Note: the numbers initially published of eligible credit unions were updated as of October 7, 2021.
Recently the former NCUA General Counsel Bob Fenner, now in private practice, asked if I was aware of the Employee Retention Credit grants provided under the Cares Act.
I had no knowledge. He sent me a brief description:
There is a provision in the federal stimulus legislation not well publicized and not well understood that may entitle a credit union to significant federal funds.
The criteria to qualify are:
- the credit union averaged fewer than 500 full-time employees in 2019, and
- the gross income in quarter 4 of 2020 declined by 20% or more when compared to quarter 4 of 2019, or
- gross income in any quarter of 2021 declined by 20% or more when compared to the same quarter of 2019.
The reason for the decline in gross income does not matter.
The credit union is eligible for up to $7,000 per employee per qualifying quarter in federal funds, in the form of so-called Employee Retention Credits.
Finally, if your CU has an 80% or more interest in one or more CUSO’s, you must consolidate the books for purposes of determining the number of employees and applying the gross income test.
This IRS official website gives a January 26, 2021 update on the program’s extension into this year.
Estimate of Number of Credit Unions Eligible
Scanning the data for credit unions with fewer than 500 employees in 2019 and declines in total revenue in one of the three applicable quarters (2020-4th, 2021-1st and 2nd) shows the following count:
For test 1 (empl <500 @ 2019, 4Q ’20 income -20%+): 782 CUs
Test 2 (excluding test 1): 350
Test 3 (excluding test 1 & 2): 135
The total of 1,267 includes mostly smaller credit unions. However the results show that a few credit unions with over $1 billion would also qualify.
This list could be expanded if additional credit unions meet the negative 20% fall in revenue for the third and fourth quarters of 2021 versus the comparable quarter in 2019.
Bob is working with a colleague, Darrell Smith, CEO of Highmark Companies. He describes their approach as follows:
There is no fee for a consultation and a determination whether a CU qualifies. There is a fee only if a CU qualifies and uses our services to obtain the credits. We don’t talk fees until we do the initial consultation.
Our services include determining qualifying amounts, preparing the forms to be filed with Treasury, providing a pre-submission audit review from an independent accounting firm, and working with the CU and their payroll provider to submit to IRS.
He continues: It is a complicated process unless you have studied it carefully and understand it. Sometimes credit unions who have not carefully studied the law and the IRS guidance often conclude either they are not qualified when in fact they are, or they don’t get everything they are entitled to.
Once you understand all the ins and outs of the process, it does not take long to complete the forms. It does however take anywhere from 2 to 10 months to receive the money from the Treasury Department. So while it is definitely good money that qualifying credit unions are legally entitled to, it’s not quick money.
As one example, we recently worked with a with 55 employee credit union that will obtain $1.1 million based on the first three quarters of 2021. We will assist credit unions of any size.
Resources to Help
Bob’s contact information is email@example.com and Darrell Smith at Highmark Companies is firstname.lastname@example.org. The only information about their program is what they have sent me. So as with all contacts, credit unions should always perform their own due diligence, as I am sure Bob in his former General Counsel role would advise.
I am not aware of any other organizations providing credit unions assistance to access this program’s funds. Bob’s heads up could be a valuable service especially if smaller credit unions who are likely most in need, can be easily qualified.
If readers have other information on this program that would benefit credit unions, I would be glad to offer it in future posts.