MKA Executive Planners Blog

What has happened to retirement benefits?  Defined benefit plans have gone the way of the horse and buggy; 401(k) and 403(b) plans only do part of the job; traditional non-qualified plans are subject to employer insolvency, 409A design limitations and, in many cases, long term vesting or forfeiture provisions.  Cash is nice, but with the public hungry to focus on large salaries and Boards feeling governmental, regulatory and public pressure, what is one to do?

A high level executive at a Wall Street investment bank learned a tough lesson recently.  According to a published news report, he was at a New York City holiday party and left expecting to find his car and driver at the curb.  When it did not arrive, he hailed a cab for the 40 mile ride to his Connecticut home.

While many, if not most, supplemental retirement agreements (SERPs) and deferred compensation arrangements do not require the participating executive to sign a release in order to receive payment, many employment contracts along with other agreements tied to compensation, employment or severance often do.  If you have a SERP or deferred compensation arrangement or another agreement that has a requirement to sign a release at separation from service you could be caught in a huge tax trap.

A senior executive or physician earning $250,000 or more at retirement is likely to receive less than 30% of her final pay as a retirement benefit from her employer’s retirement plan and Social Security.   It is not unusual for us to find retirement benefits from employer dollars in the 20 to 25% range of final salary.  At the same time, the average employee’s retirement benefit is likely to be at 50% or more of final salary.

Life Insurance

Deferred Compensation Administration