4 minutes
Is your CU ready to attract the next generation of leaders?
Sponsored by The Sheeter Group
Supplemental executive retirement plans have been crucial for the growth of credit unions. With the baby boomers rapidly exiting the employment market, the need to retain key talent is just as important as ever. If you read the industry news outlets, you are seeing the hiring of a new generation of leadership. What you might not think about is the butterfly effect from these hirings. A lot of times, a new CEO likes to bring in their own executive team with them. This creates gaps in a full executive team rather than just one individual. Even if they don’t bring their team with them, there will always be a deep dive into the performance of the existing executives. The conversation about SERPs starts with the CEOs, but truly successful CEOs want to surround themselves with the talent to make the rest of their career much more productive.
A SERP is a non-qualified deferred compensation plan offered to a company’s key employees, including CEOs, CFOs and high-ranking officials. They are typically used to retain talent but are tied to both employee and company performance.
At the Sheeter Group, we are having more and more conversations about the next level of executives with our business clients. This could be a situation where a CEO wants to have a long-term executive team. We are also having conversations with boards where a CEO is seeing the light at the end of the tunnel, and the board will have an important decision ahead about who will be the next leader of their organization. Maybe they have their next CEO in-house, and maybe not. All that to say, there are multitudes of situations that boards are finding themselves in, and the use of SERPs can be an essential part of succession planning and long-term growth.
Executive Benefits for Credit Unions
Because credit unions abide by the non-profit tax codes, when it comes to plans specifically designed for your CEO and other execs, there are only a few types of plans the board can select from. This can be viewed as both positive and negative. On one hand, you don’t have as many options as some of the for-profit institutions that you are vying with for talent. On the other hand, you only must learn about the few types available and design a plan within the framework of those types. The two most common plans in the credit union market are 457 plans and Split Dollar Plans. 162 Bonus Plans have also been popular due to the current rate environment.
At Sheeter Group, we can help you evaluate the best way for the credit union to provide these benefits. There are pros and cons to each. We help you consider these questions:
- Is the tax on these plans an issue?
- Is the long-term nature of the plan a problem for your board?
- Is liquidity an issue?
These are all questions that need to be addressed in the design of a SERP. Keep in mind that these are highly customizable for each situation. You might have a different plan type for each of your executives. Some executives have a couple of different plan types for themselves. Even if your board doesn’t see that the use of a SERP can help them, they should still consult with their financial, tax and legal professionals to educate themselves for when the time comes. The fact is these plans are becoming more and more common. Even if you aren’t using them now, when you go to hire your next CEO and C-suite, they will likely be expecting these as part of the compensation package.
Neither MML Investors Services, LLC nor any of its subsidiaries, employees or representatives are authorized to give legal or tax advice. Consult your own personal attorney legal or tax counsel for advice on specific legal and tax matters.
Robert Fitzgerald, Jr., is executive vice president—south for CUES Supplier member The Sheeter Group.
Securities offered through qualified registered representatives of MML Investors Services, LLC, Member SIPC (www.sipc.org). Supervisory office: 530 Gaither Road Suite 350, Rockville, MD 20850, 301.355.5800. The Sheeter Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. CRN202607-4814625
