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FCUs Can Use Impermissible Investments To Fund Benefit Plans

NCUA recently said that federally-chartered credit unions are allowed to invest in impermissible investments to fund an actual or potential employee benefit plan obligation within limits.

By Staff Writer | Updated on January 23, 2007

ALEXANDRIA, Va. — NCUA recently said that federally-chartered credit unions are allowed to invest in impermissible investments to fund an actual or potential employee benefit plan obligation within limits.

In a Dec. 15, 2006 opinion letter, NCUA responded to a query on whether FCUs may use multiple investment vehicles to fund multiple, potential obligations where only one obligation, to the exclusion of the others, will result in a paid benefit. NCUA said “this investment strategy, where some investments are made but ultimately may not be needed to pay an employee benefit plan obligation, is permissible if an FCU can support the cost effectiveness of this strategy and manages the investments, including periodic divestiture to avoid over funding, so the investments are directly related to its obligations.”

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