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CUNA Mutual exec outlines prefunding benefits
NEPTUNE, N.J. (1/6/10)--CUNA Mutual Group Executive Benefits Specialist Mike Downey covered an emerging concept--credit unions prefunding benefits--at Monday’s Monmouth/Ocean County credit union chapter meeting in Neptune, N.J. With credit union health care costs increasing by 20% on average, some credit unions are using prefunding benefits to help mitigate costs, Downey said, according to the New Jersey Credit Union League (The Daily Exchange Jan 5). “It’s not a program to reduce benefit costs, but rather get higher investment yields to offset rising costs,” Downey added. Prefunding benefits is covered under National Credit Union Administration (NCUA) Reg. 701.19 with clarification letters in February 2004 and December 2006. CUNA Mutual had an ongoing dialogue with NCUA on what investments are permissible for prefunding of benefits, Downey noted. Credit unions can fund benefit obligations using normally non-permissible investment vehicles, Downey said. Prefunding is a long-term investment strategy. The earnings from the investments can offset costs of underlying benefits. One New Jersey credit union prefunds benefits, as do about 12 on the East Coast. The concept is still new to most credit unions, Downey said.
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