457(f) Plans Help CU Keep Key Execs

golden handcuffs
By Scott Albraccio

3 minutes

'Golden handcuffs' an effective benefit for top leaders of Randolph-Brooks Federal Credit Union. By Scott Albraccio

Content provided by CUNA Mutual Group through CUESolutions

When you’ve taken careful measures to build a strong leadership team, it can be devastating to lose a key executive to an outside organization. $7.3 billion Randolph-Brooks Credit Union, Universal City, Texas, uses 457(f) plans to help retain its top executives and preserve leadership continuity. According to industry data, 55 percent of credit unions offer 457(f) plans to their executives.

EVP/CFO Robert Zearfoss explains the strategy of Randolph-Brooks FCU. “To be competitive in the marketplace, it is something that we have to offer,” says the CUES member. “Otherwise, our executives are going to be taken away by other institutions that have those programs.”

What Is a 457(f) Plan?

A 457(f) plan is a type of non-qualified retirement plan that creates an opportunity to supplement executives’ income with no contribution limits. The assets are owned by the credit union until they are paid out to the executive. These plans are not subject to IRS limits on contributions, meaning your credit union can add an unlimited amount of funds to any of your executives’ 457(f) plans. This makes them a great way to motivate your team and reward your top performers. A 457(f) plan can also help your credit union recruit new talent. By offering a 457(f) plan, you can compete with banks and other organizations that are able to offer more in terms of compensation.

Flexibility Helps Achieve Retention Goals

Zearfoss says implementing customized 457(f) plans helps his credit union retain its leadership team. “We use [them] as a golden handcuff for the executives, because we have a good executive team,” he said. “We want to keep them here.” The plan offers flexibility in distribution, allowing the credit union  to customize payout amounts and distribution dates. You can set payout options based on your executive’s length of service, retirement, or other milestones.

Elements to Consider There are a few considerations to make when choosing to offer a 457(f) plan. As a non-qualified plan, 457(f) funds are subject to taxation at vesting, when the risk of forfeiture lapses. 457(f) plans are also subject to creditor claims, meaning bankruptcy or liquidation. Randolph-Brooks FCU successfully utilizes 457(f) plans. When evaluating your leadership continuity goals, remember the 457(f) plan as an option for your team.

Scott Albraccio is executive benefits sales manager at CUESolutions Platinum provider CUNA Mutual Group, Madison, Wis. For more information about executive benefits, contact Albraccio at 800.356.2544, ext. 665.6542. For information about providing content through CUESolutions, email Kari Sweeney, supplier relations manager.

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