Every year at or near the beginning of November, certain Intel employees are provided the opportunity to participate in the company\u2019s deferred compensation plan, called SERPLUS.<\/p>\n
It should be noted that, technically speaking, a deferred compensation plan can refer to any program through which employees can elect to have a portion of their income paid out at a date later than when it was earned. Using this definition, 401(k) plans and other retirement plans are \u201cdeferred compensation\u201d. However, in this case we are referring to a non-qualified, deferred compensation plan.<\/p>\n
Intel\u2019s SERPLUS plan is different from a qualified plan like a 401(k) in several important ways:<\/p>\n
Understanding the risk and the benefit of participating in the plan, what factors should you consider before deciding to participate?<\/p>\n
How much, if anything, should you contribute?<\/strong> How much should you defer?<\/strong> When would you like to receive distributions?<\/strong> How would you like your dollars invested?<\/strong> You should consult your tax professional and financial advisor before making any changes to your SERPLUS plan.<\/p>\n
\nIf you\u2019re close to retirement, the benefit of tax deferral is less than for someone with several years or even decades of working life ahead of them. Also, you should keep in mind the percentage of your net worth or savings that are held in the SERPLUS plan, given its unfunded nature.<\/p>\n
\nIf you decide to participate, you need to decide how much, and whether it will be salary or bonus. This is really just a question of personal preference. You may wish to consult with your CPA or accountant to discuss your tax brackets and phase-outs.<\/p>\n
\nWhen you elect to participate in the plan, you must also decide when you want your deferred compensation distributed. You\u2019ll need to decide on a start date (either at retirement, or a year at least three years out from retirement), and on a distribution schedule \u2013 a lump sum, 5 year instalments or 10 year instalments. Note that receiving a large lump sum, as opposed to a series of smaller payments, can be unattractive from a tax perspective.<\/p>\n
\nThe benefit of tax deferral is greatest when the dollars invested grow. But it is important to keep your overall investment mix and asset allocation in mind when deciding how to invest your SERPLUS account.<\/p>\n