Even in Face of Retirement, Increased Competition, Executive Compensation Must be Top Priority, CUNA Mutual Expert Says

MIAMI BEACH, Fla. – Credit union human resource departments would be well advised to educate themselves on building a comprehensive and rewarding compensation program to attract the best and brightest executives, one industry expert noted. Speaking at CUNA’s annual Human Resources/Training & Development Council Summit here recently, Joe Tripalin, CUNA Mutual Group vice president said “credit unions are facing increased competition within the financial services marketplace in hiring qualified executives.” “You, as a credit union human resources leader, must be aware of the components that comprise an effective executive compensation program,” Tripalin said. “That means not only knowing what’s available, but being able to articulate the benefits of these arrangements to your credit union’s management team and board of directors.” Important executive compensation components go well beyond base salary, bonus, employee benefits and other traditional perks, such as a car, country club access or educational opportunities, Tripalin said. Additional rewards in today’s executive benefits landscape include, deferred compensation arrangements, executive disability coverage, post retirement health funding, long-term care insurance and financial planning. “If the only qualified retirement program at your credit union is a 401(k), then every one of your highly compensated executives has a retirement benefits shortfall,” he said, adding disability income protection, in particular, is often lacking. Many executives fear becoming disabled more than they fear dying, Tripalin told conference attendees, and the vast majority of long-term disability plans only replace about 30% of an executive’s salary because of the monthly dollar amount cap, leaving most executives far short of their monthly income needs after taxes are taken out. Retirement income is also a concern, since tax laws give credit unions fewer and less favorable compensation and benefit tools than what’s provided to their for-profit competitors (see story on this page). However, deferred compensation plans, including 457(b) and 457(f) plans are gaining in popularity as a means for executives to set aside money for the future, Tripalin pointed out. “These `golden handcuff arrangements’ tie the executive to the credit union for future service in exchange for the deferred compensation,” Tripalin said. “Beneficial for both parties, these can correct an anticipated retirement shortfall. Plus, they tie the executive to the credit union for future service, possibly to help implement a succession plan.” Tripalin also spoke on other executive compensation arrangements including supplemental executive retirement plans (SERPs); split-dollar life insurance; key person insurance coverage; employee options; and executive bonus plan and severance. “With 25% of credit union CEOs expected to retire in the next five years,” Tripalin said, “it’s important to know about these various arrangements, because it’s quite likely you may be asked to consider one or more of them in the future.” [email protected]