Unlike their bank counterparts, credit union executives have limits on how much they can contribute and receive from traditional qualified retirement plans.
Many credit union CEOs may retire at only 30% to 40% of their current salary, even after including Social Security and 401(k) plan savings.
To level the playing field, credit unions should consider offering non-qualified compensation options, including supplemental executive retirement programs (SERP), said Bruce Bauer, a CUNA Mutual Group senior executive benefits specialist, during a Breakout Session Wednesday.
Bauer said credit unions are facing a “perfect storm” when it comes to recruiting, retaining, and compensating their executives.
Nearly half of U.S. employers are challenged to fill mission-critical positions, according to a 2012 Manpower Group Talent Shortage Survey, and 63% of organizations say other companies try to recruit their leadership.
“Jobs are opening up, executive talent is being aggressively wooed away from you, and your top talent is feeling financially vulnerable,” Bauer said. “Credit union executives who might retire at only 40% of their current salary may seek other employment options.”
SERPs are non-qualified retirement plans that provide benefits beyond qualified plans. Coupled with a strong continuing education program, they form the foundation of a solid leadership continuity program, which his essential to recruiting, retaining and rewarding key employees, Bauer explained.
“Maintaining your bench strength can prevent disruption in the attainment of your credit union’s strategic and financial goals while providing consistency in decision making,” he said.
When developing compensation plans, Bauer recommended credit unions:
Align compensation philosophy with their mission, organizational, and financial goals;
Encourage leadership continuity by defining a scope that addresses the CEO and key executives;
Use peer compensation data to establish a desired level of competitiveness and include it in their overall succession plan; and
Ensure regulatory soundness by working with a firm with a trusted long-term service commitment. Consider the firm’s ability to provide flexible designs, top products and funding options, exceptional knowledge, and strong regulatory adherence.
NCUA Chair Rick Metsger told CUNA that the agency has begun the process of consulting industry practitioners to assist in the transition as credit unions work to implement the new current expected credit loss accounting standard.
CUNA’s inaugural Fair Lending Workshop took place last week in Denver, leading to valuable discussions on compliance with the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act and more.