GLENDORA, Calif. – Baby Boomers continue to capture the spotlight as they reach or near retirement age and many of those, defined as those who were born between 1946 and 1964, work at credit unions. Their choices and the delivery mechanism for retirement income both through qualified plans and non-qualified plans is the focus of the just-released 2005 Employee and Executive Benefits Survey for credit unions from Executive Compensation Solutions (ECS), an executive benefits design firm, and KG & Associates (KGA), a firm specializing in the development and administration of compensation programs for small and mid-sized organizations. The survey’s questionnaire was sent to more than 2,000 CEOs of credit unions with $50 million or more in assets, with 223 responding. The survey was designed to gather information as to how and at what level credit unions are structuring employee and officer benefit programs to attract and retain top level, executive talent, according to ECS and KGA. Some of the choices looked at included qualified plans such as 401(k) plans, pensions and profit sharing plans; non-qualified plans including 457(f) plans, 457(b)s and split dollar plans; severance pay provisions; health and welfare benefits such as medical and dental and flexible benefit plans; and pay-related benefits, fringe benefits and special benefits for executives. As with many employers, 401(k)s continue to be the most popular type of qualified plan at credit unions. Ninety-nine percent of those who responded said they have 401(k) plans. Forty percent said they have both 401(k)s and pension plans. The findings are consistent with similar trends noted in the 2004 survey. When it comes to non-qualified plans, there are generally two types: employer contribution or supplemental executive retirement plans (SERPs) and employee contribution or elective deferral plans. The survey found that 49% of respondents have at least one non-qualified plan, 22% have implemented a 457(f) plan, 38% have 457(b) plans, and 13% have split dollar plans. The survey noted plans may be deemed “eligible” or “ineligible” depending on whether the employer sponsor is eligible to have such a plan under current law. The primary authority governing plans of tax-exempt employers, including credit unions, is Internal Revenue Code Section 457. The litany of plans now being offered reflects the industry’s desire to hire and retain top-notch executives, said Alec Berkman, ECS President. “The credit union movement continues to respond to the challenges of a new landscape,” Berkman said. “It is developing new approaches to providing benefits that attract, retain, and reward employees and officers who represent the future of the industry.” For instance, 457 plans typically have a targeted purpose. Of those surveyed, 44% use them for retention, while 40% use them to supplement retirement. Sixteen percent use them for motivation and 13% use the plans as a recruitment tool. While severance pay is intended to “bring a level of security and comfort to the board, and to the executive, by providing very clear and specific definitions as to how much, when, and the manner in which the severance payment is made,” most credit unions don’t offer it. The survey revealed that 86% of them don’t have the provision in place. There were some significant drops in health and welfare benefits. Long-term disability dropped from 92% in 2004 to 48% this year, according to the survey. Life insurance also dropped 89% to 48%. Dental maintenance organizations, however, increased 47% to 72%. ECS and KGA noted that “given the similarity in all other offerings surveyed, these significant differences must be viewed as attributable to the composition of the responding group.” Other benefits – also referred to as fringe benefits, perquisites, or ancillary benefits – have tended to be more conservative for credit unions than for-profit entities and other financial institutions, particularly banks, which offer a myriad of ancillary benefits, the survey pointed out. The bulk of pay-related benefits for all respondents in 2004 and 2005 indicated that professional development lead the pack at 92% and 85%, respectively. Educational assistance was 83% and 85%; vacation, 72% and 57%; and sick leave, 71% and 70% for 2004 and 2005. Above all, “with the increased competition for employee and executive talent, it is probable that credit unions will have to focus more energy on structuring the right benefit mix at efficient cost levels,” Berkman noted. NCUA and state regulators deserve credit for allowing the industry to expand their options to recruit and retain top talent, Berkman said. “NCUA has recognized the increased competition for talented people and has made an admirable effort to change its rules so that credit unions can respond to this competitive environment in a meaningful way,” he said. “The state examiners are also recognizing, through their various parity provisions, that credit unions must find new and better ways to address the competition for people.” -

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