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|The Pulse (02-07-2017)|
Volume 6, Issue 6
Over the past two weeks, more than 175 credit union professionals from across the state joined MnCUN to meet with legislators and advocate for the state’s not-for-profit financial institutions and their members. During the events, attendees received information about state political issues relevant to credit unions and built relationships with the state’s elected officials through face-to-face meetings.
“With dozens of new lawmakers at the Capitol, it is as important as ever that credit unions develop strong relationships with legislative decision makers,” said MnCUN Vice President – Governmental Affairs Mara Humphrey. “Credit Union Day at the Capitol is a fantastic opportunity to show legislators how credit unions benefit the constituents and communities they serve.”
In an effort to continuously improve events, MnCUN is asking for feedback from those who attended Credit Union Day at the Capitol. A short survey can be found online. Pictures from each Credit Union Day have been added to Facebook for easy sharing.
By John Pesh, Director of Executive Benefits at CUNA Mutual Group
SERPs are a valuable tool to help retain and attract talented leaders.
In an environment where 63% of companies report that employee retention is their top concern, a talented leadership team is critical to keep on board. Retaining high-performing credit union executives could rest on whether you can provide them a more comfortable retirement.
There are limitations on how much credit union executives can contribute and receive from traditional retirement plans, such as a 401(k) or pension plan. These limitations make supplemental executive retirement plans (SERPs) a viable and important complement to these conventional plans.
SERPs are nonqualified retirement plans that provide benefits beyond those offered by qualified plans. Although qualified plans may have more tax advantages, nonqualified plans offer more flexibility in customizing contribution amounts and timing of distributions. SERPs allow you to build a powerful supplemental benefits package, which can create greater loyalty to the credit union.
As more CEOs approach retirement, retaining and attracting capable leadership has never been more critical. In the next two years, 10% of credit union CEOs are expected to retire, and 2/3 of new CEOs are hired externally from the financial services industry. SERPs can help credit unions stay competitive in the search for new talent, and to strengthen leadership continuity.
Nearly 60% of credit unions offer SERPs to their CEOs. Of these credit unions, 75% offer 457(b) plans; 55% offer 457(f) plans; and 30% offer both types. The 457(b) plan supplements a 401(k) plan and defers income taxes on contributions until the benefits are paid to them at retirement. Although 457(b) plans allow for self-direction of investments, they have a contribution limit, which is $18,000 for the 2016 tax year.
A 457(f) plan has no contribution limits, and taxes are paid in the year the “risk of forfeiture” lapses—when the executive becomes vested, which is typically when the benefit is paid. Plans can be designed with multiple vesting dates to spread payments and create ongoing retention incentives. The credit union owns the 457(b) and (f) plan assets until distribution.
Life insurance-based plans can be a more cost-effective alternative to 457(b) or (f) plans. The credit union can lend the executive money or offer a bonus to pay the annual premiums, and the executive owns the policy. These plans have no program limits, and income from life insurance can be withdrawn income tax-free.
Tailoring a supplemental benefits package to the executive’s needs may create greater loyalty to the credit union. Some might value a 457(b) or (f) plan. Others might even prefer other benefits in addition to retirement incentives, such as additional life or disability insurance. Long-term care insurance can also be an important component as it helps to preserve nest eggs from medical costs Medicare doesn’t cover.
Competition for top executives continues to intensify. Quality executives are in high demand, and losing an executive to a competitor is costly. Supplemental benefits can strengthen your succession plan and preserve leadership quality and continuity.
John Pesh is Director of Executive Benefits at CUNA Mutual Group. For more information about SERPs, contact him at 800.356.2644, ext. 665.8223.
For more information about CUNA Mutual Group, contact MnCUN Vice President – Network Service Corporation John Ferstl by email or at (651) 288-5505.