Qualified Retirement Plans PDF Download

To raise private savings for workers' retirement, federal law provides tax incentives for contributions to pension plans. Company sponsors of private defined benefit (DB) pension plans can claim a tax deduction for their contribution amount to a tax-qualified pension plan, and employees' taxes on contributions and investment earnings are deferred until they retire and start receiving benefit payments. Some plan sponsors have designed ways to indirectly transfer some of these nontax-qualified supplemental executive benefits into their existing tax-qualified DB plans. In effect, plans accomplish this by increasing the benefits under the qualified plan, with an offsetting reduction in the benefits under the nonqualified plan, which extends to the HCE the security of DB plan funding and the tax benefits of a qualified plan. These arrangements, commonly referred to as Qualified Supplemental Executive Retirement Plans (QSERP), can provide HCEs with a higher qualified benefit amount, the tax advantages provided by a qualified plan, as well as the increased benefit security provided by the backing of qualified plan assets. Since QSERPs are provided to HCEs, but are funded by the assets used to pay qualified plan benefits for all employees, some observers have questioned whether these arrangements affect the benefits promised to NHCEs. examine several aspects of QSERP arrangements. This report addresses (1) what is known about the prevalence and design of QSERP arrangements and to what extent recent economic conditions have influenced plan sponsors implementing these arrangements; (2) the key regulatory and statutory issues associated with these arrangements; and (3) the implications of these arrangements for involved parties, including the Pension Benefit Guaranty Corp. (PBGC). Figures. This is a print on demand report.