By Tony Streeter
In today’s economic environment, credit unions are facing mounting pressure to cut costs, improve liquidity, attract and retain talent, serve their members’ needs, and anticipate change.
Member-facing employees set the tone for the member’s experience and ultimate satisfaction. Credit Union leaders face the challenge of ensuring their financial stability while facing employee benefit cost pressures, leaving them with a decision that could negatively affect their employee’s satisfaction and ultimately their member’s satisfaction.
The Challenges Credit Unions Face
1. Rising Employee Benefit Costs
Depending on the state, employee benefit costs generally rise 4-8% per year (up to 12% in California). Many credit unions must decide whether to absorb the increase, pass it on to their employees or reduce their benefit package offering.
2. Dismal Investment Returns
Bond, CD and life insurance-based investments (i.e. COLI for executives) generally only return an average of 2.8% or less after fees. These lean earnings generally represent a place to park money rather than make money.
3. Attracting And Retaining Talent
Employees want to be a part of the credit union movement, but they also want to be able to pay their bills. Many credit unions can’t compete with higher salary incentives aimed at luring away their best candidates and employees.
4. Inconsistent Employee Messaging
“Our people are our most important asset” is something all employees have heard for years, but beyond pizza parties and certificates of appreciation, most credit unions can’t provide more in terms of incentives beyond the basics.
How CUB’s Total Benefit Prefunding℠ Can Help
Total Benefit Prefunding℠ was created in 2019 in compliance with NCUA reg. 701.19, to create customized investment portfolios enabling credit unions to invest in formerly non-permissible investment types, so long as the yields from those investments are put toward the benefit of their employees. These investments generally yield a minimum of 6-8% per year, are principal protected, and have no net income cap. Yields are generally used to offset employee benefit costs and, depending on the length and amount of the investment, can grow to cover 100% of a credit union’s employee benefit costs and their annual increases.
Key Benefits Of CUB’s TBP Program
Conversion Of Underperforming Investments
Many of our clients have worked with us to convert their underperforming investments (mainly in CDs and Bonds) into higher yielding investments while covering any early surrender fees with investment company bonuses (currently ranging from 13 – 23%).
Your Choice Of Investments
Based upon your risk preference, investment amount and duration, CUB will make a strategic recommendation of investments to consider. However, you make the ultimate choice. CUB only partners with and recommends products from A-rated carriers.
Improved Employee Satisfaction
Informing your employees and prospective employees that health, vision and dental benefits are 100% covered provides significant peace-of-mind considering most people are one major healthcare event away from financial ruin.
Improved Executive Benefits
Executives can participate in TBP. In fact, we have had many conversions from COLI to TBP when the executive and their board realize that TBP returns are generally 3X higher than COLI – and there is no net income cap which means that more than just the CEO can be covered.
NCUA Compliance
Since 2019, 100% of our credit union clients experiencing an NCUA audit on their TBP program have passed with flying colors. Since the program was made within the boundaries of NCUA reg. 701.19, the choices, investments and reconciliations always comply.
Board Preparation
Generally, making changes to either an executive’s retirement plan or the employee’s benefit plan requires board approval, Credit Union Benefit has significant experience preparing and co-presenting TBP to board members. CUB has a 96% success rate when we are involved in the board presentation.
A CUSO That Pays
CUB CUSO members are rewarded with significant earnings based upon their ability to bring other credit unions into the fold. CUB’s investment-based CUSO rewards its members based upon the investments made by other members.
Request A Free Consultation Today
Or visit totalbenefitprefunding.com to learn how we can tailor an investment strategy to fit your credit union’s unique needs.
Tony Streeter is the Senior Vice President of Strategic Growth for Credit Union Benefit.