Updated for 2022. SERPLUS, Intel’s deferred compensation plan, can help eligible employees significantly reduce their tax bill while building retirement assets. Grade level 10 or higher Intel employees are eligible to enroll in SERPLUS.
How Does Intel’s Deferred Compensation Plan Work?
SERPLUS works similar to your pre-tax 401(k). Contributions into SERPLUS reduce your taxable income on a dollar-for-dollar basis. Unlike the 401(k), though, it’s worth pointing out SERPLUS is an unfunded liability of Intel, so in the unlikely event that Intel went bankrupt, you would have an unsecured general claim against liabilities.
How Much Salary and Bonus Can You Defer with SERPLUS?
If you are eligible for this benefit, you can defer up to 60% of your salary and up to 75% of your bonus/commission. SERPLUS enrollment begins in late Fall; the elections you make will begin the following year.
Intel matches your SERPLUS contribution up to 5% of excess pay. What’s excess pay? The IRS puts a limit on how much income is eligible for an employer to match into an employee’s 401(k). This is so that highly compensated individuals don’t get an extremely large match. This threshold can be reduced downwards if employees contribute to additional retirement savings vehicles. The amount an employee earns above this threshold is called excess pay.
Let’s look at an example of how excess pay can work. If you earn $295,000 and contribute the $10,000 of excess pay to your SERPLUS plan, Intel will provide a match of 5% on this amount. Depending on how much you contribute to the SERPLUS plan, the excess pay amount can become much larger as more of your income is deferred, but your total pay amount stays the same.
How Can SERPLUS Reduce Your Tax Bill?
In this example, our Intel employee, Susan, is grade level 10 and earns the following in compensation:
BASE SALARY
$285,000
CASH BONUS
$60,000
INTEL STOCK GRANTS
$100,000
This amounts to $445,000 in total compensation which means she is in the 35% marginal rate. However, if Susan defers some of this compensation, she can lower her overall tax bill significantly.
Susan maxes out her 401(k) for the year, contributing $19,500, lowering her tax bill by approximately $7,000, but this barely makes a dent. In addition, Susan defers into SERPLUS $150,000 from her salary and cash bonus. Here is where she really begins to see the benefit of SERPLUS – this deferral will cut her Federal tax bill by approximately $55,000. Over several years, the tax savings can add up to hundreds of thousands of dollars.
Manage Your Cash Flow With SERPLUS
Your salary and cash bonus are only two-thirds of your total compensation. As your Restricted Stock Units (RSUs) begin to vest, they are treated as income and are taxed, even if you never sell them. If you decide to hold onto those RSUs, it’s as if you’ve been given cold hard cash, and you’ve chosen to invest every dollar in Intel.
Instead of holding onto those RSUs, we recommend you sell them and use the proceeds to fund your cash flow. The proceeds can offset the salary and cash bonus you defer.
Your SERPLUS can be invested in many different funds, so rather than keeping your money tied up in Intel stock, you can invest in a diversified portfolio. Once you’ve sold your RSUs and funded your cash flow, you can re-invest any remaining funds.
Living off of the proceeds of your RSUs means that you’ll have several very large “pay days” throughout the year – you’ll need to manage your cash flow in between those “pay days” to ensure you have enough money to pay your bills.
It is extremely important to evaluate and plan ahead regarding your specific situation when participating in SERPLUS. Some major considerations include how to elect the payout structure of your deferrals, what your current and short-term cash flow needs are, and how the rest of your compensation will fit in with SERPLUS.
Do You Have Questions About SERPLUS?
We know that Intel employees have enough going on, and that finding the time to research, plan, and make the appropriate elections into SERPLUS may feel overwhelming. This may mean some put off enrolling in SERPLUS, which can amount to paying tens, if not hundreds of thousands of dollars in taxes beyond what you would pay by utilizing this deferred compensation benefit.
If you have questions about how to take full advantage of your compensation package and the benefits of being an Intel grade level 10 or higher employee, our team will partner with you to develop a plan, implement, and manage the process.