SERP is an acronym for supplemental executive retirement plan, a nonqualified deferred compensation arrangement that promises selected executives additional retirement income beyond what qualified plans such as 401(k)s can provide. A SERP is typically an unfunded or informally funded contractual promise by the employer to pay a defined benefit or account-style benefit at retirement, termination, disability, or death. Because SERPs are not subject to most qualified plan limits or nondiscrimination rules, they can be tailored to key employees with higher benefit levels and flexible vesting conditions. However, SERPs generally expose executives to employer credit risk, and must comply with Section 409A rules on deferrals and distributions. Many SERPs are informally funded with corporate-owned life insurance to help the employer offset future benefit obligations.

Advisors use the term SERP when helping business owners and boards design executive benefit programs to attract and retain key leaders. Working with attorneys and CPAs, they specify benefit formulas, vesting schedules, and triggering events such as retirement or change of control. Life insurance is often proposed as an informal funding tool, with policy cash values supporting future payouts and death benefits protecting the company if an executive dies early. Advisors explain to executives that SERP benefits are typically taxable when paid and can be lost if the company becomes insolvent. Properly designed SERPs can complement qualified plans, stock options, and bonuses, creating a competitive total rewards package. Understanding SERP mechanics allows advisors to position life insurance solutions within a compliant, strategically sound executive compensation framework.