NCUA Final Succession Planning Rule Explained

In December, the NCUA approved its final credit union successional planning rule, which requires federally insured credit union boards to establish succession planning processes for key positions and will go into effect on Jan. 1, 2026.

The final rule states that the board must “establish and comply with a written succession plan that addresses certain specified positions and contains specified elements. In addition, the board of directors will be required to review the succession plan no less than every 24 months.”

Strategic Considerations Including Mergers

While the NCUA’s final rule brings new requirements for credit unions, understanding its core purpose is essential before diving into the details. At its heart, this regulation aims to strengthen credit union sustainability.

In a statement published on Dec. 17, 2024, previous NCUA Chairman Todd M. Harper said: “This final rule on succession planning establishes a way for the NCUA to address one of the most common causes for unplanned and unforced credit union mergers. It also ensures that smaller institutions remain the cornerstone of our nation’s federally insured credit union system.”

​​Before examining the specific requirements of the rule, credit unions should consider their broader strategic position. While the NCUA’s goal is to prevent unplanned mergers, strategic mergers can be an effective succession planning tool. In fact, for some credit unions, particularly smaller institutions, considering merger opportunities might be the most prudent succession strategy.

Smaller-sized credit unions and even some mid-sized institutions may find they can’t compete in an era of rising executive compensation, increased technological complexity, and rapid industry transformation. Consequently, seeking out an appropriate merger partner may help solve succession issues.

Larger credit unions, meanwhile, may find that mergers are a way to bring more talent into their organization as a pipeline for future leadership roles that include CEOs and other C-suite positions.

Whether your credit union is considering a merger or planning to maintain independence, compliance with the NCUA’s specific requirements is mandatory (for federal credit unions). Let's examine what your credit union needs to include in its succession plan.

Credit Union Succession Planning Requirements

The NCUA’s final rule was published late last year. I have summarized the key points below.

General: Federal credit unions must have a written succession plan approved by the board of directors that is “consistent with the credit union’s size and complexity.” In other words, larger credit unions with more complex operations will need more substantial plans that cover more positions. The plan must be reviewed by the board at least every two years.

Covered positions: The succession plan must, at a minimum, cover the following positions or their equivalent (if the CU uses different position titles):

• all members of the board of directors;
• management officials and assistant management officials, including a credit union’s chief executive officer, any assistant chief executive officer (including any assistant president, any vice president, or any assistant treasurer/manager), the chief financial officer (or controller); and
• any other personnel the board of directors deems critical given the 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 the succession plan: The succession plan must, at minimum, contain the following information for each of the above positions:

• the title for each covered position and the expiration of the incumbent’s term (if serving in a term-limited capacity) or other anticipated vacancy date if known (such as the CEO’s retirement eligibility date or announced departure date);
• the credit union’s plan to permanently fill vacancies for each of the positions; and
• the credit union’s strategy for recruiting candidates with the potential to assume each of the positions. The strategy must consider how the selection and diversity of skills among the employees covered by the succession plan collectively and individually promote the safe and sound operation of the federal credit union.

Board responsibilities: The board of directors must:

• approve a written succession plan that meets these requirements; and
• review and update, as necessary, the succession plan following a schedule established by the board of directors but no less than every 24 months.
• In addition, newly appointed board members must be familiar with the plans within six months of their appointment.

For federally insured, state-chartered credit unions in states that have established succession planning requirements, the NCUA will defer to the state’s requirements if no conflict exists between the final rule and the state’s rules.

The NCUA provides a template to help small credit unions create their plans.

Conclusion

While these requirements may seem extensive, they provide a framework for ensuring your credit union’s continued success. How you implement them should align with your strategic goals, including any merger considerations discussed earlier. To help credit unions navigate these decisions, we invite you to download our free white paper “Succession Planning and Mergers.”

Ultimately credit unions wish to positively impact the membership, employees, and communities they serve. The succession planning process is an ideal time to take a fresh look at the mission of the credit union and evaluate the best pathway forward. Download the free white paper now.