Balancing Act: Offering Competitive Employee Benefits on a Tight Budget

Health care premiums are rising at a rate of 11% per year —increasing costs don’t include other benefits like long-term disability and 401(k) matching. Many employers feel they have no choice but to decrease employee coverage or raise co-pays. There are better options, though—including CUES Yield Enhancement, a smart pre-funding strategy.


Credit unions everywhere are facing tighter budgets and rising costs from all sides, including:

Skyrocketing Health Care Costs
In a February 2008 report, the U.S. Chamber of Commerce revealed that medical benefits account for 12.1 percent of companies' total payroll costs. Funding health care plans takes the biggest chunk out of your credit union's resources—and the size of that chunk continues to grow. Since 2001, premiums for family health coverage have increased by 78%, according to a 2007 study by the Kaiser Family Foundation.

Competitive Recruiting
As securing good employee benefits becomes more difficult for both employers and employees, a solid benefits package has gone from an extra perk of employment to a key consideration for job candidates. Many studies show that employees consider their benefits as valuable as their salaries.

This focus on benefits by job candidates will only become more pronounced as Generation Y floods the job market. This discerning group is ambitious, ready to make a positive impact on your credit union and have a great interest in how your credit union's benefits will add to their personal goals. For example, 49% say that retirement benefits are an important factor in their choice of employer and 70% already contribute to their 401(k), according to USA Today. Credit union leaders are striving to build a competitive benefits plan that will recruit the best of this bunch.

Employee Satisfaction
Cutting benefits costs may be an immediate fix, but maintaining a robust benefits package may actually improve the bottom line. A competitive package will also help reduce costly turnover and increase productivity by boosting employee satisfaction. As Baby Boomer employees retire, retaining Generation Y staff members will be crucial. This group has no qualms about switching jobs to gain the benefits they need. According to a 2007 study commissioned by Robert Half International and Yahoo! Hot Jobs of more than 1,000 21- to 28-year-olds, participants ranked health care coverage as the benefit that pertains most to job satisfaction, and 24% plan to stay at their current place of employment for only one to two years.

Many credit unions are looking at these issues from a new perspective. As an alternative to reducing benefits or passing the extra cost on to employees, organizations are implementing “cafeteria plans,” HSAs/FSAs, wellness programs that reward staff for healthy habits that keep medical costs down and more. Others are finding ways to keep their current benefits by managing their benefits dollars differently, such as pre-funding long-term obligations, including health insurance, long-term disability and 401(k) matching through services such as CUES Yield Enhancement.

This approach, a common practice used by credit unions to fund defined benefit retirement plans, executive benefit plans and post retirement health programs, is NCUA compliant. Credit unions are allowed to use normally impermissible investments to fund long-term benefits. By re-directing a portion of your normal investments into funds that earn a higher rate of return, your credit union can cover a significant amount of its out-of-pocket employee benefit expenses.

To learn more about the advantages of pre-funded benefits through CUES Yield Enhancement, visit; call Joe Tripalin, president, Preferred Benefit Partners Consulting, LLC, at 608-445-0984 ; or e-mail .



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May 19, 2008



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