Watch Your Charitable Contribution Grow

Watch Your Charitable Contribution Grow

The CDA – It’s Not Magic

Every year, credit unions miss out on contributing between $130 and $180 million to their communities and their favorite 501(c)3 charities.

John Moreno, Director of Newcleus Credit Union Advisors, said on The Insider Forum podcast, “If they were to use a Charitable Donation Account, credit unions could contribute that amount at virtually no cost to themselves.”

“That’s money sitting on the table,” said Insider Forum host Isaiah Moskowitz. Moreno spoke about CDAs, their structuring and distribution possibilities in a recent edition of the Cooperative Credit Union Association’s “The Insider Forum.”

In ten short minutes, Moreno explains how a CDA can be structured to cover the cost of giving and even expand the amount contributed while earning money on those funds set aside in the CDA.

“As part of their core values, every credit union that we’ve spoken to is doing great charitable work,” Moreno said, “whether it’s collecting donations for the Children’s Miracle Network or sponsoring the National Credit Union Foundation or any of those entities that serve their communities.”

Corporations can take a tax deduction for charitable donations, but credit unions, as income tax-exempt entities, cannot. A CDA, Moreno explained, gives credit unions an alternative investment vehicle. “They commit 51% of the earnings of that asset to an eligible 501(c)3 organization,” he said. The other 49% can be used to increase their charitable contributions, or the credit union can elect to use it to offset benefit costs.

Setting up the CDA, Moreno explained, is straightforward. The planning and fund distribution potential is what is important and enlightening. “At the end of the day you want to do the charitable thing. But if you can do that and enhance your presence in the community by helping solve a problem that’s core to the financial needs of your community, that overlaps with your mission as a credit union,” he said.  Then you’ve got a winning solution.

Moreno said he encourages credit unions to consider an “audacious charitable goal” like one Iowa credit union’s $500 million plan to eliminate the effect of redlining across the state.

What’s most important is to figure out what the community’s problems are and how to navigate them, making sure that the credit union is seen as helping the community on a small or grand scale.

Newcleus Credit Union Advisors helps credit unions optimize their charitable giving using tools such as the CDA. They also help credit unions develop leveraging strategies to increase employee engagement through charity. Finally, they help credit unions integrate the business case for charitable giving with the credit union’s core mission.

Newcleus also helps credit unions with setting and measuring compensation, structuring and implementing deferred compensation plans and using specialized investments to help offset general employee benefit costs.

Listen to the interview on The Insider Forum podcast and contact John Moreno with questions you might have about CDAs and how Newcleus Credit Union Advisors can help develop a program that funds your charitable efforts.