Broker Check

Employee Expense Offset

Many Credit Unions enjoy offsetting expenses by generating income from various investments.


What is Employee Expense Offset?
The Credit Union generates income from an investment, and uses that income to offset employee benefit expenses. This type of investment is permissible for Credit Unions under 12 CFR part 701.19 if they use the income to pay for, or offset, employee expenses, or reimburse a sponsor group for expenses.

Which employee expenses are we talking about?
Most Credit Unions use this income to defray employee-related expenses such as the cost of group health, dental, or 401(k) plans.

Who should consider Employee Expense Offset?
Any Credit Union with a lot of liquidity. You will improve your bottom line by reducing annual expenditures on expenses for all employees.

Which investment strategies are appropriate?
NCUA-friendly options are the usual investment vehicles for Employee Expense Offset. Depending upon the Credit Union’s tolerance for fees, risk and other factors, various investments can be used. In the current economic environment, the most popular funding option trends toward life insurance which is a conservative yet can be a high-yield product.

What do auditors look for in these plans?
As with any investment strategy, safety and soundness is key. Auditors generally view these plans positively and consider them a smart investment.

Do these plans go by other names?
Yes. It is sometimes called Benefits PreFund, Earnings Enrichment, or Income Acceleration. These are all the same concept.