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The Credit Union Movement

The landscape for credit unions in the US is changing. In 2005, we had 8,877 CU's but at the close of 2009, that number had reduced to 7,708. In contrast, the assets of all CU's in 2005 amounted to $694,151,000,000 but by the year end 2009, the total had grown to $896,824,000,000. In 2010 the trend continued. The year closed with only 7,581 CU's and yet assets increased to $991,129,000,000.

Fewer entities with larger asset bases bring greater complexity to credit unions, whether state or federal chartered. "People helping People" is still the philosophy but the challenges in achieving it are greater.

At Kaeding & Company we are leveraging our core competencies in employee benefits and executive compensation to help our credit union clients meet these challenges.

In managing these larger more complex institutions, there is a shrinking talent pool which must be shared with for-profit employers who often have the ability to offer stock ownership and other enticements.

With today's greater focus on long term performance, non-qualified plans provide a credit union with the ability to attract and retain the people who can achieve its strategic goals.

Retirement planning is cited as a primary concern in most executives' overall financial plan. The use of 457(f) plans is growing rapidly in the credit union world to address the need for supplemental retirement income for these key executives. In direct correlation, employment of long term care insurance programs designed to be completely paid for by retirement provide powerful asset protection for these key employees. Combined, these two programs address primary needs of the executive while promoting the goals of the credit union.

Core Employee Benefit Programs

The value of Executive benefits is further enhanced when supplemental to a sound core employee benefit program. When designing complementary benefit programs, it is critical to partner with a firm with solid knowledge of financial institutions and expertise in both supplemental and core benefits.

The arena we operate in today is daunting - resources are strained, costs are spiraling, benefit programs are becoming more specialized as we experience heightened regulation and changes of historic proportion. The need for education has never been greater. For the past twenty-five years, the Team at Kaeding & Company has specialized in education, design and management of executive and core benefit programs for the financial community and delivery of integrated employee benefit solutions.

Executive Compensation Overview

Attracting and retaining key executives is a primary goal for virtually all credit unions. The competition is greater than ever as institutions grow in asset size and regulatory compliance is ever more complex.

For institutions addressing this issue, there are time tested programs that will virtually guarantee "The Team" stays in place. By addressing the financial concerns of college costs, retirement income needs and the "graying of America" theme of long term care, any credit union board has the ability to custom design a program which allows executives to stay focused on the job at hand without the distractions of these other personal financial planning worries.

Example Programs

  • Supplemental Executive Retirement Plans
  • 457(f)
  • Section 162 bonus arrangements
  • Executive carve out long term care plans
  • Pre and post retirement life insurance

Reducing Employee Benefit Plan Expenses

In 2004, the NCUA opined on the employment of single premium life insurance contracts by Federally Chartered credit unions. In her letter, Associate General Counsel Sheila Albin stated that an FCU may recover its cost of funds and reiterated the NCUA's position with respect to the purchase of life insurance for the purpose of recovering costs associated with funding an employee benefit obligation. Read the full letter.

It is clear that the NCUA is following the lead of the OCC in the ownership of life insurance. A cautious approach is recommended but the opportunity is clear. The ability to re deploy excess liquidity earning 15 to 30 basis points to a Credit Union Owned Life Insurance (CUOLI) contract earning 300 to 350 basis points creates a transaction worthy of analysis.

Click here for sample pro forma balance sheet which will demonstrate significant increase to income through repositioning of assets on the balance sheet after a CUOLI purchase.

Follow the links below for additional letters written by Sheila Albin related to this subject.
Cost Recovery For Federal Credit Unions (FCUs) Funding Employee Benefit Obligations With Life Insurance

Guidelines for Investing to Fund Employee Benefits

Let Kaeding & Company be your "Go to Resource" and partner to protect your organization's financial and human resources.

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