Are You Making the Most of Your Intel SERPLUS Benefit?
Alex Krider | November 4, 2020
The Intel SERPLUS benefit is a deferred compensation plan that has the potential to help eligible employees build retirement assets and significantly reduce your taxbill each year you choose to use it.
It works similarly to a pre-tax 401(k) plan in that it each dollar contributed reduces your taxable income by the same amount.
Any dollars you contribute can then be invested for growth and used down the road during your retirement. 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 November; the elections you make will begin the following year.
One difference between the 401(k) and a deferred compensation plan is that the latter is an unfunded liability of your employer. This means that in the unlikely case Intel goes out of business, you would have to get in line with other creditors to get your money, and it is not guaranteed.
In 2021, Intel will match 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. In 2020, this total was $285,000. 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. For example, 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.
It is extremely important to evaluate and plan ahead with regards to your specific situation when participating in SERPLUS. Some major considerations include how to elect the payout structure of these deferrals, what your current and short-term cash flow needs are, and how the rest of your compensation will fit in with SERPLUS. These are all aspects we help our clients think through, so they can reduce their taxes now while still being able to comfortably cover their current cash needs.