By the Division of Banks


October 4, 2012

Matthew G. Schondek
President and CEO
Fall River Municipal Credit Union
333 Milliken Blvd.
Fall River, MA  02721

Dear Mr. Schondek:

This letter is in response to your letters dated March 26 and August 27, 2012 to the Division of Banks (the “Division”) in which you request an opinion relative to whether Fall River Municipal Credit Union’s (the “Credit Union”) policy for reimbursing individual directors the cost of the director’s health insurance is in compliance with Massachusetts law.

Massachusetts General Laws chapter 171, section 25 authorizes state-chartered credit unions to provide group life insurance, group accident and health insurance or group medical, surgical or hospital insurance or benefits for its employees, officers and directors.  Directors ineligible for the group benefit may be reimbursed up to the net dollar amount of the individual participant cost of the group benefit.

During the course of the Credit Union’s most recent examination by the Division, Division examiners questioned the policy of the Credit Union to reimburse an individual director’s health care cost by including a spouse’s portion of the health insurance premium in the cost of the director to be reimbursed.  You believe that the examiner’s position on this issue is incorrect and you are requesting a legal opinion from the Division to clarify this matter.

In your letter you indicate that, in developing the Credit Union’s policy on reimbursing individual directors for the cost of health insurance, section 25 does not indicate what can be considered a health insurance cost for a director.  You argue that it does not disallow the inclusion of two individual plans as a cost to the director.  Based on the Credit Union’s interpretation of section 25 of chapter 171, the Board of Directors has adopted a policy to reimburse health insurance premiums of individual directors as well as the requirements for documentation of those premiums.  Your position is that the health insurance premium of a director’s spouse is a health insurance cost to the director’s household and, therefore, to the director.

While the Division acknowledges the time and effort of the Credit Union in developing its policy on reimbursing health care costs of individual directors, the Division disagrees with your position that a spouse’s health care cost may be included in determining the cost to be reimbursed to a director.  The Division’s position is that the cost of a director’s health insurance premium authorized to be reimbursed under section 25 is the cost to the director and not his or her spouse, other family member, or household.  Based on the set of facts set forth in your letter, if a director of the Credit Union is insured under a spouse’s family plan, the director must obtain documentation on what the cost of an individual plan would be at the spouse’s place of employment and the Credit Union should retain that documentation for the purpose of determining the reimbursement cost to the director.  The Credit Union, as authorized under section 25 of chapter 171, may then reimburse the director the actual cost of his/her health insurance premium for an individual plan in an amount not to exceed the individual participant cost of the group benefit that the Credit Union provides to its officers and employees, whichever is the lesser.

The conclusions reached in this letter are based solely on the facts presented.  Fact patterns which vary from that presented may result in a different position statement by the Division.

Very truly yours,

Sandra Clarke
Chief Operating Officer