NCUA regulations give FCUs the general authority to provide employees and officers with benefits, including retirement benefits that are “reasonable given the FCU's size, financial condition, and the duties of the employees.” For more information, see § 701.19(a).
One way to assess reasonableness is to compare recent salary and compensation surveys for similar positions in peer institutions. In areas with a higher cost of living, compensation surveys based on a credit union’s geographic location may be necessary. A FCU may work with a third-party vendor to help determine which benefits are reasonable for a credit union of its size.
NCUA regulations also allow FCUs to fund employee benefit plans using investments that would otherwise be impermissible. For example, a FCU may want to offer an equity investment option for its executive retirement plan.
NCUA regulation part 703, Investment and Deposit Activities, identifies investments that are permissible for FCUs. Part 704, Corporate Credit Unions, identifies investments that are permissible for corporate credit unions.
Such investments are permissible provided they fund a “defined benefit plan” or “employee benefit plan” and are directly related to the credit union’s obligation or potential obligation under the employee benefit plan.
NCUA regulation part 703, Investment and Deposit Activities, identifies investments and deposit activities permissible for FCUs under the FCU Act and prescribes certain requirements governing those investment and deposit activities. However, § 701.19(c) states, “A FCU investing to fund an employee benefit plan obligation is not subject to the investment limitations of the Act and part 703, Investment and Deposit Activities or, as applicable, part 704, Corporate Credit Unions, of this chapter and may purchase an investment that would otherwise be impermissible if the investment is directly related to the FCU’s obligation or potential obligation under the employee benefit plan...”
This section addresses the following topics:
Last updated September 25, 2017
