Back in May, the Government Accountability Office issued a report entitled: Private Pensions: Little Information Available on Qualified Supplemental Executive Retirement Plans. As a practical matter, companies used QSERPs (which we will use, like the report, as a generic term to describe a variety of similar plan design and funding strategies) more frequently before the economic downturn, when they had surplus funds available in their pension plans. However, the QSERP is still a strategy that nearly every company in America ought to consider, at least.
Shifting accrued or future benefits from a non-qualified plan to a qualified plan creates:
- contribution deductibility and tax-free accumulation for the company, and
- benefit protection and the 19 or so other advantages of a qualified plan for the executives and other highly compensated employees.
Therefore, it is a win-win for the company and the highly compensated employees. As the GAO report itself explains:
Due to the restrictions placed on benefits in a tax-qualified plan, some private sponsors of tax-qualified retirement plans provide additional nontax-qualified supplemental retirement benefits to certain HCEs as part of the HCE's total compensation. These benefits do not enjoy the tax advantages conferred upon qualified plans. In addition, any assets backing these benefits generally remain company assets and, depending on the funding arrangement, could be withdrawn by the sponsor or made available to creditors in the case of a sponsor bankruptcy. Utilizing flexibilities in the nondiscrimination rules, 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.
At first, I did not know whether to laugh or cry over the fact that, during a time of financial turbulence, crushing unemployment, and spiraling debt, senior members of the House Ways and Means Committee seem to be most concerned about QSERPs. However, the good news is that the GAO report's findings were so meager and vague as to make it unlikely that the August Committee will take action to address this pressing national concern. The report's finding includes statements such as:
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....We were unable to identify any other private or public data on the prevalence of QSERPs....We found no academic or related literature on the prevalence or design of QSERPs. While many of the pension experts we interviewed were familiar with QSERPs, some stated that they did not possess sufficient specialized knowledge about the prevalence or design of these arrangements.
I guess they just didn't know whom to ask. However, that doesn't need to stop you, as there are many of us out here with significant experience with QSERPs and the advantages they offer to both companies and higher paid employees.
On July 25, 1866, Congress passed legislation authorizing the five-star rank of General of the Army. Lieutenant General Ulysses S. Grant becomes the first to be promoted to this rank. To that time, the only other Lieutenant General in history had been George Washington. Grant's memoirs are still among the most widely-read of any presidential memoirs and/or histories of the Civil War. There are memorials to Grant in New York City, Washington, D.C., West Point, and Vicksburg (at least – those are the ones I have seen personally) and his home in Galena, Illinois.