MADISON, Wis. — A marriage between 401(k) plans and credit unions with business members is one that CUNA Mutual Group is aiming to consummate.

The company said it is stepping up its efforts to market its 401(k) and defined benefit plans as an entry into the small business market. While there is a base for business loans, deposits and other related services, offering retirement savings plans is just one more way to round out existing relationships, said Kevin Thompson, vice president, asset accumulation products at CUNA Mutual.

“We've all known of the challenges with member growth and how to attract deposits. Many credit unions are looking to business services as one way to become more relevant to business customers,” Thompson said.

To that end, CUNA Mutual kicked off a pilot last summer with a handful of credit unions to see how far its 401(k) plans would resonate with members who own small businesses (see related news brief on page 9). The $3.7 billion Alaska USA FCU was one of the front-runners and now, more than 60 credit unions are offering the company's plans.

Thompson said CUNA Mutual licenses proprietary software to analyze the geography on different plans. Meaning, representatives will run a list of businesses in a credit union's field of membership that offer their employees retirement plans. The credit union can then cross reference those plans with their select employee groups. Once an interested business owner is contacted, the local CUNA Mutual representative will meet with the credit union's business development officer to present the plan's features and benefits as a means to build that new relationship.

New hires who attend employee orientation meetings are another avenue CUNA Mutual is promoting as a way not only to build 401(k) connections but to also tout joining the credit union. In the long run, having such plans can help build touch points and could potentially increase business relationships, Thompson said.

“From a financial standpoint, credit unions see the fee income,” Thompson suggested. “It seems many are struggling with [return on assets] so the timing is very good for credit unions in be involved in business services.”

As for the type of credit union prime to cross sell 401(k) plans to member-owned businesses, Thompson said he tries to stay away from hard or fast rules on asset size. More importantly, the credit union should have a financial services program that shows a strategy and commitment to the market. Having someone, say in the lending department, who would have minimal time to devote to building relationships with businesses might not fly, he added.

“It would have to be someone with boots on the ground, so to speak. Someone who knows investment products and is a sales person.”

Above all, CUNA Mutual wants to keep it “sophisticated, simple and guaranteed.” The sophistication part would be having a product that is comparable to what larger plan providers offer, Thompson said. The simple is keeping it stress-free for employees who may have been bombarded by a litany of fund options in the past. In his research, Thompson discovered that the more complex plans are, participation rates decline. Finally, CUNA Mutual guarantees that if there is an unsatisfactory experience with service or product, the company will fix it. If it's not fixed, the following year's administrative fee will be waived.

“The 'simple' and the 'guarantee' are where we shine,” Thompson said. “The end goal is for people to retire in a comfortable fashion. The key to that is simplicity. We don't put any metrics [around the guarantee]. We're putting our money where our mouth is.”

–msamaad@cutimes.com

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CUNA Mutual Continues Plans to Build 401(k), Small Business Connections

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