Podcast Available on Retirement Plans

ARLINGTON, Va. — NAFCU Services Corp. and its preferred partner for executive compensation and benefits, Burns-Fazzi, Brock, are offering a free podcast that discusses the legal and tax requirements that credit union executives must address to comply with new split-dollar plan requirements by the end of 2008.

Recently, the Financial Accounting Standards Board began requiring organizations to account for split-dollar plans where they had not before. The IRS and FASB created a new set of final regulations for split-dollar plans in 2003.

According to one of the podcast's experts, Larry Brody of Bryan Cave LLP, these changes have significant legal and tax implications for credit union executives. “The tax rules were never clear as to what happens to any cash left in split-dollar policies at the termination of the agreement (aka retirement),” said Brody. “The new set of final regulations in 2003 is very clear: this money is taxable. Many credit union executives with older plans are surprised to learn this.”

According to the 2008 NAFCU compensation and benefits survey, cosponsored by Burns-Fazzi, Brock, approximately 18% of credit unions have an executive with a split-dollar plan.

The 24-minute podcast, which is free for NAFCU members, may be accessed at www.nafcu.org/bfb or on the NAFCU services podcast site with show notes at http://nafcuservices.podbean.com.

Export-Import Banker Goes to TARP

WASHINGTON — Export-Import Bank Director James H. Lambright will be the interim chief investment officer of the Treasury Department's Troubled Asset Relief Program.

Lambright, who has been at the bank since 2001 and the director since 2005, manages a $60 billion credit portfolio with $100 billion in financing capacity. Before joining the public-sector, he was an investment banker with Credit Suisse First Boston.

Lambright will fill the position until a permanent replacement is named and confirmed by Congress.

TARP, which was created by Congress as part of the financial rescue package passed last month, will by assets from financial institutions to increase their liquidity and the government hopes make it more likely that they will increase their business and consumer lending.

NCUA Says FCUs Can Use Bank Units As Safekeepers for Investments

ALEXANDRIA, Va. — Federal credit unions are permitted to entrust their investments to companies that are subsidiaries of registered bank holding companies, according to a recent NCUA letter.

“NCUA's investment rule permits an FCU to have its investments and repurchase collateral held by a safekeeper that is regulated by the Securities and Exchange Commission, a federal or state depository institution regulator or a state trust company regulator. As you have noted, bank holding companies and their subsidiaries are subject to regulation and supervision by the Federal Reserve,” NCUA Associate General Counsel Sheila A. Albin wrote to Richard Pearlman, an attorney in Tallahassee, Fla.

Federal credit unions must get board approval for use of the safekeeper and a written agreement with the safekeeper. They must also obtain and reconcile a monthly statement from the safekeeper and appraise the safekeeper's performance annually.

Attorney-Client Privilege Clarified

ALEXANDRIA, Va. — Credit unions can no longer withhold privileged documents from the NCUA by asserting that producing them involves waiving attorney-client privilege, the NCUA ruled.

Recent changes to the Federal Credit Union Act still permit credit unions to invoke attorney-client privilege, but a court cannot interpret a credit union's release of a privileged document as evidence that the credit union waived its attorney-client privilege, NCUA General Counsel Robert Fenner wrote in a letter to CUNA Deputy General Counsel Mary Dunn.

She said in a statement that they plan to seek additional clarification from the agency because “unanswered questions remain” about the rights of credit unions in those cases.

NAFCU Praises Plan to Honor Companies With Literacy Plans

WASHINGTON — A government program to highlight the work of companies that provide financial literacy programs for their employees will encourage other firms to follow suit, NAFCU wrote the Treasury Department.

The department and the President's Advisory Council on Financial Literacy have proposed a workplace financial education honor roll program that would profile successful efforts in this area.

“We believe strongly that by highlighting exceptional employers that are providing noteworthy workplace education programs to their employees, others will be inspired to step up their efforts to improve the financial knowledge of our nation's workforce,” Dan Berger, senior vice president of government affairs wrote Dubis Correal, the director of the Treasury Department's Office of Financial Education.

“The credit union mission has always been to promote savings, and today credit unions are among the finest financial educators in the United States. Recognizing this, credit unions are making an extraordinary impact on financial literacy by providing their members with opportunities to learn sound skills to improve their financial health and well-being,” he added.

NCUA Clarifies Rules for Insurance on IOLTA Accounts

ALEXANDRIA, Va. — All client funds in Interest On Lawyer Trust Accounts are insured for clients who are members of the credit union or if the credit union is deemed low income, the NCUA ruled.

Additionally, the agency said all IOLTA funds in low-income credit unions, which can accept nonmember deposits, are insured regardless of the client's membership status.

“The interest earned from the money in the IOLTA accounts is aggregated and paid generally to another state agency or private nonprofit organization, such as a state bar association, to subsidize legal aid services or for other charitable purposes,” NCUA Associate General Counsel Sheila Albin wrote Mary Hoeft Smith, Wisconsin's trust account program administrator.

Albin pointed out that clients, not lawyers, own the funds in these accounts and attorneys are the agents holding the funds in trust for their clients. A lawyer or law firm opens an IOLTA account and, as an agent, deposits its clients' funds in the account and holds them there in trust until they are needed.

Software Can Help Manage Compliance

WASHINGTON — Credit unions using Cardinal Software can help manage the regulatory compliance risks tied to their lending lines through the company's use of Wolters Kluwer's ComplianceOne technology.

By using the interface, Cardinal customers will be able to transfer data between Cardinal's core processing system and ComplianceOne and eliminate redundant data entry and also reduce the incidence of errors.

Cardinal clients will also be able to access to Wolters Kluwer Financial Services' compliance content that can help them meet regulatory requirements in all 51 U.S. jurisdictions. And they can use functionalities such as imaging and bar-coded documents.

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