WASHINGTON – They may seem like some small technical changes, but CUNA and NAFCU say they are very important to give credit unions flexibility in how revocable trust accounts are designated. Responding to an NCUA request for comment on a proposed rule concerning deposit insurance, CUNA and NAFCU wrote in separate comment letters that changes to forms for revocable trust accounts could be costly and inefficient. NCUA's proposal would require credit unions to name the type of account in the account title, for which many forms do not have a title line. "Many of these forms currently do not have a specific title line in which the intention to establish a revocable trust account, like a payable on death account, can be noted," CUNA Associate General Counsel Jeff Bloch wrote. The proposal also does not clarify if the revocable trust account designation must be in the electronic record, in which credit unions do not always note the revocable trust status, or paper records. CUNA warned that the "rigid requirement that the type of account be noted in the account title could also lead to needless confusion and possible loss of insurance coverage. Credit union employees would certainly note the existence of a revocable trust account on the agreement but may neglect to note it on the title line, if there is one, but instead may note it somewhere else on the agreement, such as on a "check-off" box. This technical error would likely not be corrected by the member, since he or she would not be familiar with these requirements. This could, therefore, result in a loss of insurance coverage if the credit union fails and NCUA does not apply the insurance rules for revocable trust accounts as a result of this technical error." NAFCU President and CEO Fred Becker added, "As currently configured, data processing layouts for account title or name fields are too small to accept the proposed required information and would need to be enlarged to accommodate the new titling requirement. This would be particularly critical for revocable trust accounts with multiple beneficiaries. Further program changes would be needed to adjust the name fields of all screens where the information appears. These programming changes would be expensive, and the cost would be borne by credit unions and their members." Credit unions would also have to manually check their documentation to identify beneficiaries and re-title the accounts, according to NAFCU, a burdensome and expensive task. In addition, NAFCU claimed that the changes would impact third parties, like the Internal Revenue Service, as well. The IRS uses the content of the name field to fill in similar fields on tax forms, but the proposal would cause problems for the agency in the name and social security matching phase. This would also affect credit bureaus, Becker pointed out. CUNA's comment letter suggested that NCUA provide the flexibility to "note the type of account on the agreement in the manner that is efficient for the credit union, as long as it is sufficiently clear enough for NCUA if there is ever a need to make an insurance determination in the event of a credit union failure." CUNA also recommended that NCUA postpone the rule's compliance date for one year to allow for proper training and make changes to the agreements as well as data processing systems. The trade group did support the proposed six-month grace period for deposit insurance coverage for members while restructuring accounts following a credit union merger or death. CUNA also approved of the clarification that Coverdell Education Savings Accounts are insurable. [email protected]

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