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Retirement Planning > Retirement Investing

GAO: Qualified SERPs a Mystery

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No one seems to know how many qualified supplemental executive retirement plans (QSERP) are out there or how the economic downturn affected the plans.

Charles Jeszeck, a director at the U.S. Government Accountability Office (GAO), writes about the lack of information about QSERPs in a QSERP report prepared for members of the U.S. House Ways and Means Committee.

Federal tax laws encourage pension plan sponsors to provide benefits for rank-and-file workers by penalizing plans that appear to be discriminating excessively in favor of highly compensated employees.

Pension consultants can create a QSERP by determining how much a pension plan can allocate to executives without violating the antidiscrimination rules, then allocating a sum up to that amount to specified executives.

Some companies and executives prefer the QSERP approach to the traditional non-qualified executive benefits plan approach because it minimizes tax payments and maximizes Pension Benefit Guaranty Corp. benefits protection, Jeszeck says.

“The prevalence of QSERPs is unknown because comprehensive data are not available, and we were unable to identify sufficient experts with broad quantitative information on QSERP arrangements,” Jeszeck says.

The Internal Revenue Service has no data on the topic, and academic researchers have not published papers on the prevalence or design of QSERPs, Jeszeck says.

The same economic conditions that have hurt funding levels of other types of pension and retirement plans may have affected QSERPs, too, but because of the lack of QSERP data, there is no good way to confirm whether the downturn has affected the number of QSERPs, Jeszeck says.

Other executive comp coverage from National Underwriter Life & Health:


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