THE WOODLANDS, Texas – Supplemental executive retirement plans (SERPS) are becoming more the norm at larger credit unions, according to a just-released industry survey. In D. Hilton Associates Inc.'s SERP survey, the CEOs of 353 credit unions with assets of $50 million or more shared their thoughts on the plans. DHA is a consulting firm to the credit union industry in the areas of retention and retirement; executive recruiting; strategic research; human resources; and marketing and advertising. The DHA findings show that, of these credit union executives, approximately one in three currently has a SERP. When only the largest credit unions, which are those with assets of $400 million or more are considered, roughly one of every two executives has a SERP in place. Based on responses from executives at credit unions where SERPs are not already offered, approximately one in three will implement one in 2005. CEO respondents strongly confirmed their interest in this benefit, with 86% of those who have plans expressing satisfaction with the benefit. Two-thirds of the respondents with a plan in place indicated that they initiated the discussions that led to its implementation. On average, the survey found that a SERP was established about 10 years after the CEO took the helm of his or her credit union. However, fewer than one in four of the respondents reported having accepted their current position in the past five years, which may have resulted in an under-emphasis on the importance of the SERP benefit in executive hiring in the current marketplace. Separate research by DHA's Executive Recruiting Practice indicates that 90% of the CEO placements the firm made in 2003 and 2004 negotiated a SERP as a benefit. Demographically, respondents to the second SERP survey were very similar to those in the previous year. Their average age was 52, and their average length of service in their current position was 11 years. On average, they reported more than 25 years of experience in the financial services industry. The average anticipated retirement age for these respondents was 63 years, although a substantial group (45%) indicated that their projected retirement age was 65 or older. Notably, respondents to the current survey were less likely than respondents to the first survey to report that their projected retirement date had changed in the preceding 24 months. Only one in four respondents to this survey reported a change, down from one in three a year earlier. However, those who did anticipate a change were overwhelmingly more likely to say they would delay retirement (84%) than that they would retire earlier, as was the case in the previous survey. Approximately one-third of the SERPs currently in place incorporate a guaranteed minimum payout to the recipient at retirement, DHA said. More commonly, credit union sponsors of existing plans designate a set amount of dollars to earn interest toward their CEOs' retirements, but do not guarantee a specific payout level. However, 44% of respondents to the current survey reported that their plan design had targeted a specific payout level, up from 35% the previous year. In this case, though a specific benefit level is targeted-on average, 53% of the executive's estimated income at retirement-it is not always guaranteed. DHA said within the next decade, many of the CEOs at America's credit unions will retire. “In the intervening years, top executives will remain concerned with securing an income level that will allow them to maintain their current lifestyles after retirement,” DHA said. “Those who do not already have SERPs in place will likely push to get them established. Credit unions seeking to hire top talent are likely to find it necessary to match or beat a candidate's existing SERP to gain serious consideration.” Credit unions with assets of $400 million or more, where the current average CEO age is 55, slightly older than at smaller credit unions, are likely to be among the first affected by executive retirements, DHA said. Approximately half of these institutions already have SERPs in place. “Because length of time to retirement affects the investment required to provide a set level of benefit, those credit unions that intend to incorporate a benefit floor will probably want to move as quickly as possible to put plans in place,” DHA said. Once retirements begin at larger institutions, movement in executive ranks will increase and competition for executive talent will intensify, the firm predicted, adding this will pressure smaller credit unions to implement supplemental plans as retention tools. Fewer than one in three credit unions with assets of under $200 million now provide SERPs to their CEOs, and only one in five of those with asset of under $70 million offer the benefit. However, the CEOs at these institutions tend to be slightly younger, meaning both that plan entry “is more affordable and CEOs are slightly less anxious about their retirement prospects.” DHA said credit union boards play an active role in SERP programs, even when CEOs initiate the push for a plan. Based on the current survey, 40% of existing plans are reviewed annually by their credit union's board of directors, and 41% of respondents indicated that their credit union had considered making changes in plan design. Of those who said plan design changes had been considered, the targeted benefit amount was the most frequently cited concern. Depending on the plan design employed, changes in market performance can dramatically alter payout prospects for SERP plans. Consequently, although CEOs with these plans are generally pleased that they exist, only one in four claims to be “very satisfied” with the specifics of his or her existing plan. -

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