Compliance Blog

This week, NCUA issued NCUA Legal Opinion 08-0218 (April 4, 2008), which addresses whether a credit union may provide HR benefits for CUSO employees, or in the alternative, manage the benefits if the CUSO pays the costs.  NCUA indicated the following:

You have asked if a federal credit union (FCU) may provide employee benefits to the employees of a CUSO that is wholly-owned or majority-owned by the FCU. You specify that by “provide,” you mean obtain, administer and pay for the benefits. No, that is not permissible. You also have asked, in the alternative, if the FCU may obtain and administer benefits for the CUSO employees if the CUSO pays for them. Yes, this is permissible subject to the conditions discussed below.

An FCU is authorized to provide employee benefits, including retirement benefits, to its employees and officers. 12 C.F.R. §701.19(a). The kind and amount of these benefits must be reasonable given the FCU’s size, financial condition, and the duties of the employees. Id. This authority is expressly limited to the FCU’s employees. It does not extend to the employees of a CUSO, which is a legal entity separate and distinct from the FCU, even if wholly-owned or majority-owned by the FCU. Also, an FCU may provide employee benefits to an FCU employee, who also performs some duties for a CUSO, but only for the duties that employee performs for the FCU.

We believe, as you suggest, that an FCU may obtain and administer employee benefits for CUSO employees, as part of a program for its own employees, if the FCUA does not pay for the benefits for CUSO employees and subject to certain conditions. By “obtain and administer,” you mean the FCU will combine CUSO employees with FCU employees to form a larger employee group solely for administrative convenience and as a cost savings measure to obtain better rates as a result of having a larger group of beneficiaries.

NCUA went on to clarify that if the credit union obtains and administers employee benefits for CUSO employees as noted above, the credit union must take steps to ensure the practice does not alter the legal separateness of the credit union and the CUSO.

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This weekend, the Compliance Guy is off to Pittsburgh for his bachelor party.  The plan is to watch as much baseball as possible (the Pirates take on the Phillies), eat poorly (Fatheads and Churchbrew), and try not to end up in the Ohio, Allegheny or Monongahela Rivers.  I should easily accomplish two out of three goals.

Have a great weekend, everyone!