The Executive Roth Plan^sup SM^: Updating Defined Benefit SERPs

With competition fierce for attracting and retaining a quality executive team, and in light of stringent new proxy reporting requirements, a well-designed nonqualified plan has never been more important. For many companies, defined benefit Supplemental Executive Retirement Plans (SERPs) are the core of their executive retirement program. In April of 2007, the US Treasury and IRS issued final regulations for Section 409A that affect nonqualified plans. The changes to Section 409A create new restrictions on nonqualified arrangements and impose stricter reporting and disclosure guidelines. These new rules reduce the flexibility, security, and appeal of many nonqualified arrangements. Defined Benefit (DB) pension plans became a staple of corporate retirement delivery. However, DB plans (and DB SERPs) began to lose favor due to the popularity of 401(k) plans. Whether or not the Executive Roth Plan is the right plan for companies, now is a good time to restate their objectives and compare current plans to new alternatives available in the marketplace.