By David Frankil, President, Burns-Fazzi, Brock and Associates
Some people are lucky enough to be able to walk into a store, pick a nice suit off the rack, maybe have the sleeves adjusted and the cuffs hemmed, and walk out with something that fits them perfectly.
My experience is more like major surgery, but when done right the suit looks great.
The same is true for executive benefits – some rare executives and their credit unions are fortunate enough to have a set of circumstances and needs that allow them to take something basic and off-the-shelf. But more often they end up with their proverbial arms sticking out and socks visible with cuffs four inches off the floor. What they really need is a more complex mix of solutions that are tailor-made for them.
Where we see credit union executives considering (or stuck in) ‘one-size-fits-all’ solutions, it is usually because there is a misperception that credit union executives can only have one type of executive benefit. In other words, they think they have to pick just one from a long list that includes 457(b), 457(f), Split-Dollar Plans, Invested Retirement Plans, and others.
In fact, credit unions can mix and match from a variety of plans to achieve the best combination possible to accomplish their goals, whether they are more focused on reward, retention and/or recruitment. So how does a credit union decide which plans and which benefits make the most sense?
Often the first step is some sort of shortfall analysis, which looks at an executive’s desired retirement income goal (or the credit union’s desired benefit to the executive). Once the gap to be filled is clear, then you can start looking at which plan(s) should be used. Boards typically take a number of factors into consideration, including years to retirement and years of service, just to name two. They also tend to look at peer group analyses, to see what other similarly situated credit unions are doing.
These plans can get very complicated very fast, especially when you’re trying to ensure tax-advantaged income on top of assumptions of future returns and future income. So it’s important to make sure whoever you’re working with performs all the requisite analyses and discloses all risk factors and any other issues to enable an informed choice.
NCUA and State regulators also have a thing or two to say on this topic, so make sure your partner is focused on compliance for the plans, and for your Board as well. To take it a step further, ongoing service and administration are critical to ensuring future compliance and performance. Ask your partner about their experience in these areas, and if they outsource any client service components to an outside third party – and if they do, understand what sort of due diligence they have performed on their service providers.
If you’re interested in learning more about options for customizing executive benefit plans, T.J. Telford, Regional Vice President, Burns-Fazzi, Brock presented a free live webinar with NAFCU Services entitled “Executive Benefits 101: Achieving the Right Mix to Increase Efficiency and Maximize Retention.” The recording is available here, along with upcoming topics in the Executive Benefits Learning Series: http://www.nafcu.org/BFBwebinars/.