Periodically auditing an existing COLI portfolio can mean reducing risk and significantly improving earnings over time. Many credit unions, however, do not review these contracts regularly.
For credit unions that are investing in traditional securities, current accounting treatment now requires mark-to-market accounting and volatility can directly impact net income.
Credit union-owned life insurance (CUOLI/COLI) is the best “otherwise impermissible investment” for your credit union. Using CUOLI in your CU can solve major issues from narrowing margins to employee retention.
Under the National Credit Union Administration (NCUA), Section 20 and Section 21 allow credit unions to contribute to strategies outside of typically permissible investments CUOLI/COLI and CDAs.
In today’s interest rate environment and in the face of rising employee benefit expenses, the yield on a credit union’s safest and most liquid assets is extremely low and typically generates little income. Additionally, in order for a credit union to potentially increase the yield on its assets, liquidity and/or safety typically must be compromised. Using credit union-owned life insurance (also known as “COLI” or “CUOLI”) as a way to pre-fund the increasing cost of benefit expenses, however, can provide significant advantages to your credit union. Let’s discuss the benefits of COLI.