More than ever, credit unions are feeling the pressure to increase earnings and maintain high levels of statutory capital while attracting the best and brightest executives. Historically, attracting and retaining top executives has been accomplished using defined benefit plans. These plans require the recording of significant liabilities on the credit union's balance sheet and recording benefit-related expenses each year. As a result of these negative consequences, credit unions routinely purchase life insurance (BOLI) with the hope that the crediting (earnings) on the life insurance policy's cash value will offset (fully or partially) the impact to the balance sheet and income statement.

The Secured Split Dollar Program for credit unions takes an innovative approach to the seemingly conflicting goals of executive retention benefits and negative financial statement impact. This is accomplished by instituting a plan that does not create the initial liability for the credit union. Further, the structure results in the recording of assets and (in many cases) earnings in the first year of implementation. Finally, the credit union will receive a return of its capital plus accrued interest in the future.

The Secured Split Dollar Program can either work in concert with, or as a replacement to, existing plans.

For additional information or to request a follow up call to discuss the applicability of Secured Split Dollar to your institution, please contact our strategic partner Burns-Fazzi|Brock.