A board-approved policy for employee benefit plan investment purchases should be in place before investments are made. A thorough pre-purchase analysis should be conducted, to help ensure that a credit union understands the risks, rewards, and unique characteristics of investments that fund employee benefits. The nature and extent of the pre-purchase analysis should be commensurate with the size and complexity of the investments under consideration to fund employee benefits purchases and should also take into account existing investments for employee benefits holdings. The credit union needs to maintain adequate records concerning its pre-purchase analyses, including documentation of the purpose and amount of investments needed.
As part of the due diligence process, credit unions should understand the accounting requirements for any investments acquired to fund the employee benefits. Refer to Accounting for more information about accounting for employee benefits and investments related to employee benefits.
A credit union can evaluate the risks and rewards of investments for employee benefits through a variety of activities. As an example, the ten steps described below offer an approach that can result in a more comprehensive and effective pre-purchase analysis. Each step is outlined in more detail within this section. Some steps only apply to FCUs, which must comply with ยง 701.19, Benefits for employees of Federal credit unions.
Last updated September 25, 2017
