Supplemental Retirement Assistance: Rewarding Key Employees
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Rewarding Key Employees in Every Department

Would you like to provide more retirement benefits to your high-performing employees? Consider adopting an SERP.

David Graham is the vice president, advanced markets for The Atticus Group

While 10,000 baby boomers turn 65 every day, nearly one in five (17%) has less than $5,000 saved for retirement and 20% has less than $5,000 in personal savings. For generation X, the numbers are greater — 21% have less than $5,000 saved for retirement and 22% have less than $5,000 in personal savings.

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Forty-six percent of all Americans expect to work past the traditional retirement age of 65, with nearly one out of five baby boomers (18%) and an equal percentage of generation X expecting to work even longer — past the age of 74.

Interestingly, more than half (53%) of Americans who expect to work past age 65 say it will be by choice, compared to 47% who say it will be out of necessity. Among those who say they expect to work past age 65 out of necessity, the top three reasons why include:

“I won’t have enough saved to retire comfortably.” (78%)
“I do not feel like Social Security will take care of my needs.” (56%)
“I am concerned about rising costs like health care.” (49%)

Rising Health Care Costs

Some Americans may be able to accurately estimate their entertainment, food and transportation costs in retirement, but health care is the one major outlier that is unpredictable and expensive.

One financial company estimates that on average, a 65-year-old retired couple needs $285,000 to spend on health care over the course of retirement. For planning purposes, you may want to factor in an even higher number because many people experience above-average expenses — often due to chronic illnesses, longevity or long-term care costs.

Using a Supplemental Executive Retirement Plan to Reward Key Employees

Would you like to provide more retirement benefits to your high-performing employees but do not have the current cash flow?


If you answered yes, your business may want to consider adopting a Supplemental Executive Retirement Plan (SERP). Such a plan is simply an agreement between your dealership and an employee to pay the employee retirement compensation in the future. This can be an effective strategy to keep key employees in every department of your store. 

SERP plans differ from typical plans, such as pension, 401(k) and profit sharing plans, in that they are exempt from the strict non-discrimination, vesting, funding, reporting and disclosure rules imposed by government agencies. While a SERP plan’s “non-qualified” status means that an employer cannot take a tax deduction until the employee is taxed, the many benefits of a SERP plan often outweigh the delayed deduction.


For example, a regional auto dealer decides to reward 16 key employees for their years of faithful service and loyalty to the company. The dealer will implement a SERP for these employees to assist them in saving and planning for their retirement. The SERP provides a supplemental retirement income, as long as they meet the vesting conditions spelled out in the agreement. If any of the employees die before retirement, the SERP may provide survivor benefits to their family.

Advantages for the Dealer

• Impressive retention and rewarding tool.
• Tax-deductible when paid to employees (retirement).
• Less plan administration and funding than qualified plans.
• Complete cost recovery when properly structured with life insurance.
• Enhances dealership value.

Advantages for Employees

• Significant tax-deferred retirement benefit for your loyal key employees.
• Can provide survivor benefits for key employees’ beneficiaries.

Perhaps it is time to assess how you can help your key employees plan and save for retirement as a reward for their loyalty to you and their years of service. A SERP can provide the promised retirement benefit and provide 100% cost recovery when properly structured.  

Statistics in this article are based on the on the 2019 Planning & Progress Study by Northwestern Mutual

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