This step only applies to FCUs.
A FCU should estimate and document the amount of the obligation and ensure that the corresponding amount of investments is not excessive in relation to the projected cost and associated product risks. When using investment strategies to recover employee benefit costs, the projected future returns from investments should not exceed the estimated benefit costs. In situations where a credit union purchases insurance on a group of eligible employees, it may aggregate its estimates for the amount of obligations or the risk of loss for an entire group and compare that to the aggregate amount of insurance to be purchased. In such cases, these estimates should be based on reasonable and supportable financial and actuarial assumptions.
In determining and documenting if an investment is directly related to an actual or projected employee benefit, a FCU must reasonably quantify that the return on the investment is predictable over the time horizon associated with the benefit to offset the benefit obligation costs. Using historical returns on an asset class (such as equities) is not sufficient.
Last updated September 25, 2017
