7 key risks of funding benefits programs

If you’re a credit union executive or board member, you’re probably familiar with the seven key risks identified by the NCUA: credit, interest rate, liquidity, transactional/operational, compliance, strategic and reputation. You may not be aware, however, that the NCUA has detailed in its online Examiner’s Guide how each of these risks applies to a specific—and too often misunderstood—area of credit union investments: employee benefits funding.

Reading the guide’s section, “Risks Associated with Employee Benefits Programs and the Investments that Fund them,” will help you address the seven risks when investing to fund benefits such as health insurance, 401(k), 457(b), 457(f) and split-dollar life insurance plans. It will also help you document how you’ve addressed these risks. That’s good for examinations and audits, and it’s also good for successors in the C-suite and the boardroom.

Here are some notes on the seven risks, based on the examiner’s guide and on CUNA Mutual Group’s work on employee benefit pre-funding and non-qualified deferred compensation plans.

 

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