Pentegra :: A Message From the Pentegra President



June 28, 2010

You may have seen the news recently that the Federal Reserve will be more closely supervising the incentive compensation paid to executives following a recent rule change.

You probably also are aware that the financial regulatory reform legislation that is working its way through Congress requires greater regulatory oversight of compensation. It is clear that banking executives and directorates will be subject to much greater scrutiny of short-term incentive plans (ICP) to better ensure that plan designs do not threaten the soundness of financial institutions.

In my opinion, drawing upon considerable experience as a former bank regulatory official, this may impact you more than you anticipate. Bank examiners will be operating in a "gray area" and incentive compensation is not something in which they have much experience or expertise. From a competitive standpoint, it appears very likely that your ability to offer compensation based upon short-term incentives will suffer, at least in the near term. In addition, other tax-advantaged community based financial firms likely will not be subject to the reform legislation which could enable them to offer superior benefits and compensation packages and, in doing so, better compete for your top talent.

Attracting and retaining talented employees is one of the biggest challenges facing all organizations, including banks. In a highly competitive employment market, benefits and compensation are critical tools in attracting and recruiting financial professionals-and a key competitive resource for employee retention.

With these added competitive pressures, you may wish to consider benefit enhancements that can be designed to replace the short-term ICP type programs that will come under heavy scrutiny. We will help in any way we can. Pentegra offers a comprehensive array of Executive Benefit plans that can be designed with maximum flexibility in developing benefit and compensation strategies. Our Benefits Financing Advantage program can help you implement a more cost-effective strategy to offset some or all of the expenses related to your retirement plan and other employee benefit programs.

Benefit programs are a critical element in designing total compensation programs for banks today. After health insurance, the most important benefit program cited by employees is a retirement plan. Our Plan Consultants are happy to assist you in maximizing your benefit investment with a retirement program that meets your bank's business as well as benefit objectives. I encourage you to get ahead of the curve from a planning standpoint by contacting them to learn more about how we can help you (800-872-3473).

Robert C. Albanese