Commonwealth Credit Union

“Any individual that has an account with the credit union is a member. In total, there are 90,132 members of the credit union. Elgibility to join commonwealth credit union is as follows: if a person or someone they are related to lives, works, worships, attends school or volunteers in the kipda and bluegrass regions, which includes the following 24 counties: anderson, bourbon, boyle, bullitt, clark, estill, fayette, franklin, garrard, harrison, henry, jefferson, jessamine, lincoln, madison, mercer, nicholas, oldham, powell, scott, shelby, spencer, trimble, and woodford.”

“Commonwealth credit union board of directors are elected by the membership at an annual meeting held in january of each year. Each primary member is entitled to one vote to elect the board.”

“Commonwealth credit union board of directors were provided with a copy of the form prior to the board meeting. They were asked to review the form and contact the ceo with questions. At the board meeting, the ceo provided explanations and answered questions from the board during the review of the form.”

“A statement of the credit union's compliance with kentucky revised statue 290.195 is included in the associate handbook which each employee signs as having read and agrees to abide by krs290.195 which provides that no director, officer or associates participate in interests that could give rise to conflict. Also, at the beginning of each year, every employee must sign a conflict of interest policy. The human resource department ensures that each employee signs and agrees to this policy and monitors that it is done.”

“Integrity hr is used as an outside consultant to provide an independent review of the positions, salaries, levels, and overall compensation. Integrity hr uses several sources of comparable data including cuna salary surveys, as well as local, regional and national salary data. In addition to integrity hr, cardwell consultants was also used for compensation studies.”

“The financials are made available and distributed to the public every year at the annual meeting in pamphlet form. Governing documents, conflict of interest policy and financials would also be distributed on a request basis to the public.”

“Unrealized loss on pension obligation -9,453,887. Capital reclassified as liability for unfunded pension (see narrative) -20,307,847.”

“The process has not changed from the prior year.”

“An accounting pronouncement was issued by the governmental accounting standards board (gasb) as it relates to accounting and reporting of pensions by governmental entities. The credit union's employees participate in a government sponsored plan. The pronouncement requires the plan to provide sufficient information to the entity for it to be able to recognize a liability for its share of the actuarial projected benefit due to its employees. Previously, the plan only required and provided information for the credit union to reimburse the plan for the current obligations due to the employees enrolled in the plan. The credit union is not subject to gasb pronouncements, but is required to account for liabilities based on accounting principles generally accepted in the united states of america (gaap). Gaap requires recognition of a liability if it is probable of payment and the amount can be measured, and thus requires the credit union to record a liability for the actuarial projected benefit obligation. Management acknowledged that this liability is probable of payment; however, the liability could not be measured as of december 31, 2014, since the records needed to measure this liability reside with the kentucky retirement system (krs). The new gasb pronouncement was required to be implemented for periods beginning after june 15, 2014. The credit union recorded a liability as discussed below based on an estimate from their actuary at december 31, 2015. The liability was established with a charge to undivided earnings. On december 17, 2015, the board of directors approved the credit union's plan to voluntarily cease participation in krs under the voluntary withdrawal rules effective june 30, 2016. The credit union did not record the amount of the liability of $42,700,000 determined and communicated to them by krs, but rather recorded a liability of $33,950,000 at december 31, 2015 based on the estimate prepared by the credit union's actuary. The credit union was required to continue making employer contributions for the period july 1, 2016 through december 31, 2016, which totaled $3,026,889. All payments made subsequent to june 30, 2016 were applied toward lump sum liability owed to krs. On april 20, 2017, the krs board of trustees formally approved the credit union's cessation from the retirement system and provided the credit union with a final liability of $54,257,847, prior to consideration of payments made after the extraction date. The lump sum payment is due in may 2017. The final liability figure from krs corrected the discount rate assumption that was incorrect in their initial calculation. The revision is also considered a correction of an error. The impact of the error noted above resulted in an additional increase in the withdrawal liability and a decrease in undivided earnings at december 31, 2015 of $20,307,847. The error correction resulted in a decrease in the net worth ratio for 2015 previously reported of 2.00%.”