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This is not a new issue (see the references below to prior NCUA Letters). Honorary Titles are not a mechanism to avoid application of the limitations and rules on compensation. In 2003 NCUA addressed a request to give “director emeritus” status to certain persons. The NCUA response makes it clear that this is a purely honorary status (for persons to serve in a purely advisory capacity) and that there generally will not be expenses associated with such persons (such as for travel). Please read carefully what NCUA says (abridged) – and then read the Legal / Compliance Consultation Note at the end of this Section: You have asked this office to review and comment on proposed nonstandard bylaw amendments submitted for approval by [ ] Federal Credit Union to amend Article VI to add a director emeritus position. The credit union proposes to add three new sections to Article VI. The first two govern the appointment of a director emeritus. The third would permit a director emeritus to attend board meetings and to serve and vote on any committee. In previous legal opinions, this office determined that a board of directors may appoint an advisory committee under Section 113(13) of the FCU Act that consists of individuals given director emeritus status. See attached OGC 90- 0321, dated April 17, 1990; OGC 93-0527, dated June 29, 1993; OGC 95-0116, dated February 2, 1995. This office, therefore, has no legal objection to the FCU adopting a bylaw that provides for the appointment of director emeriti to function as an advisory committee. [Such persons] should not vote on proposals before the FCU’s committees. … [W]e believe these individuals can attend and provide advice at board meetings or committee meetings, it would be improper for these individuals to have voting authority. In their role as directors emeritus, these individuals are not given any responsibilities or standards for which they would be held accountable, other than attending a set number of board meetings. A director emeritus should not have a voice in a committee’s decision-making if they are not truly members of the committee. Voting authority should be limited to committee members that are seated in accordance with the bylaws and charged with the full responsibility of their position for the term appointed. Another reason for our objection to allowing a director emeritus to vote at committee meetings is that this person may improperly alter the makeup of other committees established under the FCU’s bylaws, causing technical violations of the FCU Bylaws. The FCU Bylaws require the FCU’s board to appoint between three and five members to the supervisory committee and to establish the number of members on an FCU’s credit committee, if it chooses to have one. FCU Bylaws, Articles IX, Sec. 1 and VIII, Option 1, Section 1 (Rev. Oct. 1999). If a director emeritus is allowed to vote on any committee matter, he or she effectively becomes a member of the committee and increases the number of members on the committee in a manner likely to violate the FCU’s bylaws. To avoid this problem and comply with the FCU Act, the FCU would have to submit corresponding bylaw amendments for review and approval. In addition, members of the supervisory and credit committees are seated with specified terms. By allowing a director emeritus to join any committee as a voting member, at any time, disrupts this process. We also note that, although the board of directors may appoint an advisory committee as discussed, we cannot foresee any need for the FCU to provide expense reimbursement or insurance benefits to these officials under Section 701.33. Our rule allows these limited benefits only as a result of an official carrying out the responsibilities of his or her credit union position. Given that the FCU grants this honorary title in recognition of past FCU service and that director emeriti simply provide experience-based advice, these people will not incur expenses such as those related to training or travel. Copyright©1994-2010 by Credit Union Resources & Educational Services, LLC. All rights reserved. Revised February 2010 20
Legal / Compliance Consultation Note: There may be circumstances where remuneration may be allowed, but the interpretation and assessment of the issue needs to be addressed with your legal/compliance advisor as there are many factual issues that may vary the interpretation of this NCUA “Opinion Letter” together with practical application issues that may cause you to risk assess the limited statement in a somewhat different light.” We acknowledge that many Credit Unions have extended certain such courtesies to former board members time out of mind; and that the matter – if not abusive – is low risk. Nonetheless, the Credit Union needs to consider the letter above; and insure it makes a fully informed decision with regard to any actions it may take that could be called into question pursuant to the Letter in question or otherwise. Question on Reimbursement of Expenses by Credit Union: Particular Question Omitted Per Rules of Prof. Responsibility. Response (Revised for general consideration): These are complicated issues; and complicated times (where such costs/expenses are more likely to face scrutiny. Thus, it is a good time to revisit this topic to insure your house is in order. It is difficult to assess without individual assessment of particular facts. Generally, such questions are determined via consideration of the following factors: 1. For Volunteers: (1) Is it permissible per the Credit Union’s written policy and is also a bona fide business related expense; and (2) Are expenses for an “immediate family member” permissible? 2. For Employees: (1) Is it permissible per the Credit Union’s written policy and is also a bona fide business related expense; and (2) Are expenses for an “immediate family member” taxable? In assessing this look to: 1. Our Sample Policy in CUPP IX / Section T / Item O – see particularly pages 5-9. (Updated 9/14/2009) 2. Consider the following chart and assessment of NCUA Letters on these issues of reimbursement of expenses. 3. Consider “common sense” issues – such as the “de minimis” rules associated with “less costly items such as meals per the IRS Publication 15-B (2009) which is discussed in the CUPP Item noted. In light of the many variables I provide no further response other than the general matters addressed herein; and in the sample policy noted above. If you have particular questions, please pose them to a qualified legal and/or tax adviser as applicable. TABLE – Are expenses of a Volunteer, Employee and/or their Immediate Family Members Reimbursable. Based on the following considerations – each (Volunteer vs. Employee) is a separate matter that has to be assessed independently: Copyright©1994-2010 by Credit Union Resources & Educational Services, LLC. All rights reserved. Revised February 2010 21
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Compliance Update - I REGULATORY AN
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Introductory Notes: Basic Obligatio
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What if an applicant “volunteers
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Page 85 and 86: 135-2009 Community Notice // OE/CE
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