CUs increase giving with Charitable Donation Accounts

Credit unions can elevate their donations to good causes through Charitable Donation Accounts, which are rapidly growing in popularity.

In December 2013, NCUA opened the door for federal credit unions to contribute to charitable donation accounts (CDA) that use investments previously not compliant with Part 703. Many states now allow state-chartered credit unions to have a CDA, too.
Through professionally managed investment portfolios, a CDA can potentially earn significantly more than traditional credit union investments.

NCUA unanimously approved the CDA rule at a December 2013 meeting. NCUA Chairman Debbie Matz said the new ruling sets safeguards to ensure credit unions use CDAs for their intended purposes.

“This innovative rule strikes the right balance to provide flexibility, but ensures that the majority of earnings received from the account will benefit charities and communities, rather than propping up a credit union’s income statement,” Matz said.

One safeguard requires credit unions to dispense at least 51% of their investment returns to qualified 501(c)(3) charities at least every five years. If your credit union fulfills this and other requirements, you can allocate up to 49% of the earnings to your bottom line.

Other stipulations include that credit unions must hold CDA assets in a separate custodial account or special-purpose trust. Also, for federal credit unions, the rule limits total aggregate investment to 5% of a credit union’s net worth. Certain states might have different rules.

Read more about credit unions investing in the plan in an article in CU Times.