CUNA Regulatory Comment Call
December 17, 2001
NCUAS PROPOSAL ON RETIREMENT BENEFITS FOR EMPLOYEES OF FEDERAL CREDIT UNIONS
The NCUA Board unanimously approved the issuance of a proposal amending its rule that permits a federal credit union (FCU) to provide reasonable retirement benefits to its employees and officers. In the proposed rule, NCUA clarifies that the scope of the rule is not limited only to retirement benefits but is more broadly applicable to other employee benefit plans. The intent of the proposed rule is to provide FCUs with flexibility to use safe, reasonable and efficient methods to fund their employee benefit obligations.
The following are the main provisions of the proposal:
- Under the proposal, the rule would be renamed Benefits for Employees of Federal Credit Unions to reflect current employee benefits terminology.
- Where a FCU is the benefit plan trustee or custodian, the plan must be authorized and maintained in accordance with Part 724 (Trustees and Custodians of Pension Plans) of NCUAs rules. Where the benefit plan trustee or custodian is a party other than a FCU, the benefit plan must be maintained in accordance with applicable laws governing employee benefit plans, including any applicable rules and regulations issued by the Secretary of Labor, the Secretary of the Treasury, or any other federal or state authority authorizing jurisdiction over the plan.
- The FCU must comply with safety and soundness standards by ensuring that the kind and value of employee benefits it offers are reasonable given its size and financial condition.
- An FCUs authority to offer and fund an employee benefit plan does not guarantee the permissibility of the plan under other laws, such as the Employee Retirement Income Security Act (ERISA) or the Internal Revenue Code.
- The proposal incorporates positions taken by NCUAs Office of General Counsel on FCU investments to fund employee benefit obligations. An FCU investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the FCUs obligation or potential obligation under the employee benefit plan and the FCU holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
- An FCU acting as a fiduciary of the plan must obtain appropriate liability insurance coverage according to ERISA. NCUA clarifies that Section 410(b) of ERISA describes certain kinds of insurance coverage but does not require any party to purchase insurance.
- NCUA reminds FCUs with assets over $10 million that they are required to account for their employee benefit plans in accordance with generally accepted accounting principles (GAAP). FCUs with assets under $10 million are not required to follow GAAP for their employee benefit plans but are encouraged to do so.
- Comments on this proposal are due to NCUA by February 19, 2002. Please feel free to fax your responses by February 8, 2002 to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at firstname.lastname@example.org or to Senior Regulatory Counsel Catherine Orr at email@example.com; or mail them to Mary or Catherine in c/o CUNAs Regulatory Advocacy Department, 601 Pennsylvania Avenue, N.W., South Building - Suite 600, Washington, DC 20004. You may also contact us if you would like a copy of the proposal.
QUESTIONS REGARDING THE PROPOSAL
- The proposal notes that as competition to attract and retain qualified employees has increased and the employee benefits marketplace has become more sophisticated, FCUs are increasingly providing more diverse and less traditional forms of employee benefits (such as deferred compensation plans and stock option plans). NCUA intends this proposal to provide needed flexibility to credit unions to fund their employee benefit obligations. Do you agree the proposal provides enough flexibility for your credit union to adequately fund employee benefit obligations given the competitive marketplace?
- Are there any other changes NCUA could adopt to make it easier for credit unions to manage their employee benefit plans?
Yes ______ No ______
If so, what are those changes?
- Are there any other things NCUA could do to assist credit unions in attracting and retaining highly qualified employees
- Other comments?
Yes ______ No ______
If not, what other modifications would you like to see incorporated into the rule to make it more flexible
Yes ______ No ______
If so, what are they?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Associate General Counsel (202) 508-6736 email@example.com
Jeffrey Bloch Assistant General Counsel (202) 508-6732 firstname.lastname@example.org
Catherine Orr Senior Regulatory Counsel (202) 508-6743 email@example.com