Credit Union CEOs Fear Pensions, 401(k)s May Not Be Enough to Retire, Survey Reveals

THE WOODLANDS, Texas – A retirement crisis appears to be looming as credit union CEOs grow frustrated over increased regulations governing pensions and 401(k) plans that may restrict their retirement needs. This, from the Supplement Executive Retirement Programs (SERP) survey done by D. Hilton Associates, Inc. that highlights retirement funding trends of CEOs at credit unions with more than $50 million in assets. Among its findings, one out of four CEOs have postponed their anticipated retirement date and 23% surveyed said they will have to work past age 65 because they cannot afford to retire. “After more than a decade when everyone, it seemed, had the Midas touch when it came to self-directing a 401(k) retirement portfolio of high-tech and telecommunications stocks, reality has set in,” said David Hilton, president of D. Hilton Associates, Inc. “A three-year bear market has decimated the illusion of easy money, and with it, many retirement dreams built on double-digit equity returns.” The good news is that credit union boards have become more proactive as evidenced by the number of credit unions that have adopted non-qualified deferred compensation programs known as 457(f) plans. Forty-nine percent of credit unions with $400 million or more in assets and 28% of those with $100 or more in assets have the 457(f) plans in place. While most credit unions adopted a 457(f) plan once their CEO had served eight to 10 years, a growing number of CUs view SERPs as a means to attract and retain new chief executives. Once exclusive to executives, credit unions with more than $200 million in assets tend to offer SERPs to senior managers as well. “This trend is expected to continue as credit union boards use SERPs as succession and management continuity tools for key executives,” Hilton said. Still, because of the contribution limitations on highly compensated employees, credit union executives rarely have the opportunity to participate at the maximum levels of their 401(k) plans, the survey found. That means “tellers are retiring with a larger percentage of their final incomes than CEOs do.” Other findings include the following: most boards favor defined contribution plans (54%) over defined benefit plans (35%), and nearly 70% of respondents expect to take their plan payout in one lump sum. Survey respondents ranged in age from 28 to 78, with the median age being 52. The mean length of time as a CEO was 9.7 years. The survey was conducted in the summer of 2003. – [email protected]