Compilation of Legal Opinion Letters on Board Compensation

Written by Brandy Bruyere, Director of Regulatory Compliance

At NAFCU, we’re often asked about where the line is between reasonable reimbursements for a federal credit union’s board of directors and impermissible compensation that is prohibited by section 701.33 of NCUA’s regulations.  As it turns out, there are many legal opinion letters from NCUA on this subject. This chart provides the letter number, title with hyperlink to the letter, and a very short description of the letter. Because legal opinion letters can be rather nuanced, this is not a substitute for giving these a detailed review when answering a question about what kinds of costs are permitted for reimbursement. But, it can help hone in initial research efforts and save some time digging around NCUA’s website.

Board Compensation
11-0152	Training Reimbursement to Credit Union Officials	Permissibility of reimbursing “appropriate” training and related travel expenses
11-0805	Volunteer Service Award Policy	Nominal monetary awards permitted to recognize multiple years of service
10-0919	Compensation under 701.33 of NCUA’s Regulations	Section 701.33 definition of compensation versus IRS 1099 definition
10-0913	Provision of Long-term Care Insurance to Credit Union Officials	Long term care insurance as permissible health care coverage for directors (discussion regarding nonvoting directors later rescinded for those directors serving beyond mere “honorary” capacity by 11-0152 included above)
03-1053	FCU Officials’ Use of Business Equipment	Use of office equipment like computers and cell phones to perform official duties permitted
03-1030	Hiring of FCU Director as Part Time Employee	Permissibility of paid employees serving on the board where paid responsibilities are distinct from board duties
00-0508	Impermissibility of Free Safe Deposit Boxes for Board and Committee Members	Free safe deposit box is impermissible compensation
99-0621	Health Insurance for Board and Committee Members	Providing health insurance either directly or by reimbursing costs
98-1215	Reimbursement to Credit Union Volunteers for Child Care	Reimbursement of child care is impermissible (same conclusion reached in letter 92-0507)
97-0305	Travel, Lodging, and Lost-time Pay for Board of Directors	Reimbursement of travel and lodging to attend board meetings is permissible, reimbursement for lost wages is impermissible
95-1218	Reimbursement of Expenses	Reimbursement of lost wages is impermissible (but board meetings can be attended by phone)
93-0233	Gifts to Committee Members	Gifts of nominal value are permissible (notes that IRS interpretation of “compensation” used to some extent on this issue)
93-0733	Reimbursement of Lost Wages	Reimbursement for lost wages impermissible
91-0215	Meal Reimbursement for Directors	Reasonable costs for meal reimbursements are permissible

The overall takeaway is that NCUA has historically taken a pretty narrow view of what expenses can be reimbursed for a FCU’s board of directors. Besides health care costs which are permitted by §111 of the FCU Act (12 U.SC. § 1761), expenses that can be covered are generally those that relate to the directors’ official duties. Examples include relevant training and related travel, lodging and meal reimbursement, use of office equipment. In some narrow cases, a nominal gift like a volunteer service award is permissible, but other expenses that may seem reasonable in a colloquial sense, such as child care costs or lost wage reimbursement, are not permitted.

A PDF version of this chart can be downloaded here: BOD Compensation Chart

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Comments

[Rose Ann Lambert]

Thank you. This is a great compilation for those who are confronted with this topic. I found that drawing a convincing distinction between what the NCUA views as 'compensation' vs that of the IRS to have been a serious challenge.