Understanding and Addressing the New NCUA Succession Planning Rule

The NCUA has released its new succession planning rule in final form. The new regulations will apply to all federally insured credit unions, whether federally or state charted. The NCUA’s stated purposes for the new rule were to, first, reduce the volume of mergers where a lack of a leadership succession is a factor in the merger decision, and, second, address the risk associated with “baby boomer” generation retirements.
The new rule goes into effect on Jan. 1, 2026. January will be here before we know it. Credit unions should begin reviewing and preparing to address the new succession planning requirements now to ensure compliance.

Noteworthy NCUA Succession Planning Requirements

While credit union leaders should review the rule in full, there are a few noteworthy requirements that credit union leaders should keep top of mind.

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First, establish what positions need to be part of the succession plan. Under this rule, succession plans must cover members of the credit union’s Board of Directors, management and assistant management officials, senior executive officers and other critical personnel. There is flexibility regarding who should be included, as critical positions will vary by credit union size and complexity. However, it is unlikely that having a succession plan for only the CEO will be sufficient.

Second, define “sufficient” detail regarding timing to the extent possible. The new rule requires succession plans to articulate expected retirement or vacancy dates for relevant positions. The rule allows for “unknown” to be an answer to the retirement date question. However, credit unions are encouraged to establish a plan with “sufficient detail” to allow for effective planning, and there is an inference that establishing dates for most positions will be part of the evaluation of sufficiency.

Third, articulate how you will fill positions as they turn over. Credit unions must detail their plans to fill positions as they are vacated, including recruitment strategies. When internal candidates are part of the plan, activities related to developing those employees’ skill sets would likely be part of this discussion.

Fourth, make sure the Board is adequately involved. The rule requires that the board must have a “working familiarity” with the succession plan. As a result, the plan should be incorporated into new board member orientation and should undergo periodic board reviews.

Addressing the NCUA Succession Planning Rule

Updating or developing a succession plan in alignment with the new rule can be a daunting task for credit unions. Here are three considerations to help guide the process.

1. Realize the value of succession planning other than just regulatory compliance.

Let’s face it, there is uncertainty regarding enforcement of new regulations at this time. Our new federal administration’s approach to regulation in general, and the new list of NCUA priorities articulated by Chairman Hauptman in January 2025, give the impression that regulatory enforcement may be less stringent going forward. It may be tempting to address the new rule from a purely compliance standpoint, and then make the assumption that the new approach to regulatory enforcement will result in notably lower compliance risk than the industry is accustomed to.

However, there is value to be derived by credit unions who establish or update their succession plans with the perspective that planning for leadership succession is an important risk management process, not just a regulatory compliance requirement. Have a discussion that goes beyond just regulatory compliance.

2. Consider options to help determine retirement or vacancy dates.

The element of defining a “turnover” date for specific positions can be one of the more challenging elements of succession planning. As a result, credit unions may consider entering deferred compensation arrangements to help establish a timeline for leadership transitions. One of the most common deferred compensation agreements is the split dollar life insurance arrangement.

The benefit of split dollar plans is that they allow flexibility for tax-free cash payments to the executive on a pre-defined timeline. That timeline can be established around a person’s planned or intended retirement date, providing an incentive to remain engaged through that date but then essentially no incentive to stay beyond that date.

It is important to get advice from a knowledgeable expert before signing any contracts to make sure your split dollar plan is right for your credit union’s succession planning objectives. The same is true for other deferred compensation arrangements.

3. Find a balance between confidentiality and transparency.

Succession plans are not required to be made public. However, it is reasonable that stakeholders may ask to see the plan. Sharing succession plans with current and future stakeholders can be beneficial in demonstrating that you have addressed succession risks in a thoughtful and effective manner. On the other hand, refusing to share your succession plan with stakeholders may raise a red flag in their mind. Either way, credit unions should address such requests in a manner that is responsive to that stakeholder while also maintaining appropriate confidentiality.

Consider asking yourself what a candidate interviewing for your credit union’s leadership position might think of your succession plan if they reviewed your plan during the recruiting process. Can you provide a written plan that reflects positively on your credit union? What impression will this candidate have if you do not have a plan to share or refuse to share your succession plan?

In conclusion, smaller, resource-constrained credit unions are already struggling to keep up with compliance requirements. On the surface, this rule may seem to exacerbate that struggle. However, proactively planning for leadership succession now will ultimately help ensure long-term viability for credit unions. For further guidance and support, credit unions should consider reaching out to a trusted, third-party advisor.