Retire in Style
Here's a shocker: According to a 1997 study by the accounting firm Coopers & Lybrand (now PricewaterhouseCoopers), themost common executive perk in America is something called a SERP. Never heard of it? The term broadly refers to all kindsof "supplemental executive retirement plans" that provide deferred compensation to key employees and business owners. Thestudy found that 60% of the 149 companies surveyed had some type of management SERP.
Small companies, however, make little or no use of SERPs. "They tend to offer stock options instead, which managers haveviewed as an attractive substitute," says survey author Carl Weinberg, a principal in PricewaterhouseCoopers' Westport,Conn., office. But, Weinberg warns, that may change if stock market conditions make options less profitable. Then "smallercompanies won't be able to compete with bigger corporations for top talent unless they start offering SERPs as well."
Although SERPs don't earn the same tax benefits that you can get from "qualified" companywide retirement plans such as401(k)s, the "nonqualified" plans, such as a nonqualified profit-sharing plan for selected employees, don't bring the sameregulatory hassles, either. With nonqualified plans, you can pretty much offer whatever you want to your highly compensatedemployees. Just remember the trade-off in tax benefits: Although your business's contributions to a qualified plan result incurrent tax deductions, your company's contributions to a nonqualified plan will not provide tax deductions until peopleactually receive the funds. Note: To set up a nonqualified plan, you will need professional advice.