Some Key Points on Succession Planning

The National Credit Union Administration (NCUA) has released a final rule on succession planning, with an effective date of January 1, 2026. The final rule amends parts 701 and 741 of NCUA’s regulations. Essentially, it requires credit union boards of directors to establish processes for succession planning for key positions. Succession planning is the process through which federally insured credit unions (FICUs) identify, develop, and retain key personnel, to ensure viability and continue effective performance. The final rule covers all FICUs, which the NCUA finds appropriate to protect the National Credit Union Share Insurance Fund (NCUSIF) from undue risk, noting that “[t]he inclusion of FISCUs within the scope of the final rule is consistent with the Board’s statutory authority to ensure a safe and sound system of cooperative credit for its member-owners.”

This statement from current NCUA Chairman Todd M. Harper states that “[t]his 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.”

So, what will be expected of credit unions? Section 701.4(e) will require a FICU to establish a written succession plan, approved by the board of directors, that is consistent with the credit union’s size and complexity. The regulation states that, at a minimum, the plan should include the following “covered positions” or “their equivalent if the federal credit union has adopted different position titles”:

“(i) Members of the board of directors;
(ii) Management officials and assistant management officials, as those terms are defined
in Appendix A, if provided for in the federal credit union’s bylaws, and, to the extent not
already covered, the senior executive officers identified in § 701.14(b)(2); and
(iii) 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.”

For each covered position, the plan should identify the title of each covered position, an anticipated vacancy date, the FICU’s general plan or strategy for permanently filling vacancies for each of the positions and the FICU’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 promotes the safe and sound operation of the federal credit union.”

The NCUA notes that succession plans should “include an estimate of the budgetary impacts of executing the succession plan, including costs associated with new hires, such as any hiring of recruitment firms and any increased compensation packages for new hires. Credit unions are not required to have an exact figure for any such anticipated costs, but at a minimum should provide an estimate to allow for better planning.”

Please note that the board of directors will be required to review the succession plan no less than every 24 months.

Furthermore, the final rule adds succession planning to the list of items that directors must have a working familiarity with. Per the final rule:

“(b) * * *
(3) At the time of election or appointment, or within a reasonable time thereafter, not to exceed six months, have at least a working familiarity with, and to ask, as appropriate, substantive questions of management and the internal and external auditors of:
(i) Basic finance and accounting practices, including the ability to read and understand the Federal credit union’s balance sheet and income statement; and 
(ii) The Federal credit union’s succession plan established pursuant to paragraph (e) of this section.”

Additionally, the NCUA has drafted a sample template for succession plans that may be appropriate for smaller FICUs, and helpful to FICUs of all sizes. However, the NCUA noted that federally insured state-chartered credit unions (FISCUs) choosing to use the template should also consult any applicable state law requirements.

With respect to Part 741, which discusses requirements for insurance, the final rule states that:

Ҥ 741.228 Succession planning.

Any credit union that is insured pursuant to Title II of the Act must adhere to the requirements in § 701.4(b)(3) and (e) of this chapter, to the extent these regulatory provisions do not conflict with an applicable state requirement.”

Credit unions can also access our Final Regulation Summary on Succession Planning on our Advocacy website here.