What Is a Supplemental Retirement Plan?

Supplemental retirement plans are post-work savings plans that enable workers to put away more funds for retirement than what their employers offer. These plans have different features but operate in the same manner, according to TIAA-CREF. They deposit money directly from a paycheck into a retirement account, which lowers the value of the plan holder's taxable annual income.

Once stored in retirement accounts, income does not become tax-eligible until it is withdrawn. Tax-deferred plans maximize retirement money by increasing the possibility for a large tax benefit. They also have higher contribution limits than IRAs, according to TIAA-CREF. They also do not have a sales charge, which helps maximize retirement revenue.

As with traditional retirement plans, supplemental retirement plans give plan holders several options. People can choose to allocate contributions in a portfolio. This portfolio is flexible, and as with traditional retirement plans, can be changed according to the plan holder's wishes. Supplemental plans may impose contribution limits for employers and employees. Contributions are made voluntarily and may be subject to IRS restrictions.

When setting contribution limits, the IRS takes several factors into consideration, and age and income are two determining factors. Tax-deferred contributions made by the policyholder are considered, as is the length of time a person has worked for a company. Reaching a certain number of work years with a company, such as 15 years, may increase the contribution amount.