Small banks and credit unions fear heavier toll from new lockdowns Posted by AVCU on 10:50 AM

 For smaller financial institutions — where an entire department could be just one employee — COVID-19 poses a much higher risk to operations than at large banks, since closing a single location due to infection could leave customers and members without alternatives.

Additionally, the limited resources small banks and credit unions have compared to what big banks utilize makes it hard to determine who should work remotely when the technology might not be in place to handle back-office tasks or customer service outside the branch.

The outlook on office openings seems to change day by day. Even at large banks like Wells Fargo and U.S. Bancorp, back-to-office dates are getting pushed out amid the growing threat of the COVID-19 delta variant. Credit unions that may have previously given the all-clear to come in are struggling with whether to implement their own delays, particularly if doing so deprives their members of the human touch that smaller institutions offer.

“The difficulty for these institutions is that their identity and competitive advantage is wrapped up in customer service and personal interaction,” said Greyson Tuck, an attorney and consultant at the Memphis-based law firm Gerrish Smith Tuck who has been working with community-based financial institutions for nearly 15 years. “So how do you maintain your identity and competitive advantage in a world where close contact is difficult?”

Questions like these are on the minds of the credit union and bank executives, who’ve expressed concerns over the delay in all staff returning to work in-person, as well as a fear that the overall state of the pandemic could prompt further lockdowns.

‘Vax & Relax’

“My biggest worry is that cases return to prior peak levels and we end up taking a step backwards to lose the gains we’ve had,” said Brian Schools, CEO of the $2.5 billion-asset Chartway Federal Credit Union based in Virginia. The Virginia Department of Health has reported that more than 9.5 million doses of the coronavirus vaccine have been administered, with over 54% of the population being fully vaccinated.“We have done so much with vaccinations and other matters we’re currently working on. If this delta variant knocks all of that back, it’s going to be a gut punch to have to start over.”

To protect employees and keep operations stable, Chartway has kept the plexiglass barriers erected to assist with social distancing, and is incentivizing employees to get vaccinated.

“We are asking those who have been vaccinated to share their status with us for tracking and so that we can credit our non-exempt team members with an extra day of sick leave to recover from possible vaccine side effects and / or to assist with vaccine scheduling,” Schools said. “Additionally, we are hosting a ‘Vax & Relax’ raffle. If we reach our goal of at least 70% of team members vaccinated by October 1, we will raffle off 10 prizes: each package will include $1,000 and five days of [time off] to rest and rejuvenate.”

The $2.5 billion-asset CAMPUS USA Credit Union in Jonesville, Florida, is also working to help employees get vaccinated.

“Over the summer we hosted non-mandatory vaccination clinics on-site for employees who were interested in receiving the COVID-19 vaccine,” said Pam Johnson, who serves as the vice president of operations for the credit union. “We are still utilizing plexiglass barriers at the teller windows and in our member service areas.”

These efforts are important not only for the health of employees and members, but also because credit unions and small banks risk alienating their members and customers if they can’t keep their doors open.

“Our clients are really focused on multiple delivery channels,” Tuck said. “There are customers who say ‘I’ll be darned, I still want to go into the bank branch and I don’t want to wear a mask.’ and you want to do what you can to certainly preserve health and safety, but also not to offend that customer. Financial institutions are really focusing right now on multiple delivery channels that provide the opportunity for service across all the spectrums of where the services may be needed, or how the services may be wished to be received by customers.”

Employees also want to be accommodated based on their ability and desire to return to the office.

Alerus Financial , which has $3.2 million of assets and is based in Grand Forks, North Dakota, shifted more than 75% of its workforce to home offices at the start of the pandemic. As branches began the re-opening process, the bank allowed employees to come back in phases.

“While many of our employees are very happy to be back in the office, we also provided employees flexibility with their return dates,” said Karin Taylor, chief risk management officer at Alerus. “When rapidly improving conditions in our markets allowed us to adjust our ‘return to work’ date from September to July, we provided employees the flexibility to continue working remotely through the summer.”

In consideration for the health of employees and customers, the heads of Alerus paid close attention to guidance from the federal and state level. Grand Forks County, where Alerus is headquartered, reported a cumulative total of over 61,000 vaccinations.

Small banks and credit unions fear heavier toll from new lockdowns

Alerus Financial in Grand Forks, North Dakota shifted is tailoring its response to each market. It is returning employees to offices in phases, and is requiring masks in regions with higher rates of infection.

“We have closely followed CDC guidance since the onset of the pandemic,” Taylor said. Because the bank operates in various markets throughout North Dakota, Minnesota and Arizona, it also tailored its response to each market. “In response to updated CDC guidance issued in late July, we are reinstating a face mask policy for employees working in offices located within areas experiencing substantial or high transmission rates and encouraging our clients to wear face masks when visiting these locations.”

A cautious comeback

CAP COM Federal Credit Union, which has $2.6 billion of assets and is based in Albany, New York, is allowing all employees in back-office positions to work from home for the foreseeable future.

“While we keep a close eye on transmission rates, we are currently planning to have more staff come back on-site in the fall, offering fully on-site, fully remote, and hybrid work options as determined by team managers,” said Chris McKenna, CEO and president of the credit union. Albany county has reported that over 191,000 residents have completed a full series of vaccines, but like many other areas in the state is reporting a rise in cases since July.

Data reported to the CDC shows that vaccinations against the coronavirus peaked early in the second quarter of the year, and have been on the decline since. Now, as new variants make their way across the country, some are fearful that widespread office closures are imminent.

“We have not discussed shutting branches down, and hopefully it isn’t necessary, but the masking and distancing situation in society is very fluid,” Schools said. “We learned in March of 2020 that there are some things we need to do differently that we’d never done before, and if things got really bad, I guess we would look at doing them again. I’m just hopeful that we can have the vaccination protocols in society and such to kind of get us beyond this without having to take a step back.”

Outside of the health concerns that both workers and customers face, there are the HR concerns that the heads of the financial institutions need to be wary of as well. These considerations make some smaller institutions hesitant to shift to fully remote work once again.

“We’re addressing this unknown of trying to figure out from an employment perspective, how do we balance the interest of ensuring that we have employees that are here to run the business to serve the customer, but also making sure that from an employment perspective, we’re doing what we need to do to support our customers or our employees, both from a legal standpoint, and from a practical standpoint,” Tuck said.

Coin shortage redux: Banks, merchants again searching for pennies Posted by AVCU on 2:55 PM

Bankers thought the nationwide coin scarcity was over, because the U.S. economic system reopened and beforehand housebound customers had been capable of unload extra of their change.

However a mix of things — together with authorities stimulus funds, accelerated shopper spending and the specter of the COVID-19 delta variant — has stymied progress and compelled retailers to resort once more to asking consumers for precise change. After lifting the bounds on some coin orders by banks on the finish of final yr, the Federal Reserve reinstituted them in Might.

The restoration in coin circulation has been sluggish, stated Jim Gaherity, CEO of the coin-cashing machine operator Coinstar. “As an alternative of going miles a month, it’s going yards a month,” he stated in an interview.

The nationwide coin scarcity, which started final yr, has reemerged as an issue for retailers and banks. “It started with the virus, and it’ll finish with the virus,” stated Steve Kenneally, senior vp on the American Bankers Affiliation.

The USA Mint is liable for the manufacturing of cash, and the Fed controls their distribution to banks. Banks, which preserve cash on deposit on the Fed, can order extra as they’re wanted to distribute to retailers that present change on transactions at money registers.

Limits are at present in place for pennies, nickels, dimes and quarters, a Fed spokesperson stated. That’s as a result of coin orders from banks started to extend once more in March 2021, outpacing the quantity of cash that banks had been receiving in deposits.

The Fed believes the renewed coin scarcity has been the results of a traditional seasonal enhance in demand for cash, coupled with the affect that the third spherical of financial affect funds had on low-income households that not wanted to make use of cash to pay payments, and the upper use of cash for transactional functions because the economic system reopened, in keeping with the spokesperson.

Manufacturing capability on the U.S. Mint is nearly maxed out. The company has manufactured greater than 20 billion cash since January, which is near a report degree. About $18 billion in cash stay in Individuals’ houses, Gaherity estimates.

Gaherity, together with officers from banking commerce teams and the U.S. Mint, is a part of a job pressure that the Fed fashioned final yr to deal with the issue. The group issued a public service announcement in July, once more calling for customers to eliminate their change.

“We can not manufacture our means out of this downside,” Mint Director David Ryder stated within the video.

A wholesome circulation of cash hinges on a cycle of commerce that went largely unnoticed till the pandemic.

Significantly within the early months of the well being disaster, there was confusion about how simply COVID-19 may very well be transmitted via paper forex and cash. Customers shopped in shops much less steadily, and once they did, they had been extra prone to pay with debit or bank cards.

By final summer season, the coin scarcity had turn out to be so extreme that some banks had been providing customers bonuses for depositing their change. Banks additionally resorted to stockpiling cash and strategically shifting them between branches.

After a interval of enhancement, the issue was exacerbated when the Biden administration dispatched out stimulus funds in March 2021. Many struggling Individuals who had beforehand cashed in cash to pay payments or purchase groceries not had to take action. Exercise at Coinstar merchandising machines slowed down, in keeping with Gaherity.

“The stimulus has had a major affect on of us who’re cash-preferred,” he stated.

Whereas the circulation of cash has been rising, albeit at a slower-than-expected tempo, officers are actually frightened that the delta variant could preserve would-be coin depositors at dwelling as soon as once more.

As goes the unfold of COVID-19, so goes the provision of cash, stated Steve Kenneally, senior vp on the American Bankers Affiliation and a member of the Fed’s job pressure.

“It started with the virus, and it’ll finish with the virus,” he stated.

What’s your return-to-work plan? Posted by AVCU on 7:52 AM

 A recent CUNA Councils Virtual Roundtable explored how credit unions are preparing employees to return to work as coronavirus (COVID-19) vaccinations ease safety restrictions.

BCU in Vernon Hills, Ill., gauged employee willingness to return to work through pulse surveys, says Warren Iskowitz, director of talent management at the $5 billion asset credit union.

Survey results showed that while employees have mixed emotions about returning to work, many are excited about the prospect.

“Every situation is different,” Iskowitz says. “If you’re a parent with kids age 11 and younger who aren’t eligible for vaccination, your situation is different than a single person who is vaccinated.”

In preparing employees to return to work, BCU provided managers with a discussion guide and asked staff to come up with individual plans.

Among the discussion points covered in the guide:

• Show appreciation to your employees, including for their willingness to come up with a workable return-to-work plan.
• Acknowledge that the plan is a work in progress that will require adjustments and refinements along the way.
• Set a specific date and time to determine if the plan is working.
• Acknowledge that what works for one person may not work for another.
• Reinforce that those with performance and/or technical issues will need to work at the office, and that some jobs don’t lend themselves to working from home.

Once employees had a written plan in place, they signed the document and verified they were comfortable with policies regarding their return to work.

“Once employees return to the office, they should be empowered to raise any concerns or questions to be sure they feel welcomed and safe,” Iskowitz says.

He says the credit union celebrated the return to work by hosting a cookout, hiring a barista, and bringing food trucks onsite.

Telecommuting policy

Remind employees who want to continue to work from home that telecommuting is a benefit, not an entitlement, adds Kameron Melton, an employment and cybersecurity attorney with Wood Rodgers PLC. 

Among the areas a telecommuting policy should cover:

• Defining eligibility to telecommute.
• Providing procedures for requesting approval to telecommute.
• Explaining employee and employer responsibilities.
• Defining compliance with all employer policies.
• Detailing credit union-issued equipment and cybersecurity programs.
• Establishing communication methods.

Melton says credit union telecommuting policies are a work in progress. 

“We’re still in flux in regard to the pandemic,” Melton says. “That will require you to continually adjust what you do at your credit union. Have mechanisms to check in with employees.”

Vaccinations, return to work highlight employment law update Posted by AVCU on 9:51 AM

 Employers can require shots but shouldn’t ask why employees don’t get vaccinated.

Employers can't ask why employees decide not to get vaccinated, says Aaron Zandy, partner with FordHarrison LLP.

Legal issues surrounding how to handle coronavirus (COVID-19) vaccines and returning safely to work post-pandemic topped the agenda during an employment law update Thursday at the 2021 CUNA HR & Organizational Development Council Virtual Conference.

While employers can require employees to get a COVID-19 vaccination, they can’t ask why employees decide not to get vaccinated, says Aaron Zandy, partner with FordHarrison LLP.

Employers considering setting up employer-sponsored vaccinations need to be aware of related legal hurdles, such as documents becoming medical records under Equal Employment Opportunities Commission (EEOC) rules and questions turning into medical inquires under the Americans with Disabilities Act.

“It’s much safer to require employees to get the vaccine on their own as opposed to you as an employer providing it for them,” Zandy says.

Credit unions aren’t accustomed to having much contact with the Occupational Safety and Health Administration (OSHA), but Zandy says that will change in the wake of COVID-19.

OSHA—which protects workers from health and safety hazards on the job—currently does not have standards in place that address what steps organizations need to take to maintain a safe and healthy workplace, or statutes or regulations that impose penalties for companies that fail to do so.

But OSHA and the Centers for Disease Control and Prevention (CDC) have released guidance on safety measures, such as maintaining social distance and wearing masks. Zandy says organizations that follow that guidance are well-positioned to defend themselves against complaints filed with OSHA that claim the workplace isn’t safe or healthy.

“It’s the organization’s obligation to maintain a safe workplace,” Zandy says. “How do you achieve that? Follow the guidance and ensure employees are being safe and sensitive to others.”

Employers Have a Crucial Role to Play in Covid-19 Vaccinations Posted by AVCU on 7:58 AM

 Now that the first vaccines are being rolled out to combat the Covid-19 pandemic, a major challenge is persuading people to take them. Getting 70% or more of the public vaccinated or recovered from the Covid-19 virus is critical to containing the disease and creating herd immunity. However, recent surveys indicate that a considerable number of people across the United States are hesitant to take the new vaccines. Overcoming this reluctance — which cuts across geographic, political, religious, and demographic groups but is more prevalent in certain subgroups, especially Black Americans — is critical to ending the pandemic in the United States.

The reasons for this hesitancy are varied — from skepticism about the science to worries that the approval process has been too fast or politicized to safety concerns about being first for something so new. Others distrust all vaccines.

While federal and state public health agencies are leading the charge in educating the public, their efforts can be dramatically amplified if employers join the effort. Working together, public health agencies and employers can increase transparency about the data, the allocation process, and vaccine efficacy while fostering trust and confidence in the process and safety of the vaccine. Here is a playbook that can help employers design and implement their campaigns to drive vaccination and address health equity issues.

1. Understand your population and focus on inequities.

Spend time to understand the cultural beliefs that may dissuade employees from getting vaccinated. Engage your diversity, equity, and inclusion professionals to connect with all demographics in your employee base, and conduct surveys now to understand employees’ attitudes toward and beliefs about vaccination. This information will help you develop a more targeted education and engagement plan, leveraging existing public health materials. Once you have a baseline, you can continue to conduct pulse surveys of your workforce over the coming months to see what’s changed and how to target interventions most effectively.

2. Make it local.

Personalized communications will be crucial in the campaign to foster trust. In addition, employers, working in concert with or in parallel to public health officials, should try to identify the right parties and channels in the company and local community to deliver those messages to each subgroup. Leaders can set an example by publicly supporting vaccinations and when they are eligible, getting vaccinated themselves.

3. Educate and be transparent.

Create a dynamic program to engage with your people and customers about the goals, safety, and benefits of vaccination. Provide the latest information and be transparent in terms of access challenges and other concerns. Messaging will need to be agile to respond to changing local conditions and should be delivered in a nuanced, culturally sensitive fashion.

4. Leverage data and analytics.

Analytics platforms distill data into meaningful insights and support decision-making. They can help you stay on top of evolving sentiments and behaviors, allowing you to rapidly respond with targeted tactics.

5. Address hurdles and incentivize positive behaviors.

Make sure that people in your workforce do not have to choose between getting paid and getting vaccinated and create policies that protect wages and provide paid time off for vaccination. Recognize the challenges for employees with children and facilitate vaccination during times that are both convenient and feasible. You might provide child care options. When vaccines become more broadly available, you might set up an on-campus vaccination site. If employees are getting a vaccine that requires a second dose, educate them about the importance of getting both doses and provide incentives to do so through your employee recognition and rewards programs.

Now is the time for employers to step up and be a part of the solution to ending the worst public health crisis in a century and addressing the inequities in our health system and society that the pandemic has exposed. Taking the actions that we have laid out will pay dividends now by getting people back to work faster and reviving our economy and down the road by building the infrastructures needed to overcome similar challenges in the future. By joining the campaign to persuade people to get vaccinated, employers will not only help themselves, they will also help society overcome deep-seated anti-vaccination sentiments that are a danger to us all.

CDC panel clarifies financial institution worker vaccine allocation Posted by AVCU on 9:46 AM

 Financial services employees should be included in Phase 1c of COVID-19 vaccination, a Center for Disease Control and Prevention panel voted Sunday. The presentation from the ACIP COVID-19 Vaccines Work Group covers phased allocations of vaccines.

According to the presentation, finance professionals fall under the non-frontline essential workers category, along with IT/Communications professionals and food service industries, among others.

“Among the first thing people ask in times of crisis is, ‘how can I access my money?’ and the CDC’s presentation shows that access to financial services is vitally important,” said CUNA President/CEO Jim Nussle. “Credit unions have served as financial first responders since day one of this pandemic and will continue to work hard for their members as the country looks toward recovery.”

Frontline essential workers are designated as “workers who are in sectors essential to the functioning of society and are at substantially higher risk” of exposure to COVID. Frontline essential workers include first responders and education workers and are designated Phase 1b in the presentation.

PPP forgiveness, TDR relief extension in bipartisan COVID/funding bill Posted by AVCU on 9:42 AM

 Federal policymakers unveiled an omnibus spending bill Monday that would fund the federal government through Sept. 30, 2021, and includes several CUNA-sought provisions related to pandemic relief. The bill contains CUNA-League supported language delaying the current expected credit loss (CECL) standard, Troubled Debt Restructuring (TDR), and Paycheck Protection Program (PPP) forgiveness clarity, as well as legislation addressing several other key credit union priorities.

“We’re very pleased to see a number provisions in the compromise bill that will help credit unions remain in a position to serve their members during and after this crisis. We urge Congress and the administration to take swift action to pass the bill,” said CUNA President/CEO Jim Nussle. “Throughout the pandemic, credit unions have been there for their members as financial first responders. We know credit unions will continue to be a vital part of the economic recovery.”

CUNA sent a letter to Congressional leadership Monday evening in support of the legislation.

Specifically, the bill contains:

• Language from CUNA-supported legislation sponsored by Sen. Kevin Cramer (R-N.D.) that would simplify forgiveness for PPP loans under $50,000. CUNA has strongly backed this legislation since it was introduced, and presented analysis to Congress over recent weeks showing automatic forgiveness is more cost-effective for both the government and lenders;
• Reauthorizing the PPP at $284 billion;
• A one-year delay of implementation of the CECL standard;
• Extension of Central Liquidity and Troubled Debt Restructuring relief through the end of 2021. It was originally scheduled to expire Dec. 31, 2020;
• $12 billion for capital investments in Community Development Financial Institutions and Minority Depository Institutions with $3 billion going directly to loans and technical grants provided through the Treasury’s CDFI Fund;
• An extension through 2025 of the provision that exempts forgiven mortgage debt from income tax and an extension through 2021 of the deductibility of mortgage insurance premiums; and
• Amends the CARES Act Employee Retention Tax Credit to include federal instrumentalities like credit unions.

It also contains CUNA-supported funding amounts for FY2021 for the Treasury’s CDFI Fund ($270 million), NCUA’s Community Development Revolving Loan Fund ($1.5 million) and the U.S. Agency for International Development’s Cooperative Development Program ($18.5 million).

On Monday evening, the House and Senate passed the measure. The President is expected to sign it into law this week.

Some credit unions are spending more even as earnings tumble Posted by AVCU on 8:56 AM

 Despite earnings challenges this year, credit unions haven’t cut expenses.

In fact, third-quarter noninterest costs ticked up about 6% from a year earlier to $50.7 billion, even as year-over-year earnings fell by 25%, according to data from the National Credit Union Administration.

Increasing labor costs were a significant driver behind the rising expenses, but institutions also continued to make investments in digital technology as more members shifted to online and mobile banking because of social distancing and restricted branch access brought on by the pandemic. Experts said rising labor costs and continued investments into digitization are likely to continue into 2021.

“Credit unions need to be mindful of every dollar increase in operating expenses and how that translates into revenue,” said Claude Hanley, a partner at the consulting firm Capital Performance Group. “It’s a tough operating environment, so that revenue is very hard to come by. New members will be hard to come by. That means you have to be disciplined around where you are spending money.”

One key expense metric this year — the operating-expense-to-asset ratio — has actually declined from the prior year. As of the second quarter, that figure annualized was down for every asset category when compared to the same period in 2019, according to data from CUNA Mutual Group. Second-quarter figures were the most recent data available.

But that decline can’t necessarily be attributed to better expense management or larger structural changes, experts said. Instead, credit unions have rapidly grown their assets this year in an attempt to manage a surge in deposits. In the third quarter, assets increased by 16% while deposits rose by almost 18% from the previous year, according to NCUA data.

“You want that ratio to get lower since that shows economies of scale,” said Steve Rick, chief economist at CUNA Mutual. “You are spreading the fixed expense over a larger asset base. … It did take a big drop because the denominator has had explosive growth. We’ll have to see what it looks like when the assets aren’t growing so much.”

A better metric to look at would be noninterest-expenses-to-gross-income, Hanley said. This ratio was 0.61% in the third quarter, up from 0.58% a year earlier, according to NCUA data. That means expenses are rising faster than what the industry is earning.

An increase in labor costs accounted for almost two-thirds of the overall increase in noninterest expenses, NCUA said. There could be a few reasons for that, experts noted. For one, credit unions are traditionally reluctant to layoff employees, even during hard economic times, and some institutions have given bonuses and hazard pay this year to frontline staff members.

“A lot of credit unions don’t like laying people off because you invest so much in training,” Rick said. “You don’t want to have to train new people once you are hiring again.”

Compensation could also be up for some workers because of the mortgage-refinancing boom. Interest rates hit record lows this year, and mortgage lending surged as a result. Some employees could have compensation tied to volume in this area. And some credit unions may have had to give pay raises to mortgage lenders to keep them from getting recruited by rivals to handle the significant loan volume right now.

Additionally, some institutions have accelerated plans to invest in technology as branch lobbies had to close because of the pandemic and more members adopted digital banking. Credit unions could be paying for these items out of their current expenses or they could dip into their capital, said Sam Taft, associate vice president of analytics at Callahan & Associates. Because of that, it’s hard to track exactly what is happening.

Some have suggested that continued investments in technology could help credit unions reverse an ongoing decline in customer satisfaction ratings, but the bulk of the industry is comprised of small credit unions, many of which can't afford to spend that kind of money.

Taft added that he didn’t think expenses would decline in 2021.

“Board and management teams have indicated digital is a focus,” Taft said. “What COVID has done in terms of virtual work, it has also done to digital banking. I think it’s accelerated that trend by five years just in terms of making people adapt.”

As the pandemic hit, Hiway Credit Union in St. Paul, Minn., sped up plans for a technology upgrade. Originally it had intended to add a video banking option next year but decided to move that up to 2020 after the coronavirus upended members visiting branches.

The $1.5 billion-asset credit union did a soft launch for the product on its website in early December and plans to add it to its mobile banking app.

“So many people are used to video calls and Zoom now,” said Hiway President and CEO Dave Boden. “It allows us to provide a little more personal service in a remote world.”

Despite this expense, Hiway has managed to keep its overall costs down this year by adjusting its budget in other areas, such as suspending most new hires and reducing marketing expenses. Its noninterest expenses totaled $28.1 million through the third quarter, down about 1% from the same period a year earlier, according to NCUA call report data.

Management also gave member-facing workers a 20% bonus for two months earlier this year. The expense was worth it given how difficult this year has been on employees, Boden said.

“We are asking a lot of our associates this year, especially in terms of flexibility,” he added.

CUNA asks NCUA for additional support for credit unions Posted by AVCU on 8:19 AM

 More than six months into the COVID-19 crisis, the credit union industry continues to face new issues, CUNA wrote to NCUA Chairman Rodney Hood Wednesday. The letter is CUNA’s latest engagement with NCUA on pandemic-related issues, CUNA has sent several previous letters and CUNA leaders have met with Hood and other NCUA staff.

CUNA’s letter reiterates several specific concerns it is hearing from credit unions and members, and includes policy recommendations.

These include asking NCUA to:

• Explore ways to reduce the denominator of the net worth ratio, including by excluding zero- and low-risk assets from the net worth ratio calculation;
• Permit credit unions to capitalize interest on consumer mortgage loans in connection with loan modifications made during the pandemic;
• Further delay the effective date of the risk-based capital rule to, at earliest, Jan. 1, 2023;
• Forbear on any assessments;
• Revisit the recently tabled interim final rule on overdraft policy that would allow credit unions to adopt reasonable, flexible policies for members to resolve overdrawn accounts rather than the current 45-day time limit;
• Issue an interim final rule eliminating the requirement that a borrower be a member of a credit union for at least one month before receiving a Payday Alternative Loan I (PAL I); and
• Provide additional guidance for credit unions assisting financially distressed borrowers with outstanding PALs.

 

Treasury, IRS offer clarification on employment tax deferral ordered by President Trump Posted by AVCU on 8:15 AM

 The Treasury Department and the Internal Revenue Service (IRS) Friday released guidance to clarify the implementation of an executive order allowing employers to defer withholding and payment of an employee's portion of the payroll tax if the employee's wages were below a certain amount. The executive order was issued by President Donald Trump Aug. 8.

The Treasury and IRS clarified that this deferment applies to wages paid starting Sept. 1 through Dec. 31, 2020. The due date for withholding and payment of the tax is postponed until Jan. 1, 2021; all withheld taxes are still required to be paid on time in 2021.

In addition, the deferral of the employee payroll tax may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately.

No deferral is available for any payment of taxable wages of $4,000 or above for a bi-weekly pay period, the guidance states.

For more information on this topic, NAFCU Vice President of Regulatory Compliance Brandy Bruyere tackled the Presidential Memorandum in a recent Compliance Blog post. An upcoming blog post will further review the new guidance.

NAFCU will continue to monitor tax relief related to the coronavirus pandemic and alert credit unions of updated guidance as it is released.

Visit the IRS website for additional information on available pandemic-related tax relief.

Return to work a ‘balancing act’ for HR Posted by AVCU on 9:45 AM

 As branch and office reopenings continue, human resources (HR) professionals will play a critical and multifaceted role in shaping what the return to work will look like for credit union employees during the coronavirus (COVID-19) pandemic.

"It’s never been more important for HR to have a seat at the table to figure out how we’re going to progress into the 'new normal' at credit unions," says Diane Reed, owner and founder of CU Doctor LLC.

Reed addressed the CUNA HR Compliance Rule Changes Virtual Conference during the session "Office Considerations: OSHA, ADA, and Reasonable Accommodations."

One of HR’s biggest tasks will be ensuring compliance with local, state, and national health and safety guidance—and sometimes making the best decisions possible in an uncertain environment.

"We’re getting guidance from everywhere," Reed says, "and sometimes the guidance is in conflict with itself."

Reed suggests taking a four-step approach to planning for employees to reenter the office safely.

Step 1: Who does what?

Gather an up-to-date list of all employees, including their job duties and primary work locations, and whether they work from home and how often. With a complete list in hand, focus on employees you’ll need on the first day of returning to work.

This first wave should comprise managers and essential staff who perform required functions as defined by HR.

Also identify staff who are potentially vulnerable due to increased risk factors, such as age, preexisting health conditions, and family or living situations.

"Look holistically at each employee to figure out who’s at risk and who’s vulnerable," says Reed.

‘We're getting guidance from everywhere, and sometimes the guidance is in conflict with itself.’ -Diane Reed

Step 2: What are we coming back to?

Determine which processes work well in a remote environment. "Have enough of your members moved online now that you don’t think they’re going to move back?"  Reed asks.

This might prompt a look at structure and delivery channels to see whether you’ll need the same in-person staffing as before.

Embrace change and use data to determine how members are accomplishing their banking tasks. Review all aspects of the "remote toolkit," such as phone centers, ATM networks, online and mobile banking, remote deposit capture, and eSign or eNotary.

Step 3: When should we return to work?

Follow local and state stay-at-home orders, as well as industry guidance, when planning a back-to-work timeline. Potential approaches include a phased return in stages, shifts or half-day increments in the office, or pod concepts that isolate employees to smaller groups.

State laws matter, Reed says. "Almost every state has a stay-at-home or reopening plan. Stick with it. Know that it is different from a shelter-in-place order and that we are a critical service. People need to be able to get to us."

Some states or localities are enforcing required protections like capacity limitations, mandatory masks, and six-foot distancing rules. But everything is subject to change down to the local level, such as some reopening orders being rescinded.

"Stay in touch with what’s happening in your locality," Reed says.

Step 4: How should we return to work?

The Americans with Disabilities Act (ADA) permits employees to seek reasonable accommodations from their employers due to COVID-19. Reed advises HR professionals to plan for this possibility as early as possible if they know employees will need reasonable accommodation.

The ADA does not interfere with HR’s ability to require employees with symptoms to stay home. HR departments can require a medical note certifying that an employee is fit for duty before returning to work.

HR can require COVID-19 tests if needed—but not antibody tests.

Reed also says credit unions can screen employees, vendors, visitors, and members who enter branches or offices. These screens could incorporate temperature checks or self-acknowledgement of risk factors.

Get every individual’s contact information so they can be alerted in case of potential exposure, and store information related to an employee’s medical information separately from their personnel file.

Under the Occupational Safety and Health Administration (OSHA) General Duties Clause, if an employer fails to control for high to very high occupational exposure risk for COVID-19 and guidance is available, that employer may be found in violation of the clause.

To mitigate that risk, OSHA makes several preventative recommendations:

• Create an infectious disease policy.
• Prepare to implement prevention measures.
• Create a policy to identify and isolate individuals who are sick.
• Communicate workplace flexibility and protections.
• Implement virus controls in the workplace.

Reed advises HR professionals to prioritize policy first. "If you don’t have one now, get on it immediately. Our policies and procedures at each of our credit unions should be specific to the conditions in our area."

Contact tracing is another HR responsibility. "Keep track of who is near whom so you know who to notify of potential exposure," Reed says.

Use the OSHA Form 300 (Log of Work-Related Injuries and Illnesses) for this purpose.

The difficulties created by COVID-19 can feel overwhelming, but Reed says detailed planning and organization can make returning to work safer for employees.

COVID-19 Fraud Schemes Posted by AVCU on 4:08 PM

The NCUA Board is issuing this alert to inform credit unions about the risk of fraud associated with the COVID-19 pandemic. Those committing fraud often attempt to take advantage of opportunities made possible through new or expanded large government programs arising from emergency situations, such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The CARES Act provides many ways for financial institutions to work with members impacted by the pandemic. This alert describes increased risks associated with routine operations, outlines red flags associated with common fraud schemes in major CARES Act programs, provides references and avenues to report fraud or misconduct to the most appropriate authorities, and also provides member education resources.

RISK ALERT

SBA Issues Procedural Notice Outlining Process for Lenders to Submit PPP Forgiveness Decisions Beginning August 10 Posted by AVCU on 9:39 AM

On July 23, 2020 the Small Business Administration (SBA) released a Procedural Notice to provide Paycheck Protection Program (PPP) lenders with the procedures required to submit PPP loan forgiveness decisions to SBA and to request payment of the forgiveness amount. The Procedural Notice also addresses SBA loan forgiveness reviews and payment of the loan forgiveness amount determined by SBA.

Lenders will use a new PPP Forgiveness Platform to upload and submit loan forgiveness decisions, supporting documentation, and requests for forgiveness payments. The PPP Forgiveness Platform will go live and begin accepting lender submissions on August 10, 2020, subject to extension if any new legislative amendments to the forgiveness process result in updates to the system.

To initiate the forgiveness process, a PPP borrower must submit the Loan Forgiveness Application (SBA Form 3508, 3508EZ, or lender equivalent) to its lender (or the lender servicing its loan).  The lender must review the Loan Forgiveness Application in accordance with the requirements of SBA’s PPP Interim Final Rule #15 , as revised by PPP Interim Final Rule #20, and:

• confirm receipt of the borrower certifications;
• confirm receipt of the documentation the borrower must submit to aid in verifying payroll and non-payroll costs
• confirm the borrower’s calculations on the borrower’s SBA Form 3508 or 3508EZ or Lender’s equivalent form.

Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for forgiveness. If the lender identifies errors in the borrower’s calculations or insufficient supporting documents, the lender should work with the borrower to remedy the issue. The lender must complete the review and issue a decision regarding forgiveness to SBA, along with the required documents, not later than 60 days after receipt of a complete application from the borrower.  SBA will generally remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, within 90 days of the lender issuing its decision to SBA.  The lender is then responsible for notifying the borrower of the forgiveness amount paid by SBA to the Lender.

The lender is required to confirm the following when submitting a forgiveness decision to SBA:

• That the submission accurately reflects the lender’s decision regarding the borrower’s forgiveness application
• That the submission accurately reflects the lender’s records for the PPP loan
• That the lender has made its decision in accordance with previously issued SBA guidelines
• That the PPP loan has not been canceled or repaid
• That the lender has not issued a previous loan forgiveness decision to SBA for the same PPP loan, unless it is a re-submission following a rejection or a reconsideration of a denial without prejudice.

All PPP lender Authorizing Officials (AOs) currently in the CAFS/ETRAN system will receive a welcome email from SBA (PPPForgivenessRequests@SBA.gov) with instructions on how to access the new platform. If an AO does not receive a welcome email, it should contact SBA’s PPP Lender Hotline at 833-572-0502 for instructions.

SBA will be issuing an interim final rule addressing the process for a PPP borrower to appeal SBA’s determination that a borrower is ineligible for a PPP loan, or loan amount, or loan forgiveness amount claimed.

The Procedural Notice can be found here.

In addition to the Procedural Notice, SBA issued an Information Notice on July 22, 2020 to provide a brief overview of COVID-19 assistance available under SBA’s Economic Injury Disaster Loan (EIDL) Program, including both advances (grants) and direct loans.  The Information Notice also provides guidance to alert financial institutions to the potential for suspicious activity related to COVID-19 EIDL funds deposited into business or personal accounts and points of contact at SBA to report suspicious activity in the COVID-19 EIDL loan program. The Information Notice can be found here.

FinCEN issues advisory on COVID-19 impostor, money mule scams Posted by AVCU on 8:11 AM

The Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory on COVID-19 related impostor scams and money mule schemes. The advisory is based on FinCEN’s analysis of COVID-19-related information obtained from Bank Secrecy Act (BSA) data, open source reporting and law enforcement partners

FinCEN also maintains a coronavirus updates homepage with the latest on pandemic-related scams.

Imposter scams: criminals impersonate organizations such as government agencies, non-profit groups, universities, or charities to offer fraudulent services or otherwise defraud victims. Some examples of red flag indicators of imposter scams include:

• Requests via phone/e-mail/text requesting verification of personal information in connection with COVID-19-related stimulus payments or benefits, including Economic Impact Payments (EIP).
• Unsolicited communications from purported trusted sources or government programs related to COVID-19, instructing readers to open embedded links or files to provide personal or financial information, including account credentials.
• Solicitations where the person, email, or social media advertisement seeks donations on behalf of a reputable organization, but the hyperlink points to an unaffiliated website.

Money mule schemes: involve “a person who transfers illegally acquired money on behalf of or at the direction of another.” Some examples of red flag indicators of money mule schemes include the following:

• A member who typically maintains a low account balance starts to receive transfers that do not fit his or her transactional history profile.
• A person opens a new account in the name of a business and, shortly thereafter, someone transfers the funds out of the account.
• A person opens accounts at multiple institutions in order to receive money from various individuals and business, then moves the money to other accounts at the direction of the member’s purported employer.

When reporting these schemes, FinCEN requests that financial institutions reference this advisory by including the key term “COVID19 MM FIN-2020-A003” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in this advisory.

Compliance: NCUA updates 2020 supervisory priorities Posted by AVCU on 7:56 AM

NCUA sent a letter to credit unions (20-CU-22) this week updating the agency’s 2020 supervisory priorities to reflect economic conditions emerging in the wake of the COVID-19 pandemic, as well as other statutory and regulatory changes.

A detailed analysis of the updates can be found on CUNA’s CompBlog.

Updates include:

• Examiners will review a credit unions’ good faith efforts to comply with the CARES Act. When necessary, appropriate actions will be taken to ensure credit unions are meeting their obligations under the new law. Examination areas of interest related to good faith efforts in complying with the following:
• Categorization of certain loan modifications;
• PPP Loans
• Change requirements for reporting loan modifications related to the COVID-19 pandemic to the credit reporting agencies;
• Foreclosure moratorium on all single family, federally backed mortgage loans between March 18, 2020 and May 17, 2020. Fannie Mae, Freddie Mac, FHA, VA and USDA subsequently extended the prohibition to June 30, 2020. The foreclosure moratorium expiration for mortgages purchased by Fannie Mae and Freddie Mac currently extends until August 31, 2020; 
• Up to a 360-day forbearance for borrowers with a single-family, federally backed mortgage loan that experience a financial hardship related to the COVID-19 pandemic; and
• Up to a 90-day forbearance for borrowers with a multifamily, federally backed mortgage loan that experience a financial hardship related to the COVID-19 pandemic.
• NCUA will review the actions taken by credit unions to assist borrowers facing financial hardship. Credit union policies, the use of loan workout strategies, risk management practices, as well as any new strategies that have been implemented to assist borrowers impacted by the pandemic will be reviewed.
• NCUA will not be assessing credit unions’ efforts to transition to the CECL standard until further notice. 
• Allowance for loan and lease loss accounts will be reviewed for adequacy as it relates to the pro-cyclical effects of economic downturns
• Liquidity risk, as the economic impact of the pandemic may result in additional stress on a credit unions balance sheet;
• Consumer compliance reviews will also now include compliance with the changes put in place as a result of the pandemic, including practices relating to the remittance fund transfer rule changes of Regulation E relating and concerning TILA Real Estate Settlement Procedures Act and Regulation Z Rescission rules that permit members to waive the waiting periods.
• As a result of the pandemic, NCUA has transitioned to examining for evaluating critical security controls -- rather than conducting the cybersecurity maturity assessments via ACET;
• NCUA will collect data on the type of services provided to hemp business during the examination process;
• NCUA will continue to conduct BSA/AML reviews during every examination.  Emphasis will continue to be on CDD and beneficial ownership requirements.

Congress passes bill to extend PPP deadline to Aug. 8 Posted by AVCU on 8:08 AM

The House and Senate passed a bill that would extend the deadline for applying for Paycheck Protection Program (PPP) loans. The president is expected to sign it shortly.

The bill, introduced by Senate Small Business Committee Ranking Member Sen. Ben Cardin (D-Md.), would extend the deadline for applying for PPP loans to Aug. 8.


Though the PPP still has approximately $130 billion in unspent funds, the program expired June 30 at midnight.

Credit unions are strong supporters of the PPP, but CUNA has engaged with Congress, the Treasury and Small Business Association with concerns about the program, including on the need for guidance on several matters and lender liability protection.

PPP forgiveness bill would remove regulatory hurdles

CUNA wrote in support of the Paycheck Protection Program (PPP) Forgiveness Act Wednesday, a bill that would simplify forgiveness of PPP loans under $150,000. The bill was introduced earlier this week by Sens. Kevin Cramer (R-N.D.), Bob Menendez (D-N.J.), Thom Tillis (R-N.C.) and Kyrsten Sinema (D-Ariz.).

“This bill will allow America’s small business owners and Main Street financial institutions to remain focused on serving their communities rather than jumping through burdensome regulatory hurdles. Specifically, this bill would provide forgiveness for Paycheck Protection Program (PPP) loans of $150,000 or less if the borrower submits an attestation form to the lender. It also ensures that the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.”


America’s credit unions have issued thousands of PPP loans, including more than 60,000 loans averaging $49,000 each from the smallest credit unions.

Agencies issue examiner guidance for considering pandemic effects Posted by AVCU on 8:25 AM

Four federal agencies, including NCUA, in conjunction with the state bank and credit union regulators have issued examiner guidance to promote consistency and flexibility in the supervision and examination of financial institutions affected by the COVID-19 pandemic.

No action on the part of supervised institutions is required.

“Stresses caused by the spread of COVID-19 have led to significant economic strain and adversely affected global financial markets,” a statement from the agencies reads. “The interagency guidance instructs examiners to consider the unique, evolving, and potentially long-term nature of the issues confronting institutions due to the COVID-19 pandemic and to exercise appropriate flexibility in their supervisory response.”

Analysis of the guidance can be found on CUNA’s CompBlog.

CUNA Forms COVID-19 Task Force, Aims to Become Resource for Credit Unions Posted by AVCU on 8:03 AM

In an effort to address the ongoing coronavirus pandemic’s impact on credit unions and the economy, CUNA announced the formation of the “COVID-19 Restart and Recovery Task Force” on Friday.

According to a statement from CUNA, the task force is made up of 27 credit union industry leaders representing credit unions, leagues, credit union support organizations and CUNA staff members. The group will discuss strategies, resources and best practices for credit unions as state and local governments begin to lift stay-at-home orders and ease safety restrictions on business operations.
“The Credit Union System COVID-19 Restart and Recovery Task Force is intended to act as an indispensable resource and partner to the credit union movement as stakeholders balance member needs and staff well-being moving forward,” said CUNA Chief Engagement Officer Greg Michlig.

According to the information provided by CUNA, the task force will focus on operational matters, provide guidance and strategies for credit unions as they restart paused business lines and recover from the negative impacts of the COVID-19 pandemic.
“While our primary focus will be related to credit unions restarting their business operations, we also see opportunity for long-term strategies that will help foster growth throughout the movement,” Michlig said.

Members of the task force include the following:

Jim Nussle, CUNA President/CEO
Greg Michlig, CUNA Chief Engagement Officer
Troy Stang, President/CEO, Northwest Credit Union Association (NWCUA), CUNA Board Chair
Paul Marsh, Teachers CU President/CEO, CUNA Small Credit Union Committee Chair
Lori Herrick, CEO, Manchester Municipal FCU
Tim Anderson, President/CEO, United States Senate FCU
 Mary Madden, President/CEO, Hudson Valley FCU
 Lily Newfarmer, President/CEO, Tarrant County’s CU
Sterling Nielsen, President/CEO, Mountain America CU
Sam Whitehurst, President/CEO, Summit CU
Brad Miller, Executive Director, American Association of Credit Union Leagues (AACUL)
Diana Dykstra, President/CEO, California & Nevada Credit Union Leagues (CCUL), AACUL Chair
Tracie Kenyon, President/CEO, Montana Credit Union League (MCUL)
Jared Ross, President, League of Southeastern Credit Unions (LSC)
Murray Williams, President/CEO, Iowa Credit Union League (ICUL)
Gigi Hyland, Executive Director, National Credit Union Foundation (NCUF)
Rob Purtell, SVP, Sales, CUNA Mutual Group
Mark Meyer, President/CEO, Filene Research Institute
Gail Tofil, SVP, Client Experience, CO-OP Financial Services
Tony Boutelle, President/CEO, Origence
Merry Pateuk,  SVP, Industry Engagement, PSCU
Ryan Donovan, CUNA Chief Advocacy Officer
Jessica Hrubes, CUNA VP, Strategic Credit Union Relations
Jill Tomalin, CUNA Chief Operating Officer
Todd Spiczenski, CUNA Chief Products & Services Officer
Jared Ihrig, CUNA Chief Compliance Officer
Susan Parisi, CUNA Chief Corporate Counsel
According to CUNA, the task force will meet on a biweekly basis to discuss strategic priorities including business continuity, digital services and automation, staffing and operations and industry financial impact.

2020 brings significant changes to IRAs Posted by AVCU on 8:52 AM

This year will see the most significant changes to individual retirement accounts (IRAs) in more than a decade.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, both recently signed into law by President Trump, are intended to help Americans save more for retirement and provide relief for individuals affected by the coronavirus (COVID-19) pandemic.

Following is a summary of the major IRA provisions

The SECURE Act provisions are designed to help expand retirement savings options and preserve retirement income.

Age restriction eliminated
Starting in 2020, taxpayers with earned income may make contributions to traditional IRAs at any age. Previously, traditional IRA contributions could no longer be made starting in the year the taxpayer reached age 70½.

This SECURE Act provision is effective for 2020 and later tax years, and is not retroactive. This means IRA owners age 70½ or older in 2019 cannot make prior-year contributions for 2019 in 2020, as they fall under the old eligibility rule.

This change brings the rules for traditional IRAs more in line with Roth IRAs, which have never had an age restriction for making contributions.

Payout provision
Starting with IRA owner deaths in 2020, most nonspouse beneficiaries who are more than 10 years younger than the IRA owner must distribute their inherited IRA assets within 10 years of the IRA owner’s death.

Previously, these beneficiaries could take payments from their inherited IRAs over their own life expectancies, which meant that beneficiaries in their 20s and 30s could stretch out their payments (and the taxes due on them) for 50 or more years.

There are exceptions to the 10-year payout rule for beneficiaries who, at the time of the IRA owner’s death, are:

• Married to the IRA owner
• Disabled
• Chronically ill
• No more than 10 years younger than the IRA owner
• Minor children of the IRA owner
• Recipients of certain annuitized payments begun before enactment of the SECURE Act

The exception for the IRA owner’s minor children does not apply to minor beneficiaries who are not the IRA owner’s own children. Once the IRA owner’s minor children reach the age of majority, they must switch to the 10-year payout period.

This 10-year payout provision applies to distributions from traditional IRAs, Roth IRAs, and savings incentive match plan for employees of small employers (SIMPLE) IRAs. It also is not retroactive, so the beneficiary payment options for IRA owner deaths in 2019 or earlier remain unchanged.

Required minimum distributions
The SECURE Act increased the age at which required minimum distributions (RMDs) from traditional IRAs and SIMPLE IRAs must begin from 70½ to 72. This provision is effective for distributions required to be taken in 2020 and later years by IRA owners who reach age 70½ in 2020 and later years.

This provision also is not retroactive, so IRA owners who reached age 70½ in 2019, and have already begun taking their RMDs, must continue to take them.

However, these IRA owners are not required to take RMDs in 2020 because the CARES Act waives all 2020 RMDs.

Penalty-free withdrawal exception
The SECURE Act now permits penalty-free IRA withdrawals for the birth or adoption of a child.

A “qualified birth or adoption” distribution is exempt from the 10% early distribution penalty tax (if applicable) for distributions of up to $5,000 in aggregate from IRAs and defined contribution retirement plans, 403(b) plans, and governmental 457(b) plans, per individual.

The $5,000 limit applies separately to each birth or adoption. A qualified adoptee is anyone (other than a child of the taxpayer’s spouse) under age 18 or an individual who is incapable of self-support.

“Qualified birth or adoption” distributions may be repaid at a later date as rollover contributions to IRAs and eligible retirement plans (other than defined benefit plans).

IRA contributions by graduate students
Effective for 2020 and later years, certain stipends, fellowships, and similar payments to graduate and postdoctoral students will be treated as eligible compensation for IRA contribution purposes.

Previously, because some of these types of payments were not considered eligible compensation, graduate students were not able to make IRA contributions unless they had compensation from other sources.

Difficulty of care payments
Like graduate students, certain foster care providers also receive payments that are not taxable income and, as a result, may not have been able to make IRA contributions unless they have compensation from other sources.

Under the SECURE Act, these “difficulty of care” payments may increase the amount of nondeductible IRA contributions they can make (but not above the annual statutory limit).


Two CARES Act provisions are designed to help Americans affected by the COVID-19 pandemic to both access retirement funds in cases of financial hardship and preserve retirement income by deferring RMDs and allowing repayments of CRDs:

1. Waiver of 2020 RMDs. The CARES Act waives 2020 RMDs from traditional IRAs, simplified employee pension (SEP) IRAs, and SIMPLE IRAs. IRA owners, including beneficiaries, will not be required to take a 2020 RMD from their IRAs or inherited IRAs.

The RMD waiver also applies to IRA owners who reached age 70½ in 2019 but did not take their RMD before Jan. 1, 2020. This means that IRA owners who reached age 70½ and chose to delay their payment until April 1, 2020, will not have to take their 2019 or 2020 RMD.

RMDs are not eligible for rollover. However, IRA owners who took a distribution in 2020—before the CARES Act was passed—may be able to roll over the distribution, but only if it is within 60 days of receipt of the distribution and all of the other rollover requirements are met.

In addition, for IRA beneficiaries, 2020 is disregarded for purposes of the “five-year” rule for beneficiary distributions when IRA owners died before their required beginning date. Instead, one year is added to the five-year period.

For example, if an IRA owner died in 2018, the assets in the inherited IRA must now be distributed by Dec. 31, 2024, instead of by Dec. 31, 2023.

It’s important to note that the new “10 year” rule for noneligible designated beneficiaries under the SECURE Act is not affected by this CARES Act provision. The “10 year” period applies only to certain beneficiaries for deaths in 2020 or later years.

If an IRA owner dies in 2020, the “10 year” period would not start until 2021, the year after the year of the IRA owner’s death.

2. Penalty-free withdrawal exception for CRDs. The CARES Act creates a penalty-free withdrawal exception for coronavirus-related distributions (CRDs). The provision allows IRA owners to withdraw up to $100,000 in aggregate from IRAs and qualified retirement plans (e.g., a 401(k) plan, 403(b) plan, governmental 457(b) plan)—without paying the 10% early distribution penalty tax (if applicable)—and repay those amounts to an IRA or eligible retirement plan.

A CRD is a distribution made on or after Jan. 1, 2020, and before Dec. 31, 2020, to a qualified individual. A qualified individual is:

• Someone (or the spouse or dependent of that person) who is diagnosed with COVID-19 or the SARS-CoV-2 virus in an approved test, or
• A person who experiences adverse financial consequences as a result of being quarantined.

This can include being furloughed, laid off, or having work hours reduced due for a variety of factors determined by the Treasury secretary, including lack of child care or the closing or reduced hours of a business.

CRDs, while penalty-free, are still taxable to the IRA owner. But they are taxed ratably over a three-year period—rather than in the year of distribution—unless the IRA owner elects otherwise.

To help preserve retirement income, IRA owners may repay CRDs over a three-year period, beginning with the day following the day the CRD is made to an IRA or eligible retirement plan.

Repayments may be made in single or multiple contributions, and if made within the three-year period will be treated as satisfying the 60-day rollover requirement.

Extended 2019 tax-filing & IRA contribution deadline
Separate from the SECURE and CARES Acts, the IRS also extended the deadline to make 2019 IRA contributions.

IRS Notice 2020-18, issued March 20, 2020, extended the 2019 tax-filing deadline from April 15, 2020, to July 15, 2020, but did not address the IRA contribution deadline.

The IRS subsequently updated the frequently asked questions on its website to confirm that the deadline for making IRA contributions also has been extended by three-months, from April 15, 2020, to July 15, 2020.

The SECURE Act and CARES Act have brought major changes to IRAs, and more changes are likely, especially in light of the coronavirus pandemic.

Congressional action needed to help FIs fight COVID-19 scammers Posted by AVCU on 7:24 AM

CUNA wrote in support of several bills it believes will help financial institutions combat financial scammers, it wrote Tuesday to the House Financial Services subcommittee on national security, international development and monetary policy. The subcommittee conducted a hearing Tuesday addressing ways financial bad actors are exploiting the COVID-19 crisis.

CUNA fully supports the Internet Fraud Prevention Act, introduced by Rep. Brad Sherman (D-Calif.), which would require the Federal Reserve, Federal Trade Commission, and FBI to study and report on Business Email Compromise Scams and require the Federal Financial Institutions Examination Council to include Business Email Compromise Scams in its Bank Secrecy Act and Anti-Money Laundering (BSA/AML) exam procedures.

“This effort could not be timelier. Nefarious actors are becoming more and more savvy, recruiting unsuspecting money mules – individuals who unknowingly transfer money acquired illegally in person, through a courier service, or electronically, on behalf of others,” the letter reads. “And, since the beginning of the pandemic, instances of reported cyber-attack have increased.”

Another CUNA-supported bill, introduced by Rep. Tulsi Gabbard (D-Hawaii), would require Federal Regulators, including NCUA, to issue guidance encouraging financial institutions to educate their members and customers at the signs of money mule scams.

CUNA also reiterated its principles that should be followed for any federal data security legislation:

• Any new privacy law should include both data privacy and data security standards;
• The new law should cover all business, institutions and organizations;
• Any new law should preempt state requirements to simplify compliance and create equal expectation and protection for all consumers. 
• Breach disclosure and consumer notification are important, but these requirements alone won’t enhance security or privacy:
• Hold entities that jeopardize consumer privacy and security accountable through private right of action and regulatory enforcement:   
• Recognize this issue for what it is--a national security issue.