SERPs - Defined Contribution

SERPs Remodeled: Defined Benefit Reworked to imitate Defined Contribution

SERP designs are changing: a company can pursue another approach by offering executives a defined contribution SERP (for example, a profit-sharing arrangement) vs. the more common defined benefit approach described above. Instead of receiving a stipulated annual benefit amount at retirement, participants receive current corporate contributions to a special deferred compensation account. The amount of the current contributions is the actuarial equivalent of the defined benefit. The participant allocates and manages the SERP account among various investment options, like any other account in a deferral plan. If the participants investment choices earn more than the interest rate used in the actuarial calculations, their benefits under the plan will increase as compared to the defined benefit approach.