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By Trust for Credit Unions Mutual Funds
Defined Benefit Plans Does your CU have a defined benefit plan? If so, congratulations. You are part of a group of employers who offer employees the security of a guaranteed income in retirement. While defined benefit plans can be costly, they are highly valued benefits to your employees, especially senior managers. Although less than 25% of credit unions offer a defined benefit plan to their employees, their plans are generally more generous and well funded than national averages. The following chart compares standard features of financial service firms' defined benefit plans with national averages. How does your defined benefit plan compare?
Defined benefit plan features
CUs and community banks*
Average accrual rate
Number of years of final salary used to calculate benefit
3 or 5
Early retirement reduction factor
Lump sum distribution option?
Yes (more than 50%)
Social security integration
Average funding ratio
* Pentegra Retirement Services Bank DB Survey, based on internal data covering 259 banks and other financial institutions. ** Pension Benefit Guaranty Corporation Survey and Watson Wyatt “ Accounting for Pensions and Other Postretirement Benefits.”
Defined contribution plans Most financial services employers offer a 401(k) plan. In fact, financial services companies are usually more generous than the average plan sponsor. Over 80% of credit unions offer some form of a defined contribution plan such as a 401(k) or profit sharing plan. The following chart compares financial services firms' plan features against national averages for defined contribution plans. How does your plan measure up?
Defined Contribution Plan features
Other CUs and community banks*
Average employer contribution
% of plans that make employer contributions
Average participation rate
Number of investment options -Asset allocation funds?
Investment cost to participant < 100 basis points > 100 basis points don't know/other
37% 17% 46%
Cost to plan sponsor < 1% of plan assets > 1% don't know/other
50% 19% 31%
* Pentegra Retirement Services Bank DC Survey, based on internal data covering 264 plan sponsors and nearly 20,000 participants. ** Profit Sharing/401(k) Council of America Annual Survey
Are you meeting your fiduciary responsibilities? Retirement plans carry fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) administered by the Department of Labor (DOL) and IRS regulations.
Did you know that breach of fiduciary duties can result in personal liability for plan losses?
If you are your plan's fiduciary, use this checklist to make sure you are following best practices.
Source: Based on information provided in US Department of Labor booklet, “Meeting your Fiduciary Responsibilities”, www.dol.gov/ebsa.
Pentegra Retirement Services was founded as a not-for-profit cooperative in 1943 by the Federal Home Loan Banks to manage retirement benefits. Today it administers over $4 billion in assets for community based financial services firms nationwide and is the NAFCU Services Preferred Partner for qualified retirement plans. Pentegra acts as the named fiduciary for plans under its administration for both plan investments and plan administration. For more information about Pentegra Retirement Services visit www.pentegra.com or call David Brown , 770-579-8754.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
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January 7, 2008
7/26/2012 04:00 PM
I appreciate the survey results provided by Pentegra. I see value in this article given the research they have completed.
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