Are you a credit union that has executive benefit/SERP plans?  Let’s assume you have successfully implemented your plans – but you may be wondering – what’s next?  Where do we go from here?  What are the best practices in managing and monitoring managing my/our plans? 

This is what is known as “Plan Administration.”

Plan administration can be broken down into two parts – ‘Accounting/Regulatory’ items and the ‘Annual Review’ process.

In order to successfully administer an executive benefit plan, you must account for the plan correctly and comply with regulatory requirements from the NCUA, IRS and other agencies.   Below are some key items that you will need to consider.   

Accounting and Regulatory Items

Proper accounting at implementation – Asset, liability and income statement impact
Ongoing accounting entries
NCUA 5300 completion
IRS and Department of Labor compliance
Processing payouts and distributions – W2/payroll or insurance policy withdrawals
 

Many reputable providers will have a team that is dedicated to supporting credit unions with these essential functions.  This support would include a staff member with the required expertise as well as a secure on-line portal which serves as repository for plan information, accessible to credit unions. Additionally, credit union personnel benefit from timely email push notifications signaling the readiness of specific reports, facilitating streamlined communication and access.

Annual Review Process

The annual review process is also a critical part of plan administration.  This yearly review serves as an opportunity to refresh the CEO, board of directors and participants on the workings of your plans.  It is also an opportunity to perform certain checkups.  Below are the key items addressed:

Covered participants, Plan Benefits and vesting dates
Performance of any underlying investment and/or insurance products supporting the plan
Credit quality review of any underlying insurance products
Review of concentration limits
Analysis and discussion as to whether plan(s) are on track to provide the intended benefits.
Accounting and NCUA 5300 checkup
Resolving any CPA Audit or regulatory exam issues the credit union may have encountered.
 

Typically, the responsibility for driving this process lies with the partner you work with. This includes sending a reminder to the credit union regarding the upcoming annual review, creating the necessary annual review documentation, and setting a schedule for the review.   It's crucial to emphasize that the intended audience isn't limited to just the board and CEO;  every participant should have the opportunity for a confidential participant review to discuss significant life matters and any changes that might impact the plan, such as updates to beneficiaries and other changes.

Whether you choose to handle this internally or partner with an established provider, pursuing excellence in plan administration plays a pivotal role in the success of your plans.  Executive benefit/SERP plans are not “set it and forget it” programs.  The success of your program and plans will be greatly enhanced if you have excellence in plan administration.

Jay Petty is an Executive Vice President with The Sheeter Group. Jay has over 30 years of credit union experience and specializes in the consultation, design and implementation of executive benefit and supplemental executive retirement plans. The Sheeter Group is a leading provider of executive benefit plans designed to retain, recruit and assist credit unions with succession planning and leadership continuity.

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