Dependent Care Reimbursement for Board Members
I went on my weekly Target run and ended up in the fashion section. Are the 1990s back? I saw a lot of clothing I might have worn in high school, so I thought I should do a gut check.
Fortunately, the NCUA confirmed that we are well into the 21st century by introducing a proposed rule to permit reimbursement of dependent care. Why is that a big deal?
In 1992 and then in 1999, the NCUA issued legal opinions that specifically stated that child care was not to be reimbursed. Both opinions claimed it would violate section 701.33 which allowed “reasonable and proper costs” to be reimbursed. But at its January 22, 2026, meeting, citing a letter from America’s Credit Unions, which was based on feedback from its Small Credit Union Committee, the NCUA introduced a proposed rule allowing not just child care but care for all dependents to be reimbursed to give volunteers more flexibility to attend meetings. The rule was received positively by NCUA Chair Kyle Hauptman, who emphasized that the proposed rule is an important step in supporting credit unions’ unique reliance on volunteer officials by addressing growing challenges that can make board service difficult.
A Little Bit of History
The Federal Credit Union (FCU) Act, passed in 1934, allows only one Board member to be compensated for their service. In 1975, the NCUA enacted 12 CFR 701.33 which clarified that compensation did not include reimbursement for “reasonable and proper costs” that FCU officials incurred while carrying out their responsibilities.
Traditionally, those costs meant out-of-pocket expenses, but in 1988, the NCUA proposed to allow lost wages or paid leave be considered “reasonable and proper costs” rather than compensation. At the time, FCUs resisted this effort, concerned it would dampen the spirit of volunteerism that distinguished credit unions and cause potential tax issues. The NCUA chose not to pursue that proposal. In 1992, the NCUA sought public comment on whether to include a reasonableness standard or leave the determination to the FCU boards. The feedback led to the latter, with the NCUA providing guidance for ambiguities.
In the 1992 Legal Opinion Letter, 92-0507 , the NCUA said, “In our view, neither baby-sitting expenses nor lost pay or leave are "reasonable and proper costs" that may be paid by an FCU. Payment of such costs to a volunteer official would violate Section 701.33.” In 1999, a credit union asked the NCUA to reconsider. That Legal Opinion Letter, 99-1215 , stated, “Our view is that payment of child care expenses, like reimbursement for lost leave or pay for volunteers who take time away from their jobs to attend to credit union business, would violate NCUA's regulation.”
A Persuasive Argument
On May 7, 2024, America’s Credit Unions sent a letter , penned by Regulatory Advocacy Senior Counsel Luke Martone, outlining reasons why the agency’s existing position should go the way of grunge rock. The letter likened the expense to the permitted travel expenses, noting that for a Board member or officer with young children, travel to attend an in-person meeting requires a paid caregiver, absent a trusted and available family member. It also noted that many board meetings are scheduled for evenings or weekends, which are outside regular daycare or school hours.
The NCUA agreed, providing details in its proposal about the rising cost of childcare and the decline of volunteerism.
A Few Details
The proposed rule would apply only to FCUs, including corporate FCUs. Federally insured state-chartered credit unions (FISCUs) would be subject to its state-specific board reimbursement policies. FISCUs are not subject to 701.33 and must comply with applicable state laws, instead.
Section 701.33(b ) only allows reimbursement in conjunction with credit union responsibilities. This currently excludes directors emeriti acting in an honorary capacity. However, the proposal invites comment on inclusion of associate directors, directors emeriti, and other volunteer officials.
The proposed rule would allow FCUs to have discretion to provide for the reimbursement or direct payment of dependent care costs. The payments would be discretionary, instead of mandatory. The FCU board of directors would be responsible for such decisions.
Comments are due 60 days after publication in the Federal Register and our Regulatory Team will submit a comment letter on behalf of America’s Credit Union
Questions? Comments? Reach out to compliance@americascreditunions.org