Attracting top leadership talent is essential because strong leaders grow businesses, boost productivity and motivate employees. Many companies cannot afford to offer highly competitive benefits to executives, so an executive benefits plan can provide targeted retirement or supplemental compensation to attract, reward and retain key talent.
An executive benefits plan is a contractual agreement between an employer and select employees that supplements the company’s existing benefits package. These plans are designed to give employers flexibility when offering compensation to executives and other key employees.
Plan advantages
- Replace income at retirement
- Replace benefits lost because of IRS limits on qualified plans
- Defer compensation
- Enhance benefits during an acquisition or change of control
- Add benefits to qualified employee benefit plans
Executive Benefits Plan Eligibility
Qualified employee benefit plans typically cover most workers, but executive plans are intended for a narrower group. Department of Labor guidance limits coverage to select management personnel with specific roles, and many companies also focus on highly compensated or key-responsibility employees.
Common eligible positions
- President
- Chief executive officer
- Chief financial officer
- Senior or executive vice president
- General counsel
- Treasurer
Products Available in an Executive Benefits Plan
When assembling a plan, consider the variety of product options that can be combined to meet your goals. For example, see Executive Bonus Plan as one option among many employers use.
Typical product options
- Executive health plans
- Elective deferred compensation plans (EDC)
- Benefit equalization plans (BEPs)
- Supplemental executive retirement plans (SERP)
- Medical reimbursement plans
- Section 162 bonus plans
- Split-dollar arrangements
- 457(b) and 457(f) plans
- Key-person disability coverage
- Key-person life insurance
Funding Considerations
Executive plans can be funded or unfunded. Funded plans place contributions into an independent trust that then pays benefits, offering greater security. Unfunded plans rely on the employer’s general assets and are paid when benefits come due.
Discuss funding choices with your plan administrator or insurance agent and, if you want a quote or to review options with a professional, talk to an agent.
Choosing a plan administrator
Leaders make a significant impact on company success, so choose an administrator or insurer with experience managing executive arrangements. Look for clear documentation, predictable costs and compliance support to ensure the plan meets your objectives.
Frequently Asked Questions
Who should be considered for an executive benefits plan?
Plans typically cover a small group of senior managers, highly compensated employees or those with critical responsibilities, such as C-suite officers and general counsel.
What is the difference between funded and unfunded plans?
Funded plans hold contributions in an independent trust for benefit payments, while unfunded plans pay benefits from the employer’s general assets when due.
Can executive benefits replace retirement income limited by qualified plans?
Yes, these plans are often used to replace retirement income that is reduced by IRS limits on qualified plans.
Do executive plans have participation requirements?
No—unlike qualified plans, executive benefits plans generally do not have coverage or broad participation rules and are designed for select employees.