Is Your CEO’s Retirement Secure?

It's possible that your CEO's 401(k) isn't allowing him or her to put away enough savings to completely fund a comfortable retirement-even after adding in Social Security, John Pesh told attendees of a recent webinar, "Is Your Leadership Continuity Strategy Aligned With Today's Market Trends?" The presentation by Pesh, director of executive benefits for CUES Supplier member and strategic provider CUNA Mutual Group (www.cuna mutual.coni), was part of CUES Compensation Week in April.

Supplemental employee retirement plans are special retirement plans that provide key executives with benefits above and beyond those covered in other retirement plans, such as 401(k)s or IRAs, Pesh noted. Various kinds of SERPs are available to credit unions wishing to ensure their CEOs are able to maintain their current standard of living in retirement.

Of credit unions that provide SERPs, according to the 2013 CUES Executive Compensation Survey,

* 40 percent do so using a 457(b) plan,

* 32 percent do so using a 457(f) plan, and

* 20 percent do so using split-dollar life insurance.

Pesh noted that 457(b) plans supplement 401(k) plans with a $17,500 contribution limit in 2014 and by deferring income taxes on contributions until they are withdrawn at retirement. A 457(f) plan, in contrast, has no contribution limits, and taxes are paid in the year the "risk of forfeiture" lapses-when the CEO becomes vested in the plan.

Life insurance-based plans, an alternative to 457 plans, have no program limits and defer taxes until the funds are withdrawn. (For more on split-dollar life insurance programs credit unions are using, read "On Time for Retirement" at cues. org/1212onti meforreti re ment.)

According to Pesh, CUNA Mutual Group data shows that credit unions of all asset sizes can and do offer these kinds of supplemental plans to their executives. (See Figure 1, at left.)

SERPs not only help CEOs with retirement, but also help credit unions recruit and retain their leaders. So why don't more credit unions have such plans in place?

According to Pesh, SERPs are not something about which all boards are knowledgeable. Or, credit unions may have a CEO compensation philosophy that doesn't support offering a supplemental retirement program. Or, the logistics of offering a SERPincluding up front due diligence or funding the account-may be a challenge.

SERPs are probably worth another look, as credit unions try to get and keep the best leaders in the financial services world, Pesh said. These programs can play an important role in helping credit unions deal with the challenge of leadership continuity.

Read more about SERPs in the free article atcues.org/0811funding the future. Learn more about CUNA Mutual Group's offerings at cues.org/cunamutualgroup.Get the playbacks for all the CUES Compensation Week webinars atcues.org/webinarplaybacks.