Intel’s SERPLUS Benefit
What is Intel’s SERPLUS Benefit?
SERPLUS is Intel’s deferred compensation plan for grade 10 level employees and above. If you are an eligible employee and have not participated in this program, you should check it out!
Similar to your 401(k), the SERPLUS benefit allows you to contribute pre-tax dollars, reducing your taxable income. However, you can contribute well above what you can into the 401(k): you can contribute up to 60% of base compensation and up to 75% of bonuses and commissions into SERPLUS. Unlike the 401(k), SERPLUS is an unsecured liability of Intel’s, which means that in the unlikely event that Intel were to go bankrupt, you would have an unsecured general claim against assets.
How Does SERPLUS Compare to Other Forms of Deferred Compensation in the Tech Industry?
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 2021, this total is $290,000. 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.
Is SERPLUS Right for Me?
Let’s look at an example for Susan, a grade level 10 Intel employee making a salary of $285,000, receiving $100,000 in Intel stock grants, and earning a $60,000 bonus. Her total compensation of $445,000 means she is being taxed at 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 $150,000 in salary and cash bonus. Here is where she really begins to see the benefit of SERPLUS – this deferral will cut her tax bill by approximately $55,000. Over several years, the tax savings can add up to hundreds of thousands of dollars.
How Do I Manage My Cash Flow with SERPLUS?
Remember that 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 do decide to hold onto those RSUs, it’s as if you’re given cold hard cash, and you’ve choosen 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 are then used to supplement the income and cash bonuses you are deferring.
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 cashed out your RSUs and funded your cash flow, you can re-invest any remaining funds.
Living off of the proceeds of your RSUs means it’s 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 these deferrals, what your current and short-term cash flow needs are, and how the rest of your compensation will fit in with SERPLUS. That is where we come in and help
MORE INTEL INSIGHTS
For more information and advice from our Intel-focused advisors visit our other pages focused on Intel Compensation and Miscellaneous Benefits page, Intel SERPLUS, or Intel 401(k) & Retirement page.
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