As you set your credit union’s strategy for supplemental executive retirement plans (SERP) and recruitment plans, consider these statistics:
Because this data represents actual buying behavior, it can add another level of insight to augment comprehensive annual survey results such as those found in CUNA’s salary and compensation research.
A more meaningful benefit
For the 19% of credit unions that provide SERPs that mirror bonus plans, the most common plan contribution is 25% of annual salary for CEOs and 20% for non-CEOs.
Certainly, these plans can help executives save for retirement. But the 81% of credit unions that use retirement income targets are creating a more meaningful benefit for their executives or recruits.
They’re giving these executives a powerful tool to solve the retirement income gap that affects highly paid employees. The most common targeted salary replacement level for SERPs is 60% for both CEOs and non-CEO.
457(f) and split-dollar options
A 457(b) plan remains a popular tool for supplementing retirement income for executives. These are generally used as voluntary savings plans for the executives, although credit unions can contribute to them. But 457(b) individual contributions are capped. In 2017, that ceiling is $18,000.
In contrast, 457(f) plans, which the credit union contributes, aren’t capped. They can be designed to provide income to executives before retirement at key life stages, such as when their children reach college age.
SERPs containing a CASD life insurance plan can also provide flexibility when executives draw income from them. With a CASD, the employee owns the policy and the employer lends the premium required to pay for it. These are more typically used for an executive nearing retirement age, but they’re also purchased for new executives as part of employment agreements.
The increased funding potential and flexibility of 457(f) and CASD plans might be driving their popularity. Between year-end 2013 and 2016, 457(f) plans increased 9.3%, while CASD increased a whopping 48.2%.
Implementation occurring earlier
The perception that SERPs are mainly for rewarding longterm executives appears to be fading.
Certainly, additional benefits are often bestowed late in executives’ careers. But data shows that credit unions implement 52% of SERPs within eight years of an executive’s hire, and 70% are in place within 15 years.
These statistics show that the composition and timing of SERPs are shifting to provide additional short-term benefits to more levels of executives, who have flexible options for using the plans’ proceeds.
This represents a positive trend for the credit union industry in protecting its best talent.