NAFCU Compliance Blog

Stabilization Fund; BOA Updated

Representative Paul Kanjorski, a well-known champion of credit unions (and a fellow Keystone Stater, to boot!) has introduced legislation designed to help credit unions spread out payments to recapitalize the NCUSIF over a number of years.   The legislation does a number of other things as well.  I'd say this is a must read.  Access his press release here.  NAFCU Today has a good article on the development here.

Spreading out payments doesn't lessen the amount that a credit unions would ultimately pay.  But it would help credit unions that might facePCA problems due to a one-time "whopper" NCUSIF recapitalization payment. 

Yes.  I said Whopper. 

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Hey NAFCUers: We've updated our Book of Answers.  Download it here.

For you non-NAFCUers, here's a taste:

Question: We are redesigning our account application. We see some credit unions that require two signatures – one for the credit union application, and a separate signature for the substitute W-9. Other credit unions require one signature. Which is correct?

Answer: Either method is permissible. As you stated, the IRS allows credit unions to incorporate a substitute W-9 within their membership application. AW-9 is an IRS form used to request the taxpayer identification number of a U.S. person, including a resident alien. The form also asks for certain certifications and claims for exemptions. Credit unions that incorporate a substitute W-9 into their application must clearly state certain things. The IRS has indicated that substitute W-9s that require a separate signature line for the certifications satisfy the requirement that the required disclosures be “clearly stated.” If your credit union decides to use a single signature line for the required certifications and other provisions, “the certifications must be highlighted, boxed, printed in bold-face type, or presented in some other manner that causes the language to stand out from all other information contained on the substitute form.” In addition, the IRS requires the following statement to appear immediately above the single signature line: “The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.” See Instructions for the Request of Form W-9 (Rev. September 2007), available at www.irs.gov.
May 2009

IRA RMD Guidance; New Flood Form Unveiled

The IRS has released IRS Notice 2009-09 to help financial institutions report required minimum distributions (RMDs) for 2009.  As you may recall, President Bush recently signed the Worker, Retiree, and Employee Recovery Act of 2008, which waives RMDs for 2009.  The notice gives guidance on how to complete IRS Form 5498 and gives other tips.

Issuers of the 2008 Form 5498, IRA Contribution Information, should not put a check in Box 11. However, in recognition of the short amount of time to make programming changes, if a financial institution issues a 2008 Form 5498 with a check in Box 11, the IRS will not consider such form issued incorrectly solely because of the check in Box 11, provided the IRA owner is notified by the financial institution no later than March 31, 2009, that no RMD is required for 2009.

In addition, the RMD information required under Notice 2002-27, 2002-18 I.R.B. 814, need not be sent to IRA  owners for 2009. If a financial institution sends a separate RMD statement to an IRA owner, either initially or in response to the owner’s request for the financial institution to calculate the RMD for 2009, the financial institution must show the RMD for 2009 as zero (0). Alternatively, the financial institution may send the IRA owner a statement showing the RMD that would have been required but for the waiver of RMDs for 2009, along with an explanation of the waiver for 2009.

The IRS encourages all financial institutions to inform IRA owners who delayed taking their 2008 RMD until April 1, 2009, that they are still required to take that distribution.

Access Notice 2009-09 here.

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FEMA recently unveiled its new Standard Flood Hazard Determination Form.   (Unveil, perhaps is too strong a word.   This certainly isn't the new I-Phone.)  Access the FEMA press release here, which also contains a link to the new form.  To allow users of the Form time to update their systems to the new version, the effective date for mandatory use of the new Form will be June 16, 2009.

Frequently Asked Questions; delicious

Anthony has mentioned the value of Frequently-Asked-Questions documents in past blog postings here and here.  These documents can help compliance officers weave through convoluted regulations and find answers to common issues.  Here are a few that I've found useful in the past: 

Bank Secrecy Act

Anti-Money Laundering Compliance FAQs

FinCEN Answers to FAQs on BSA

FAQs on Final CIP Rule - February 2004

FAQs on Final CIP Rule - May 2005

FAQs Relating to BSA and Hurricane Katrina

OFAC

OFAC Q&As Prepared by Treasury

Privacy

FAQs on the Privacy Regulation

Share Insurance

FAQs from NCUA's October 7, 2008 Webinar on Share Insurance Changes

NCUA's FAQs on NCUSIF and Share Insurance

HMDA

FAQs on Regulation C (HMDA Reporting)

RESPA

FAQs on RESPA for Industry

Appraisals

FAQs on Appraisal Regulation and Interagency Statement*

*Note:  The Agencies recently announced a proposal to replace this interagency statement.

Third Party Due Diligence

FAQs from NCUA's January 29, 2008 Webinar on Third-Party Relationships

Flood Insurance

2008 Proposal on Interagency Q&As on Flood Insurance (would replace 1997 Q&As)

1997 Interagency Q&As on Flood Insurance

Servicemembers Civil Relief Act (SCRA)

HUD's Q&As for Lenders Regarding SCRA

Judge's Guide to SCRA - including Q&As

Health Savings Accounts

Q&As on Health Savings Accounts - IRS Notice 2004-50

Q&As on Health Savings Accounts - IRS Notice 2008-59

Check 21 Act

Consumers FAQs on Check 21

FAQs for Financial Institutions on Check 21

Check 21 FAQs on Financial Institutions Requirements - from ABA

Accounting for Loan and Lease Losses (ALLL)

Questions and Answers on Accounting for Loan and Lease Losses

Online Banking

FFIEC Guidance on Authentication in an Internet Banking Environment

Savings Bonds

FAQs on Savings Bonds

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You never know when these FAQ's will come in handy.  That is why I have mine bookmarked on my delicious page.

If you are wondering what delicious is, take a look at the user guide and slides I prepared for a talk on Organizing the Compliance Information Flow at NAFCU's 2008 Regulatory Seminar.

If you know of other valuable FAQ documents, please let us know by adding a comment to this post. 

HSA....Q and A!

You know how much I love "question and answer" guidance.  (Here's an earlier post that lists some of my favorite FAQ's.)  Yesterday, Treasury released this "question and answer" guidance document that addresses Health Savings Accounts.  Many of the issues addressed seem to be directed toward consumers that use HSAs, but a few touch upon credit union issues.  For example...

Q-28.May an HSA account beneficiary authorize someone else to withdraw
funds from his or her HSA?

A-28. Yes. Although an HSA is an individual account, an HSA account
beneficiary can designate other individuals to withdraw funds pursuant to the
procedures of the trustee or custodian of the HSA. Distributions are subject to tax if
they are not used to pay for qualified medical expenses for the HSA account
beneficiary, the account beneficiary’s spouse, or dependents.

FBI Warns of IRS Stimulus Scam

The FBI issued an e-scam alert (back in May - hopefully this isn't too late!) that warns of a scam involving IRS stimulus payments.  You can access the e-scam alert here.  Here is part of the alert:

The FBI warns consumers of recently reported spam e-mail purportedly from the Internal Revenue Service (IRS) which is actually an attempt to steal consumer information. The e-mail advises the recipient that direct deposit is the fastest and easiest way to receive their economic stimulus tax rebate. The message contains a hyperlink to a fraudulent form which requests the recipient's personally identifiable information, including bank account information. To convince consumers to reply, the e-mail warns that a failure to complete the form in a timely manner will delay the issuance of the rebate check.

Why should compliance officers care about this?  NCUA's security guidelines require credit unions to take appropriate steps to safeguard sensitive member information.  In recent guidance, NCUA suggests that education campaigns alerting members to phishing scams and other threats are a good idea.  Here's a timely threat to your members that you may want to incorporate into some sort of member education.  Or you should be aware of it, at the very least.

FinCEN has a New Look; You Win Some, You Lose Some; Where's My Check?

FinCEN has updated its web page.  I normally get queasy when agencies update their web pages, because I have to spend the next two weeks wandering around the "new and improved" website to find what I need.  But this change makes sense.  You can visit it here.  FinCEN now organizes information by industry.  Along the top, you'll see an icon for "financial institutions."  When you click on that, you'll go to an area that gathers all the information that pertains to us.  Nice.

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NAFCU (4-6) split another double-header.  Somehow, we have to win two in a row to get back to .500.  I'd like to say that we're a much better team than our record reflects.  But doesn't every team with a losing record say that?  That being said, we are a much better team than our record reflects.  Really.

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Here's a link to an old post that tells you when you can expect your IRS stimulus check. Or, as my friend Larry puts it, when he can expect to buy a big screen TV.  Based on the IRS schedule, many of the checks are about to delivered or are on their way very soon.  For credit unions, this could lead to increased deposits or loan payments. 

Can a Credit Union Borrow Money to Purchase Investments?; HSA Index Amounts

According to NCUA, the answer is yes, subject to the general rules and limits that apply to borrowing and investing.  Go here to read  NCUA Legal Opinion Letter 08-0139 (April 18, 2008) for all the details.

Under the FCU Act, FCUs have the express power to borrow from any source, limited to 50% of paid-in and unimpaired capital and surplus. 12 U.S.C. §1757(9). The National Credit Union Administration’s (NCUA’s) regulation on maximum borrowing authority implements this provision at 12 C.F.R. §741.2. The statute and the regulation do not restrict how an FCU can use borrowed funds.

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The IRS has issued new Health Savings Account index amounts for 2009.  Read all about it here.

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We have more entries for the flower garden flower contest.  Check out the photos here. (Don't forget to send in your entry!)

Have a great weekend, everyone!

IRS Economic Stimulus Payments

While this is not a classic compliance issue, I understand that people often task compliance officers with difficult queries.  In other words, if they don't know the answer, they ask you.

In that vein, here's some intel regarding IRS Economic Stimulus payments.  The IRS indicated that that it will deliver economic stimulus payments to taxpayers via direct deposit if the taxpayer selected direct deposit to receive their tax refund.  If the taxpayer received their tax refund via paper check, then they'll get the economic stimulus payment via check. 

The IRS also indicates when the deposits will hit accounts.  It states that:

Taxpayers who choose direct deposit on their federal income tax returns can expect to receive their economic stimulus payments between May 2 and May 16 provided their returns were received and processed by April 15, 2008. For taxpayers who did not choose direct deposit on their tax return but whose returns were processed by April 15, the paper checks will be in the mail starting May 16, with the initial mailings completed by around July 11.

I'd give your front-line staff a head's up.  I'm sure they'll get a bunch of questions that will come in two flavors.

Flavor 1.  Did my economic stimulus payment hit yet?
Flavor 2.  I see a $600 deposit in my savings account.  (Pause.)  Can I keep it?

Important thought: not everyone will get a stimulus package payment.  The IRS provides this calculator to taxpayers, which allows the taxpayer to see if they are getting one.   

You can access the IRS announcement regarding economic stimulus payments here.  It provides some good information - such as the exact date taxpayers can expect a payment (assuming they get one), based on the last two digits of their social security number.  I've cut and pasted the chart below.  (I cringe as I write this, because I really don't know how the chart will look when this post is "posted" to the blog.  There's a good chance that you'll see gobble-gook below.  If not, disregard this sentence of paranoia.) 

Stimulus Payment Schedule for Tax Returns
Received and Processed by April 15

Direct Deposit Payments
If the last two digits of your Social Security number are:	Your economic stimulus payment deposit should be sent to your bank account by:
00 – 20	May 2
21 – 75	May 9
76 – 99	May 16
Paper Check
If the last two digits of your Social Security number are:	Your check should be in the mail by:
00 – 09	May 16
10 – 18	May 23
19 – 25	May 30
26 – 38	June 6
39 – 51	June 13
52 – 63	June 20
64 – 75	June 27
76 – 87	July 4
88 – 99	July 11

Here's a thought: this might be good information to share with your members.  You could place it on your homebanking log-in page, or on your website.  It could cut down on some calls and emails.

Free HMDA Software Available; 1099-INT Thresholds

The FFIEC has announced the availability of free HMDA data entry software, which was created by the Federal Reserve.  You can access a press release about it here.  The software is to be used with 2008 HMDA data, which will be due March 1, 2009.

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We've had calls from a number of credit unions who appear to be working on 1099-INTs.  Here is some guidance for the following situation:

Last year, member A earned $6.78 in dividends and $11.58 in interest in U.S. Savings Bonds.  Clearly, you would need to report the $11.58 in box 3 on the 1099-INT.  But what about the $6.78 in dividends?  Do you report that in box 1, since you have to file a 1099-INT anyway?

Well, a dutiful compliance officer made a call to the IRS Martinsburg Computer Center.  (They are the IRS' resident expert on 1099s and W2s.)  They indicated that you are not required to report the $6.78 in box 1 in the hypothetical situation above.  (You may, however, at your discretion.)  According to the IRS, you must report amounts in boxes 1, 3 or 8 if the amount in question is $10 or greater.

Oh, I almost forgot.  The phone number for the IRS Martinsburg Computer Center is (866)455-7438.  They've been very helpful to me in the past.