NCUA Final Rule Summary: Succession Planning

Final Rule Summary National Credit Union Administration: Succession Planning

NASCUS Legislative and Regulatory Affairs Department
December 17, 2024

On December 17, 2024, the NCUA Board unanimously approved a Planning. The final rule requires that federally insured credit union (FICU) boards of directors establish a written succession plan that addresses specified positions and contains certain information. It also requires newly appointed members of a credit union’s board to have a working familiarity with the credit union’s succession plan no later than six months after appointment.

The Board issued this final rule and believes that without specific regulations on succession planning, the Agency lacks the tools it needs to address deficiencies in a FICU’s succession planning process.

The final rule is effective January 1, 2026, giving credit unions time to develop succession plans and will be reapproved three years after its effective date for a term of the Board’s choosing.

Summary

The NCUA issued a proposed rule on July 25, 2024, on which NASCUS filed comments. The NCUA has made several amendments to the proposed rule in light of comments from the industry. The final rule includes the following:

  • A requirement the credit union board must review its succession plan no less than every 24 months, as opposed to the annual review initially proposed.
  • Removing loan officers, credit committee members, and supervisory committee members from the list of FICU officials who a credit union’s succession plan must cover.
  • Streamlining the required contents of the succession plan, specifically, the rule no longer specifies that a succession plan must address unexpected or temporary vacancies in covered positions.
  • Deviations from approved succession plans are no longer required to be documented in the Board minutes.
  • The Board has also issued a Succession Plan Template to assist credit unions as part of the final rule.

Federally Insured State Chartered Credit Unions

The final rule also covers federally Insured State Chartered Credit Unions (FISCUs). However, the final rule provides that for FISCUs in states with established succession planning requirements, the NCUA will defer to those requirements “to the extent no conflict exists between the final rule and the state requirements.”

The NCUA further states in response to comments on the proposed rule, that deferral to the states does not apply to other issuances in the form of guidance as “FISCUs are not required to comply with such guidance because it is by definition non-binding.” Additionally, FISCUs should work with their state regulator if they elect to utilize the NCUA’s template in developing their succession plans.

Final Rule: Succession Planning Requirements

A credit union must establish a written succession plan, approved by the board of directors, and consistent with the credit union’s size and complexity. When evaluating the plan, the NCUA will consider the size of the credit union, its complexity, and the risk of its operations.

Covered positions: The plan, at a minimum, will cover the following positions or their equivalent:

  • Members of the board of directors
  • Management officials and assistant management officials, defined in Appendix A if provided for in a federal credit union’s bylaws, and senior executive officers identified in §701.14(b)(2); and
  • Any other personnel the board of directors deems critical given the federal credit union’s size, complexity, or risk of operations. This includes new positions that may be required due to planned changes in operations, supervisory landscape, or corporate structure.

Contents of a succession plan: The plan must contain, at a minimum, the following regarding each covered position:

  • The title for each covered position and the expiration of the incumbent’s term or other anticipated vacancy date if known (e.g., incumbent’s retirement eligibility date or announced departure date).
  • The credit union’s plan for permanently filling vacancies for each of the positions.
  • The credit union’s strategy for recruiting candidates with the potential to assume each of the positions including how the selection and diversity of skills among the employees covered by the succession plan.

Board responsibilities: The board of directors must:

  • Approve a written succession plan that meets the requirements discussed above; and
  • Review, and update as necessary, the succession plan in accordance with a schedule established by the board of directors but no less than every 24 months.