Dear Credit Union Board of Directors and Chief Executive Officers:
On December 18, 2020, the NCUA Board approved changes to its regulations and associated methodologies for computing the annual operating fee charged to federal credit unions, as well as the resultant Operating Fee Schedule for 2021. I am pleased to inform you that operating fees charged to federal credit unions will decrease by an average of 19.6 percent in 2021.
The enclosed 2021 Operating Fee Schedule will help you calculate the exact amount of your credit union’s 2021 operating fee. The enclosure includes a web link to the NCUA’s online calculator (opens new window). If your credit union owes an operating fee, it will be due no later than Thursday, April 15, 2021.
This letter provides additional insight to the operating fee calculation and payment options.
Why did the 2021 operating fee methodology change?
In July 2020, the NCUA Board published in the Federal Register several proposed changes to the methodology it uses for computing the annual operating fee paid by federal credit unions and requested public comments about those changes. At its December meeting, the Board approved the proposed changes to: (1) clarify the treatment of the capital project budgets when calculating the operating fees; and (2) clarify the treatment of miscellaneous revenues when calculating the operating fees.
In addition, the Board also approved amending its rule for determining total assets used as the basis for calculating the Operating Fee by: (1) excluding Paycheck Protection Program (PPP) loans from the computation of a credit union’s total assets; and (2) using the average of the four quarters’ call report data available at the time the Board approves the annual budget to compute total assets instead of using the projected fourth quarter total assets.
What is the timeline for the billing?
In March 2021, federal credit unions with total assets greater than $1 million will receive an invoice for their 2021 operating fees. The operating fee exemption continues to apply to federal credit unions with total assets of $1 million or less. Your credit union’s 2021 operating fee will be based on a four-quarter average of total assets reported as of September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019.
Concurrently, all federally insured credit unions will be notified of any adjustments needed to maintain their Share Insurance Fund capitalization deposits at one percent of insured shares, as required by the Federal Credit Union Act. Your credit union’s capitalization deposit may be adjusted up or down, based on insured shares reported as of December 31, 2020.
For federal credit unions, the NCUA will combine your operating fee and capitalization deposit adjustment into a single invoice. Payment will be due no later than April 15, 2021.
How do I make the payment to the NCUA?
All federally insured credit unions are encouraged to participate in the Pay.gov direct debit program. To enroll, please complete the Authorized Electronic Transfer Payments form, which can be found on ncua.gov, and email the form to firstname.lastname@example.org. Once enrolled, credit unions will continue to receive invoices by mail. Payments will be drafted automatically on the due date; no further action is required.
Federally insured credit unions that do not participate with the Pay.gov (opens new window) direct debit program must submit payments to the NCUA in accordance with the instructions provided with the invoice and no later than Thursday, April 15, 2021.
What are the main factors impacting the operating fee?
Three major factors contribute to the 19.6 percent average decrease in the 2021 operating fee rates: (1) growth in reported credit union assets in 2020; (2) changes to the treatment of the NCUA’s capital budget and miscellaneous revenues approved by the NCUA Board on December 18, 2020 as described above, and (3) the change in the computed Overhead Transfer Rate (OTR) between 2020 and 2021.
Each year, the NCUA uses the OTR to determine how much of the NCUA’s operating budget is funded by the National Credit Union Share Insurance Fund. The OTR is derived from estimates of the NCUA’s resources that will be used for insurance-related functions. Generally, if the OTR increases, the operating fee revenue collected from federal credit unions decreases, and vice versa.
For 2021, the OTR increased to 62.3 percent, a change of 100 basis points compared to the 61.3 percent level in 2020. This change results in a reduction to the estimated 2021 operating fee revenue compared to the 2020 operating fee collections. Additional discussion of the OTR and detailed information about the NCUA budget are available on the Budget and Supplementary Materials page of the NCUA website.
To preserve the relative relationship of the operating fees paid by federal credit unions with different levels of reported assets, the range for each operating fee tier has been adjusted by the computed growth in federal credit union total assets, net of all reported PPP loans, using the average of the same four quarters’ call report data used to compute your credit union’s operating fee. You will see the new asset ranges to the right of the adjusted fee rates on the enclosed chart.
If you have any questions about your credit union’s operating fee, please contact the NCUA’s Office of the Chief Financial Officer at email@example.com.
Rodney E. Hood