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NCUA alters indemnification proposal
ALEXANDRIA, Va. (5/20/11)--The National Credit Union Administration (NCUA) approved a final rule addressing so-called “golden parachute” compensation arrangements and indemnification payments, with several clarifications. The rule does not apply to “bona fide” deferred compensation plans or severance pay plans that are not just for certain employees. One key clarification from the agency’s initial proposal, which was released in September, is language that ensures that current contracts held by credit union executives would not be impacted by the new rules, unless they are revised. The new rules would apply to new contracts. The golden parachute provisions would apply if the credit union is in insolvent, in conservatorship, has a CAMEL 4 or 5 rating or is otherwise in "troubled condition." Severance packages and other assorted employee benefits will not be impacted. The indemnification payment limits would only apply to legal proceedings that are brought by the NCUA or a state regulator where the wrong-doer was assessed a civil money penalty, removed from office or subjected to a cease and desist order. Repayment of related legal expenses will then only be permitted if a given credit union’s board of directors determines that the employee in question acted consistently with their fiduciary duty and the payment of these legal expenses will not materially adversely affect the credit union’s safety and soundness. The Credit Union National Association (CUNA) remains concerned about the application of this rule and is urging the NCUA to re-examine this final rule after it has been in effect for one year. The final rule will come into effect 30 days after it is published in the Federal Register. For the NCUA release, use the resource link.
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