Credit Union SERP Advisory

We’re a credit union looking at a SERP.
Who should we talk to first?

Arctis Advisory helps credit unions evaluate, design, fund, and govern Supplemental Executive Retirement Plans before a product, provider, or funding path is selected. Objective, fee-only analysis so boards and leadership teams can make transparent, defensible decisions.

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What the board is really evaluating

“SERP” is industry shorthand, not a single plan design. Some providers use the term narrowly for 457(f) and split-dollar arrangements. Others use it more broadly to describe the executive benefit program as a whole, including 457(b), 457(f), split-dollar, and taxable bonus-based designs. Before a board commits, it helps to name the actual structure on the table, because the tax treatment, funding, accounting, retention effect, and examiner posture differ for each.

457(b)

Eligible top-hat deferral

An eligible deferral plan for a select group of management or highly compensated staff, capped at a single annual IRS limit. For a credit union it must stay unfunded: the deferred dollars remain the credit union’s assets, subject to its general creditors, even when tracked against a menu of mutual funds. That cap is why it rarely carries the retention weight on its own.

457(f)

Ineligible deferred compensation

The ineligible side of §457, with no contribution cap. The benefit stays subject to a substantial risk of forfeiture until it vests, then is taxed to the executive as ordinary income in that year. Design and timing drive the outcome.

Split-Dollar

Insurance-based benefit and recovery

Split-dollar is a family of designs built on a life insurance policy, with the cost, cash value, and death benefit divided between the credit union and the executive. Who owns the policy and whether the executive builds equity drive both the tax treatment and how the credit union recovers its money. “Split-dollar” names a category, not a single plan.

Restricted Bonus

Vesting-based incentive designs

Bonus dollars can carry a repayment obligation tied to continued service, with the repayment drawn from an asset the executive owns, such as a policy the bonus funded. The amount owed on early departure steps down as the arrangement vests, and that decreasing balance is the retention hold.

Funded vs. Non-Funded

The balance-sheet question

Funding the obligation with a predictable yield asset, for example CUOLI, is a separate decision from the benefit promise. The funding asset has to stay tied to the obligation it covers, and the choice carries net economic value exposure and lost opportunity cost the board has to weigh.

How Arctis Helps

From first question to documented decision

Engagements are scoped to where the board needs clarity. Most include some combination of the following.

SERP design

Structure the arrangement around the institution’s retention goals and risk tolerance.

Split-dollar review

Evaluate collateral assignment terms, recovery, and tax mechanics.

Vendor proposal comparison

Stress illustration assumptions and surface the incentives behind a quote.

Governance documentation

Build a decision file that holds up to examiner and auditor scrutiny.

Shortfall analysis

Quantify the gap an executive faces and what it takes to close it.

Funding and opportunity-cost modeling

Compare funded and non-funded paths against the cost of capital tied up.

Board education

Translate technical structures into plain language for committee review.

In-force reviews

Reassess existing arrangements against today’s rates, regulation, and goals.

Objective by design

There is no product on the other side of the advice.

Arctis is paid a flat fee by the credit union and by no one else. We hold no carrier appointments, sell no products, and accept no commissions, referral fees, or revenue sharing from any carrier, vendor, or distributor.

The fee is the same whichever structure the board selects and whichever vendor it chooses, and it does not change if the board decides to do nothing at all. If you place a product, you do it through a producer of your choosing, and Arctis receives nothing from that transaction.

Common Questions

What boards ask before approving

457(f) or split-dollar — how do they compare?

A 457(f) plan is a deferred compensation promise from the credit union. The benefit stays subject to a substantial risk of forfeiture until it vests, then is taxed to the executive as ordinary income in that year, and until it pays out it is an unfunded obligation carried by the credit union. Split-dollar routes the benefit through a life insurance policy instead, so the credit union’s premium dollars are structured to be recovered rather than spent, and the executive’s tax is generally spread out or deferred rather than landing all at once. Neither is automatically better. A 457(f) is simpler to explain and gives the board precise control over vesting and payout timing. Split-dollar can improve cost recovery and tax efficiency but adds policy performance, carrier, and design questions, and it comes in several forms covered in the next question. The right choice depends on retention goals, balance-sheet appetite, and how the board wants the cost to behave over time.
What are the different kinds of split-dollar?

Split-dollar is a category, not a single plan. Every version is built on a life insurance policy and an agreement that divides the policy’s cost, cash value, death benefit, and repayment rights between the credit union and the executive. Two choices set everything else.

The first is who owns the policy. If the credit union owns it and endorses a share of the death benefit to the executive, the executive is taxed each year on the economic benefit of that coverage. If the executive owns it and the credit union advances premiums secured by a collateral assignment, the tax path turns on the second choice.

The second is whether the executive builds equity, meaning cash value beyond what the credit union recovers. A non-equity design, where the credit union’s recovery reaches the full cash value, is taxed each year only on the cost of the insurance. An equity design, where the executive keeps value above the recovery, is taxed either on that value as it accrues or under the loan rules, depending on how it is built.

Those two choices, ownership and equity, drive the credit union’s recovery, the executive’s tax, and the examiner posture. A proposal labeled simply “split-dollar” tells a board very little until the actual design is named, which is exactly the review Arctis runs before a board commits.
Should a SERP be funded with life insurance?

Funding is a separate decision from the benefit promise. COLI or CUOLI can fund the long-term cost of a SERP, but the funding asset stays tied to the obligation it covers, and it introduces carrier credit, policy performance, crediting-rate, and liquidity considerations, plus the lost opportunity cost of capital no longer available for lending or investment. Whether it fits depends on the institution’s net economic value posture and risk tolerance. Arctis models the funded and non-funded paths side by side so the board sees the trade-off before committing.
What should the board document before approving a SERP?

A defensible file generally shows the retention rationale, the design alternatives that were considered, a funding and opportunity-cost analysis, the regulatory considerations, the incentives and disclosures behind any vendor proposal, and the reasoning for the decision the board reached. The goal is a record that demonstrates prudent, fiduciary decision-making if an examiner or auditor asks later.
We already received a vendor proposal. Can you review it?

Yes. Proposal and in-force reviews are a common engagement. Arctis stress-tests the illustration assumptions, compares the proposal to alternatives the board may not have seen, identifies the compensation embedded in the structure, and flags any assumptions that do not hold up. The output is framed for board and committee review, not for a sales meeting.
Is Arctis trying to sell us a product?

No. Arctis does not sell insurance, hold carrier appointments, or receive compensation from any product manufacturer. An engagement is analysis and decision support. If the board later decides to place a product, it does that through a producer of its choosing, and Arctis receives nothing from the transaction.
Is Arctis independent, and is there any revenue sharing?

Arctis is paid a flat, fixed-scope fee by the credit union and accepts no commissions, referral fees, or revenue sharing from any carrier, vendor, or distributor. The fee does not change with the structure the board selects or the vendor it chooses. There is no arrangement under which Arctis earns anything from a placement, which is the shortest way to answer the question.

Considering a new SERP, or reviewing one already on the table?

Request an independent review before the board commits to a plan, product, or provider.