Credit Union Exam Solutions Presents With Flying Colors

Speaker 2: It's an emergency.

What is it?

Just wait and see.

Boardroom courtroom, footnotes.

Fees.

Policy shifts quietly.

New regulation, new direction.

Leadership in question.

Insurance on camel.

Watch, examine attention.

We'll wait for next week when
the meeting's on the NCU at

well agenda drop something.

And pops.

Now.

It's in your head.

It's in your head.

Third party cyber liquidity,

concentration, rising risk model.

Stress assumptions.

Everybody,

it's an emergency.

Didn't plan it.

Here we go.

When the signal star flashing red,

we hit.

Speaker: Hey everyone.

This is Mark Kel with another emergency
episode of With Flying Colors.

If you are a regular listen listener,
you noticed a new intro song,

which is my new emergency podcast.

Song, we just got back from a credit
union QS cruise to The Bahamas

hosted by Scott Gladden and who
was in charge of the local chapter.

Had a great time.

Todd Miller, myself, Steve Farrar.

We talked to the group about a
lot of things going on that we're

seeing in our credit unions that
we're seeing relative to NCA.

And one of the discussions was about AI
and how to use that with the credit union.

And I went down a rabbit hole saying
how I had created some music this

summer just playing with it, which
I'm sure a lot of you had done.

I had a little bit of motivation.

There's a podcast I may have
mentioned on the cruise.

That uses that has a Patreon site and
when they have an emergency signing,

even if it's of a backup catcher
for the baseball team, Minnesota

twins, they'll have a quick podcast.

They'll throw it up.

And when it works out for me to have
something live that quick that I wanna

talk about, I'm gonna be using this this
type of intro, the emergency podcast.

Music.

And if you can figure out who I tried
to make it sound like, send me a note

and I'll tell you if you're right.

NCA had a board meeting.

They had two items on the agenda.

And you can debate whether
how you define emergency.

If you think it's an emergency.

I'm sure there's some people
who'd want to hear it quickly.

So time sensitive is probably
better than emergency.

But in this instance, they
had two items, the proposed.

A board briefing proposal on
dependent care and board member

expense reimbursement and a
board briefing on the CLF.

I noticed that Matt Belos, who
usually is in charge of the office

of Consumer Compliance was sitting
in as acting head of the CLF.

It sounded like he may have just
taken that role here in January

and that briefing, I'm not gonna
go much into it other than.

They said over the last year they've
gone up 14 members in the CLF to four 50.

They have borrowing capacity of 21.9

billion and that their budget is down
similar to the rest of the agency budget.

I'm not gonna say a lot more about that.

If you want to join the CLF, reach
out to NCUA they always beat the

drum about the importance of that.

And the more members they have, the
more borrowing capacity they have.

So it's real.

Really consistent with
the credit union spirit.

So back to the main item, which was the
dependent care and board member expense

reimbursement, which was proposed.

It was interesting that board member,
board chair Halman mentioned that at

his testimony he ran into Brad Sherman
or Brad Sherman asked from California.

Where they were at, where
NCOA was at on this rule.

And that probably means by the way,
that CUNA slash America's credit

unions always gonna be calling them.

America's credit unions may have planted
that question with them to get some

momentum here, because I know that
CUNA America's credit unions has had

written some letters relative to this.

Basically Helpmann said here we are.

Voila, we have the proposal.

And it was a short, concise.

Board briefing that didn't go into all
the nuances that are in the regulation

but I think this is very positive.

For and by the way before I forget to
say this applies to federal credit unions

only, not state chartered credit unions,
but if you are a state charter and you're

listening and you're in one of those
states that has immediate reciprocity,

if this rule does get finalized, you
may be able to apply it in your role.

Of course, consult your state, when, if,
and when it gets to that point in time.

I also wanna say this doesn't
impact anything about what might be.

Treated it as income with the IRS.

They said, reach out to your CPAs.

And I'm not gonna get into that.

I have an accounting degree,
not a CPA, but I have no

thoughts as it relates to that.

But I'm excited about this
because many states allow

their board members to be paid.

The Federal Credit Union Act does
not allow federal chartered seat

boards and officials to be paid
other than the treasurer, of course.

This provides a little bit of a
equalized playing field in that

dependent care can be covered.

And they talked about it being covered.

For the 12 meetings.

Helpmann made an interesting point.

That if you were on a board member of IBM
or Facebook, you only have to have four.

Quarterly meetings of the, of that board.

NCA, the Federal Credit
Union Act requires 12.

So the burden is higher,
yet you're not paid.

So again, I I'm excited about the
possibility of this rule being

proposed and costs being approved
so that you can have a more.

Well-rounded board.

So you can have a more diverse board in
all ways, including diversity of thought.

If there are people, you probably are
listening, you've had people that, Hey, I

can't make that commitment 'cause I've got
kids, or I've got a grandparent, or I've

got a mother that I have to take care of.

I can't make that commitment.

This allows some flexibility there, which
again, I think is really a nice big step

forward for the value of the federal.

Credit Union Charter.

So I'm gonna walk through
I took some notes here.

Bear with me a little bit more
detail than what they talked about.

My take and what I believe
will be the take were this rule

as written to become final.

So what the proposed rule does,
it allows federal credit unions

to reimburse or directly pay.

Reasonable dependent care
costs for volunteer officials.

So what's the definition of
reasonable dependent care costs?

It's in the eye of the
beholder, of course.

What's the definition
of safety and soundness?

Obviously you wanna be reasonable.

You don't want to jump off the
deep end and do any crazy things,

but I am gonna suggest some things
in here that they didn't talk

about that this might apply to.

So it does apply to when those costs
are incurred, while attending board

meetings or performing official duties.

To me that's pretty big.

Having just come back from a cruise
where there was education on BSA,

there was education on board member
education, on financial information.

There was many other programs that were
put on, including what we talked to

the folks about the NCA exam process.

There could be scenarios.

Obviously, there's scenarios
where you can pay for some of that

because it's linked to training.

Now.

Should this get put in place,
you'd be able to pay for some

dependent care related to that.

And I'll have some more details
on that as we come up and it.

So what happens is this adds dependent
care costs to the list of reimbursable

expenses under the Reg 7 0 1 0.33

applies to federal credit unions.

It does not apply to state charters.

Unless, of course they have a reciprocity
rule, NSU a didn't mention that,

but that always is a qualifier here.

So who qualifies?

Volunteer officials only not, who are
not compensated for their services.

So it wouldn't be the CEO, it
wouldn't be the CFO, et cetera.

It would be the volunteer officials only.

It includes board members and
other volunteers officially

performing actual duties.

Directors emeriti or honorable
roles generally would not qualify

unless they perform assigned duties.

So what counts as dependent care
defining, defined using the IRS standard?

If there's a definition somewhere, it's
always good to use that definition.

Why create recreate a definition?

So the care for a qualifying individual.

Such as a child under 13, a dependent
or spouse, incapable of self-care

who lives with the official.

It can include childcare, it can
include adult dependent care.

What the rule does not do, it does not
allow reimbursement for lost wages.

It does not cover paid leave
indirect costs of volunteering.

It does not require federal credit
unions to reimburse dependent care.

It's optional and discretionary.

So if your board members come to you
and you can't afford it this year.

It's not something that you
have to automatically do.

But it's a nice to do and it would
be something I think you'll see

a lot of places do quite quickly.

Should should this become final,
which I anticipate it will.

And I mentioned it does not
impact the IRS tax treatment.

Why does NCA say they're proposing this?

They mentioned this in
the briefing childcare.

Dependent care costs have increased
dramatically over 200% since 1990.

A volunteering nationwide has declined
significantly since pre pandemic levels.

Current rules may discourage younger
and working age members from serving.

We talked a lot about on the cruise,
about, the baby boom generation and

the deposit to nature of those folks.

And the challenge of getting.

Younger members.

One way to get younger members is to be
able to encourage them to participate at

a rule like this, I think would do that.

And as I mentioned, it limits the
diversity of board candidate candidates

by eliminating people who have.

Kids or have other people that
they need to take care of.

Now, is it gonna be a
cure all and an end all?

But no.

I think there will be some people who
will become on board members or stay

longer as board members should they
find themselves in that situation.

And NCA acknowledged board duties
are more complex Today, credit

unions are more complex and
volunteer expectations are higher.

I can tell you with all.

All the board governance we've
seen in our discussions with

credit unions, they clearly are
raising the bar on the expectation.

And this is nice that you can reward and
compensate for some of the costs that

these folks of your team are incurring.

All right, so existing
safeguards still applies.

Federal credit unions must adopt
written reimbursement policies,

must ensure expenses are.

Reasonable and appropriate must con,
must consider the safety and soundness.

If you're losing money this year and you
know you're gonna make money next year,

you might wanna wait till next year.

NCA can object to policies that are
unsafe or unsound or risky to the share

insurance fund regulatory cost and impact.

NCA says it's not a
significant regulatory action.

No major Im economic impact
on small credit unions.

This means.

They didn't need to send it
over for preapproval under

the way the regulations work.

It's not a major rule.

It's a minor rule and it changes what kind
of approvals they need to get and who they

need to send it to through this process.

So what is NCA?

Asking to comment on whether to
limit reimbursement to temporary

or incremental costs only.

Whether to require specific documentation
standards, whether other situations

should qualify training events.

Here we go now.

I had had written my notes here, but
pulling this out, so they're saying

training notes and conferences wouldn't
apply, and my take on it would be that

they would apply because they would
fall into the what's the language?

The performing official duties
training is not an official duty.

I would argue that training
is an official duty.

Okay.

First takeaway here.

I would encourage you to.

Comment and say that training events
and conferences should be covered

under the, under that clause that
it is performing official duties.

Need to write that down here.

Performing official duties.

One second Gang.

So a good opportunity here for you to
impact the regulation since they proposed,

and by the way, since they asked if they
should expand it, should they decide to

then expand it, which I think because
they've asked it, they probably do.

It had to have been contemplated
in order to be in the final rule.

So it's a positive thing that they're
asking you to comment on that.

And I would imagine they'll get a lot of
comments saying that they that people.

That should make that change.

So what else?

How many volunteers are
realistically affected?

What, whether safeguards used
by other federal agencies

should apply best practices from
state chartered credit unions?

So bottom line summary.

This is a narrow targeted change.

It does not change compensation rules.

You still can't pay them as part
of a salary, et cetera, et cetera.

And again, the goal is to reduce
barriers to volunteering so that you

can get a better, more robust board
and keep your board as the burden

on boards keep, keeps going up.

Now, Helpmann also made reference
while we're on here, made reference to.

Their regulation simplification
project which is their spring cleaning.

I've done some posts on that, on LinkedIn
specifically on some of those details.

Some of those are.

Changing.

Happy to, glad some of them are
taking appendixes that are in

regulations or as guidelines.

But 'cause they're in the
regulation as guidelines.

They're in the regulations, so
they're not really guidelines.

They fix that.

That was a pretty cool one.

And I've got some podcasts
on the sister podcasts.

Samantha shares that walked through
those changes in particular.

Next week I'll be doing a podcast,
recording a podcast on Monday with

Steve and Todd of my team about the
cruise presentation we did and n

NCAA's priority letter that came out.

Earlier this week.

I had a 10,000 foot level
podcast on the priority letter.

Hopman made reference to it
that they will be having.

A webinar on it on February 19th.

I'll issue a challenge to NCUA
when you have that webinar.

Please do more than just read
the letter to Credit Union.

Some of the recent webinars on NCUA
guidance have been pretty mundane, not

adding much in value in my opinion.

What we're gonna try
and do next week is say.

Here's what we think this means.

We, this is how this will be interpreted.

Maybe this is what should
have been in the letter.

And then of course we'll talk about
some things some fun things that came

up in our conversations on the cruise.

Again, emergency podcast wrap number one.

And let me know what you think of this
quicker, quicker hit podcast approach.

I'll do it when it makes sense.

I'll do it when I have the time to do it.

And again, coming off the discussion on.

On ai on the cruise.

This was a really good
opportunity to launch this.

And again I worked on this morning
before my coffee, I was playing

around with with the software and came
up with this new one minute intro.

The emergency podcast.

All right, that's it.

Mark Trekel signing
off with flying colors.