CUNA MUTUAL RETIREES SEEK
REVIEW OF BENEFITS DISPUTE
WASHINGTON-A group of former CUNA Mutual employees has asked the Supreme Court to overturn an appeals court decision that said the credit union insurer was within its rights to cancel payments on retirees' health care costs.
The lower court, the U.S. Court of Appeals for the Seventh Circuit, ruled last year that CUNA Mutual did not violate provisions of the Employee Retirement and Income Security Act, known as ERISA, when it stopped paying out retiree health care costs in 2008, including to non-union employees who had agreed to trade their accrued unused sick leave to cover their portion.
The change in retirees' healthcare policy allowed CUNA Mutual to book a $120-million gain in 2008 by removing this huge liability from its books.
The former CUNA Mutual employees bringing the suit were Thomas Olson, the well-known former senior vice president corporate affairs, John Sullivan, William Phillips, Paul Specht and Karen Withee.
Under the policy, CUNA Mutual had calculated how much each person's unused sick-leave days would be worth at that person's daily wage. The company's union workers could choose between taking that sum in cash or putting it toward the retiree's premium, but non-union employees did not have that option.
In dismissing the case, the appeals court explained that health care is considered a welfare benefit and not a pension benefit under ERISA and employers must fund pension benefits but not welfare benefits under ERISA. In fact, employers are free to reduce or abolish benefits under welfare plans. "CUNA Mutual therefore was entitled to cut back on health benefits even though this dashed retirees' expectations," the court ruled.
The retirees argued that the credits they accrued by accumulated unused sick leave amounted to assets of their retirement plans. But the court ruled otherwise, saying the sick-leave accounts of former managers don't contain money and never did. "Far from being assets, these balances were liabilities: they represented amounts that CUNA Mutual had agreed to contribute to the Plan in lieu of cash from retirees," the appeals court ruled. "CUNA Mutual reserved the right to amend its health care plan. It is a business decision, not a legal question."
A CUNA Mutual representative expressed confidence the appeals court's ruling will stand.
"We are pleased the federal courts in Madison and Chicago dismissed this case, and confirmed CUNA Mutual Group did not violate the law when it made the difficult decision to end subsidies for retiree health coverage," said Rick Ulhman, senior manager-media relations. "This is not a case that merits review by the U.S. Supreme Court."
SENATE SEEKS AUDIT OF NCUA,
BANK REGULATORS' EXAMS
WASHINGTON-THE SENATE BANKING COMMITTEE CALLED ON OFFICIALS AT NCUA AND THE BANKING REGULATORS LAST WEEK TO CONDUCT INTERNAL REVIEWS ON THE APPLICATION OF THEIR OWN STANDARDS DURING EXAMINATIONS.
Sen. Tim Johnson, chairman of the Senate panel, called on each agency's Inspector General to conduct an audit reviewing examination timelines and how each agency ensures consistency in its examinations. "Please report on the ability of regulated institutions to question examination results, such as through an ombudsman, an appeals process or informal channels, and the frequency and success of such appeals," wrote Johnson, the North Dakota Democrat.
The Senate's interest comes as counterparts in the House are debating a bill that would create a new exam appeals process and a national ombudsman where dissatisfied CUs and banks could appeal their regulators' examination findings. The Senate panel is also said to be studying a similar proposal.
"Recently," wrote Johnson, "I have heard numerous concerns from community banks and credit unions that the financial regulators' examiners are conducting examinations with unclear standards or with inconsistent application of agency policies and procedures. Community banks and credit unions indicate that exam concerns create uncertainty in their business operations and hesitation to provide credit to their customers."
Johnson sent his request to NCUA, the FDIC, the Comptroller of the Currency, the Treasury, the Federal Reserve and the Consumer Financial Protection Bureau.
NCUA SETS TERM FOR 40-YEAR
MORTGAGE MODIFICATIONS
ALEXANDRIA, Va.-NCUA said last week a federal credit union may set the maturity date for modified or refinanced mortgages beyond the regulatory 40-year maturity limit, as long as the terms of the original loan were no more than 40 years.
"In other words, a loan that complies with the long-term maturity limitation at the time it is made will continue to comply with the maturity rule, even if it is later renegotiated and its maturity is modified," NCUA told FCUs in a legal opinion signed by its General Counsel, Michael McKenna.
The NCUA opinion comes as numerous credit unions, having recently begun offering mortgages out to 40 years, inquired about the legality of extending the terms of troubled loans to as long as 50 years.
NCUA's rules allow that the loan term is determined from the modification date, not the origination date. "A loan modification that is a new or subsequent transaction complies with the 40-year maturity rule if, at the time the FCU makes the new loans, the new loan is made for a period not exceeding 40 years," McKenna wrote.
NCUA believes its interpretation is consistent with federal guidance.
