Chart the Course
for
Bank Executive
Benefits, SERPs and Perks
Speaker:
Arthur Warren, Esq.
Arthur Warren Associates
Executive and Board Compensation Advisor
1600 Boston Providence Highway, Walpole, MA 02081
508-660-0280  [email protected]  www.afwarren.com
Conference:
New York Bankers Association
Symposium for Senior Executives and Directors
June 2013
NYBA 2013 Symposium
Are Your Executive Benefits
Caught in Changing Winds?
Federal Income Tax Reform
Attract and Retain
Talented Executives
Benefits Cost
Regulatory
Safety and Soundness Exams
The Great Recession:
Profitability, Capital
and Asset Quality
Arthur Warren Associates
508-660-0280  [email protected]
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How One
Systemically Important Bank
Weathers the Storm
Batten Down the Hatches
“There are no special executive benefits –
 No pension credits for incentives.
 No 401(k) Savings Plan matching contributions for any senior
executive.
 No special medical, dental, insurance or disability benefits for
executives.
 No private club dues, car allowances, financial planning, tax
gross-ups for benefits.”
Source: JPMorgan Chase & Co. 2013 Proxy Statement, page 29.
Arthur Warren Associates
508-660-0280  [email protected]
-3-
Community Banks Respond
Strategically by
Trimming Their Sails
Team Racing
TYPE
Supplemental
Retirement
Benefits
Supplemental
Welfare
Benefits
More Participants
but shift to
Defined Contribution
More Participants
but
Limited Benefits
PERKs
PREVALENCE
Arthur Warren Associates
508-660-0280  [email protected]
Fewer Participants
and limited to
Demonstrated
Business Purpose
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Supplemental Retirement Benefits
Heading Downwind
Why SERPs Are Popular
 Attract and retain executives
 Provide retirement income security
 Make-up IRS imposed limits on bank retirement plans
 Restore benefits from frozen defined benefit pension plans
 Substitute for lack of stock awards in mutual banks
Arthur Warren Associates
508-660-0280  [email protected]
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New Trends in SERP Design
Rounding the Buoy
Define the Contribution, Not the Benefit
 Prevalence of Defined Benefit SERP is waning
 No link to Bank performance
 Sold, not designed
 Too expensive
 Prevalence of Defined Contribution SERP is waxing
 Fixed and discretionary Bank contribution
 Flexible design unique to each executive
 Cost control and administrative simplicity
Arthur Warren Associates
508-660-0280  [email protected]
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Defined Contribution SERP
Design Concepts
Shortening the Course
Single Plan of Deferred Compensation with
Individual Executive Participation Agreements
Annual Fixed
Level
Contributions
or
Percentage
of Base
Salary
Arthur Warren Associates
508-660-0280  [email protected]
Annual
Discretionary
Performance
Based
Contributions
401(k)
Match
or
Profit
Sharing
Make-Up
Voluntary
Executive
Pre-Tax
Deferral of
Salary or
Incentives
(IRS Limits)
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Supplemental Welfare Benefits
Windward Tack
Death and Disability…Still Inevitable

Life Insurance in excess of Group Policy


BOLI endorsement split dollar popular for pre but not post retirement
Executive-owned policy popular, with taxable Bank paid premium
 Disability Insurance in Excess of Group Policy

Executive-owned policy with taxable Bank paid premium
 Long-term Care Insurance


Expensive
No true group underwriting with limited carriers
Arthur Warren Associates
508-660-0280  [email protected]
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PERKs
Heading for Port
Navigation Aids
 Perquisites Curtailed or Limited
 Post-retirement life and medical
 Tax and financial planning
 Spousal benefits
 Auto allowance replaces bank-owned car
 Club Dues with demonstrated business purpose
 No tax gross-ups on Executive PERKs value
Arthur Warren Associates
508-660-0280  [email protected]
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Arthur Warren Associates
508-660-0280  [email protected]
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