The NCUA’s role is to ensure that all federally insured credit unions, including federally insured, state-chartered credit unions, provide employee benefits and manage any related investments in a safe and sound manner. In addition, the NCUA ensures that FCUs provide employee benefits and manage any related investments in compliance with applicable regulations.
Reviewing employee benefits and any investments used to fund them is a multi-step process that examiners should incorporate into the risk-focused exam process as needed. The Examiner's Guide provides the general framework for reviewing a federally insured credit union’s employee benefit program(s) and any related investments. If a credit union does not offer any employee benefits not required by federal or state law and does not fund employee benefits using investments, no additional review is necessary.1
A credit union that holds investment products to fund employee benefit plans in a manner inconsistent with safe and sound practices (or, in the case of a FCU, in violation of § 701.19, Benefits for employees of Federal credit unions) is subject to supervisory action. When exam staff identify ineffective controls, safety and soundness concerns, or regulatory violations, examiners should document this in the appropriate CAMELS and/or risk ratings, and take appropriate corrective action. Before requiring a credit union to divest of or cease employee benefit or investment purchases, exam staff should consult with their supervisor.
Examination procedures for employee benefits and investments for employee benefits fall into two categories:
When a FISCU or FCU's exposure to otherwise-impermissible investments exceeds 25 percent of its net worth and the risk is not borne by one or more beneficiaries, exam staff must expand the scope of review to include the following expanded examination scope review procedures.2 In that case, please review the Expanded Examination Scope procedures.
Last updated September 25, 2017
