After tax supplemental compensation plans funded with life insurance offer a hybrid arrangement that reduces the complexity and expense associated with non-qualified deferred compensation plan. These plans are a great benefit for a company to offer to non-owner key executives to retain and reward them for their valuable services. They are especially attractive in pass through entities such as Subchapter S corporations and tax exempt organizations.Read More
MKA Executive Planners Blog
The current disconnect between payments made to health care systems and the compensation plans of physicians employed by them is an elephant in the waiting room. Unlike the smooth pendulum swing of the 1990s from fee-for-service to global payments, there are now several new flavors of risk and most organizations are trying them all. Fee-for-service, shared savings, alternative quality contracts, bundled payments and global capitation all require a different approach to maximize value. Yet other than niche organizations that focus on one brand of risk and pair it with appropriate reimbursement, is anyone actually doing that?
CommonWealth magazine recently posted an opinion piece by Barry Koslow that focuses on executive compensation for leaders of private colleges and universities. The article begins:
The media and the public (not sure which drove which) have become frenzied over executive compensation, making broad-brush examples out of a few outliers. It is time to settle down and realize the importance of a proper balance between what is actually “bad” and what is not. Legislation and regulation are not the answer. We need careful analysis, decision making and the willingness to act on behalf of both employees and the organization.
It is becoming more and more obvious that we all need to pay more attention to our long term need for capital accumulation. Concerns are growing that the current dysfunction of our federal government and the continuing growth of entitlement programs may force more and more of the middle and upper classes to become self-reliant. It is not a question of approval of the current direction of government. It is whether the resources will be there to meet the promises made, while providing for other needs such as defense, infrastructure, etc.
Periodically, activists and the press engage in challenging the value of executives and their compensation, especially for executives at not-for-profit organizations or non-stock for-profits such as mutual banks and insurance companies.
While there are many reasons that a Board should consider, design and implement supplemental benefit plans for their top executives, professionals and performers, this discussion will focus on five of them.
A high level executive at a Wall Street investment bank learned a tough lesson recently. According to a published news report, he was at a New York City holiday party and left expecting to find his car and driver at the curb. When it did not arrive, he hailed a cab for the 40 mile ride to his Connecticut home.
While many, if not most, supplemental retirement agreements (SERPs) and deferred compensation arrangements do not require the participating executive to sign a release in order to receive payment, many employment contracts along with other agreements tied to compensation, employment or severance often do. If you have a SERP or deferred compensation arrangement or another agreement that has a requirement to sign a release at separation from service you could be caught in a huge tax trap.
A senior executive or physician earning $250,000 or more at retirement is likely to receive less than 30% of her final pay as a retirement benefit from her employer’s retirement plan and Social Security. It is not unusual for us to find retirement benefits from employer dollars in the 20 to 25% range of final salary. At the same time, the average employee’s retirement benefit is likely to be at 50% or more of final salary.