Creating a SERP philosophy & why it’s so important for a credit union

Today, the credit union employment market is highly competitive, and Supplemental Executive Retirement Plan (SERP) arrangements are frequently used to retain key employees, while offering future-orientated incentives tied to their retirement goals. For organizations seeking to offer SERPs, the first step should comprise the development of a SERP Philosophy.

A SERP allows an employer to provide a highly compensated key employee with additional retirement benefits beyond those provided by traditional qualified plans. The purpose of a SERP is to retain and reward those who are driving the day-to-day objectives and long-term goals of the credit union. A SERP allows an employer to provide a highly compensated key employee with additional retirement benefits beyond those provided by traditional qualified plans.

Boards of directors adopt these types of plans as a tool to share the success of the credit union with key executives over time, believing that the financial rewards paid to the executives are human capital investments in the success of the credit union.

Factors a CU should consider with their SERP philosophy

SERPs should be sustainable and customizable to meet the needs of the CU and its key employees over time. Common factors a CU should consider include:

• Does the CU fund the entire SERP?

• Does the CU want a defined contribution or defined benefit SERP?

• How is the SERP benefit calculated?

• What is the criteria to qualify for a SERP?

• Is the SERP competitive enough with the market?

• Does the SERP meet the needs and wants of your senior leadership team?

• Should the CU create separate classes of SERPs based on differentiation that matters to the CU’s talent strategy?

• Does the CU want to offer short-term to long-term benefit SERP programs?

The SERP Philosophy should help answer key questions related to your SERP strategy and it needs to support your credit union’s goals and values. Knowing these benefits will make your senior leadership team happy and keep them productive and engaged.

Once complete, a SERP Philosophy should clearly define the parameters within which SERPs are designed and implemented.

Modern Capital Executive Solutions is a consulting firm rooted in the credit union space providing full services across the country to C-Suites & boards, with expertise in the executive benefits/retention planning arena.