Long-term care is an opportunity for a credit union to provide something of value to their board members for volunteering their time, talent and dedication to the success of the organization. Tom Telford of Burns-Fazzi, Brock guest-writes this edition of "Inside NAFCU Services" for the May/June issue of The Federal Credit Union magazine. Learn more at http://www.nafcu.org/bfb

1. Inside NAFCU Services
The case for credit unions providing
their directors long-term care
insurance
By Tom Telford
T
he term “volunteer” exemplifies commitment,
impact and shaping a desired outcome through the
offering of one’s own ability. For all board members bathing, dressing, toileting, transferring and maintaining con-
committed to the credit union movement, this tinence. The purpose is to help maximize your independence
means thousands of hours of work to help shape their organi- and function at a time when you are not able to be fully inde-
zations. With the new regulations from NCUA regarding pendent. Planning is essential for you to be able to get the care
fiduciary duties, the responsibilities and expectations of credit you will need.
union directors have multiplied.
The position of board member in for-profit sectors typically How would an LTC plan impact a credit union
equates to monetary rewards for service. In the credit union financially?
industry, most forms of “compensation” are not allowed Simply stated, the credit union pays the long-term care pre-
under NCUA guidelines. mium directly to the carrier while the director is serving on
NCUA regulation section 701.33 prohibits compensation to the board. When a director leaves the board, the credit union
more than one board officer but allows a federal credit union stops making premium payments and the director takes the
to provide all directors with reasonable health, accident and long-term care policy with him.
other related types of personal insurance protection subject to Long-term care has many features and comes in a variety of
numerous restrictions. forms. Similar to medical insurance, long-term care policies
One such restriction is the requirement that the insurance have various levels of coverage. The coverage is typically
protect against an area of risk to which the director is priced by the insurance carrier in the form of a “daily benefit.”
exposed through the board service. Even with this restrictive The daily benefit is expressed as the dollar amount an insured
statute, the NCUA recently clarified its position in Opinion would receive to cover their daily cost of care. As a credit
Letter 10-0913. It states that federal credit unions may pro- union actively researches and completes their due diligence
vide voting members of their boards with reasonable long- on the different types of plans and features, it will see that
term care insurance, even if the insurance protects against expense differs based upon the duration of coverage, the daily
some areas of risk outside of board service. Indirect support benefit amount and medical underwriting consideration from
for treating long-term care as similar to health and accident the carrier.
insurance is found in the tax code. Section 7702B(a)(3) of the
Internal Revenue Code provides that under a “qualified con- Is long-term care right for your credit union?
tract,” long-term care coverage provided “shall be treated as Credit unions need to be prudent in their understanding of
an accident and health plan.” the financial impact of the plan for the organization and estab-
lishing eligibility requirements. Additionally, as with other
Why offer long-term care insurance? benefits received in an organization, long-term care insurance
Long-term care is an opportunity for a credit union to pro- for board members may impact the culture of the credit union
vide something of value to their board members for volun- board.
teering their time, talent and dedication to the success of the As with all other benefit decisions, there should be adequate
organization. discussion and due diligence regarding the plan as well as the
The Department of Health and Human Services has stated risks and rewards for the credit union of providing board
that at least 70 percent of people over age 65 will require long-term care insurance.
some long-term care services at some point in their lives.
Contrary to what many people believe, Medicare and private Tom Telford is regional vice president for Burns-Fazzi, Brock,
health insurance programs do not pay for the majority of the NAFCU Services Preferred Partner for executive benefits and
long-term care services that most people need. Most long- compensation consulting and long-term care insurance. For more
term care is non-skilled personal care assistance such as help information, visit www.nafcu.org/bfb.
performing the activities of daily living, including: eating,
34 THE FEDERAL CREDIT UNION MAY/JUNE 2011