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The Salary Continuation Plans: Does ERISA Applied Regulations to It?

Here's what you need to understand regarding salary continuation plans.
The Salary Continuation Plans: Do ERISA Applied Regulations To It? (Photo: Forbes)

Here’s what you need to understand regarding salary continuation plans.

Here's what you need to understand regarding salary continuation plans.

The Salary Continuation Plans: Do ERISA Applied Regulations To It? (Photo: Forbes)

Salary Continuation Plan

A salary continuation plan is a corporate-sponsored benefit typically planned to replace an executive’s payment in the event of his/her retirement, death, or disability. The benefit plan is exempt from ERISA and must be confined to a privileged group of highly compensated individuals. In other words in the United States while you are working for your firm and has enrolled you in a salary continuation plan, whereby an agreement is in place for you or your family to obtain either a percentage or your salary in full following the incident.

The Benefits Of A Salary Continuation Plan

The main benefit of a salary continuation plan is that an employer can engender a sense of loyalty from their employees as the workers believe they are being properly taken care of. It is important to note that employees are usually categorized into classes.

Some of the benefits to executives are:

  1. Personal financial security;
  2. Benefit payments can be negotiated with the employer;
  3. Acts as a supplement to the 401(k) plan for retirement.

However, the downside of enforcing a salary continuation plan is that certain individuals might abuse the plan by refusing to come back to work even if they can, particularly if they are being paid in full.

What Is ERISA?

The Employee Retirement Income Security Act (ERISA) according to the department of labor, is a federal law that strives to safeguard established retirement and health plans in the private sector.

Lastly, Salary continuation plans are not protected by the ERISA because it is a non-qualified benefit, the company may choose which executives participate and the level of their benefit.

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