Are You Providing Health Insurance To Board Members The Right Way?

November 6, 2018 at 9:18 am 3 comments

Image result for doctor12 USC 1761 (c) seems simple enough. It gives federal credit unions the authority to provide board and committee members “reasonable health, accident,{or} similar insurance protection” notwithstanding the general rule against compensating all but one board member at a federal credit union.

But while the concept is simple, it is a deceptively poorly drafted statute which has necessitated about as much guidance from the NCUA’s counsel’s office over the years as any provision of the Federal Credit Union Act. The issue is all the more relevant today because in early October, New York State’s Department of Financial Services used its wildcard powers to authorize state charters to provide board member health insurance. But what exactly does NCUA permit credit unions to do anyway? Here is a look at that question with some of the pertinent legal opinions NCUA has issued over the years.

Most importantly, NCUA has consistently explained that credit unions can provide board members   health insurance so long as  that “health insurance must be reasonable in coverage amount and terminate immediately upon the individuals leaving office excluding any pending clams.”

Can a credit union simply reimburse a board member? NCUA’s legal eagles have further explained that, “An FCU may provide reasonable health insurance to its officials by either directly purchasing insurance coverage or by reimbursing officials for their actual costs in obtaining coverage facts.” This seems clear enough but you have to make sure that you are only providing health insurance reimbursement to board members who are actually going to use it. In other words, this can’t be a windfall for a board member who already has insurance. This is one of the main reasons why you have to have policies in place explaining your approach to board member health insurance.

The authority to provide health insurance generally    does not extend to the family of board members but in this opinion letter, NCUA opined that this general prohibition does not extend to certain employee assistance programs such as those offering a variety of counseling sessions targeting mental or emotional health issues. Read this opinion letter closely though. There are several caveats including the fact that each participant, whether an employee, volunteer or immediate family member paid a ten-dollar fee for each counseling session. Remember also that even with this program, family members are not allowed to participate in the larger health insurance program.

Here’s one to put my compliance brethren at ease. Read 701.33. It limits its coverage as follows; “insurance protection must exclude life insurance; must be limited to areas of risk, including accidental death and dismemberment, to which the official is exposed by reason of carrying out the duties or responsibilities of the official’s credit union position.” Say what? What exactly are the risks entailed in being a volunteer board member beyond the aggravation and potential lawsuit? Would a credit union have to show, for example, that it does an offsite team building exercise in which its board members must climb one of New York’s high peaks together?

NCUA has basically thrown up its hands when it comes to explaining what exactly this language means. It has explained that it would “likely be impossible to limit health insurance only to credit union activity.”

There’s so much more I could say but I’m running out of space and time for today’s blog. One more important point to keep in mind is that all these letter are predicated on the assumption that your credit union has laid out in policy what exactly its health insurance practices are when it comes to board members.

On that note, don’t forget to vote. I’ll talk politics tomorrow and try not to get too fired up.

Entry filed under: Compliance, HR. Tags: .

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3 Comments Add your own

  • 1. Thom Powers  |  November 6, 2018 at 9:37 am

    The opinion letter NCUA sent to me in 1994 while I was a CEO in Florida…gave our Board members the ability to get the same health insurance we provided to employees. For all the self employed Board members it was a nice little perk besides the $20,000 a year they got in travel with their spousal equivalent. And yes many equivalent folks got to travel.

    Reply
  • 2. Henry Meier  |  November 6, 2018 at 11:31 am

    That was one I had to leave on the cutting room floor. Here it is:

    https://www.ncua.gov/Legal/OpinionLetters/OL1994-0902.pdf

    By

    Reply
  • […] a power that federally chartered institutions have, but that state chartered credit unions do not. In recent years, the Department of Financial Services has utilized its authority to help both banks and credit […]

    Reply

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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