Open enrollment season is in full swing. Amid rising health care costs, credit unions are navigating a growing challenge: how to attract and retain top talent, stay aligned with their mission, and protect earnings, all the while benefit costs loom and investment performance continues to lag.

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At Acumen Financial Advantage, we focus on tailored strategies that align with your unique mission. We specialize in helping mission-driven institutions like yours access untapped investment strategies to support what matters most—your people, your performance, and your purpose.

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One of the most powerful yet misunderstood tools available to credit unions is Employee Benefits Prefunding (EBP), a strategy that leverages otherwise impermissible investments to fund employee benefits. But despite its enormous potential, misinformation persists,preventing many institutions from taking full advantage of it.

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Let’s bust five of the most common myths about paying for employee benefits and explain why correcting them could change the future of your credit union.

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Myth #1: “We can only prefund up to 25% of our net worth.”

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Truth: There is no such limit in the regulation.

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This is the single most pervasive myth in the creditunion space, and it stems from a misinterpretation of guidance, not law. In2004, the OCC (Office of the Comptroller of the Currency) issued a bulletin suggesting that banks should limit their investment in bank-owned life insurance (BOLI) to 25% of their net worth. The NCUA piggybacked on this guidance, and since then, many have assumed it was a hard limit.

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In short, NCUA Regulation §701.19 does not contain any reference to a 25% cap for employee benefit prefunding.

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What it does require is due diligence, proper documentation, and a demonstrated “direct relationship” between the investment and your projected employee benefit obligations.

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Why it matters: By shaking off the 25% misconception, credit unions can strategically expand their prefunding program, giving them more flexibility to invest in better-performing assets and provide world-class benefits to their teams.

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Myth #2: “These investments are too risky for us.”

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Truth: Risk is not the enemy—uncompensated risk is.

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We work with credit unions that have traditionally relied on government-backed bonds. These are safe, but in today’s market, safety often comes at the cost of returns. The beauty of Employee Benefits Prefunding is that it allows you to consider “Otherwise Impermissible Investments” (OIIs)–vehicles like indexed life insurance, private credit, interval funds,and structured products–within a compliant, risk-managed framework.

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These assets are designed to be:

• Non-correlated with public markets
• Downside-protected
• Designed to generate steady, long-term returns
  

When structured correctly and tied to specific benefit obligations, these investments can unlock better performance without increasing institutional risk.

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Why it matters: You're already carrying the cost of employee benefits. Prefunding allows you to use smarter investments to offset thosecosts, protect your bottom line, and deliver consistent value to employees.

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Myth #3: “Only large credit unions can benefit from this.”

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Truth: EBP is scalable and works for credit unions of all sizes.

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We often hear this from smaller institutions, especially those where leaders wear multiple hats. Maybe the CEO is also the COO, the Head of Payments, and the CIO. The assumption is that complex strategies are only accessible to multi-billion-dollar shops.

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But here’s the reality: every credit union, no matter the size, can benefit from a well-structured prefunding strategy.

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From covering health insurance costs to funding executive retirement plans, prefunding helps small and mid-sized credit unions:

• Smooth cashflow
• Reduce long-term liabilities
• Attract and retain high-quality talent

We believe every employee—from your CEO to your front-line teller—deserves best-in-class benefits. Prefunding gives you a powerful way to deliver on that commitment.

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Myth #4: “It’s too complicated to manage or getapproved.”

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Truth: Yes, it takes planning—but that’s what strategic partners like Acumen Financial Advantage are for.

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NCUA §701.19 and related examiner guidance do require due diligence, including:

• Demonstrating a direct relationship between investment income and benefit obligations
• Ensuring returns don’t exceed future liabilities
• Conducting pre-and post-purchase risk analysis
• Informing and involving your Board of Directors

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You don’t have to go at it alone. With the right support,credit unions can build and maintain compliant programs that meet both financial goals and regulatory requirements. A good partner helps you:

• Conduct peer benchmarking and retirement surveys
• Implement robust Board policies
• Provide annual performance assessments
• Maintain transparency and documentation

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When managed properly, EBP becomes an asset—not a liability. It creates budget stability, supports talent retention,and aligns with your long-term mission.

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Myth #5: “Employee benefits are just a cost center.”

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Truth: Benefits are a strategic asset for growth and retention.

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The credit union industry is unique—you’ll often find CEOs who started as tellers. Your team grows with you. Prefunding allows you to honor that commitment by providing benefits that support employees through every stage of their career.

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In a tight labor market, great benefits are more than just nice to have—they’re a competitive advantage. Whether it’s funding:

• Executive retirement plans (SERPs, 457(f), Split Dollar, etc.)
• Health and life insurance expenses
• Long- and short-term disability coverage
• 401(k) match or defined benefit contributions

Every dollar you invest in your people today will return tenfold in loyalty, productivity, and performance.

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Why it matters: Talent retention isn't just an HR issue, it’s a bottom-line business issue. Prefunding gives you the power to offer competitive benefits without straining your budget or sacrificing your mission.

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Awareness is Opportunity

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Too many credit unions are operating under outdated assumptions and missed opportunities.

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You’re not constrained by regulation—you’re constrained by awareness.

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By understanding the real rules, and leveraging tools like Employee Benefits Prefunding, you can:

• Maximize investment performance
• Provide exceptional benefits to every employee
• Stay compliant and aligned with your mission

At Acumen Financial Advantage, our mission is to help you align your financial strategies with your core values so you can grow your impact without compromising your integrity.

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Let’s unlock that potential together.

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Need help understanding what your credit union can do differently?

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Let’s have a conversation. Acumen Financial Advantage will show you how tailored, compliant strategies can support your people and your purpose without increasing risk.