Adjusting deferred compensation

In the wake of the Great Recession, Railway CU effectively modifies its CEO’s plan.

Any executive non-qualified deferred compensation plan looks great when its assets are growing smoothly along with a strong economy. The proof of a well-designed deferred compensation plan, however, isn’t only good returns—it’s how well the plan protects the credit union’s bottom line when the economy isn’t strong.

The board of $106 million, 7,220-member Railway Credit Union, Bismarck, N.D., chose wisely when setting up a deferred compensation plan for CEO Paul Brucker in 2005. He’d been CEO since 1997 and overseen growth from $12 million in assets to $33 million.

Considering leadership retention, the board put into place an executive benefits package that included a life insurance policy with Brucker’s family members as beneficiaries and a 457(f) plan scheduled to vest in 15 years, when Brucker would be 55.

The 457(f) plan was designed with a goal that the investments funding it would generate enough income to produce the full anticipated benefit at vesting and earn the credit union a bit of additional income to cover the cost of funds. (The board also purchased a key person life insurance policy on Brucker, with the credit union as the beneficiary, so if Brucker should die while CEO the credit union would have additional funds to cover recruitment and transition costs.)


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