Attaching investments to health plans can help credit unions contend with rising costs and compete for talent, according to a CUNA Mutual Group executive benefits specialist.
John Moreno, speaking on Monday at a CUNA conference in Fort Lauderdale, Fla., said credit unions struggling to keep up with rising costs could consider implementing a total benefits pre-funding program.
Moreno said TBPFs allow credit unions to pre-fund employee benefit obligations with potentially higher-yielding investments than would be considered permissible by the NCUA, because they relate directly to the credit union's employee benefits obligation or potential obligation.
TBPF funding options include corporate-owned life insurance that provides predictable returns through interest earnings on policy cash values and dividends; institutional-managed account programs holding mutual funds, stocks and bonds; and, variable annuities or variable life insurance, Moreno told his breakout session at the CUNA Human Resources and Training and Development Council Conference.
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"The benefit for credit unions is they can potentially increase investment returns, which in turn could improve the bottom line. Plus they can use the additional income to continue offering high-quality employee benefits," Moreno said.
TBPFs do come with some potential risks, according to the NCUA. Moreno said those include credit, interest rate, liquidity, transaction, compliance, strategic and reputation risk.
However, "with benefits costs increasing 8% annually and investments yielding only 1.6% on average, it's becoming increasingly difficult for credit unions to maintain a competitive benefits package and remain an employer of choice," he said.
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