Questions Concerning The Application Of Section 701.19 For Eligible Credit Unions

THE CORNERSTONE GROUP provides creative solutions to the Management Process of Employer Sponsored Benefit Programs. We have helped employers successfully manage the cost of benefit programs through 25 years of experience focusing on plan design and the delivery system of benefit programs.

Through a more effective approach to the Management Process of Benefit Programs, we have customized plan designs to minimize the inflationary impact on health care cost while maintaining a comprehensive level of employee benefit coverage's. Our Management Process incorporates skillful applications of plan design, creative methods of premium funding, access to competitive market providers, proficiency with the compliance requirements of state and federal regulations and effective systems to communicate benefits to employees and claims issues to insurance providers.

Our systematic process can be summarized as follows:

PREFUNDING: A BETTER WAY TO MANAGE CREDIT UNION EMPLOYEE BENEFIT COST

The increasing cost of health insurance has required Credit Unions to make difficult decisions which in many situations results in cost shifting through higher deductibles, co-pays or co-insurance requirements on the part of employees. NCUA regulations have addressed this issue with rulings providing for pre- funding options with variable investment accounts.

Federal Credit Unions now have a unique opportunity to pre-fund the cost of Benefit Programs through equity in- vestments of general account assets. NCUA regulation under Section 701.19, provides for Federal Credit Un- ions to include equities as permissible investments of general account assets for the purpose of pre-funding the cost of benefit plan obligations. Pre-funding includes the cost of Health Insurance, Prescription Drugs, Dental and Vision insurance, Short Term and Long Term Disability Programs, Long Term Care Insurance, Directors Benefits, Executive Benefit Programs, Retiree Benefit Programs, and Employer Funded Retirement Plans.

Pre-funding Employee Benefit Obligations have been a common practice with Employer Benefit Programs to provide for future benefit obligations as in a Defined Benefit Pension Program. However, the distinction for Federal Credit Unions is that Section 701.19 provides for the pre-funding of the pre- sent cost of Benefit Obligations with Equity Investment which would normally be considered impermissible in- vestments for General Account Assets.

Refunding present benefit obligation is not necessary restricted to Federal Credit Unions. There is a pending petition before OFIR requesting a declaratory ruling to allow Michigan State Chartered Credit Unions parity with NCUA regulations. The Michigan Credit Union League has assisted with filings under the wild card exception, Section 208, of the Michigan Credit Union Act. Other state regulatory offices have provided similar rulings for the operations of their respective State Credit Unions.

For More info, please contact:
Jerry Ciaramitaro, Jason Ciaramitaro, or Ben Rush