Must Reads

INVESTMENTS

‘Pensionize’ 401(k)s and IRAs In a world of defined contributions, American workers have three challenges – inadequate savings, leakage (or loans/early withdrawals) tied to their retirement accounts and the need for retirement income. Plus, just half of all DC plans offer a way for investors to transform balances into periodic retirement income, with only one in five offering guaranteed lifetime payouts.

This situation prompted Steve Vernon of the Stanford Center on Longevity, Wade Pfau of The American College of Financial Services and researcher Joe Tomlinson to explore and devise solutions to “pensionize” retirement plans. Their work, first published last year and then updated this year, finds that only one-third of workers contact financial advisors, and most lack the necessary skills to convert savings into retirement income and typically have short planning horizons.

But research from the Stanford Center on Longevity (SCL) and Society of Actuaries (SOA) has found a “straightforward retirement strategy,” according to the three authors. “Choosing a specific solution that will help workers generate retirement income requires them to make informed tradeoffs between potentially competing goals,” they explained, such as “maximizing lifetime income; providing access to savings (liquidity); planning for bequests;

HUMAN RESOURCES

Care Costs Strain Employers Small employers are particularly feeling the heat of rising health benefit costs, according to th Mercer National Survey of Em-ployer-Sponsored Health Plans

2018.

Among smaller employers (those with 10 to 499 employees), co ts rose by 5.4% on average, while mid-siz and large employers with 500 or m re employees held cost growth to 3.2%, according to the survey.

For all 2,409 employers polled, average total health benefit cost per employee rose by 3.6%, com pared to an increase of 2.6% in 2017. While overall cost growth remains moderate, averaging 3.3% annually over the past five years compared to 5.7% over the prior 10-year period, it continues to outpace inflation.

In 2018, employees paid, on average, 25% of the total cost of coverage through paycheck deductions – nearly $3,200 per em ployee on average not including out-of-pocket costs.

Among smaller employers, the verage PPO in-network deductible rose sharply in 2018, topping $2,000 for an individual. Most large employers did not raise PPO deductibles, the plan type ith the highest enrollment.

“Employers are very awar
of the burden that high health
care costs places on employees,”
Sharon Cunninghis, who leads
Mercer’s Health business in the
U.S., said. “We’re helping them
implement cost-saving Y15

CUs Open Core Strategies ROY URRICO rurrico@cutimes.com

ransforming to a more member-friendly business model, more quickly incorporating third-party vendors, and achieving developmental efficiencies are a few reasons why credit unions migrate to open core systems.

For this second installment in a two-part look at open cores, credit union executives presented their perspectives on the strategy.

The $150 million Tucson Old Pueblo Credit Union, a client of the Farmington Hills, Mich.-based “We needed to integrate with more third-party vendors. All our processes were scattered and separate, and the system we were on was not doing any development,” Manny Chavez, senior systems engineer for TOPCU, said.

The Tucson, Ariz.-based credit union considered several Y17

TECHNOLOGYFOCUSREPORT: BUSINESS GROWTH

To grow business, credit unions must first widen their opportunities for new business. In this Focus Report, some of the largest credit unions share the details of their field of membership expansion strategies. Y6

Chavez

Schenck

Retention Attention

Create a loyal member base. Y14

Commercial

Lending Growth

Enlist your peers’ help to succeed. Y10

ince Hurricane Maria ravaged Puerto Rico in

2017, the island has returned to normalcy, especially in the cities of San Juan, Ponce and Hatillo, where one can feel the bustling energy building momentum.

The $24 billion Pentagon Fed-
eral Credit Union, headquartered
in McLean, Va., is doing its part to
keep that momen-
tum going. In Janu-
ary, PenFed Presi-
dent/CEO James
Schenck traveled to
Puerto Rico to of-
ficially open a new
$4 million branch
that created 30 jobs.

“A lot of folks, tens of thou-
sands, have left for Orlando and
New York City, so what Puerto
Rico needs is other businesses
like PenFed to continue to in-
vest in Puerto Rico, because ev-
ery community needs jobs, and
when you create jobs you create
strong communities,” Schenck
said.
To attract new investments,
Puerto Rico is offering aggres-
sive tax incentives. Moreover, the
entire island was designated last
year as an Opportunity Zone un-
der the Tax Cuts & Jobs Act, which
will offer 10-year tax deferrals for
real estate firms that invest in de-
velopment projects.
PenFed Invests in Puerto Rico