All supplemental executive retirement plan arrangements should be established by a contractual arrangement between the organization and participating executive. These agreements define the terms of the plan, the rights and responsibilities of the parties, and the key terms. Depending upon the type of arrangement and complexity of the structure, these agreements can be lengthy and difficult to understand at a practical level. Keep reading to learn more about contracts for retirement benefit plans and how they are broken down.
At TriscendNP, we are focused on ensuring the legal agreement is thorough, accurate and understandable. Many of our SERPs are long-term arrangements between the employer and employee, and we want them to stand the test of time by clearly and simply stating the plan benefits and respective party obligations.
In general, SERP contract terms fall into the following categories.
- Plan Funding
- Rights and Obligations of the Parties
- Limitations on Access
- Termination Provisions
The Plan Funding section of the agreement should describe the amount and timing of the funds that will be placed into plan assets. Even plan types that require an “unfunded” status, meaning dollars cannot be set aside for a particular executive and protected from corporate creditors, should still clarify the determined amount.
In a SERP agreement, each party also has defined rights and responsibilities. For the organization, responsibilities include plan funding and administration, with their rights being protected by vesting and termination provisions. For executives, their responsibilities are adherence to the contractual arrangement and their rights center on access to vested benefits during retirement or at a defined point in the future.
It is important to consider the various termination of employment scenarios and what happens to plan benefits in those events. To learn more about these scenarios and how termination should be broken down, click here (video, article, document).
Negotiating the plan agreement is a crucial part of the SERP implementation process. Organizations and executives should allocate ample time to make sure the document is structured in a manner that meets the objectives of both parties. To learn more about TriscendNP and how we help organizations and their executives develop comprehensive and well-structured SERP arrangements, contact us today.