Banking Interpretations


November 10, 2004

Dear [                       ]:

Your letter dated November 2, 2004 to Superintendent Taylor has been referred to me for review and response. As I understand your inquiry, your letter asks if a New York State chartered credit union may invest in a proposed insurance policy. You further explain that the "purpose of the investment in the insurance policy is to fund an employee benefit plan for one or more of the credit union's employees." You go on to state that the investment in the insurance policy "will satisfy all the requirements set forth in regulations approving this type investment for federal credit unions...." You ask first whether a State chartered credit union may make the type of investment you have described.

It is not clear from your letter what type of insurance benefit plan is being contemplated. In my experience, such insurance policies typically are intended to provide for increased retirement benefits or life insurance benefits for corporate executive officers and not for the general employee base. (Please advise me if this assumption is incorrect.)

Section 477 of the Banking Law impacts both types of benefit plans. Subdivision 1 of Section 477 provides that a New York State credit union may provide a nondiscriminatory pension plan to its employees. Subdivision 2 of Section 477 provides that a credit union may provide life insurance for its employees, provided the insurance does not only protect "highly compensated employees."

Accordingly, if your proposed insurance policies were typical of the plans sold to corporate entities, they would not appear to comply with the provisions of Section 477. If, however, your proposed insurance benefit plan is of a different kind, please advise so that we may consider it further.

As to your second question regarding whether Federal credit unions authorized to do business in New York may purchase such insurance policies, please be advised that this Department has no authority to opine on the powers of Federal credit unions.

I trust you will find the above helpful. I look forward to your further correspondence on this matter. In addition, please do not hesitate to contact me by phone at (212) 709 - 1641.

Very truly yours,

Gene C. Brooks
Assistant Counsel