Choosing an Executive Benefits Provider

The National Credit Union Administration identifies seven categories of risk to consider when running a credit union: credit, interest rate, liquidity, transaction, compliance, strategic, and reputation. Conduct thorough due diligence on prospective executive benefits providers with these risks in mind, advises John Pesh, director for executive benefits at CUES Supplier member and strategic provider CUNA Mutual Group, Madison, Wis.

“The provider should have a history with deferred compensation plans for non-profit entities,” stresses Pesh. “Working with for-profit Fortune 500 companies is very different” when you consider the regulations involved.

Pesh recommends asking prospective supplemental retirement plan providers for the following: referrals from credit unions similar to yours; audited financials; its succession plan (to help ensure support throughout the life of the plan); and how the firm will provide oversight of the program and underlying investments.

“Make sure they can walk you through how the plan works, and understand state and federal considerations. For instance, some states don’t allow you to make preferential loans to executives,” Pesh says.

In addition, adds Scott Albraccio, sales manager for executive benefits at CUNA Mutual Group, “choose a provider that offers a variety of options so you can meet your specific needs.”

Also, it’s important to keep in mind that hiring a provider doesn’t relieve a board of its duty to deeply understand what is going on.

“Look at the (NCUA) Examiner’s Guide for due diligence recommendations,” Pesh says. “Your board and senior executives must be able to demonstrate to the examiner that they understand the value of these plans and the risks associated with having them and not having them. You must also understand your legal authority to create a deferred compensation program and make sure the plan is set up under the correct tax code. Work with a qualified advisor, attorney, and CPA.”

“Remember,” Pesh cautions, “the ultimate responsibility for the plan stays with the credit union, not the provider. These are a great tool, but must be managed appropriately.”

Fran Zaugg is senior marketing specialist for CUES Supplier member and strategic provider CUNA Mutual Group, Madison, Wis.

Learn more about Executive Benefits Program and CUNA Mutual Retirement Solutions, in partnership with CUES.