Incentive Programs

Incentive programs encourage members to start or increase savings and develop healthy financial habits. The programs may offer benefits such as points and prizes, including PLS accounts.

PLS accounts are share accounts (in some cases, share certificates) that pay no (or close to no) dividends on the money held in the account. Instead of earning dividends, PLS accounts are entered into a no-lose lottery. The more money held in the account, the higher their chances of winning prizes, which are funded through the dividends accrued on the pool of PLS accounts.

Other programs may include, but are not limited to, incentives such as anniversary bonuses, rewards when account balances reach a certain threshold, or rewards when members use select credit union services. Credit unions may offer incentive programs to existing and prospective members.

Due Diligence

Due to the controversial nature of promotional raffles or sweepstakes to entice members to save, credit unions should document compliance with applicable state laws. The American Savings Promotion Act allows financial institutions to use savings promotion raffle products to encourage saving.

Incentive programs are typically promotional. Credit unions should treat the costs associated with incentive programs as promotional expenses under GAAP. Following ASC 450-20, Contingencies, the credit union should record an expense and a corresponding liability for each raffle as soon as the credit union’s obligation to pay each raffle prize is both probable and can be reasonably estimated. Therefore, the credit union should record an expense and a corresponding liability for each raffle at the time the first eligible deposit is made for that raffle.

Last updated on TBD