Earlier this year, the Trump Administration announced that it was going to end the production of the U.S. Penny. The cessation of the minting of pennies has resulted in some significant issues for the financial services industry. Fortunately, the United States Department of Treasury has recently published some guidance to address some commonly-asked questions.
The U.S. Treasury published Frequently Asked Questions (FAQs) to address penny circulation issues. While the guidance is for businesses, some of the answers may provide better insight to credit unions. Additionally, the Federal Reserve has announced new actions “to better support the circulation of pennies for commercial activity.” As part of that support, the Federal Reserve will resume accepting pennies from banks and credit unions at commercial coin distribution locations beginning on January 14.
The industry has seen its fair share of issues arising from the cessation of circulation. While non-cash transactions have not been affected, cash transactions have become more challenging, forcing the financial services industry to resort to some creative solutions. Some of those solutions have included creative messaging or penny buy-back incentives. Many credit unions have also had to navigate these challenges while also maintaining effective membership communication about the issues.
Among the published FAQs, the U.S. Treasury responded to the question of how to properly address the question of what to do as penny circulation decreases. The FAQs give the guidance that merchants will either need to round up or down to the nearest five cents. The guidance also says that retailers are to continue accepting pennies.
The additional, over-arching issue is addressing sales tax. While any amendments to the amount of sales tax are within the sole discretion of state and local jurisdictions, a recent report from the National Council of State Legislators (NCLS) provides a suggestion to adapt to the changes. According to the report, the NCLS recommends”…[a] form of rounding [that] is symmetrical rounding whereby if the final digit of the total transaction amount (including taxes) is 1, 2, 6, or 7 cents, the amount is rounded down to the nearest multiple of five. If the final digit is 3, 4, 8, or 9 cents, the amount is rounded up. Transactions totaling exactly $0.01 or $0.02 might be rounded up to $0.05. Rounding rules would not apply to payments made via electronic methods, checks, gift cards, or other non-cash instruments.”
While neither the Federal Reserve nor the U.S. Treasury have issued guidance specific to credit unions, the published FAQs provide some answers to credit unions questions. In considering operational changes that may need to occur as a result of penny circulation issues, credit unions should consider the totality of the risks involved.
Have questions or want to know more? Contact ViClarity’s compliance services team at compliancesupport@viclarityus.com.
For more information, email Heather Line.
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