Executive Incentive Retirement Plan (EIRP) / Director Incentive Retirement Plan (DIRP)
- An annual deferred award will be made to participants if the organization exceeds certain pre-determined benchmarks on an annual basis. Examples of benchmarks are return on equity, return on assets and net income.
- Interest is credited on each participant’s account (i.e. prime rate).
- The accumulated account balance will be paid out to the participant upon retirement from the bank over a 5, 10 or 15-year period (with interest), or in a lump sum, at the discretion of each participant.
- Amounts deferred are not taxable income to the participant or heirs until actually received.
- Full pre-tax amounts that are deferred earn interest that is compounded without current taxation.
- Each participant has an individual agreement that specifies:
- Annual award criteria
- Interest crediting
- Payout duration
- Death Benefits
- Disability
- Change of control protection
- Vesting
Supplemental Executive Retirement Plan (SERP) / Director Retirement Plan (DRP)
- An income benefit paid at retirement by the bank to the executive or director equal to a flat dollar amount or a percentage of final pay (i.e. 25% of final 3 year average salary).
- The annual benefit payment is paid out over a 5, 10, or 15-year period or in a lump sum, at the discretion of each executive or director.
- Each executive/director has an individual agreement with the bank that specifies:
- Vesting
- Death benefits
- Payout duration
- Disability
- Change of control protection
Executive & Director Deferred Compensation Plan
- Each executive has the ability to defer a percentage of his or her salary or a flat dollar amount annually. Directors can defer board meeting fees and retainer fees.
- Interest that is credited on each executive & director’s deferral account is adjusted annually (i.e. prime rate), a crediting rate is typically designed with a floor and ceiling rate.
- Each executive and director is 100% vested in his or her account balance.
- The accumulated account balance will be paid out to the executive or director upon retirement from the bank over a 5, 10, or 15-year period (with interest), or in a lump sum, at the discretion of each participant.
Group Term Replacement Plan
- The bank provides Group Term Life insurance through Bank Owned Life Insurance.
- The benefit can mirror the Group Term plan or it can be enhanced (i.e. remove cap, provide post retirement).
- The bank maintains the first $50,000 of coverage with the Group Term provider to deter adverse census rates by removing insureds from the pool.
- Participant reports a reduced amount of annual reportable income due to less expensive one-year term rates utilized by insurance carriers than those used by Group Term providers that are based on IRS tables.
- The bank will own the cash values of the individual, permanent BOLI policies, and show the earnings of the policies (cash value increases) on its financial statements.
- The bank will be the beneficiary of the death benefits in excess of each executive’s multiple of salary.
- The plan design will create significant net income for the bank, rather than the pure expense of the current group term premiums.