SAN DIEGO-Most credit union CEOs are 50-plus and many plan to retire relatively soon, leaving CUs with a five-year window to develop a succession plan.
That was the message from Scott Albraccio, executive benefits sales manager for CUNA Mutual Group. Albraccio said 50% of credit union CEOs aged 60-64, or roughly 20% of current CEOs, are planning their retirements-and noted that many more would have already headed out the door if not for declines in the value of retirement accounts. Now, he said, those managers are just waiting for those accounts to "recover."
Albraccio suggested credit unions should be worried about a number of factors that are affecting the employment market, citing a CUNA study that found 21% of CU CEOs plan to retire within five years. In 2011 the first Baby Boomers hit retirement age, meaning there are more workers near retirement than are entering the workforce.
"Despite all the talk about high unemployment numbers, 52% of U.S. employers are challenged to fill critical positions," he said. "One of the biggest risks is developing talent at credit unions and then losing them to other financial institutions. Only 63% of credit unions have a succession plan, not just for their CEO, but for other senior managers, he added.
Another worrisome trend for CUs: just 30% to 40% of executive salary is replaced in retirement by traditional qualified plans and Social Security. Albraccio said highly compensated employees do not have same opportunity to save as their employees because they make too much money.
"Credit union CEO cash compensation is 71% of that paid to bank CEOs. Credit unions need to help make sure their CEOs stay with their credit unions and keep focused on doing their job," Albraccio said. "It is the role of the directors to put a plan into place. CEOs need direction from the board to know where to go next. The good news is the CEO knows the talent on his or her team and can assist the board with putting together a plan."
In the wake of the recession, fewer CEOs received bonus and incentive awards in 2010 compared to 2008. Albraccio said retirement and retention packages are needed for continuity of strategic decision-making.
Because of the limits put in place by the Employee Retirement Income Security Act (ERISA), many CUs are challenged to properly compensate their top-level executives, Albraccio said. He recommended the use of Supplemental Executive Retirement Plans (SERPs), including 457(b) and 457(f) Supplemental Retirement Plans, Split Dollar Life Insurance Plans, long-term care insurance for executives, and supplemental disability insurance.
Split dollar life insurance is "on the rise" as more CUs offer such options, he said.
"Many different types of SERPs are available," he said. "Whichever one credit unions pick, it needs to be flexible, have income tax-free death benefits, and a sense of cost recovery for the credit union. It should be easy to administer and have minimal impact on the financial statement.
"A good SERP can be useful as a retention tool," he added.