OVERLAND PARK, Kan.–Credit unions have been given a list of issues they were told they need to be giving more attention.
Gene Marks, an author and business consultant who often appears on network and cable television programs, spoke to credit unions at the Heartland Credit Union Association’s annual meeting here on “Millennials, Trump and Amazon.com: Trends and Issues that Will Affect Your Cash Flow and Profits in the Next Four Years.”
“One thing successful businesses all have in common: All of them are always looking ahead,” Marks said. “They are not thinking about 2017 anymore. They are thinking about 2018, 2019 and 2020, and so should you. You guys are leaders and managers and you have a responsibility to your members and employees, to your partners and suppliers, and all of their families who rely on you for their livelihoods to make sure you are making the right decisions.”
Despite all the press attention, Marks urged credit unions to largely disregard who is in power in Washington at any one time, although he then went on to list a number of initiatives he believes credit unions should watch that stem from the Trump Administration and the Republican Congress.
Here are the issues highlighted by Marks, as well as the actions he recommends credit unions take:
Making America Great…For Business
In November, observed Marks, credit unions should prepare to hear a lot about the “two for one.” That is in response to President Trump’s order that federal agencies eliminate two regulations for every one enacted, for which the president set a November deadline. Every agency is supposed to have in place a regulatory reform officer, as well.
Numerous regulations are being rolled back, including environmental rules, and Marks said credit unions should be paying attention to how these are affecting members, their jobs and the companies they may own.
Healthcare
A high-profile issue that affects everyone, Marks noted some of the provisions affecting credit unions, especially those with 50 or more employees, remain in place.
“But looking ahead you can expect significant changes to happen in next few years. For starters, the healthcare exchanges are all in trouble. Forty-two percent of all U.S. counties are expected to have just a single insurer offering plans in 2018,” he said.
The result: In some states rates charged by those exchanges are expected to skyrocket, including projected increases of 60% in Virginia, 57% in Georgia, 50% in Maryland, and 37% in Nevada.
The news is better for company health plans, with Mercer projecting companies will see an average health insurance cost increase in 2018 of 4.3%. Today, 50% of companies offer health insurance, Marks said, down from 69% in 2010. Employee deductibles have doubled since that time to $1,221.
In the coming years, forecast Marks, President Trump will continue to put the “squeeze” on Obamacare by threatening to end or ending cost-sharing subsidies to insurers and largely eliminating deductibles for low-income enrollees. In addition, both Congress and the administration are providing Medicaid spending power to states, while big budget cuts are hitting the Department of Health and Human Services (which oversees the Affordable Care Act) and the IRS, which is charged with enforcing its provisions.
What should smart business leaders be doing to control their healthcare costs in 2018? According to Marks:
- Stick with high-deductible plans combined with HSAs (better than retirement accounts). “You should be talking to your members and (member companies) about this.”
- Consider level-funded plans, a combination of self-insurance and group insurance. “I have some clients saving 15%-20% with these plans.”
- Take advantage of Healthcare Reimbursement Accounts. “The credit union puts away money pretax, as do employees, and you can take that and buy healthcare.”
- Associations may want to look at offering healthcare plans.
- Invest in education for your employees and your members.
Millennials & The Workforce
A frequent topic for discussion at CU conferences, Marks noted the demographic group isn’t just ripe for CU membership, its members also now represent about 50% of the workforce. A majority favor independence and flexibility options over compensation when it comes to employment, said Marks.
Particularly popular, he said, and increasingly demanded are paid time-off (PTO) benefits. “Millennials prefer PTO over paid vacation,” he said. Marks pointed to a number of large companies that have installed new, generous PTO options, including:
- Bank of America: 16 weeks PTO for new parents
- Netflix: One year paid time off for new parents
- Salesforce.com: Six days of paid volunteer time off annually as well as $1,000 a year to donate to a charity of their choice
“I’m not saying you have to do this, but this is what this generation, 50% of the workforce, wants,” said Marks.
But credit unions worried about employees who spend more time away from work than at work (and the related expense) will find some reassurance in the example set by LinkedIn. The San Francisco-based company offered employees unlimited vacation days.
“Guess what? It’s backfiring on them,” said Marks. “People are taking less time off. When you have one guy who is working 60 hours a week and another guy taking time off with the sniffles, guess who gets the promotion? So, people aren’t taking as much time off as they did when they had standard vacation days.”
Good news, too, for credit unions, is that Millennials want more than PTO in their careers.
“Two-thirds prefer organizations that are socially conscious. They want to feel they are doing something good,” he said. “And healthcare is their top requested benefit.”
Still, Millennials will expect competitive pay packages, and Marks cited data from Korn Ferry that projects workers will see wage increases of approximately 3% in 2018. But another factor could also come into play. Marks pointed to President Trump’s support for an increase in the minimum wage to as much as $11.
“You may think it doesn’t impact you, but it impacts us all,” he said. “If you have members who are working in companies and they are making $15 an hour, they’re thinking it’s good, it’s twice (today’s) minimum wage. But what if minimum wage goes to $11 an hour? They think it’s not such a great thing anymore.”
Similarly, new overtime rules are going to go into effect in 2018, even if the Department of Labor has been forced to scale back the increases it planned to require.
“The Equal Employment Opportunity Commission is going to be busy in 2018,” said Marks. “They have issued more lawsuits in 2017 than the past three years with a focus on discrimination, gender, LBGT, disabilities and more. It’s a five-member commission and four were Obama appointees. Even when Trump appointees are approved, three out of five will be from the Obama Administration.”
Tax Relief
With Congress and the Administration just beginning to tackle federal tax reform, Marks nonetheless said he expects “big changes.”
“You’re in the financial services industry and you need to be talking taxes with your members,” he said.
“The idea is to reduce taxes,” Marks told the meeting. “The big thing for your members could be in pass-through organizations, Subchapter S companies. A 25% pass-through rate that could be a significant benefit for some of your members.”
The proposal that’s been put forth in Washington also calls for a doubling of the standard deduction to $12,000, which would impact many members, he reminded.
Of course, all of that needs to be viewed through the lens of a huge federal deficit, and the fact that two-thirds of the federal budget goes to entitlement programs, which will affect everything, Marks said.
What steps should credit unions be advising members to take? According to Marks:
- If in business, tell members to invest in capital equipment
- Members who own businesses should be urged to revisit the R&D tax credit
- For individuals, they should employ their kids, invest in 529 plans, and max-out their retirement plans
- “Tell members to take advantage of the Work Opportunity Tax Credit and the Differential Wage Credit”
Three Technologies to Watch
Finally, Marks said there are three technologies credit unions should be watching as 2018 approaches:
- CRM. (Zoho, SafesForce, Microsoft Dynamics, etc.). “You’ve got to stay in touch with your members and everyone in your community so nothing falls through the cracks.”
- Video (distributed via Facebook, YouTube, Twitter). “Go to a local university and hire a junior marketing manager and say ‘Kid, I’m going to make you a star. I want you once a month to do a video for our credit union. Interview people from the credit union about financial advice. Interview happy members.’ Initially, three people will watch it. But over time, it builds, and the Millennial generation is getting its information from video. It’s projected that video will represent 80% of the Internet over the next two years.”
- Security and Ransomware. “You don’t want to be paying these guys. You’ve got to invest in the backing up of data.”