deferred compensation arrangement that promises selected executives additional retirement income beyond what qualified plans like 401(k)s can deliver. A SERP is typically an unfunded or informally funded contractual commitment by the employer to pay a defined benefit or account-based benefit at retirement, termination, disability, or death. Because SERPs are not subject to most qualified plan limits or nondiscrimination rules, they can be tailored to key executives with higher benefit levels and customized vesting schedules. However, benefits remain subject to employer credit risk and strict Section 409A rules governing deferrals and distributions.

Advisors use supplemental executive retirement plans to help employers attract, retain, and reward top leadership. They coordinate with attorneys and CPAs to design SERP benefit formulas, vesting conditions, and payment triggers, and often recommend corporate-owned life insurance as an informal funding vehicle. Policy cash values can support future benefit payments, while death benefits help the company recover costs if an executive dies prematurely. Advisors explain to executives that SERP benefits are generally taxable when paid and may be lost if the employer becomes insolvent. Understanding supplemental executive retirement plans allows advisors to position life insurance solutions within a broader executive compensation strategy that complies with Section 409A and aligns with company goals.