Credit unions, we get it.
Between NCUA investment limits, the relatively low yield on government-issued bonds and the unrealized losses from said bonds can make both you and your balance sheet feel underwater.
Your costs aren’t standing still, either. Credit union employee benefit costs are rising, charitable giving remains a priority, and attracting and retaining the right people has never been more critical.
So, the question becomes: How do you work within the rules while still moving your institution forward?
That’s exactly what I break down in the videos below. 701.19 products and charitable donation account strategies are already being used by some of the most successful credit unions in the country.
The NCUA issued its 701.19 guidelines to help give credit unions a leg up in retaining top talent. These guidelines allow credit unions to include otherwise impermissible investments in their portfolios, as long as they use the gains from those investments for employee benefits.
The returns on these investments can help cover:
- Deferred comp
- Training
- Health insurance
- Payroll taxes
- Other employee-related costs
Not only does this help offset rising employee-related costs, but it also helps you reposition underperforming assets.
How 701.19 Products Help Strengthen Your Balance Sheet
Selling your underwater bonds means realizing a loss, which is something most institutions understandably want to avoid.
Certain 701.19 strategies can help offset that by offering an upfront bonus that helps cushion the impact of repositioning assets and aligning with credit unions’ conservative risk profiles.
The result is a strategy that reduces the drag low-performing assets have on your balance sheet, helps fund your rising employee costs, and improves your ability to retain key talent.
In most cases, credit unions treat charitable giving as a line item that resets every year. Charitable donation account strategies offer a different approach.
Instead of funding donations annually from operating income, a charitable donation account allows you to create a dedicated investment pool that generates the funds for those contributions over time.
How Charitable Donation Account Strategies Work
A credit union takes a sum of money and invests it in this account. A minimum of 51% of the investment earnings must go toward charitable giving, while the remaining portion can be used at the credit union’s discretion.
This means that up to 49% of the earnings can help fund:
- Operational initiatives
- Capital expenditures
- Marketing efforts
- And more
Instead of writing a check every year, you’re creating a structure designed to fund your charitable giving indefinitely.
If you’re evaluating your current position, it may be worth taking a closer look at how these approaches could fit into your broader strategy. Let’s sit down together to see how these two strategies can help strengthen your institution.