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Abstract
Generally Accepted Accounting Principles in the US (US GAAP) provide little specific guidance on Supplemental Executive Retirement Plans (SERPs) where benefits are based on an account balance. Instead, US GAAP's pension plan guidance focuses on traditional defined benefit pension plans (both qualified and nonqualified). This article suggests that account balance SERPs are a type of defined benefit plan, because such arrangements do not meet the strict definition of a defined contribution plan and most arrangements that cover more than a single participant meet the definition of a plan. As a result, defined benefit accounting requires that the cost of a single stand-alone notional contribution (not part of a series of such contributions) should be spread over the vesting period, and the liability should reflect expected forfeitures and any above-market (or below market) interest crediting. Finally, converting a traditional defined benefit SERP to an account balance SERP poses additional issues under US GAAP.