Compensating Directors: what is Fair and what is Foul?
Thu, Sep 24, 2015
As is well known, federal credit unions are not permitted to directly compensate members of their Boards of Directors. However, the National Credit Union Administration (NCUA) has approved a number of methods to assist directors financially through NCUA guidance issued in response to inquiries from many federal credit unions anxious to support the work of their Board members and to encourage volunteers. Some of the expenses NCUA’s guidance has found to be permissible are well known (such as reasonable travel reimbursement), while others less so. NCUA has typically found expenses directly incurred for the benefit of the federal credit union, or in connection with a director’s official business on behalf of the federal credit union, to be permissible. While the rule does have a gray area, the less direct the connection of the expense to the federal credit union or the official business, the less likely that expense is to be permitted by NCUA.
Below you will find a chart to help you navigate questions related to director compensation with the applicable NCUA document referenced. Federal credit unions can use this chart and the details provided by NCUA in the source letters to prepare or amend policies relating to director expenses. New guidance is issued periodically so, as always, if you have any questions related to director compensation please consult with NCUA or your attorney.
NCUA Source letter
NCUA Source letter
$ 250 gift card provided to officials as a 5th year service award
sets gift limit at $50/year
Reimbursement of baby-siting expenses while official is engaged in official activity
“small” gift made to official’s share account
no set value but must be nominal
Reimbursement for taking vacation time to conduct official activity
Long-term care insurance without coverage limited to associated activity
Long term care or cost reimbursements for non-voting officials (modified by 11-0152 which limited this opinion to honorary members)
Training cost and expense reimbursement for non-voting members that are not purely honorary
Free banking services
Reimbursement for use/ provision of electronic equipment/internet
Direct purchase of health insurance or reimbursement of premium
Reimbursement of medical expenses not covered by health insurance (i.e. co-payments and deductibles)
Meals- Case specific analysis Evaluation factors:
1. Was the meal cost incurred while on official business? 2. Was the meal reasonable and propriety according to the norms of the Board?
Preferential banking services/terms/conditions
Reimbursement for travel expenses to CU meeting of official and one (1) immediate family member
Reimbursement of cost of official's "friend" accompanying official to CU meeting
Reimbursement of travel expenses via per diem (must be reasonable/proper)
Reimbursement of health insurance costs that are not greater than 3rd party benefit received by the official
Reimbursement of cost for attending conference as CU official (includes the cost of one (1) additional family member)
Provision of Long Term care insurance as long as the official is capable and is actually serving as a CU official
Participate in self-funded health benefit plans (need to meet conditions set forth in letter)
Extension of health benefits to immediate family members of official if there is no additional cost to the FCU
1) Reimbursement of premiums for disease specific health insurance in accordance with written policy outlining reimbursement, documentation requirements, and monitoring
Plan must have reasonable coverage and amount,
Plan must be within bounds of safety and soundness
Coverage must stop with termination of board service
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Dustin H. DeVore is co-chair of Kaufman & Canoles’ nationally recognized Credit Union Team. He works closely with a number of credit unions on regulatory and lending issues.