Compliance Blog

Apr 25, 2016
Categories: Board and Governance

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


Training Reimbursement to Credit Union Officials

Permissibility of reimbursing "appropriate" training and related travel expenses


Volunteer Service Award Policy

Nominal monetary awards permitted to recognize multiple years of service


Compensation under 701.33 of NCUA's Regulations

Section 701.33 definition of compensation versus IRS 1099 definition


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(discussion regarding nonvoting directors later rescinded for those directors serving beyond mere "honorary" capacity by 11-0152 included above)


FCU Officials'™ Use of Business Equipment

Use of office equipment like computers and cell phones to perform official duties permitted


Hiring of FCU Director as Part Time Employee

Permissibility of paid employees serving on the board where paid responsibilities are distinct from board duties


Impermissibility of Free Safe Deposit Boxes for Board and Committee Members

Free safe deposit box is impermissible compensation


Health Insurance for Board and Committee Members

Providing health insurance either directly or by reimbursing costs


Reimbursement to Credit Union Volunteers for Child Care

Reimbursement of child care is impermissible

(same conclusion reached in letter 92-0507)


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


Reimbursement of Expenses

Reimbursement of lost wages is impermissible (but board meetings can be attended by phone)


Gifts to Committee Members

Gifts of nominal value are permissible (notes that IRS interpretation of "compensation" used to some extent on this issue)


Reimbursement of Lost Wages

Reimbursement for lost wages impermissible


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


Preparing for an NCUA Cybersecurity Exam

Thursday, April 28 | 2:00 p.m. - 3:30 p.m. EST

Part of the Data Security Webcast Series

Your best approach for successfully completing an NCUA cybersecurity exam: preparation. The ever-changing cybersecurity environment requires regular upkeep, and this webcast will help you stay ahead of the game. Learn how to assess your credit union through the FFIEC self-assessment tool, and discover how risk management and cybersecurity affect each other. You'™ll walk away with ideas on how to conduct proper testing, how to identify and evaluate threats and even more vital cybersecurity issues.