Executive Benefits: A Plan Sponsor Guide

For many organizations, a competitive retirement plan is the foundation of the employee benefits package. Yet traditional 401(k) or 403(b) plans often fall short for highly compensated employees and key leaders whose retirement savings needs exceed qualified plan limits. Executive benefits fill that gap. They are specialized, employer-sponsored arrangements designed to attract, retain, and reward top talent while helping organizations meet long-term business goals.

What Are Executive Benefits?

Executive benefits are nonqualified compensation programs offered outside of ERISA-qualified retirement plans. Because they are not subject to the same IRS contribution and nondiscrimination limits as qualified plans, they provide greater flexibility in how much can be contributed, when benefits are paid, and how programs are structured.

Unlike broad-based benefits, executive plans are typically offered to a select group of management or highly compensated employees. The intent is to provide additional retirement income, supplemental savings opportunities, or performance-based rewards that align the interests of leadership with the success of the organization.

Who Are They Designed For—and What Problem Do They Solve?

Executive benefits are built for individuals who face two common challenges:

• Qualified plan limits restrict meaningful savings. Even with catch-up contributions, IRS caps can prevent executives from replacing a reasonable percentage of income in retirement.
• Compensation structures are complex. Bonuses, equity awards, and variable pay can make long-term planning difficult without a tailored strategy.

From the employer perspective, executive benefits address critical workforce objectives. Competition for senior talent is intense, and organizations need tools to differentiate their total rewards package. These plans can also support succession planning, protect the business from the loss of key contributors, and encourage leaders to remain with the company during pivotal growth periods.

5 Common Executive Benefit Solutions

Several structures are widely used, each solving slightly different needs:

1. Nonqualified Deferred Compensation (NQDC) Plans. These allow executives to defer a portion of salary or bonus beyond 401(k) limits. Taxes are postponed until benefits are paid, often in retirement. Employers can also make discretionary contributions tied to performance or tenure.
2. Supplemental Executive Retirement Plans (SERPs). SERPs promise a specific level of retirement income, often designed to replace benefits lost due to qualified plan limits. They can be formula-based or funded through company contributions.
3. Executive Bonus Plans (Section 162 Plans). Employers provide bonuses earmarked for life insurance or other savings vehicles, with the executive owning the policy. This approach offers flexibility and immediate vesting.
4. Split-Dollar Life Insurance. Costs and benefits of a life insurance policy are shared between employer and executive, providing death benefit protection and potential supplemental retirement income.
5. Key Person Insurance and Retention Agreements. These protect the organization financially while creating incentives for critical leaders to stay through defined milestones.

Each option can be customized around vesting schedules, payout timing, and performance metrics to support both employee and employer objectives.

How Executive Benefits Fit Within the Total Rewards Package

Executive benefits should not stand alone. They work best when integrated with:

• The core retirement plan
• Equity compensation programs
• Health and welfare benefits
• Succession and compensation strategies

A well-designed package creates alignment: the organization rewards behaviors that drive growth, while executives gain a clearer path to financial security. For example, pairing an NQDC plan with a robust 401(k) match can help leaders save consistently while deferring taxes during high-earning years. SERPs can complement equity grants by providing predictable income alongside market-based rewards.

Risks and Challenges to Consider

While powerful, executive benefits carry unique complexities:

Regulatory and Tax Compliance. Nonqualified plans must comply with Internal Revenue Code Section 409A rules governing deferrals and distributions. Missteps can trigger immediate taxation and penalties for participants.

Employer Credit Risk. Unlike qualified plans, nonqualified benefits are typically unsecured promises of the company. Executives become general creditors, which requires careful communication and funding strategy.

Accounting and Cash-Flow Impact. Plans can create long-term liabilities on the balance sheet. Employers must model future costs and consider funding methods such as corporate-owned life insurance or rabbi trusts.

Perception and Equity Concerns. Offering benefits only to leadership may raise questions among the broader workforce. Clear rationale and thoughtful program design are essential.

Administrative Complexity. Enrollment, deferral elections, distribution schedules, and participant education require specialized oversight.

How a Plan Advisor Can Help

A knowledgeable retirement plan advisor can be the quarterback of the executive benefits process. Their role typically includes:

• Needs Analysis: Evaluating gaps between current benefits and executive retirement goals.
• Plan Design: Recommending structures that align with compensation philosophy and budget.
• Vendor Coordination: Working with recordkeepers, insurers, attorneys, and accountants.
• Compliance Oversight: Helping sponsors navigate 409A requirements and documentation.
• Financial Modeling: Illustrating long-term cost scenarios and participant outcomes.
• Participant Education: Guiding executives on deferral strategies, distribution timing, and integration with personal planning.

Advisors also help ensure that executive benefits complement—rather than conflict with—the organization’s qualified retirement plan. This holistic view protects the sponsor while delivering a cohesive experience for leadership.

Getting Started

For plan sponsors considering executive benefits, the first step is clarifying objectives. Are you trying to retain a founding partner? Recruit a CEO? Replace lost pension income? The answer drives the design.

Next, evaluate how the program will be funded, communicated, and governed. Establish written policies, model various scenarios, and involve legal and tax professionals early.

Finally, partner with an advisor who understands both qualified and nonqualified plans. Executive benefits are not off-the-shelf products; they are strategic tools that require thoughtful integration into the broader benefits ecosystem.

Final Thoughts

Executive benefits help organizations solve a problem qualified plans cannot—providing meaningful, flexible retirement and incentive opportunities for the people who matter most to the company’s future. When designed carefully and supported by experienced advisors, they become a powerful component of a competitive total rewards strategy.

Informational Resources

NAPA (National Association of Plan Advisors): “Here’s Why Companies Offer Nonqualified Deferred Compensation Plans” (February 25, 2025)
Rippling: “Non-qualified Deferred Compensation Plans: Full Guide For Employers” (July 24, 2025)
World at Work: “Q&A: Why Evolving Your Executive Benefits Strategy Is a Necessity” (September 30, 2025)
Principal Financial Group: “Trends in Nonqualified Deferred Compensation Plans” (November 25, 2025)