Funding Nonqualified Benefit Plans with an EBFT: A Guide for Credit Unions

Credit unions often review different approaches when planning for long-term employee benefit obligations. Nonqualified benefit plans, deferred compensation programs, and other employee-related commitments can create responsibilities that extend well into the future.

An employee pre-benefit funding trust is a trust arrangement sometimes considered to hold assets designated for these obligations. A common structure for implementing this type of trust is the Employee Benefits Funding Trust (EBFT).

An EBFT provides a defined administrative framework through which assets intended for employee benefit programs, including nonqualified benefit plans, can be documented and maintained. Members Trust Company (MTC) offers trust services related to EBFT arrangements that credit unions may use when evaluating employee pre-benefit funding trust structures.

How EBFTs Support Funding Nonqualified Benefit Plans

Credit unions evaluating funding nonqualified benefit plans may consider how assets designated for these obligations are organized and administered. An EBFT provides a structured framework for holding those assets within a trust arrangement.

Within an EBFT structure:

• The credit union retains responsibility for its employee benefit programs and plan design.

• The trustee administers the trust according to the governing trust agreement.

• Assets designated for nonqualified benefit plans are held within the trust structure.

This framework establishes a formal administrative process for documenting and maintaining assets intended to support employee benefit obligations.

Key Considerations for EBFT Arrangements

When reviewing funding nonqualified benefit plans through an EBFT, credit unions may evaluate several structural and administrative elements:

• Defined trust framework
  Assets designated for employee benefit obligations are held within a trust governed by a formal trust agreement.

• Trustee administration
  The trustee performs administrative responsibilities according to the governing trust agreement.

• Institutional oversight
  The credit union maintains oversight of employee benefit programs and determines how the trust fits within broader benefit planning discussions.

• Documentation and reporting
  Trust administration may include record-keeping and reporting consistent with the trust agreement.

These elements provide a structured, transparent approach for organizing assets related to nonqualified benefit plans while helping maintain regulatory and fiduciary alignment.

The Role of Professional Firms

Firms like Members Trust Company provide trust services related to EBFT arrangements that may be used by credit unions when considering funding nonqualified benefit plans.

In this role, MTC administers the trust according to the governing trust agreement and performs administrative responsibilities associated with the EBFT structure. The trustee maintains documentation, reporting, and oversight for the assets held in trust.

Credit unions determine whether an EBFT aligns with their employee benefit planning considerations. When implemented, the trust framework allows the credit union to maintain oversight while relying on a trust company to manage administrative responsibilities.

Compliance and Regulatory Considerations

Employee Benefits Funding Trusts operate under applicable federal and state regulatory frameworks, including rules related to trust administration and employee benefit arrangements.

Credit unions typically review governing trust documentation, administrative processes, and plan design to help support alignment with regulatory requirements. Consultation with legal and financial professionals may help credit unions assess considerations when using an EBFT to support funding nonqualified benefit plans.

Conclusion

An employee pre-benefit funding trust, implemented through an Employee Benefits Funding Trust, represents one approach credit unions may evaluate when funding nonqualified benefit plans and other long-term employee benefit obligations.

Members Trust Company provides trust services that may be used in connection with EBFT arrangements. By working with a trust company, credit unions can establish a structured administrative framework for assets designated for employee benefit obligations while maintaining oversight of their employee benefit programs.

Understanding employee pre-benefit funding trusts and EBFT arrangements can help credit unions review structured approaches for documenting and administering assets designated for nonqualified benefit plans, while maintaining regulatory and administrative clarity.

This material is provided for informational purposes only and does not constitute legal, tax, or investment advice. The services described are subject to applicable laws, regulations, and governing agreements. Institutions and individuals should consult their legal, tax, and financial advisors before implementing any structure or strategy.

Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.