By Donya Parrish, MCU VP- Risk Management
Q: Are holiday gifts to board members allowed?
A: Maybe! While compensating your volunteer board members is generally not allowed, there are a few exceptions.
In this 1993 Legal Opinion Letter, NCUA noted that the Federal Credit Union Act states, “No member of the board or of any other committee shall, as such, be compensated, except that reasonable health, accident, similar insurance protection, and the reimbursement of reasonable expenses incurred in the execution of the duties of the position shall not be considered compensation.” It goes on to explain the the IRS does not generally consider nominal gifts to be compensation and that the NCUA, in general, agrees with that.
In Montana, our state Credit Union Act notes in 32-3-406 M.C.A. that, “An official of the credit union, other than the treasurer or an employee, may not be compensated for service in that position.” It goes on to offer these two specific examples that are not considered compensation:
(a) necessary expenses incidental to the performance of official business of the credit union; or
(b) reasonable life, health, accident, and similar insurance protection for an official.
We checked with the Montana Division of Banking, and they noted that they have traditionally allowed gifts of nominal value to board members.
This discussion might lead you to start asking ‘what is nominal?’ and that is an excellent question. NCUA guidance from 1987 noted the difficulty in applying a dollar amount to the term. They said, “it is not advisable for the [NCUA] Board to establish rules about what is reasonable or normal in fixed dollar terms. What is reasonable in one part of the country may appear lavish in another part of the country. A credit union should seek to embody the highest ethical standards in its code of conduct. In doing this, a credit union may establish in its own code of conduct a range of dollar values which cover the various benefits that its Credit Union Officials may receive from those doing or seeking to do business with the credit union.”
Montana does not have a definition of “nominal”, but does define “gift of substantial value” in 2-2-102 M.C. A. and that might be a good reference for state-chartered credit unions to consider.
There are clearly some gray areas for being in compliance. My suggestion is to review your Bank Bribery Act or code of conduct policies to ensure that any holiday cheer is within your own policies and guidelines. You can also reach out to your peers to see what they have provided without issue. And, when in doubt, engage your examiner to see if they would consider your planned gift to be acceptable. I suspect credit union logo wear or a nice homemade fruitcake would pass, and a paid vacation to Europe might not.