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Increase Giving—and Reward Deserving Directors and Employees—With a Charitable Donation Account
Tuesday, April 25, 2017 6:35 AM

John Pesh, Executive Benefits Director, CUNA Mutual Group

Credit unions are seeing the value in improving their charitable giving strategy through a charitable donation account (CDA) program. In the past year alone, CDA investments have increased by 39 percent.[1]

A CDA’s primary objective is to help credit unions donate to their favorite charities and foundations, which may include the National Credit Union Foundation, a league’s foundation, or a credit union’s own foundation, while simultaneously increasing return on assets.

By using professionally managed investment portfolios, your credit union’s CDA has the opportunity to invest in equity and bond portfolios that have not been available through traditional credit union investments. In turn, you may have more to donate. Making donations in a board member's or an employee's name is a great way to recognize them.

In the NCUA board minutes[2] from the meeting at which the CDA rule was unanimously approved, then-NCUA Chairman Debbie Matz mentions that the new ruling sets safeguards to ensure that CDAs are used for their intended purposes.

“This innovative rule strikes the right balance to provide flexibility but ensures that the majority of earnings received from the account will benefit charities and communities, rather than propping up a credit union’s income statement,” Matz says in the minutes.

One of the safeguards Matz is referring to is the requirement that at least 51 percent of the investment returns are paid to qualified 501(c)(3) charities at least every five years. If your credit union fulfills this and other requirements, you can retain up to 49 percent of the earnings to allocate to your bottom line.

Other stipulations for CDA assets include that they must be held in a separate custodial account or special-purpose entity, such as a trust. Also, the total aggregate investment is limited to 5 percent of a credit union’s net worth (for federal credit unions; certain states may have different rules).

A Means of Recognition and Reward
As it’s often a struggle to find a suitable way to reward volunteer board members, public recognition in the form of charitable donations is a fitting tribute.

So, consider using CDA earnings to not only increase donations, but to make those donations in the name of a board member or employee—perhaps someone who’s been a key figure at the credit union and has been involved in a specific charity or community program for many years.

Whatever giving strategy you decide upon for your CDA, document it thoroughly. You should have a specific board resolution in place regarding CDAs.

You will probably also need to update your credit union’s investment policy statement to reflect that you may be using investments in the CDA that previously weren’t compliant with Part 703. If your credit union happens to have an employee benefits pre-funding program, you may already have inserted this type of language, as the investments may be similar to those of a CDA.

When you’re ready to implement your CDA program, be sure to work with an established partner that can help you stay in compliance and address any regulator or examiner concerns.

John Pesh is executive benefits director at CUNA Mutual Group. For more information about CDAs, contact him at john.pesh@cunamutual.com.

CUNA Mutual Group is an endorsed five-star business partner of Credit Union Resources, Inc., a wholly owned subsidiary of Cornerstone Credit Union League.

Proprietary insurance is underwritten by CMFG Life Insurance Company. Proprietary and brokered insurance is sold by CUNA Mutual Insurance Agency, Inc., a wholly owned subsidiary. This insurance is not a deposit and is not federally insured or guaranteed by your credit union. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, and its subsidiaries. Representatives are registered through, and securities are sold through, CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, 2000 Heritage Way, Waverly IA 50677, toll-free 866.512.6109. Insurance and annuity products are sold through CMFG Life Insurance Company. Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the credit union.


[1] NCUA call report data 12/31/2015 & 12/31/2016

[2] NCUA Board Action Bulletin, December 12, 2013