November 8, 1999
Mr. Hubert H. Carroll
O’Rourke, Sacher & Moulton, PC
150 North Hill Drive
Suite 27
Brisbane, CA 94005
Dear Mr. Carroll:
You have asked four questions regarding a federal credit union’s (FCU) provision of health insurance to board and committee members. We have addressed your specific questions below. Generally, you have asked whether an FCU may reimburse credit union officials for the cost of health insurance. Our view is that, under its authority to provide reasonable health insurance, an FCU may reimburse officials for the cost of health insurance as long as the reimbursement does not amount to compensation in violation of our regulations. 12 C.F.R. §701.33.
Must the credit union pay the insurance premiums directly to the insurance company for the official’s insurance coverage or may the credit union reimburse each official for their actual costs incurred for the health insurance they choose to obtain?
Our regulations permit FCUs to provide health insurance to officials that is reasonable in coverage and amount. 12 C.F.R. §701.33(b)(2)(ii). An FCU may reimburse officials for their actual health insurance costs pursuant to written policies adopted in compliance with 12 C.F.R. §701.33. No official, other than the designated compensated official, "may receive compensation for performing the duties or responsibilities of the board or committee position to which the person has been elected or appointed." 12 C.F.R. §701.33(b)(2)(1). Therefore, the FCU’s written policies must include limits and documentation requirements that ensure the FCU is not compensating officials, and monitor the direct application of funds to health insurance premiums. The policies would need to address the extent of coverage for which the FCU will provide reimbursement as the costs of coverage may vary depending on factors such as individual age and health. The policies would also need to provide that reimbursement of health insurance costs would terminate immediately upon the insured individual’s leaving office. 12 C.F.R. §701.33(b)(2)(ii).
If the officials obtain their own insurance, what documentation is required to be received by the credit union to support the reimbursement?
The FCU’s board of directors is responsible for determining appropriate documentation requirements as part of its written reimbursement policy.
For those officials who wish to obtain their own insurance coverage may they receive their reimbursement in a flat dollar amount per month?
Again, the board would need to establish a written reimbursement policy compliant with the prohibition against compensation to officials.
If the official is already receiving health insurance through an employer’s benefit package, how should the credit union respond? Should the credit union not fund the health insurance, because it is already in place, or may the credit union continue to reimburse the official for a reasonable amount equal to what the health insurance would cost?
An FCU may provide reasonable health insurance to its officials by either directly purchasing insurance coverage or by reimbursing officials for their actual costs in obtaining coverage. However, if an official declines this benefit because such official has health insurance without out-of-pocket expenses, the official may not receive compensation for the benefit’s value. Under these facts, 12 C.F.R. §701.33(b)(1) prohibits an official from receiving money that would not directly provide health insurance protection.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/CJL:bhs
SSIC 3500
99-0621