[Federal Register Volume 63, Number 189 (Wednesday, September 30, 1998)]
[Rules and Regulations]
[Pages 52146-52147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26114]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 724
Organization and Operation of Federal Credit Unions; Trustees and
Custodians of Pension Plans
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final Rule.
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SUMMARY: NCUA is adopting as final the interim final amendments to part
724 regarding federal credit unions acting as trustees and custodians
of pension and retirement plans and part 701 regarding retirement
benefits for federal credit union employees that were issued in March,
1998. The final amendments revise part 724 to authorize federal credit
unions to act as trustees and custodians for Roth IRAs and Education
IRAs. The final amendments also conform part 701 to be consistent with
the changes made to part 724.
DATES: Effective January 1, 1998.
ADDRESSES: National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia, 22314-3428.
FOR FURTHER INFORMATION CONTACT: Frank S. Kressman, Staff Attorney, at
the above address, or telephone at (703) 518-6540.
SUPPLEMENTARY INFORMATION:
Interim Final Rule
On March 13, 1998, NCUA issued an interim final rule that made the
above summarized substantive and conforming revisions to part 724 and
part 701. It became effective upon its publication in the Federal
Register on March 24, 1998. 63 FR 14025, March 24, 1998. In response to
a request for comment made in the interim final rule, NCUA received
four comment letters, three from trade associations and one from a
federal credit union. Each of the four commenters supported the final
amendments and also provided additional comments, as discussed below.
The interim final rule provides that federal credit unions are
authorized to act as trustees and custodians of Roth IRAs and Education
IRAs. Such authority is in addition to those trustee and custodian
services that federal credit unions have been authorized to provide for
other kinds of pension and retirement plans for approximately the past
twenty-three years. Two commenters noted that many federal credit
unions began acting as trustees and custodians of Roth IRAs and
Education IRAs as early as January 1, 1998, the date on which such
accounts were available to consumers, and that many other federal
credit unions did the same between January 1, 1998 and March 23, 1998.
Each of these two commenters voiced a concern that such action, having
been taken by federal credit unions in advance of the effective date of
the interim final rule, could leave many federal credit unions and Roth
IRA and Education IRA account holders subject to possible tax liability
or other regulatory difficulties. Specifically, each of these
commenters noted that, because NCUA did not technically provide federal
credit unions with regulatory authority to act as trustees and
custodians for such accounts prior to March 24, 1998, accounts opened
prior to that date might be viewed as failing to qualify for the
intended tax treatment under the Internal Revenue Code. Under such
circumstances, holders of Roth IRA and Education IRA accounts opened
prior to March 24, 1998, with regular contributions or especially via a
roll-over from another qualifying plan, could face severe tax
consequences and other significant financial hardships. Accordingly,
the commenters urged NCUA to make this final rule effective
retroactively to January 1, 1998. The tax benefits available to
individuals through Roth IRA and Education IRA accounts arise through
amendments to the Internal Revenue Code. Those amendments became
effective for tax payers as of January 1, 1998. Through the same IRA
amendments, FCUs' existing statutory authority was expanded. In the
Board's view, any limitation resulting from the wording of NCUA's
regulations would raise a technical regulatory violation for an FCU,
not a tax problem for individual account holders. Nevertheless, to
avoid any undesirable consequences, cure unintended results and relieve
federal credit unions acting as trustees and
[[Page 52147]]
custodians of Roth IRAs and Education IRAs of unnecessary restrictions,
NCUA makes this final rule retroactively effective as of January 1,
1998. 5 U.S.C. 553(d)(1).
The remaining two commenters requested NCUA to amend or otherwise
provide clarification regarding the authority of federal credit unions
to act as trustees and custodians of state and federal Medical Savings
Accounts (MSAs). One of these commenters also indicated its preference
for NCUA to move forward in this regard with a request for comment,
rather than an advanced notice of proposed rulemaking. As indicated in
the interim final rule, NCUA requested comment pertaining only to Roth
IRAs and Education IRAs. NCUA made a request for comment in this manner
because to amend part 724 and part 701 to address MSAs would entail
extensive modifications or possibly a new rule and would unduly delay
satisfying the more immediate need to implement the final amendments
pertaining to Roth IRAs and Education IRAs. The NCUA agrees with the
commenters that the role of federal credit unions with respect to the
administration of MSAs is an issue that warrants regulatory review and
intends to conduct such a review in a timely fashion.
In summary, NCUA is adopting the interim final amendments in final,
without any changes, except to make such amendments effective as of
January 1, 1998.
Regulatory Procedures
Regulatory Flexibility Act
This final rule conforms the current regulation to recent changes
in the federal tax law and does not expand upon the nature of the
activity authorized for federal credit unions. The Board has determined
and certifies that this rule will not have a significant economic
impact on a substantial number of small credit unions. Accordingly,
NCUA has determined that a Regulatory Flexibility Analysis is not
required.
Paperwork Reduction Act
This final rule does not impose any paperwork requirements.
Executive Order 12612
This final rule only applies to federal credit unions. It has no
affect on the regulation of state-chartered credit unions.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) provides generally for congressional review of agency
rules. A reporting requirement is triggered in instances where NCUA
issues a final rule as defined by Section 551 of the Administrative
Procedures Act. 5 U.S.C. 551. The Office of Management and Budget has
reviewed this rule and has determined that for purposes of the Small
Business Regulatory Enforcement Fairness Act of 1996 this is not a
major rule.
List of Subjects
12 CFR Part 701
Credit unions.
12 CFR Part 724
Credit unions, Pensions, Reporting and recordkeeping requirements,
Trusts and trustees.
By the National Credit Union Administration Board, this 23rd day
of September, 1998.
Becky Baker,
Secretary, NCUA Board.
For the reasons stated above and in the interim final rule, NCUA
amends 12 CFR chapter VII 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, 1789. Section 701.6 is also
authorized by 15 U.S.C. 3717. Section 701. 31 is also authorized by
15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601-3610. Section 701.35
is also authorized by 42 U.S.C. 4311-4312.
2. Revise the second sentence of Sec. 701.19(a) to read as follows:
Sec. 701.19 Retirement benefits for employees of Federal credit
unions.
(a) * * * In those cases where a Federal credit union is to be a
plan trustee or custodian, the plan must be authorized and maintained
in accordance with the provisions of Part 724 of this chapter.* * *
* * * * *
PART 724--TRUSTEES AND CUSTODIANS OF PENSION PLANS
3. The authority citation for part 724 is revised to read as
follows:
Authority: 12 U.S.C. 1757, 1765, 1766 and 1787.
4. In Sec. 724.1, revise the section heading and first sentence to
read as follows:
Sec. 724.1 Federal credit unions acting as trustees and custodians of
pension and retirement plans.
A Federal credit union is authorized to act as trustee or
custodian, and may receive reasonable compensation for so acting, under
any written trust instrument or custodial agreement created or
organized in the United States and forming part of a pension or
retirement plan which qualifies or qualified for specific tax treatment
under sections 401(d), 408, 408A and 530 of the Internal Revenue Code
(26 U.S.C. 401(d), 408, 408A and 530), for its members or groups of its
members, provided the funds of such plans are invested in share
accounts or share certificate accounts of the Federal credit union. * *
*
[FR Doc. 98-26114 Filed 9-29-98; 8:45 am]
BILLING CODE 7535-01-U