Long-Term Wealth Accumulation
Salary Continuation Plan
Salary Continuation Plans (SCP) are nonqualified benefit plans that provide additional retirement income as an added component of compensation to attract and/or retain key executives and officers who are instrumental to the bank’s success. It is an ideal supplemental retirement benefit to reward highly-compensated individuals for their dedicated service. SCPs give the bank the freedom to structure and calculate the benefit in any number of ways.
The most common benefits are based on two factors: a benefit formula and years of payments. Continuous employment until reaching a retirement age, determined by the bank, is required to receive full benefits. For example, the normal retirement benefit may be a percentage of the executive’s projected final salary with payments commencing on a designated date or event, and paid for a pre-determined number of years.
Executive Deferred Compensation Plan
A key objective of many highly-compensated executives is minimizing taxes and saving additional money for retirement. Traditional qualified plans, such as 401Ks, are often inadequate for highly compensated executives due to their contribution limits. One solution banks offer to help executives achieve these goals is an Executive Deferred Compensation Plan (EDCP). EDCPs are nonqualified benefit plans that allow executives to defer a portion of their salary and/or bonus without the limits inherent in qualified plans. The executive’s contributions help defer taxes and provide supplemental retirement income. Offering these plans give banks an advantage when recruiting and retaining key talent.
In most plans, selected executives elect to defer a portion of their compensation, in addition to amounts allowed under their qualified plans. These elections may be changed or waived each year. The bank may match these amounts, provide an additional grant and/or pay interest on the deferred compensation. Payment of the benefit may be customized to best fit the needs of each executive.