Dependent Care and Board Member Expense Reimbursement

NATIONAL CREDIT UNION ADMINISTRATION <CFR>12 CFR Part 701</CFR> <RIN>RIN 3133-AF64</RIN> <SUBJECT>Dependent Care and Board Member Expense Reimbursement</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> National Credit Union Administration (NCUA). <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The NCUA Board proposes to amend its regulations concerning the reimbursement of reasonable expenses for federal credit union (FCU) officials. The proposed rule would enable FCU boards to establish policies that allow for the payment of reasonable dependent care costs incurred by volunteer officials while attending board meetings and performing their official duties. This proposed amendment would include dependent care costs as a reimbursable expense. The proposed changes aim to provide FCUs with greater flexibility to create family-friendly policies, thereby alleviating dependent care costs for volunteer officials, which may otherwise hinder their ability to volunteer. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received by on or before March 27, 2026. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit written comments by any of the following methods identified by RIN (Please send comments by one method only): • <E T="03">Federal eRulemaking Portal: https://www.regulations.gov.</E> Follow the instructions for submitting comments for Docket Number NCUA-2026-0067. • <E T="03">Mail:</E> Address to Melane Conyers-Ausbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. • <E T="03">Hand Delivery/Courier:</E> Same as mail address. Mailed and hand-delivered comments must be received by the close of the comment period. <E T="03">Public Inspection:</E> All public comments are available on the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> as submitted, except when impossible for technical reasons. Public comments will not be edited to remove any identifying or contact information. If you are unable to access public comments on the internet, you may contact the NCUA for alternative access by calling (703) 518-6540 or emailing <E T="03">OGCMail@ncua.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Keisha L. Brooks, Attorney-Advisor, Office of General Counsel at (703) 518-1156 or by mail at the address above. Office of Examination and Insurance (E&I): Lauren G. Kamin, Risk Officer, by telephone at (703) 664-3868 or by mail at the address above. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Introduction</HD> <HD SOURCE="HD2">A. Background</HD> Since 1934, the Federal Credit Union Act (the FCU Act) has restricted FCU board compensation. <SU>1</SU> <FTREF/> The FCU Act provides that only one FCU board member may be compensated as such. No other FCU official may receive compensation for serving as a board or committee member. In 1975, the NCUA added 12 CFR 701.33 (§ 701.33). This section clarified that compensation excludes payments for reasonable and proper costs incurred by FCU officials in carrying out their responsibilities. <SU>2</SU> <FTREF/> Section 520 of the Garn-St. Germain Depository Institutions Act of 1982 amended section 111 of the FCU Act (section 111) to codify that such expenses are not considered compensation. <SU>3</SU> <FTREF/> <FTNT> <SU>1</SU>  Federal Credit Union Act, 12 U.S.C. 1761(a), 1761(c), 1761a. </FTNT> <FTNT> <SU>2</SU>  40 FR 30261 (July 18, 1975) (adding 12 CFR 701.33). </FTNT> <FTNT> <SU>3</SU>  Garn-St. Germain Depository Institutions Act of 1982, Public Law 97-320, title V, sec. 520, 96 Stat. 1531 (1982) (adding 12 U.S.C. 1761(c)). </FTNT> Under the NCUA regulation, reasonable and proper costs incurred by an official in carrying out their responsibilities may be paid directly or reimbursed by an FCU. This is contingent on the payment being determined by the FCU board of directors to be necessary or appropriate to carry out official credit union business. And, the payment must be in accordance with written policies and procedures established by the board of directors. The NCUA Board considers the “necessary or appropriate” requirement to mean that the reimbursement is appropriate for the official to fulfill their responsibilities to the members in the effective management of the FCU. Such policies should also ensure that such payments are reasonable in amount in relation to the FCU's resources and financial condition. This means that the reimbursement should be limited to an amount that the FCU can afford while maintaining financial stability and capital adequacy. <SU>4</SU> <FTREF/> <FTNT> <SU>4</SU>  Proposed Rule, 57 FR 18837, 18838-39 (May 1, 1992). </FTNT> Although the NCUA is not bound by Internal Revenue Service (IRS) rulings in this area, the NCUA has previously followed IRS interpretations when construing the word “compensation” as used in section 111 and § 701.33. <SU>5</SU> <FTREF/> The NCUA has consistently viewed reimbursable payments, which do not count as compensation, as limited to out-of-pocket costs. However, indirect costs such as lost wages or paid leave used while attending credit union activities have been considered compensation under § 701.33. In 1988, the NCUA proposed eliminating this distinction for FCU officials' attendance at board and committee meetings. <SU>6</SU> <FTREF/> In the past, some credit unions expressed a need to reimburse their board members for lost wages or leave to attract and keep qualified volunteers. <SU>7</SU> <FTREF/> The NCUA suggested reimbursing lost wages for credit union board members to attract qualified volunteers. <SU>8</SU> <FTREF/> <FTNT> <SU>5</SU>  OGC Legal Op. 92-0626 (June 1992), <E T="03">https://ncua.gov/regulation-supervision/legal-opinions/1992/compensation-officials-0;</E> OGC Legal Op. 93-0233 (Mar. 12, 1993) (holiday gifts of nominal value given to volunteer board members are not considered compensation), <E T="03">https://ncua.gov/regulation-supervision/legal-opinions/1993/gifts-committee-members.</E> </FTNT> <FTNT> <SU>6</SU>  Proposed Rule, 53 FR 4992 (Feb. 19, 1988). </FTNT> <FTNT> <SU>7</SU>  OGC Legal Op. 95-1218 (Jan. 1996), <E T="03">https://ncua.gov/regulation-supervision/legal-opinions/1996/reimbursement-expenses.</E> </FTNT> <FTNT> <SU>8</SU>  Proposed Rule, 53 FR 4992 (Feb. 19, 1988). </FTNT> The comments received on the 1988 proposal, however, signaled that the vast majority of FCUs felt such reimbursement was unnecessary and may be harmful to the credit union volunteer spirit. Noted concerns included that voluntarism distinguishes credit unions from other financial institutions and that easing the reimbursement restrictions could endanger the tax-exempt status of credit unions. Many credit unions opposed the proposal, citing concerns about harming the volunteer spirit, potential tax issues, uneven reimbursements among board members, additional IRS reporting, and verification challenges. <SU>9</SU> <FTREF/> Given the credit union community's overwhelming opposition to reimbursing volunteer officials for lost pay or leave, the NCUA Board decided not to go forward with the 1988 proposal. <SU>10</SU> <FTREF/> As discussed further in this preamble, other amendments to § 701.33 have provided FCUs with clarity as to what types of expenses the NCUA has found to be consistent with the law. <FTNT> <SU>9</SU>  Final Rule, 53 FR 29640 (Aug. 8, 1988). </FTNT> <FTNT> <SU>10</SU>  Final Rule, 53 FR 29640 (Aug. 8, 1988). </FTNT> <HD SOURCE="HD3">1. Reasonable and Proper Costs</HD> With certain exceptions discussed in this section of the preamble, the NCUA has generally granted each FCU's board flexibility in determining which costs are necessary or appropriate to carry out official credit union business, including official travel costs. This flexibility is consistent with the general powers granted to FCU boards under the FCU Act. Section 113 of the FCU Act provides that an FCU's board of directors shall have the general direction and control of the affairs of the FCU. <SU>11</SU> <FTREF/> The FCU board of directors must oversee the credit union's operations to ensure the credit union operates in a safe and sound manner. For example, the FCU board must be kept informed about the credit union's operating environment, as well as hire and keep competent management. FCU boards must also ensure that the credit union has a risk management structure and process suitable for the credit union's size and activities. The NCUA Board also clarified that this flexibility was based in part on public comments received in rulemaking. <SU>12</SU> <FTREF/> <FTNT> <SU>11</SU>  12 U.S.C. 1761b. </FTNT> <FTNT> <SU>12</SU>  Final Rule, 57 FR 54499, 54501-02 (Nov. 19, 1992). </FTNT> Specifically, in 1992, the NCUA Board solicited public comments on whether to include a reasonableness test or common business practice test in the regulation, or leave the determination to the FCU's management under NCUA oversight. <SU>13</SU> <FTREF/> Based on the comments, the NCUA Board left these matters to each FCU's board of directors, within the boundaries of reasonableness and safety and soundness. <SU>14</SU> <FTREF/> Further, the NCUA may take exception or object to policies and procedures that are unreasonable, unsafe and unsound, or present an undue risk to the National Credit Union Share Insurance Fund. NCUA staff interpretations help clarify ambiguities in § 701.33 when necessary. <SU>15</SU> <FTREF/> The NCUA Board believes this framework provides sufficient boundaries while keeping flexibility for FCUs. <FTNT> <SU>13</SU>  Proposed Rule, 57 FR 18837, 18838-39 (May 1, 1992). </FTNT> <FTN ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 65k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━