These Investments Require Pre-Purchase Analysis

laptop and pen next to financial investment report charts
Lisa Hochgraf Photo
Senior Editor

2 minutes

CUES Podcast Episode 61 describes prescribed due diligence before investing to fund benefits plans.

Due diligence is a good idea before any credit union purchase. But the National Credit Union Administration actually requires a formal pre-purchase analysis before you buy investments to fund your employee and executive benefits plans. How is this best done? In Episode 61 of the CUES Podcast, Greg Smyth gives insights and guidance.

An executive benefits specialist with CUESolutions platinum provider CUNA Mutual Group, Madison, Wis., Smyth notes that benefits expenses have been consistently and dramatically increasing year over year, especially health insurance benefits. While benefits expenses may be increasing 4 percent to 5 percent a year, according to Smyth, investment yields for credit unions have been growing much more slowly, in the range of 2 to 3 percent annually. NCUA recognized this imbalance and created a way for credit unions to mitigate it by making certain investments to help fund their benefits plans that were previously considered “impermissible.”

“This expanded investment offering allows credit unions to seek potentially higher yielding investments” outside of section 703, he says. “And that extra income can go towards employee benefits expenses” and support offering really good benefits plans to staff.

To make these investments, NCUA requires a pre-purchase analysis. In the podcast, Smyth talks in more detail about:

  • What NCUA says about how to do and document the pre-purchase analysis
  • The difference between permissible and impermissible investments
  • What kinds of benefits plans can be funded with these kinds of investments
  • Why a credit union would want to fund a benefit plan with these kinds of investments

Listen to my conversation with Greg Smyth.

Lisa Hochgraf is senior editor with CUES and a host of the CUES Podcast, an audio program that features credit union and cross-industry experts talking about their perspectives on trends and topics that matter to you.

Learn more about CUNA Mutual Group’s executive benefits plan offerings.

In Episode 59 of the CUES Podcast, CUNA Mutual Group’s Fred Palmer talks about business-owned life insurance for credit unions.

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