There are many misconceptions around NCUA’s 701.19 regulation and how it can be utilized to the benefit of a credit union. In the past, credit unions have used strategies like COLI/BOLI, Split-dollar plans, 457(f), and other investments mainly for executive benefits. However, the feedback Credit Union Benefit received for their credit union clients was that their biggest financial challenge was paying for rising employee benefit cost. So, when Credit Union Benefit went to the NCUA to design our Total Benefit Prefunding, these are the questions we asked:
- Why can’t credit unions have ALL their employees benefits cost covered under 701.19?
- What if the credit union could build an endowment, similar to colleges across the country, but instead using it to offset rising tuition cost, they were able to use it to pay for rising benefit cost?
- If the credit union’s employee benefits were paid into perpetuity with our Total Benefit Prefunding program, how could credit unions use that freed up capital to better serve their members?
Key Takeaways:
- Understanding the NCUA’s 701.19 Regulation
- Pros/Cons of existing 701.19 COLI/BOLI Programs
- What is Total Benefit Prefunding and how does it work
- How a credit union can have their benefits cost paid for into perpetuity
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