Employee benefit programs run the normal range familiar to salaried employees. They include statutory benefits such as Social Security, Medicare, Workers Compensation, and Unemployment Insurance. At the same time, executives are eligible for company benefits such as vacation, holidays, sick days, severance pay, life insurance, and medical insurance.
In addition to the benefits provided salaried employees, executives are often eligible to participate in special retirement plans. These plans, unlike those that apply to all employees, are not protected by federal tax and pension rules and are typically not secured by a trust. Instead, the amounts in these plans are at risk, and if the company is unable to pay them, such as in insolvency or bankruptcy, the executive would lose those funds.
These special plans include the following:
- Nonqualified Deferred Compensation Plans which allow executives to voluntarily defer salary and bonus amounts until a date certain, death or retirement (much like a non-tax-favored 401(k) plan).
- Supplemental Employee Retirement Plans (SERPs) which are meant to supplement traditional pension plans, but are at risk
Many nonqualified deferred compensation plans and SERPs are "restoration plans" designed to allow executives to save the same percentage of income as other employees may save in tax-favored plans.