Mergers can be defining moments for credit unions including opportunities to expand reach, improve efficiency, and strengthen member value. But while operational and financial considerations often dominate the conversation, one area that requires equal attention is Supplemental Executive Retirement Plans (SERPs).
These plans represent commitments made to key leaders who helped build and sustain the institution’s success. Failing to address them properly during a merger can lead to confusion, mistrust, and reputational risk. For boards and executives alike, understanding how to protect and harmonize existing SERPs is essential to maintaining stability and integrity through change.
Why SERPs Must Be Addressed Early in the Merger Process
Every SERP has its own governing plan document, which typically outlines how the plan should respond to a merger or acquisition under a “change of control” provision.
Some plan documents specify that a merger automatically triggers accelerated vesting or early payout for the executive. Others continue unchanged. Without reviewing these details upfront, boards risk unintended financial obligations or compliance issues after the merger is finalized.
Beyond contractual obligations, SERPs also play a key role in leadership retention. When executives hear “merger,” uncertainty naturally follows, particularly around who will retain their position in the combined organization. A well-structured SERP can provide reassurance and continuity, helping retain critical leadership during a time of transition.
The Board’s Fiduciary Responsibility
Boards have a fiduciary duty to ensure that all promises made to executives are honored according to the terms of the plan document. Since these plans are legal agreements signed by both the credit union and the executive, they represent binding obligations.
The board’s responsibility is twofold:
- Uphold the contractual commitments documented in existing SERPs.
- Ensure full understanding of those commitments before approving any merger terms.
This requires a detailed review of all plan documents to determine how each one responds to a change of control, what financial impacts may arise, and what actions—if any—must be taken to preserve compliance and fairness.
When SERP Structures Differ Across Merging Credit Unions
One of the most complex challenges arises when two merging credit unions have different SERP structures or benefit levels. For example, one organization may fund plans up to 50% of compensation, while the other funds to 60%.
In these cases, boards face decisions about how to harmonize the plans:
- Equalize benefits across executives to create parity in the new organization.
- Use enhancements selectively to retain key talent or fill leadership gaps.
- Phase in alignment over time to manage cost and balance sheet impact.
Comprehensive analysis of all existing SERPs including funding levels, vesting schedules, and performance triggers, provides the foundation for a fair and effective integration strategy.
Preserving Retention Value Through Harmonization
Merging organizations can consolidate or redesign SERPs without losing their retention power. The key is to maintain alignment between individual incentives and organizational goals.
This might mean supplementing underfunded plans, adding new benefits to critical leadership roles, or combining multiple plan types (such as 457(f) and split-dollar arrangements) to achieve balance. The goal is not just consistency, it’s continuity. By ensuring executives feel valued and secure, boards can maintain focus and productivity through the merger process.
The Importance of Transparent Communication
During a merger, uncertainty is inevitable. Clear, proactive communication is the best antidote. Boards should engage in open dialogue with executives about how their plans will be handled, even if every answer isn’t available yet.
Transparency builds trust and reduces speculation, helping executives stay engaged rather than anxious. A simple acknowledgment that the board understands the stakes and is working toward equitable solutions goes a long way in preserving morale and trust.
Legal and Reputational Risks of Mishandling SERPs
While major legal issues are rare, misunderstandings or misinterpretations of plan language can cause friction. Most discrepancies can be resolved through discussion and negotiation, but the greater risk is reputational.
If executives perceive that commitments were overlooked or mishandled, the organization may lose valuable leaders and damage its credibility within the credit union community. Conversely, honoring commitments—especially in difficult transitions—demonstrates integrity and strengthens the institution’s reputation as a fair and reliable employer.
What Successful SERP Transitions Look Like
In most well-managed mergers, existing SERPs transfer seamlessly to the new organization with minimal disruption. The plan continues as written unless the merger triggers a vesting or payout event specified in the document.
When differences in plan design exist, some credit unions opt for a “true-up” process, adjusting or supplementing certain plans to ensure the entire executive team is on a level playing field post-merger. These adjustments can create cohesion among leadership and reinforce a unified compensation philosophy for the future.
Partnering with Experienced Advisors
Because SERPs are both legally binding and financially significant, navigating them during a merger requires specialized expertise.
Independent advisors like Earnest Consulting Group help boards:
- Review and interpret existing plan documents for merger implications.
- Conduct comparative analyses to identify disparities in funding or design.
- Recommend harmonization strategies that preserve retention value and compliance.
- Facilitate transparent communication between leadership, boards, and regulators.
With the right guidance, boards can protect their commitments, retain their leadership, and move into merger integration with confidence and integrity.
Honor the Past. Protect the Future.
SERPs represent more than compensation, they’re promises of trust and loyalty between a credit union and its leaders. During a merger, those promises must be honored with care, transparency, and foresight.
Earnest Consulting Group helps credit unions safeguard these commitments, harmonize executive benefits, and maintain continuity through even the most complex transitions.
Contact us to learn more about how we help credit unions manage executive benefit programs during mergers.
Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. Earnest Consulting Group is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. Supervisory address: 280 Congress Street, Suite 1300 Boston, MA 02210 | Phone 617.439.4389
CRN202811-9918905
