The term “pre-funding” is not interchangeable between defined benefit pension plan pre-funding and overall employee benefits pre-funding. They’re different tools, and credit unions with defined benefit pension plans can gain advantages from using both forms of pre-funding simultaneously.
Read on to learn how credit unions use both types of pre-funding. But first, here are some very basic definitions:
Employee benefits pre-funding. To help meet overall employee benefits expenses—including health insurance, retirement plans, supplemental executive compensation, etc.—you can use certain investments that credit unions otherwise aren’t permitted to use.
For example, the National Credit Union Association and many state regulations allow credit unions to pre-fund employee benefits with corporate bonds, securities, life insurance products and other instruments that fall outside of those allowed by the Code of Federal Regulations, Part 703 (or in some circumstances, Part 704).
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