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ALEXNDRIA, Va. – NCUA recently gave the go-ahead to a federally-chartered credit union wanting to use split dollar life insurance to fund employee benefit obligations. The FCU said the split dollar arrangement is owned by the employee and paid for by the FCU. The FCU treats the split dollar arrangement as a nominal loan to the employee to conform to Internal Revenue Service regulations to obtain favorable tax treatment, it added. The credit union also indicated the split dollar arrangement complies with 701.19 of NCUA’s regulations regarding benefits for employees of FCUs and the Office of General Counsel opinion letters 03-0512 and 04-0453, dated February 27, 2004 and November 24, 2004, respectively, regarding funding employee benefits with life insurance; and general safety and soundness considerations. NCUA Associate General Counsel Sheila Albin wrote “based on your description of the arrangement, we have no legal objection.”

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