A credit union was seeking an investment option that could generate a competitive yield during flat and rising markets, and not negatively impact the balance sheet during declining markets, pursuant to the FASB ASU 2016-01 guidance.
The credit union’s accountant introduced the CFO to Grant, Hinkle & Jacobs where we showed her how the growth of the cash value component of Credit Union-Owned Life Insurance (CUOLI) can compete favorably with stock or bond mutual funds and ETFs, while protecting principal to guard against market downturns. The CUOLI also provides a death benefit to further improve yield. Not only did these characteristics make it ideal for FASB ASU 2016-01 compliance, but state credit union regulations allowed for up to 25% of a credit union’s member equity to be invested in CUOLI.
The CFO was relieved to know that a proven solution to ASU 2016-01 exists and that it has been codified in the regulations. She is in the process of gradually divesting the credit union’s $20 million of mutual funds and ETF holdings and re-investing the proceeds into CUOLI insuring the credit union’s key executives. She plans to be done with the transition in time for the December 2018 FASB deadline