Three common misconceptions about benefits pre-funding investments
Make programs that offset benefits costs—and therefore qualify for non-703 investments—part of your overall income strategy.
Employee benefits pre-funding programs can do more for your credit union than simply offset future benefits expenses. The credit unions that get the most value from pre-funding programs use the expanded array of allowable investments to balance their overall investment portfolio—and, at the same time, they actively manage the program as they would any other potential income stream.
Pre-funding programs make use of expanded investment options allowed by the National Credit Union Administration and by many states. Investments that credit unions otherwise aren’t allowed to make under the Code of Federal Regulations, Part 703 (and Part 704 in some circumstances)—such as certain corporate bonds, securities and insurance products—are allowable to offset expenses for, among other things:
- health insurance plans;
- supplemental executive compensation; and
- group life and disability insurance.
When I work with credit unions that are considering employee benefits pre-funding programs, I often come across some misconceptions that are holding executives and boards back from using this strategy.
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