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CU System
Wash DFI Issues Guidance For Employee Benefits Trusts Investments
FEDERAL WAY, Wash. (3/27/13)--The Washington State Department of Financial Institutions (DFI) has issued an interpretive letter  indicating that state-chartered credit unions may make certain investments that otherwise would be impermissible, so long as they are for the express purpose funding employee benefit obligations.

DCU Interpretive Letter 1-13-02 creates parity between state and federal credit unions. Both now have the same investment latitude in funding employee benefit obligations through an employee benefit trust, said the Northwest Credit Union Association (Anthem Recap March 22).

Three limitations federal credit unions have in investing in this area now apply to state-chartered credit unions exercising the parity provision:

  • The purpose of the investment must be for funding "an employee benefit plan" obligation. The National Credit Union Administration defines "employee benefit plan" the same as the Employment Retirement Income Security Act (ERISA), which includes employee welfare benefit plans or employee pension benefit plans.
  • The investment must be directly related to the credit union's obligation or potential obligation, and the credit union must be able to explicitly demonstrate that relationship.
  • The credit union can hold the investment only for the period in which it has an actual or potential obligation under the plan the investments are to fund. If a credit union holds an investment to fund retirement benefits for an employee, the employee retires and the obligation is paid, the credit union must divest of the investment unless additional employee benefit obligations exist that would replace the original and take its place directly related to the investment in question.
To segregate the employee benefit plan investments from the credit union's own investments, credit unions can establish an employee benefit funding trust using a trust agreement. For more detail, use the link.
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Anthem Recap Article
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