Compliance Blog

Posted by Anthony Demangone

Recently, NCUA issued Legal Opinion Letter 10-0913 (October 29, 2010) that touches upon whether federal credit unions can offer long-term care insurance to officials without limiting coverage to situations or areas of risk that involve the official's duties with the credit union.  

NCUA responds in the affirmative.  

In 1982, we indicated that, from a practical point of view, it “would likely be impossible” to limit health insurance (e.g., limit the cause of illness, etc.) only to credit union activity. See attached Letter from E.F. Callahan, NCUA Chairman to James C. Barr, Executive Vice President and Director, Credit Union National Association, Inc. (July 29, 1982). Similarly, it would be difficult, from a practical standpoint, to provide long-term care insurance to FCU officials, but to limit coverage only to the risks associated with an official’s credit union activities. Accordingly, the mere fact that long-term care insurance would provide protection for other areas of risk to which an official is exposed outside his or her credit union activities does not prohibit an FCU from providing such insurance to its officials.

There are two other things I want to highlight from the legal opinion letter.

• Even if a federal credit union were to offer the insurance, coverage would have to end immediately once an official is no longer capable of serving as an official or otherwise leaves office.  In addition, there could be no residual benefits, except for any claims pending.
• Non-voting volunteer committees established by the FCU’s board of directors, such as emeritus or associate directors, are not eligible to receive long-term care benefits from the credit union.  NCUA indicates that members of regular, voting volunteer committees (e.g., supervisory, credit, investment committees) are entitled to insurance benefits, while members of non-voting, advisory committees are not.