Credit unions use 457(f) plans and loan regime split dollar plans to retain and attract top talent.
Over the past 10 years, the loan regime split dollar plan has become the popular choice.
The loan regime split dollar plans, however, do have challenges:
Longevity risk of the plan. A typical design has the loan repaid from the death proceeds, which can be decades after a participant leaves the credit union.
Denial of plan distributions. If a distribution from the policy jeopardizes it’s ability to repay the credit union, the credit union can deny a distribution. The policy has a collateral assignment, using the policy
as collateral for the loan.
Complicated if participant leaves the credit union partially vested. What does partial vesting really mean? Partially vested in what?
Loan repayment. The loan can be paid off at any time, which means, another organization can pay off the loan, and the policy can be collaterally assigned to the new organization to secure the loan. If this is the case, how is loan regime split dollar a retention plan?
