IRA Periodic Statements; Shameless Plug

Posted by Anthony Demangone

Because it is Friday, and because I love all of you, I thought I would try to save you some money.  Here's a regulatory wrinkle that might save your credit union a few dollars.

IRA periodic statements.  If your credit union offers IRA accounts, you may be shocked to learn this little fact. You are under no legal obligation to deliver IRA periodic statements.  IRAs are exempt from Regulation E, as the regulation considers them to be "trusts." Trusts, are not subject to Regulation E, per the regulation's definition of "account."  In addition, Truth in Savings does not mandate that you send a periodic statement.  It only creates certain requirements if you do.  For the "Doubting Thomas" in you, here's the regulatory language from Regulation E.

(b)(1) Account means a demand deposit (checking), savings, or other consumer asset account (other than an occasional or incidental credit balance in a credit plan) held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes.

(2) The term includes a “payroll card account” which is an account that is directly or indirectly established through an employer and to which electronic fund transfers of the consumer's wages, salary, or other employee compensation (such as commissions), are made on a recurring basis, whether the account is operated or managed by the employer, a third-party payroll processor, a depository institution or any other person. For rules governing payroll card accounts, see §205.18.

(3) The term does not include an account held by a financial institution under a bona fide trust agreement.

And from the Staff Commentary of Regulation E:

Custodial agreements. An account held under a custodial agreement that qualifies as a trust under the Internal Revenue Code, such as an individual retirement account, is considered to be held under a trust agreement for purposes of Regulation E.

If you add the two together, you'll find that IRAs are not subject to Regulation E.  Therefore, they are not subject to Regulation E's periodic statement requirements. Even if the IRA gets an electronic deposit. Now, let's look at NCUA's Truth in Savings regulation. 

• The staff commentary to NCUA's Truth in Savings regulation point blank states that the regulation does not require that you send a periodic statement.  It simply states that if you do so, you must follow its requirements.
  
• Note that the definition of "periodic statement" also excludes "share certificates."  Therefore, even TIS's requirements do not apply to share certificates. So, if you have an IRA account that only holds a share certificate, you are completely off the radar. NCUA only requires if you voluntarily disclose information, that the information be accurate and not misleading. 

So, let's summarize.

•  IRAs (and HSAs for that matter) are not "accounts" for the purposes of Reg E.  For that reason, they are not subject to Reg E's periodic statement requirements - even if the member deposits funds electronically into the account on a regular basis.
• Truth in savings does not mandate that you send periodic statements. Its requirements only kick in if you decide to send one.  And its requirements do not apply to share certificate accounts.    

So, how can this save you money?  Let's see.

1. Technically, you could simply do away with periodic statements for IRAs.  You would still have to send the IRS-mandated disclosures, so members would still get some information.  This choice, however, may not be feasible from a "member expectation" point of view. 
2. If you are going to send periodic statements, there's certainly no regulatory need to send them on a monthly basis.  Quarterly certainly is OK.  And I don't see a regulatory hurdle to an annual periodic statement.  You just have to meet NCUA's Truth in Savings requirements if the IRA account holds a  non share-certificate, account. 

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Shameless plug. Next Wednesday, I'll take part in a 2-hour long webcast that will cover the August 22 Reg Z changes and the changes found within the 2010 BSA/AML Examination Manual.  I've reviewed the slides so far, I'm convinced that the content will be worth your time.  I'll take roughly 20 slides and 30-40 minutes to hit the BSA portion, and then Steve and Sarah will address the remainder.  We've allotted an extra 30 minutes to answer any extra questions and answers, as we'll hit on so many topics. And yes, I do note the irony.  I tried to save you money above.  And now I'm asking for it.  Such is life.

Have a great weekend, everyone!