Five years ago, CU Times conducted the first publically reported analysis of credit union board compensation. Prior to that time, the NCUA had periodically issued different opinions by the Office of General Counsel as to whether or not a particular benefit was viewed as compensation to a board of directors of a federally-chartered credit union.
This initial analysis by CU Times, supplemented by various opinions by the NCUA, led me to realize that a 50-state analysis of compensation to boards of directors of credit unions had never been reported, or if it had been, it needed to be updated.
The NCUA has approved a number of permissible types of "in-kind" compensation, such as reimbursement of reasonable travel expenses, but others are much less publicized. Over the years, the NCUA has broadened its views of director compensation for federal credit unions to include such items as a $250 gift card to recognize five years of service, "small" gifts to an official's share account, long-term care insurance, training costs and expense reimbursement for nonvoting members, reimbursement for electronic equipment and internet access, direct purchase of health insurance, reimbursement of meals, travel expenses, educational programs and conferences, insurance relating to disease-specific health insurance and extension of health benefits to immediate family members. These determinations are often accompanied by an NCUA letter to credit unions or a letter from the Office of General Counsel. Over the years, such pronouncements have received broad coverage. Credit unions are directed to carefully review the special NCUA letters rather than rely on a general list (visit //www.ncua.gov/regulation-supervision/Pages/policy-compliance/communications/letters-to-credit-unions.aspx for the NCUA's Letters to Credit Unions).
It is a widely-known fact that federal credit unions are not permitted to directly compensate members of their boards of directors. As a result, a number of federal credit unions are converting to state charters primarily so they can pay their directors. In the alternative, some board members are reportedly receiving "pay for play" benefits if they agree to a merger. I have found that at least 18 states allow directors of state-chartered credit unions to be compensated. Some of these state laws are very specific. For example, the Arizona statute provides, "A credit union may compensate an officer, director or committee member for the officer's, director's or committee member's services to the credit union. Providing reasonable life, health, accident and similar protection is not considered compensation." Colorado has a similar law. Four states –Georgia, Kentucky, South Dakota and Wyoming – are silent on the degree or type of board compensation that may be paid.
A preliminary review of state law indicates that, to one extent or another, the following states seem to allow direct cash compensation for those who serve on the board of a state-chartered credit union: Arizona, Colorado, Georgia, Indiana, Kentucky, Maryland, Minnesota, Nevada, New Jersey, North Dakota, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Washington, Wisconsin and Wyoming. Georgia permits all credit unions to compensate the members of their boards. A detailed commentary on each state can be found at the following link. The link provides the state-by-state analysis of this issue through Dec. 31, 2016: kaufcan.com/news/articles/Directors%20Pay.pdf.
Supplements to this information should be directed to [email protected].
E. Andrew Keeney is Co-Chair for Kaufman & Canoles. He can be reached at 757-624-3153 or [email protected].
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