[Federal Register Volume 66, Number 150 (Friday, August 3, 2001)]
[Proposed Rules]
[Pages 40641-40642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19105]



[[Page 40641]]

=======================================================================
-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Organization and Operation of Federal Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The NCUA Board proposes amending its rule limiting 
compensation to officials. The proposal amends 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.

DATES: Comments must be received on or before October 2, 2001.

ADDRESSES: Direct comments to Becky Baker, Secretary of the Board. Mail 
or hand-deliver comments to: National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428. You may fax comments to 
(703) 518-6319. E-mail comments to [email protected]. Please send 
comments by one method only. 

FOR FURTHER INFORMATION CONTACT: Dianne M. Salva, Staff Attorney, 
Division of Operations, Office of General Counsel, at the above address 
or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

Background

    NCUA has a policy of continually reviewing its regulations to 
``update, clarify and simplify existing regulations and eliminate 
redundant and unnecessary provisions.'' Interpretive Rulings and Policy 
Statement (IRPS) 87-2, Developing and Reviewing Government Regulations. 
In its review of Sec. 701.33, NCUA found several recent inquiries from 
federal credit unions (FCUs) and individuals concerning the limitation 
in Sec. 701.33 on reimbursement of expenses for travel companions of 
FCU board officials.
    The Federal Credit Union Act (the 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).
    Before, Sec. 701.33 permitted an FCU to pay the reasonable and 
proper travel expenses of officials, but it did not specifically allow 
payment for the expenses of a companion traveling with the official. 57 
FR 18837,18838 (May 1, 1992). In 1989 and 1990, NCUA staff received 
many inquiries asking whether Sec. 701.33 would permit FCUs to pay the 
travel expenses of an official's spouse who accompanied him or her on 
FCU business. In January 1991, NCUA staff issued an opinion that the 
expenses of an official's spouse did not qualify as a proper business 
expense of an FCU because there is no direct benefit to the FCU in 
having the official's spouse accompany the official on business trips 
or to credit union conferences. This reasoning was based in part on 
Internal Revenue Service (IRS) interpretations regarding business 
expense tax deductions taken for spousal travel expenses. Staff 
concluded that payment of these expenses would be considered 
compensation to FCU officials that would be prohibited by 12 U.S.C. 
1761(c) and 1761a. 57 FR 18837, 18838 (May 1, 1992).
    NCUA received many complaints that its interpretation was unduly 
restrictive. Upon consideration of the strong public sentiment in 
support of a change to the rule, the NCUA Board, relying on its broad 
authority to interpret and implement the Act, amended the regulation to 
permit FCUs to pay the travel costs for an FCU official and an 
immediate family member. 57 FR 54499 (November 19, 1992). The amended 
regulation imposed the requirement that the FCU's board of directors 
adopt written policies and procedures covering such travel 
reimbursements. The policy must ensure that the only permitted 
reimbursements are for travel that is necessary and appropriate to 
carry out FCU official business, and reasonable in relation to the 
FCU's resources and financial condition. NCUA used ``immediate family 
member'' rather than ``spouse'' in the amended regulation to provide 
greater flexibility to FCUs to determine the relationships that qualify 
for reimbursement. NCUA's Office of General Counsel has interpreted the 
phrase to permit reimbursement to those persons who have a ``familial'' 
relationship to the FCU official.
    Since the amended regulation has been in effect, NCUA has received 
several inquiries questioning why the permitted reimbursement is 
limited to immediate family members of an official. Some FCUs and 
individuals contend that the rule should permit an FCU to adopt a 
reimbursement policy for the costs of any travel companion chosen by an 
FCU official.
    The NCUA Board is cautious about expanding the types of payment 
excluded from the definition of compensation under Sec. 701.33 and 
notes that, before the last change to the regulation, it received 
inquiries focusing only on reimbursement for the travel expenses of an 
official's spouse. At that time, NCUA anticipated that some FCUs might 
not want to restrict their reimbursement policies to only an official's 
spouse. NCUA adopted the change to the rule using the term ``immediate 
family member'' to permit greater flexibility.
    Now the NCUA Board believes that there may be cases when an FCU 
official wishes to be accompanied by a person other than an immediate 
family member when on business travel. FCU officials who are unmarried 
and who do not have immediate family members might be constrained from 
attending certain events to promote credit union business activities, 
if not permitted to bring a travel companion. The Board recognizes that 
Sec. 701.33 currently may not permit an FCU to reimburse the expenses 
of a travel companion, even in circumstances the FCU believes are 
necessary, appropriate, and incurred by the official in the performance 
of credit union duties.
    To give FCUs additional flexibility regarding the reimbursement of 
reasonable and proper expenses, NCUA proposes to amend 
Sec. 701.33(b)(2)(i) to use the term ``guest'' rather than ``immediate 
family member.'' All other provisions of the regulation would remain 
the same.
    NCUA is requesting comment on this proposed change, which is 
limited to allowing FCUs to adopt written policies that permit the 
reimbursement or payment of the travel expense of any guest chosen by 
an FCU official, as long as the policy meets all other requirements in 
the regulation. As is true under the current regulation, FCUs are free 
to adopt a more strict reimbursement policy or deny reimbursement 
entirely. Further, NCUA cautions FCUs that this proposal has no effect 
on 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.

[[Page 40642]]

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). The proposed 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 the proposed 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 proposed rule, if 
adopted, 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. The Board 
believes that a credit union's board of directors is in the best 
position to know who among the credit union staff should be responsible 
for carrying out the important responsibilities of the vital records 
preservation program. In revising this regulation to eliminate the 
requirement that designated the financial officer as responsible, the 
NCUA Board does not want to replace it with another provision removing 
the ability and responsibility of a credit union's board of directors 
to make the selection itself. NCUA has determined that the proposed 
rule does not constitute a policy that has federalism implications for 
purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this proposed rule will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 
2681 (1998).

Agency Regulatory Goal

    NCUA's goal is to promulgate clear and understandable regulations 
that impose minimal regulatory burden. We request your comments on 
whether the proposed rule is understandable and minimally intrusive if 
implemented as proposed.

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 July 26, 
2001.

Becky Baker,
Secretary of the Board.
    For the reasons set forth in the preamble, the National Credit 
Union Administration proposes to amend 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. 01-19105 Filed 8-2-01; 8:45 am]
BILLING CODE 7535-01-U