For more information:
Rick Uhlmann 608/231-8940 rick.uhlmann@cunamutual.com
Phil Tschudy 608/231-7188 philip.tschudy@cunamutual.com
June 19, 2008
Credit Unions Facing Challenge To Retain Top Executives
Executive Benefit Plans Offer a Solution, Discovery Attendees Told
HOLLYWOOD, Fla. – Credit unions face challenges recruiting and retaining talented executives in a competitive marketplace, but several available executive benefit plans can help resolve the issue, Rick Boothby, executive benefits specialist for CUNA Mutual Group, told Discovery Conference attendees Thursday.
Boothby explained the types of benefits non-profit and tax-exempt organizations can offer to key executives are limited by specialized tax rules under Section 457 and Section 409A of the Internal Revenue Code. “The good news is these limits are not the end of the story for credit unions. Fortunately, alternate plan designs are available for non-profit, tax-exempt organizations which are not governed by Section 457 or 409A. Understanding how these alternate plan designs work can help credit unions recruit, retain, reward and retire top talent,” said Boothby.
Credit unions may offer one of the following five non-qualified retirement benefit plan designs, depending on executives’ needs:
- Section 457(f) Plans
- Split Dollar Loans
- Split Dollar Loan/457(f) Combo Arrangements
- Executive Bonus Plans
- Restricted Executive Bonus Arrangements
CUNA Mutual has implemented tailored executive benefit programs at about 1,600 credit unions over the last few years, but that is less than one-fifth of the approximately 8,300 credit unions today, said Boothby. “With the volatility in the banking industry, we’ve seen an increase in the number of credit unions implementing 457(f) Plans as a ‘golden handcuff’ or ‘glue in the seats’ tactic for retaining key executives. Credit union executives are contacted daily by head hunters offering positions in larger credit unions or other businesses outside the credit union industry. Many executives leave, lured by attractive executive benefit plans offered by competitors. In many situations, a supplemental executive retirement plan is written into the pre-employment offer letter to provide 50 to 80 percent of the executive’s future retirement income.”
To remain competitive with other organizations, credit union board members must provide executives with incentives to remain with the credit union, Boothby stressed.
The best plan design will be based on mutually desired features, Boothby said. In addition to attracting and retaining valuable executives, an executive benefit plan can benefit the credit union because it counters existing benefit package shortfalls, has minimal impact on the balance sheet and is easy to establish and maintain.
“Credit unions should identify their most valuable executives and determine the effect on the credit union if those employees were recruited elsewhere. Then, design an appropriate benefits solution to ensure that does not happen,” Boothby said.
Recognized as a premier hands-on professional development conference for credit union leaders, CUNA Mutual’s Discovery Conference offers more than 55 work sessions that deliver relevant content and actionable takeaways. Credit union leaders also benefit from the extraordinary networking and hands-on learning opportunities.
CUNA Mutual Group is a leading provider of financial services to cooperatives, credit unions, their members and valued customers worldwide. With more than 70 years of market commitment, CUNA Mutual’s vision is unwavering: to be a trusted business partner who delivers service excellence and customer-focused, best-in-class products and market-driven innovation. More information on the company is available on the company’s Web site at www.cunamutual.com.
|
