09/03/2026
Who Has the Control? Understanding SERPs vs. Section 162 Plans
When evaluating executive benefit strategies, one of the biggest differences between a SERP and a Section 162 Plan is the level of control the employer retains.
SERP (Supplemental Executive Retirement Plan)
• The employer typically maintains significant control over the plan.
• Benefits are generally paid in the future and can be tied to vesting schedules, performance goals, or years of service.
• The employer determines when and how benefits are distributed, subject to applicable plan terms and regulations.
• Often used as a long-term retention strategy for key executives.
Section 162 Plan (Executive Bonus Plan)
• The employer generally controls the premium payments but not the policy itself.
• The employee typically owns the life insurance policy and names the beneficiary.
• The employee may have access to policy rights and values, depending on the plan design and policy provisions.
• Once premiums are paid, the employer's ongoing control is generally more limited than under a SERP.
In simple terms:
A SERP typically gives the employer more control over the timing and conditions of benefits, while a Section 162 Plan generally provides the employee with greater ownership and control of the benefit asset.
Both approaches can be valuable, depending on an organization's goals for recruitment, retention, and executive compensation.
This post is for educational purposes only and is not intended as legal, tax, or financial advice. Consult qualified professionals regarding your specific situation.
