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EEOC rules on retiree health benefits

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WASHINGTON (12/28/07)—The Equal Employment Opportunity Commission (EEOC) has issued a controversial new rule that would allow employers who provide retiree health benefits to offer differing treatment to retirees under 65 years old and those above that age. The EEOC in a release issued this week said the rule is intended to “to preserve and protect employer-provided retiree health benefits which are increasingly less available and less generous.” But, the Dec. 27 issue of The New York Times reported, the AARP and other groups that advocate for older Americans criticized the rule that carves out an exemption for retiree health benefits from age discriminiation laws for employers. The AARP projected that 10 million people could be adversely affected by the rule. The EEOC rule clarifies the legality of a practice in which employers coordinate retiree health benefits they provide with Medicare, without having to ensuring that the benefits received by Medicare-eligible retirees are identical to those received by younger retirees. Employers sometimes reduce or eliminate retiree health benefits once Medicare eligibility kicks in. That practice came under fire after a 2000 ruling by the U.S. Court of Appeals for the Third Circuit regarding the Age Discrimination in Employment Act (ADEA). The court held that the ADEA required that the health insurance benefits received by Medicare-eligible retirees be the same, or cost the employer the same, as the health insurance benefits received by younger retirees. The EEOC noted that it had voted to approve this regulation in April 2004, but was blocked from doing so when the AARP filed suit against the commission. The court ultimately issued an opinion, according to the EEOC release, that the rule was “a reasonable, necessary and proper exercise of [EEOC’s] authority.” EEOC Legal Counsel Reed Russell said, “Our rule makes clear that it is lawful for employers to continue to provide retirees with the health benefits they currently receive. Contrary to what some interest groups have erroneously asserted, the rule will not require any cuts to retiree benefits.”

CU examiners schooled on third-party relationships

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ALEXANDRIA, Va.(12/28/07)—On a number of occasions during 2007, the National Credit Union Administration (NCUA) has identified credit union due diligence for third-party relationships as a topic of key interest. The agency has wrapped up the year by posting examiner guidance on the subject. The supervisory letter, “Evaluating Third Party Relationships,” is a summation of guidance on the use of third-party vendors to leverage their ability to provide services to members or customers. Although posted to the NCUA website in late December as Letter to Credit Unions No. 07-CU-13, the guidance to the agency field staff was distributed in October. That is the same month that the agency said an increase of seven full-time equivalent employees would be necessary in 2008, in part, because of plans to increase monitoring of credit union practices that raise potential for safety and soundness issues—including third-party relationships and outsourcing. The NCUA letter recognizes that credit unions use third parties for many types of services, including lending programs, regulatory compliance and electronic delivery. The agency endorsed the value of such relationships, and stated that it does not intend to stifle innovative use of the arrangements to meet members’ needs. “NCUA’s goal is to ensure credit unions clearly understand risks they are undertaking and balance and control those risks considering the credit union’s safety and members’ best interest,” wrote David Marquis, director of the NCUA’s office of examination and supervision. However, the guidance also states that even with proper due diligence procedures, a credit union can only mitigate, rarely eliminate, risks associated with outsourcing. It states that when examiners evaluate third-party arrangements, they should ensure a credit union has addressed the following areas in a way that is commensurate with their size, complexity and risk profile:
* Risk assessment and planning; * Due diligence; and * Risk management, monitoring and control.
The letter expands upon the agency’s expectation of the steps to be taken in each of these areas, and also includes a list of the numerous previous letters NCUA has issued on the importance of risk assessment and due diligence. The Credit Union National Association is studying all guidance on third-party relationships and soon will issue an analysis for credit unions.

Inside Washington (12/27/2007)

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* WASHINGTON (12/28/07)--The Office of Enterprise Housing Oversight (OFHEO) has classified Freddie Mac and reaffirmed Fannie Mae as adequately capitalized as of Sept. 30. Both have released financial results publicly. Fannie reported a 5.9% surplus above the OFHEO requirement, while Freddie Mac’s surplus was 1.7% … * WASHINGTON (12/28/07)--The Small Business Administration (SBA) seeks to increase Export Express’ loan minimum to $350,000 and rid some application paperwork, according to Richard Ginsburg, SBA senior international trade specialist. Export Express is SBA’s export loan program for small businesses. The agency also is working on a marketing strategy that would include outreach to lenders (American Banker Dec. 26). The changes, which aim to make Export Express more attractive, will be effective before Sept. 30, when fiscal year 2008 is complete. If the changes are successful, the program will be permanent …