Offset the rising costs of employee benefits with an Employee Benefit Pre-Funding Account (EBPA) Employee benefits have been increasing faster than the yield on a standard bond portfolio. To help your credit union offset this rising cost, the NCUA allows federal and most state chartered credit unions to direct a portion of their excess liquidity into investments to cover benefit expenses. That’s where McQueen Financial Advisors comes in!
McQueen Financial Advisors (MFA) is a proven Alternative portfolio manager with a strong track record of delivering EBPA results. By creating a custom portfolio that may contain fixed income bonds not found in your standard portfolio, stocks, ETFs, preferred stocks, or other asset classes, MFA can help provide you with a custom-tailored EBPA portfolio management solution to fit your financial institution’s unique needs. As your EBPA investment portfolio manager, MFA will seek to achieve the best return based on your objectives and risk position.
HOW AN EBPA WORKS
Goal: Increase earnings compared with traditional investments to offset benefit expenses.
Example:
NW = $40MM
25% of $40MM = $10MM
If we earn 6.50% $10MM * 6.50% = $650,000
You now have $650,000 in earnings to apply to your benefit costs.
WHAT WE DO WITH THE EARNINGS
Comparison:
In the end, you have at least $300,000 more in earnings to cover expenses you will pay either way.
ADDITONAL BENEFITS
As a client of MFA, you'll also enjoy:
Interest rates are near 15-year highs, so it is a great time to lock in high yields. The Federal Open Market Committee (FOMC) is leading MFA to believe that we are close to the high point in the interest rate cycle. EBPA’s can help retain key employees. EPBA accounts can provide a higher yield and improve your bottom line.
There are three easy ways to fund your accounts:
1. CASH - Cash is a liquid asset and can be readily used to fund your EBPA account. Many of the investment options available today provide higher yields compared to traditional savings accounts. This means your cash can work harder for you.
2. BOND MATURITIES - If you have bonds that are nearing maturity, consider reallocating the proceeds into your EBPA account. Many of the investment options yield returns that are comparable to loan rates, making it a sensible choice for reinvestment.
3. CERTIFICATES OF DEPOSITS (CDs) - Depending on your CD rates and the structure of your EBPA, your portfolio returns may offer appropriate spread over your cost of funds making this a viable funding source.
The good news is MFA does all of the heavy lifting. From the initial strategy, goal setting, and timeline development to Board member education, regulation research, and policy creation, MFA is helps your credit union through every step of the implementation process AND provides ongoing communication, education, and support.
MFA provides ongoing communication to credit union clients including monthly internal management updates, quarterly meetings with management, and Board reporting documents. MFA provides performance reports and value reports on a monthly basis so your credit union will always know how your investment is tracking.
Reach out to LEVERAGE Business Development Consultant at consult@myleverage.com to explore MFA’s offerings in greater detail. We’ll work with you to identify and evaluate the best solution for your credit union.
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