[Federal Register Volume 66, Number 245 (Thursday, December 20, 2001)]
[Rules and Regulations]
[Pages 65628-65629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31288]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Organization and Operation of Federal Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board is amending its rule limiting compensation to 
officials. The amendment changes the definition of the term 
``compensation'' to exclude the reimbursement or payment of business-
related travel costs for an official to be accompanied by a guest.

EFFECTIVE DATE: This rule is effective January 22, 2002.

FOR FURTHER INFORMATION CONTACT: Dianne M. Salva, Staff Attorney, 
Division of Operations, Office of General Counsel, National Credit 
Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-
3428, or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

Background

    NCUA published a proposal to amend its regulation covering travel 
reimbursements for guests accompanying Federal Credit Union (FCU) 
officials on business. 66 FR 40641, August 3, 2001. During the sixty-
day comment period, NCUA received thirty-seven comment letters. After 
carefully considering the comments, NCUA is publishing this final rule, 
which is identical to the proposal.
    The Federal Credit Union Act (the FCU Act) and NCUA regulations 
provide that only one board officer of an FCU may be compensated as 
such and that no other official may receive compensation for serving as 
a board or committee member. 12 U.S.C. 1761(c), 1761a; 12 CFR 701.33. 
NCUA has defined compensation to exclude reasonable and proper expense 
reimbursement for costs incurred by FCU officials in carrying out the 
responsibilities of the positions to which they were appointed or 
elected.
    Section 701.33 currently permits reimbursement of a board official 
and one immediate family member for travel expenses incurred in 
performing board duties if the payment is necessary and appropriate as 
determined by the FCU board and is made in accordance with written 
board policies and procedures. 12 CFR 701.33(b)(2)(i).
    To give FCUs additional flexibility regarding the reimbursement of 
reasonable and proper expenses, NCUA has determined to amend 
Sec. 701.33(b)(2)(i) to use the term ``guest'' rather than ``immediate 
family member.'' All other provisions of the regulation remain 
unchanged. Travel and reimbursement policies must still provide for 
payment of only those costs that are reasonable in relation to the FCUs 
resources and financial condition. NCUA cautions FCUs that this 
proposal has no effect on Internal Revenue Service (IRS) regulations 
regarding the reporting and taxing of any payments or reimbursements. 
FCUs should consult their tax advisors or attorneys concerning IRS 
requirements related to their travel reimbursement policies.

Comments

    NCUA received thirty-seven comment letters. Seventeen letters were 
from natural person credit unions and two were from corporate credit 
unions. Two were from credit union trade associations. Eight were from 
state credit union leagues and eight were from credit union officials 
or other individuals.
    Twenty-seven of the commenters strongly support the proposal and 
applaud the agency efforts to minimize government intrusion and 
maximize flexibility.
    Four commenters opposed it, pointing to possible increases in costs 
to members and concerns of its effect on family unity. The NCUA Board 
expects that any increase in costs to members will be minor and will 
support the business of the credit union. Furthermore, any FCU that 
adopts a new policy must still limit its travel expenditures to amounts 
that are reasonable in relation to its resources and financial 
condition. Of course, the amended rule does not require FCUs to change 
their current travel expense reimbursement or payment policies. The 
NCUA Board determined to amend the

[[Page 65629]]

regulation to allow FCUs greater flexibility to accommodate the needs 
of officials whose duties include business-related travel. Under the 
current regulation, FCUs may not pay or reimburse the cost of travel 
for an official's grandson to accompany her to an FCU-sponsored 
program, or for an official whose mobility is impaired to be 
accompanied by an aide, even if the FCU thought it necessary or 
appropriate. With this amendment, the FCU will have the discretion to 
adopt policies that provide for the reimbursement or payment of such 
travel costs. Again, the amendment does not require FCUs to do so.
    Five commenters, while generally supportive, suggested that the 
proposal did not go far enough in expanding credit union authority. 
These commenters believe that it is unnecessary for NCUA to have a 
regulation concerning such reimbursements or payments. They suggest 
that NCUA rescind the regulation so that FCUs can establish 
reimbursement policies that fit their individual needs. They argue that 
such policies would be subject to scrutiny in the examination process 
and would therefore pose no risk to safety and soundness. Two 
commenters also stated that NCUA should not have a regulation on travel 
reimbursement, but should rely on the examination process to ensure 
that FCUs have reasonable and appropriate policies. The NCUA Board 
believes that it is appropriate for the agency to maintain a regulation 
in this area. There is a tension between the need of FCUs to attract 
competent and dedicated officials and the prohibition in the FCU Act 
against compensating all but one of them. FCUs regularly question NCUA 
about the permissibility of new types of reimbursements. These new 
ideas for reimbursements to officials frequently fall beyond the limits 
of the FCU Act. This regulation provides FCUs with NCUA's 
interpretation of the FCU Act by clearly stating what types of travel 
reimbursements NCUA has found to be consistent with the law.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a proposed rule may have on 
a substantial number of small entities (primarily those under one 
million dollars in assets). This rule will not have a significant 
economic impact on a substantial number of small credit unions, and 
therefore, a regulatory flexibility analysis is not required.

Paperwork Reduction Act

    NCUA has determined that this regulation does not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their regulatory actions on state and local 
interests. In adherence to fundamental federalism principles, NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order. This rule will apply 
only to all federal credit unions. It will not have substantial direct 
effects on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that the rule does not constitute a policy that has 
federalism implications for purposes of the executive order.

Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget (OMB) has determined that this 
is not a major rule for purposes of the Small Business Regulatory 
Enforcement Fairness Act of 1996.

List of Subjects in 12 CFR Part 701

    Credit unions, Reporting and recordkeeping requirements, Travel and 
transportation expenses, Travel restrictions.

    By the National Credit Union Administration Board on December 
13, 2001.
Becky Baker,
Secretary of the Board.

    For the reasons set forth in the preamble, the National Credit 
Union Administration amends 12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

    1. The authority citation for part 701 continues to read as 
follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, and 1789.
    Section 701.6 is also authorized by 31 U.S.C. 3717.
    Section 701.31 is also authorized by 15 U.S.C. 1601 et seq., 42 
U.S.C. 1861 and 42 U.S.C. 3601-3610.
    Section 701.35 is also authorized by 42 U.S.C. 4311-4312.

    2. Revise the last sentence of paragraph (b)(2)(i) of Sec. 701.33 
to read as follows:


Sec. 701.33  Reimbursement, insurance, and indemnification of officials 
and employees.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * * Such payments may include the payment of travel costs for 
officials and one guest per official;
* * * * *
[FR Doc. 01-31288 Filed 12-19-01; 8:45 am]
BILLING CODE 7535-01-U