[Federal Register Volume 76, Number 122 (Friday, June 24, 2011)]
[Rules and Regulations]
[Pages 36979-36980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15729]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 750

RIN 3133-AD73


Golden Parachute and Indemnification Payments--Technical 
Correction

AGENCY: National Credit Union Administration (NCUA).

ACTION: Interim final rule with request for comments.

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SUMMARY: NCUA is issuing a technical correction to its rule restricting 
a federally insured credit union (FICU) from making golden parachute 
and indemnification payments to an institution-affiliated party (IAP), 
published in the Federal Register of May 26, 2011. The amendment 
corrects an exception to the definition of golden parachute payment 
pertaining to plans offered under Sec.  457 of the Internal Revenue 
Code.

DATES: Effective on June 27, 2011. Comments must be received by July 
25, 2011.

ADDRESSES: You may submit comments by any of the following methods 
(please send comments by one method only):
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    NCUA Web site: http://www.ncua.gov/Resources/RegulationsOpinionsLaws/ProposedRegulations.aspx. Follow the 
instructions for submitting comments.
    E-mail: Address to [email protected]. Include ``[Your name] 
Comments on ``Interim Final Rulemaking for Part 750--Golden Parachute 
and Indemnification Payments--Technical Correction'' in the e-mail 
subject line.
    Fax: (703) 518-6319. Use the subject line described above for e-
mail.
    Mail: Address to Mary Rupp, Secretary of the Board, National Credit 
Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-
3428.
    Hand Delivery/Courier: Same as mail address.
    Public Inspection: All public comments are available on the 
agency's Web site at http://www.ncua.gov/Resources/RegulationsOpinionsLaws/ProposedRegulations.aspx as submitted, except 
as may not be possible for technical reasons. Public comments will not 
be edited to remove any identifying or contact information. Paper 
copies of comments may be inspected in NCUA's law library at 1775 Duke 
Street, Alexandria, Virginia 22314, by appointment weekdays between 9 
a.m. and 3 p.m. To make an appointment, call (703) 518-6546 or send an 
e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Pamela Yu, Staff Attorney, Office of 
General Counsel, or Ross Kendall, Special Counsel to the General 
Counsel, at the address above or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

A. Background

    The NCUA published a final rule in the Federal Register on May 26, 
2011, at 76 FR 30510, containing a comprehensive framework outlining 
permissible and impermissible payments that FICUs can make in the 
nature of golden parachutes and indemnification for IAPs. The final 
rule requires a technical correction to conform the language concerning 
one permissible exception involving golden parachute restrictions to 
the intent of the rule, as described in the preamble to the May 26, 
2011 rulemaking.

B. Correction

    The intent of the final rule is that post-employment payments 
having reasonable business purposes should not be prohibited. 
Accordingly, the rule excludes from the definition of ``golden 
parachute payment'' certain qualified retirement plans such as those 
permitted under Sec.  401 of the Internal Revenue Code (IRC). As 
discussed in the preamble to the final rule, in response to comments 
the Board intended to provide similar treatment to retirement plans 
that are permissible under Sec.  457 of the IRC, which are frequently 
used by credit unions and other tax exempt organizations.

[[Page 36980]]

    Plans qualifying as eligible deferred compensation plans under 
Sec.  457(b) of the IRC exhibit characteristics that are similar to the 
more common Sec.  401(k) deferred compensation plans that many 
employers make available to their employees. For example, the amount of 
income that may be deferred under such a plan is equivalent to that 
which may be deferred under Sec.  401, which for 2011 is $16,500. As 
with Sec.  401 plans, moreover, manipulation of the timing and amount 
of the payout are also closely circumscribed by law. For example, these 
plans may not typically provide for an in-service distribution prior to 
retirement. Accordingly, the Board intended for Sec.  457(b) plans to 
be treated like Sec.  401 plans and excluded from the definition of 
golden parachute payment.
    Although the preamble to the final rule makes reference to plans 
under subsections (b) and (f) of Sec.  457, it does not provide any 
substantive discussion concerning the differences between them. In 
fact, however, plans that are permissible under the latter subsection 
are significantly broader and are accorded much greater flexibility in 
terms of structure, vesting, etc. The intent of the rule has always 
been that Sec.  457(f) plans must also meet the ``bona fide'' criteria 
outlined in Sec.  750.1(c) to qualify as exceptions to the otherwise 
applicable golden parachute restrictions. Because of the limits 
inherent in Sec.  457(b) and the constraints governing plans offered 
under that subsection, the Board intended to specify that only Sec.  
457(b) plans are excluded by definition from the term golden parachute 
payment.
    This interim final rule amends Sec.  750.1(e) to clarify that plans 
offered by FICUs under Sec.  457(b) of the IRC are excluded from the 
definition of golden parachute payment. Plans offered under Sec.  
457(f), however, must meet the ``bona fide'' criteria outlined in Sec.  
750.1(c) to qualify as exceptions to the golden parachute payment 
definition.

C. Interim Final Rule

    NCUA is issuing this rulemaking as an interim final rule effective 
as of June 27, 2011, which is the date the new part 750 will take 
effect. 76 FR 30510 (May 26, 2011). The Administrative Procedure Act 
(APA), 5 U.S.C. 553, generally requires that before a rulemaking can be 
finalized it must first be published as a notice of proposed rulemaking 
with the opportunity for public comment, unless the agency for good 
cause finds that notice and public comment are impracticable, 
unnecessary, or contrary to the public interest. In this regard, NCUA 
believes good cause exists for issuing this clarifying amendment as an 
interim final rule, in order to coordinate with the effective date of 
the new part 750 as well as eliminate as soon as possible any confusion 
resulting from preamble language that is inconsistent with, or makes 
ambiguous, the associated regulatory text. To that extent, NCUA 
believes issuing this rulemaking as an interim final rule is in the 
public interest. NCUA does not anticipate comments on this change and 
so is allowing only a 30-day comment period.

D. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact any proposed regulation may 
have on a substantial number of small entities (those under $10 million 
in assets). This interim final rule provides clarification regarding 
the applicability of one of the exceptions to otherwise applicable 
regulatory restrictions. Accordingly, it will not have a significant 
economic impact on a substantial number of small credit unions, and 
therefore, no regulatory flexibility analysis is required.

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

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

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) 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 APA. 5 
U.S.C. 551. NCUA does not believe this final rule is a ``major rule'' 
within the meaning of the relevant sections of SBREFA. NCUA has 
submitted the rule to the Office of Management and Budget for its 
determination in that regard.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden. 44 U.S.C. 3507(d); 5 CFR part 
1320. For purposes of the PRA, a paperwork burden may take the form of 
either a reporting or a recordkeeping requirement, both referred to as 
information collections. These technical corrections do not impose any 
new paperwork burden.

List of Subjects in 12 CFR Part 750

    Credit unions, Golden parachute payments, Indemnity payments.

    By the National Credit Union Administration Board, this 17th day 
of June 2011.
Mary F. Rupp,
Secretary of the Board.

    For the reasons stated in the preamble, the National Credit Union 
Administration amends 12 CFR part 750 as set forth below:

PART 750--GOLDEN PARACHUTE AND INDEMNIFICATION PAYMENTS

0
1. The authority citation for part 750 continues to read as follows:

    Authority:  12 U.S.C. 1786(t).


0
2. Revise the definition of ``Golden Parachute Payment'' in Sec.  
750.1(e) to read as follows:


Sec.  750.1  Definitions.

* * * * *
    (e) Golden parachute payment
    * * *
    (2) Exceptions. The term golden parachute payment does not include:
    (i) Any payment made pursuant to a deferred compensation plan under 
section 457(b) of the Internal Revenue Code of 1986, 26 U.S.C. 457(b), 
or a pension or retirement plan that is qualified or is intended within 
a reasonable period of time to be qualified under section 401 of the 
Internal Revenue Code of 1986, 26 U.S.C. 401; or
    (ii) * * *

[FR Doc. 2011-15729 Filed 6-23-11; 8:45 am]
BILLING CODE 7535-01-P