IAFF Financial Corporation
2018 marks the 100th anniversary of the IAFF and 2018 also marks the sixteenth year of operation for your IAFF Financial Corporation (IAFF-FC). Both milestones are significant and should be celebrated. It is always important to review where an organization started, where it currently stands and to articulate a way forward for growth.
In late 2001, an idea was born from the struggle to implement NFPA 1710 as a standard. There were a wide variety of opponents to the standard and one of those was the International City Managers Association (ICMA). It should be noted that the ICMA Retirement Corporation offers a deferred compensation (457) plan to municipal employers. In many places, it was the only option for tens of thousands of our members to invest their supplemental retirement assets. The idea to start a for-profit corporation owned by the members of the IAFF (IAFF-FC) to provide an investment option for our members was developed and implemented. It was believed that our IAFF-FC needed one of its own to help build a financial corporation for IAFF members.
In May of 2002, Billy Shields (then President of United Phoenix Fire Fighters Local 493) was appointed as Executive Director to stand up the IAFF-FC and build it with his knowledge and expertise of the IAFF, its members, and their financial service needs in mind. Executive Director Shields in turn hired Carrie Tucker, who had just completed her Master’s in Business Administration, to assist him with the development of the business model.
In early 2003, General President Schaitberger and Shields determined that the success of the IAFF-FC was dependent on building relationships with the best financial firms in the country. After much research and due diligence, they negotiated the first of several consecutive contracts with Nationwide Retirement Solutions to provide the best in education and service within the FrontLine 457 deferred compensation program.
Later that year, Executive Director Shields went back to run his local full time and to finish out his Presidential term of office over the next few years. Carrie Tucker was appointed to replace him as the ED of the IAFF-FC. In late 2004, Tucker was promoted to the Chief Operating Officer and a voting member of the Board of Directors of the corporation.
At that time the organization was running a full line of financial services and programs for IAFF members. From Deferred Compensation to Post Employment Health Plans, from a full line of personal insurance, auto and home insurance to home mortgage and refinance options.
In 2004, the FrontLine Deferred Compensation program was successful in winning its largest entity and one that has been the cornerstone of its success since the beginning when IAFF-FC/Nationwide was awarded the City of Phoenix 457 plan and the $520 million plan transferred over to the FrontLine Plan Program and our Financial Corporation was on the map. Over time, this one plan has reached over $1.6 billion in assets as of March 2016 and up until 2014 constituted 60-75percent of the total assets in the program at any one time.
The subsequent competitive bid wins to renew the Phoenix Plan in 2008 and 2014 has been a critical component of the overall success of the FC. From this cornerstone of success, the IAFF-FC and Nationwide have grown the program to a level of $8.1 billion as of March 2018.
The IAFF-FC was originally funded with a $1 million line of credit loan and a small ownership stake by the IAFF of $89,363. In the first year of operation, the line of credit loan balance was in excess of $800,000, in the second year of operation; the IAFF-FC joined forces with Nationwide Retirement Solutions and turned its first small profit.
From the time the organization turned a profit, the main focus of its management was to pay down the line of credit loan, grow a prudent level of reserves and start returning revenue back to the IAFF. The line of credit debt was paid off in September 2007. Profits in 2008 were used to start the reserve fund, and in 2009 and every year thereafter the IAFF-FC started returning revenue back to the IAFF through contracted services and sponsorships of IAFF events.
The chart above shows the relationship of paying down the line of credit debt and the positive growth of owners’ equity over the life of the IAFF-FC.
Since the IAFF-FC owns and operates E-18 Media, LLC (commenced operations in October 2013); the financial figures noted throughout this report will be the consolidated figures of the financial performance of both organizations.
The chart below shows total return in red for each year from the first year of operations. This value shows the net income or loss each year plus any revenue returned to the IAFF in each year. The annual revenue to the IAFF each year is shown in blue. The difference between the two is used for increasing reserves and financing any additional business opportunities like E-18 Media.
As of 2017, the IAFF-FC also started underwriting all the Member Media productions of E-18 Media which means that all the costs of those services that used to come from the IAFF budget including the costs for IAFF events and convention are now covered by the IAFF-FC and included in the annual revenue number shown in the chart above.
What does this financial success mean to the IAFF? In FY2017 and in FY2018, the IAFF-FC has and will generate revenue to the IAFF in the amount of $2.3 million in each of those years.
IAFF members should know that both IAFF-FC and E-18 Media are run on a very streamlined basis which is designed to produce a cost-efficient operation and maximize the return back to the IAFF. The largest expense of the operations are salaries and benefits sufficient to attract and retain the talent necessary to provide two well run and professional organizations.
An important measurement of efficiency is the Return on Equity (ROE) calculation. As noted before, the IAFF-FC was started on a line of credit and once that debt was retired, the IAFF-FC had a positive owner’s equity. The chart below illustrates the ROE which is total return divided by owners’ equity and measures how much return is generated for each $1 owned by the IAFF of the overall corporation. For instance, in 2017, the IAFF-FC generated a return to the IAFF of 120 percent. Since 2006, the IAFF-FC has consistently generated returns in excess of 60 percent or more in all but one year.
The IAFF-FC’s Board of Directors is made up of IAFF District Vice Presidents and others, none of whom receives any compensation for their service as directors and who provide the guidance and oversight of the corporation’s goals, products and activities.
E-18 Media, LLC will provide a separate report to the Convention delegates with respect to its operations and achievements over the past two years.
The following programs are available to IAFF members through the IAFF-FC:
FrontLine Deferred Compensation Program
Truly the premiere program in the IAFF-FC line up. The past two years have seen spectacular growth in the FrontLine Deferred Compensation Program with over $8 billion in total assets. With the successful wins in the Cities of Seattle, Philadelphia and Baltimore and with strong equity markets through early 2018, the program totals exceed the $8 billion mark. Nationwide Retirement Solutions administers the program and pays the IAFF-FC a flat royalty payment for the use of the FC logo and its trademarks.
In early 2017, the IAFF-FC and Nationwide entered into a new seven-year contract that enables the IAFF-FC to continue to increase its return to the IAFF year over year in a substantial way.
In addition to its commitment to the program we have spent fifteen years building, Nationwide continues to support the IAFF Foundation in the amount of $100,000 each year and has done so for the past seven years.
IAFF members in Canada have had access to a Group Rate Home and Auto Insurance plan through TD Insurance for the last fourteen years. There are now over 8,588 policies in place for Canadian IAFF members and the client retention rates remain strong at around 94 percent.
In the past two years, we have designed and implemented a group priced Union Liability program to be offered to affiliates in Canada as well as in the USA. The master 12-page application was done by the IAFF and this allows affiliates in Canada to access group pricing on a typically expensive coverage when underwritten individually.
In addition, the IAFF-FC Insurance Division offers the Pension Protection and Workplace Assault Protection insurance programs in Canada as well as in the USA.
Auto and Home Insurance
2018 marks the fourteenth anniversary of the FC working with Liberty Mutual to provide quality home and auto insurance to IAFF members in the United States. This is another story of a steady growth program in which approximately 80 percent of our members find they can save money on their home and auto insurance.
While the program continues to grow and add several thousand new policies a year, the rate of growth has been slowing over the past several years. A couple of challenges have been identified that have contributed to the slower growth; competitive pricing in some areas of the country and the overall challenges inherent in the auto industry itself. Autos are now even more costly to repair due to the increased technology in almost every part and more frequent collisions due to distracted driving.
Over the two years, our program grew 0.79 percent compared to Liberty’s standard affinity program goal of 0.40 percent growth.
Local Liberty Mutual agents across the country remain committed to building relationships with affiliates to assist with their community fire safety education programs and with their fundraising events. Liberty Mutual has a wide variety of fire safety education pieces that are available to IAFF affiliates and many have taken advantage of this opportunity to increase community awareness in conjunction with one of the best insurance companies in the United States.
Responders First-Supplemental Lifetime Income Program
Two years since deciding to implement a Supplemental Lifetime Income program, all the pieces are now in place. The IAFF-FC and Security Benefit have carefully crafted this program to help educate and inform our members who are considering purchasing a lifetime income stream product.
This program is designed to offer IAFF members and their spouses an investment that will eliminate market volatility for those assets that members would like to count on for their future. This is an annuity product that is designed to be transparent and flexible and to create lifetime income. Only qualified and vetted advisors are allowed to offer this product to IAFF members. They must evaluate and ensure the product is suitable to the member’s circumstances.
Insurance Division Programs
Our insurance division is an ever-evolving area where we listen to what IAFF members and their families need and make suitable products available. Most members have or know someone locally who can sell them term life, whole life or disability insurance. We have found over time, that, by providing low cost group term life insurance, group dental and vision plans where needed, and retiree health insurance; we have served a small group of IAFF affiliates and members who need access to these products.
Union Liability and Commercial Insurance Programs
One of our most dynamic and growing programs is the Union Liability offering. Available in both countries, this coverage is designed to protect the Local and its leaders as they go about their union business activities. This program is made price accessible to affiliates of all sizes by the group pricing structure and ease of application. The IAFF completed the 12-page application so that affiliates only have to complete a one-page application. As of March 2018, there are over 26 affiliates with bound coverage and over 19 affiliates in the process of binding coverage.
As requested by a large number of affiliates, the IAFF-FC developed a commercial insurance program to assist our affiliates with cost effective access to additional bonding coverage and all necessary insurance policies to keep our organizations safe and protected as they go about the business of working for our members. Examples of the types of coverage available include bonding, general liability, worker’s compensation, commercial auto, umbrella liability, and errors and omissions. This program continues to grow and even serves several members who have their own small business enterprises.
The IAFF-FC works with the largest majority owned union bank in the country to bring IAFF members and affiliates quality banking services that provide excellent rates and outstanding customer service. For those members who do not have access to a fire fighter credit union and who want to bank with an organization that understands union members and their family’s needs, this is the right bank to meet their needs. Affiliates that have utilized their cash management services have found it a safe, convenient option to earn a reasonable return while staying FDIC insured and is a prudent way to manage their members’ cash assets.
The current rate for personal savings account is 1.3 percent and is one of the highest in the country. As interest rates continue to rise, this rate will also rise.
Over the past 15 years the IAFF-FC has successfully worked with Nationwide Retirement Solutions to build an $8.1 billion deferred compensation program. With the efforts of the IAFF-FC Regional Reps, the IAFF-FC Task Force, and IAFF affiliate leaders, the assets in the program are expected to continue to grow at a strong pace.
Post 65 Medicare Plan Savings
The IAFF-FC Insurance Division has developed and started to market a Medicare supplement exchange. This is still a very new program that will take time to build as we identify groups in each state that we can build a program upon. The overall goal is to develop a state by state exchange to allow members and alumni an option to assist them in finding a very affordable Medicare supplemental plan along with excellent customer service and advice to ensure they find the right plan for their particular circumstance.
Once the post 65 platforms are built and successful, we hope to add additional value by offering a similar savings to our pre- 65 retirees with a full range of affordable options.
In late 2017, Nationwide Bank made a decision to discontinue its affinity mortgage business. Since that time, the IAFF-FC has been evaluating and researching a company to replace that service for our members. It will take some time to identify another organization that values service, commitment to detail along with competitive rates and that can provide the program across the entire country.
In summary, the FC will continue to develop and build quality programs for IAFF members that are designed to either make them money or save them money. While at the same time providing additional revenue streams back to the IAFF to support critical services and programs for all.