WHITE PLAINS, N.Y.-A proactive pension and retirement strategy is a must-have as credit unions begin their planning for 2013.
"We're at a historic divergence in interest rate trends, and nobody knows when, precisely, but any banker understands the interest rate environment and that the implications for pension plans are profound," said Pete Swisher, SVP and national sales director for Pentegra Retirement Services. "Any credit union with a defined pension plan should have a proactive strategy for what they are going to do with that plan over the next 10, 20 or 30 years."
But rather than just working with an outside consultant, Swisher stressed that it is imperative for at least one person within the CU to not only understand the pension and retirement programs at a high level, but to understand how all of that is integrated with the institution's overall business strategies.
That's especially important, he added, since interest rates will eventually rise again, drastically effecting pension liabilities and investments.
"You've got to have somebody inside the credit union," said Swisher. "They don't have to understand all of the arcana that I have to understand as a pension consultant, but you need somebody who can sit back and understand what I'm saying about rates and nod and say 'I know what you're talking about.'"
Pay Attention To Changes
Additionally, there have been changes to defined contribution plans that many non-profits-including CUs, stressed Swisher-have not looked at as closely as they should. "There are some best practices that are becoming common that have barely begun to trickle into the non-profit world, including credit unions," he said. "There are some neat things that can be done and improvements that can be made that are very helpful to participants if you're one of those few that has a defined pension plan."
He added that the typical CU "hasn't looked at its 401(k) very hard, and I really think they should."
Swisher noted that there's been something of a change since last year, when many people were still focused on coming out of the economic downturn rather than thinking about what's coming next year. "What I'm seeing is a keen interest among defined benefit sponsors for somebody to tell them what is the plan; I wasn't seeing that last year," said Swisher. "People are ready to deal with this now."