Employee Benefit Pre-Funding
Employee Benefit Prefunding Portfolios allow Credit Unions to direct a portion of their excess liquidity into investments to cover certain benefit expenses. Typical benefit expenses include health insurance premiums, life insurance costs, and retirement benefit costs. Retirement benefit costs include 401(K), 457(b), retirement bonuses and other post-employment plans.
In 2017, the cost of healthcare for a typical family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $25,950. The average cost of PPO plans went up 5.1% in 2017 (lowest increase in over 10 years). In contrast, the Affordable Healthcare Act plan costs are expected to increase between 20% and 30% depending on the state.
From 2010 to 2015, the average increase of the employer cost was 32%, or 6.4% annually (according to the US Bureau of Labor Statistics Healthcare report).
Why an employee benefit prefunding portfolio?
The cost of healthcare and retirement benefits keeps increasing at a very rapid pace. A well-positioned supplemental portfolio will provide you with increased earnings to cover this expense, and potentially grow earnings faster than the increase in your health care.