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Florida state charters can offer certain executive benefit plans

Earlier this year, the LSCU, in conjunction with CUNA Mutual Group (CMG), initiated a number of meetings with the Florida Office of Financial Regulation (OFR) to allow Florida state chartered credit unions the ability to offer certain benefit plans for executives and boards. Federal credit unions were permitted to offer these plans. To ensure that state chartered credit unions in Florida had parity, the LSCU asked the OFR to issue an Order of General Application (OGA) to permit this expanded authority.

The OFR’s OGA, which can be accessed here, provides Florida state chartered credit unions the same authority as federal credit unions with respect to (1) the use of investments to fund employee benefit plan obligations and (2) the provision of insurance coverages to board members. There are, however, two important differences in the authority provided. First, under the OGA, a Florida state chartered credit union must obtain the written approval of the OFR prior to implementation of any such "plan." Second, insurance plans offered by a Florida state chartered credit union to its directors must first be approved in writing by the OFR AND must also first be approved "by a majority vote of those members of the credit union so voting".

With respect to the prior approval requirements for investments, such requirement is not surprising given the potential impact any new investment authority could have on a credit union's safety and soundness. Similar prior approval requirements exist in a number of other states as well. As a drafting matter, the OGA actually extends the prior approval requirement to the "employee benefit plan" rather than to the related investments. The League suspects the OGA was intending to extend the prior approval requirement to the related investments and thus, in the League's opinion, should be read broadly to cover such investments. Accordingly, the League recommends that any credit union seeking OFR prior approval under the OGA, should share not only information about the benefit plan but also details on the investments that will be used to offset the costs of the plan.

In addition to these added restrictions, all the restrictions that currently apply to federal credit unions in this area should also be applied to Florida state chartered credit unions. For example, the investments must be "directly related to" the plan obligations and the investments may not be held longer than the actual or potential obligation exists. Similarly, for director insurance plans, the plans (a) are limited to health (including long term care insurance), accident (including AD&D), and similar types of personal insurance protection (but not life insurance), (b) should be reasonable in amount and (c) should cease to be provided by the credit union once the director leaves the board.

If you have any questions about this or would like more information, contact your CMG representative, LSCU VP, Regulatory Affairs Bill Berg at 866.231.0545, ext. 1028, or Director, Compliance Scott Morris at ext. 2165.

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