Compensation and Severance Plan Rule Changes May Impact Your Credit Union

May 5, 2015

By Kirk D. Sherman and James S. Patterson, Sherman & Patterson, Ltd.

After almost eight years and several false alarms, the IRS may finally issue the new Section 457(f) regulations addressing nonqualified deferred compensation plans and severance plans. Two IRS attorneys speaking at separate events have expressed hope that the regulations will be released by this summer.

Credit unions at greatest risk of having to modify their plans are those that sponsor:

• Nonqualified deferral plans (other than 457(b) eligible plans) that allow elective deferrals,
• Nonqualified deferral plans that use noncompete restrictions as substantial risks of forfeiture, and
• Severance plans providing severance benefits greater than two times compensation.

For other credit unions, the new regulations may be a non-event.

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Tailoring Executive Benefits to the Executive and the Credit Union

September 15, 2014

Tailoring Executive Benefits to the Executive and the Credit Union

By David Frankil, President, Burns-Fazzi, Brock

Some people are lucky enough to be able to walk into a store, pick a nice suit off the rack, maybe have the sleeves adjusted and the cuffs hemmed, and walk out with something that fits them perfectly.

My experience is more like major surgery, but when done right the suit looks great.

The same is true for executive benefits – some rare executives and their credit unions are fortunate enough to have a set of circumstances and needs that allow them to take something basic and off-the-shelf.  But more often they end up with their proverbial arms sticking out and socks visible with cuffs four inches off the floor.  What they really need is a more complex mix of solutions that are tailor-made for them.

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Aligning CU Executive Incentives With CU Goals and Member Needs

August 27, 2014

Aligning CU Executive Incentives With CU Goals and Member Needs

By David Frankil, President, Burns-Fazzi, Brock

Originally published on

Dr. Jack Clark from Clark Research Associates presented the results of the 2014 NAFCU-BFB Executive Compensation and Benefits Survey at this summer’s NAFCU Annual Conference.  There were many tidbits in the presentation, but one topic caught my eye – the wide variety of incentives that Boards have used to create bonus plans for top executives.

The topic of how incentives affect behavior is far from new – go back to freshman-year economics and Adam Smith –

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.”
Adam Smith, An Inquiry into the Nature & Causes of the Wealth of Nations, Vol 1, March 9, 1776

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Institutional Asset Management

July 15, 2014

by Kraig Klinkhammer

CUs can use non-insurance based, marked-to-market investments to offset qualifying employee benefit expenses

Originally published on “CFO Focus”

Credit unions, just like any other business these days, are faced with increasing costs related to employee benefit plans, particularly welfare benefits.

The desire for credit unions to utilize NCUA §701.19, “Benefits for employees of credit unions,” to broaden diversification among investible assets and achieve attractive risk-adjusted returns is on the rise. Institutional life insurance, which has contractual guarantees to protect against volatility of cash values (e.g., guaranteed minimum crediting rates), has been a popular investment over the past several years, but what about other alternatives?


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The Top 5 Myths about Executive Benefits

June 17, 2014

by Christine Burns-Fazzi, Principal, Burns-Fazzi, Brock.

Originally Published June 1, 2014 on NAFCU Services Blog

There is a lot of mystery swirling around executive benefits. A well-designed plan does more than pay for performance and longevity, or provide the ability to offer supplemental retirement benefits to key executives. While executive benefit plans are designed to recruit, reward, and retain senior executives, they are also arranged to have a positive impact on the credit union’s earnings. Of course, all of this must be accomplished with a constant eye on federal and state regulations.

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