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How are supplemental executive retirement plans SERP taxed once the benefit is received?

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There are many different ways they can be set up, and many different vehicles for the funds...but generally: On set up the money put in them is NOT taxed to the employee, although the payroll handling, from the companies side, may be different. (Also certain parts of things like FICA may need to be paid up front). The executive is defferring the income...not getting it now, not getting taxed on it now. When it is withdrawn/paid out, the original salary is taxable as is the investment growth. It is normally all taxed as ordinary income, even though the investment portion may have received a capital gain treatment...however, depending on the exact set up, sometimes the gain and salary can be differentiated and is taxable as each type. The SERP administrator should explain how and why the specific plan your in works.
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