Salary Continuation Plan Agreement between Greer State Bank and Key Executives
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Salary Continuation Agreements
Summary
Greer State Bank has established a Salary Continuation Plan for selected key executives, providing retirement income and family income protection. The plan outlines specific benefits for each participant, including annual retirement payments for 15 years, vesting schedules, early retirement, disability, and change of control provisions. The bank funds the plan through insurance and manages related accounting and tax obligations. The agreement details benefit amounts, financing strategies, and the impact on the bank’s financial statements, ensuring long-term income security for the executives and their beneficiaries.
EX-10.3 5 g81556exv10w3.txt EX-10.3 SALARY CONTINUATION PLAN EXHIBIT 10.3 SALARY CONTINUATION PLAN For The Consideration Of GREER STATE BANK GREER, SC Bank Compensation Strategies, Inc. 3600 West 80th Street Suite 200 Minneapolis, Minnesota 55431 ###-###-#### Fax ###-###-#### SUMMARY OF BENEFIT PLAN DESIGN SALARY CONTINUATION PLAN GREER STATE BANK Plan benefits: - Retirement income benefits are provided for selected key decision makers. - Family income protection is provided for participant's beneficiary. - Individual agreements specify: - Vesting - Incentives - Early retirement benefits - Disability benefits - Change of control provisions The following chart summarizes the retirement benefits for each plan participant. Retire- Duration Total ment Annual of Benefits Executive Age Age Benefit Benefits Paid - --------- --- ------- ------- --------- --------
BENEFIT PLAN LIABILITY SALARY CONTINUATION PLAN GREER STATE BANK Accounting considerations: - The plan provides postretirement benefits for preretirement services. - Benefit accruals are required under GAAP (APB 12/FAS 87). - Present value of benefit payments are recorded at earlier of retirement or at full eligibility (Vesting). Based on the recommended benefits, the employer's benefit liability is shown below. BENEFIT PLAN LIABILITY
BENEFIT PLAN EXPENSE SALARY CONTINUATION PLAN GREER STATE BANK
Based upon the above benefit liability and a 38.00% tax bracket, the resulting benefit expense is shown below.
COMBINED PLAN ACCOUNTING SALARY CONTINUATION PLAN GREER STATE BANK Corp tax rate: 38.00%
FINANCING STRATEGY SALARY CONTINUATION PLAN GREER STATE BANK This financing strategy recommendation will: - Cover contingent benefit liabilities in the event of death prior to retirement. - Generate additional tax-favored earnings to offset the benefit expenses. - Comply with regulatory parameters as defined by OCC Bulletin 96-51. ASSET/LIABILITY MANAGEMENT ASSETS LIABILITIES Taxable Asset (5.25% taxable) $1,100,000 Accrued Benefit Liability Other Assets (6.00% no current tax) PRO FORMA BALANCE SHEET SALARY CONTINUATION PLAN GREER STATE BANK This pro forma balance sheet illustrates changes that would result from implementation of the recommended financing strategy. This schedule is based upon the bank's call report data as of March 31, 1997.
1. Allocation to insurance assets 2. Recognition of insurance asset cash values 3. No loads or surrender charges FINANCING STRATEGY DETAIL SALARY CONTINUATION PLAN GREER STATE BANK The financing vehicles for the benefit program are summarized as follows:
FINANCING STRATEGY EARNING COMPARISON SALARY CONTINUATION PLAN GREER STATE BANK Asset Allocation: $1,100,000
RESULTS OF BENEFIT AND FINANCING DECISIONS SALARY CONTINUATION PLAN GREER STATE BANK ---------------------------- ASSET/LIABILITY MANAGEMENT ----------------------------
EARNINGS IMPACT OF ALTERNATIVE DECISIONS SALARY CONTINUATION PLAN GREER STATE BANK ASSET ALLOCATION: $1,100,000
DETAILED BENEFIT PLAN FINANCIAL DATA SALARY CONTINUATION PLAN GREER STATE BANK This section of the recommendation sets forth the estimated income and expenses associated with the implementation of the benefit plan and the related financing strategy. Included in this section are summary data for all plan participants and detailed data for the individual plan participants. In order to facilitate your review and understanding of the financial data, the following is an explanation of the key terms used: INTEREST ON POLICY EQUITY VALUE- The gross income earned on the insurance policy asset based on current policy interest rates. AFTER TAX OPPORTUNITY COST- By purchasing the insurance asset that we have recommended, the employer would either liquidate an existing earning asset or pass up the opportunity to invest the funds elsewhere. This calculation measures the after-tax effect of this lost income or "opportunity cost." This cost is compounded annually. LOAD, SURRENDER CHARGES AND MORTALITY COST- All of the expenses of providing and maintaining the insurance coverage, which are charged against the policy equity value. SALARY CONTINUATION EXPENSES- Fees paid to establish and service the plan. The expense accruals for the salary continuation benefit plan use the interest method calculation. INCOME TAXES- The estimated current and deferred tax savings on the salary continuation benefit plan. NET PLAN GAIN (LOSS)- The estimated annual net gain or loss of providing the benefit plan. CUMULATIVE NET PLAN GAIN (LOSS)- The cumulative total of the annual net plan gain or loss. The specific assumptions used in preparing the illustrations are as follows:
* The results illustrated throughout are based on the above assumptions. The results will differ over time as assumed rates fluctuate. BCS does not practice law or public accounting. Specific legal and accounting questions should be referred to your professional advisors. (c) Copyright 1997, BCS Inc.