Do we need to have an Affirmative Action Plan (AAP) in place once we have hit the 50 employee mark, but do not sell any government savings bonds (but do still redeem them)?

We believe that the affirmative action plan (AAP) requirements would apply to a bank with more than fifty employees that either issues or pays U.S. bonds or has any U.S. government deposits.

The AAP requirements apply to “[e]ach nonconstruction contractor . . . if it has 50 or more employees and: . . . (iii) Serves as a depository of Government funds in any amount; or (iv) Is a financial institution which is an issuing and paying agent for U.S. savings bonds and savings notes in any amount.” 41 CFR 60-2.1(b). (“Government funds” refers only to funds held by a federal government unit or agency, as the regulation defines “Government” as “the government of the United States of America.” 41 CFR 60-1.3.)

In other words, there are three tests that determine whether a bank is subject to the AAP requirements: (1) whether the bank has more than 50 employees; (2) whether the bank is a nonconstruction contractor; and (3) whether the bank has any U.S. government deposits or is an issuing or paying agent for U.S. savings bonds. If a bank meets all three of those tests, it will have to adopt an AAP program.

As to the first test, the regulations do not define “50 or more employees”; to be safe, we recommend counting all employees, whether full-time or part-time, towards the bank’s total.

As to the second test, all federally-insured banks are considered government contractors; the definition of “government contract” includes “any agreement . . . for the purchase, sale or use of . . . nonpersonal services,” including “insurance and fund depository.” 41 CFR 60-1.3. Therefore, any bank that is covered by FDIC insurance is considered a federal contractor. Office of Federal Contract Compliance Programs (OFCCP) Jurisdiction FAQ # 4.

Finally, if your bank has any federal funds on deposit or acts as an agent on any U.S. bonds, and it fulfills the other two tests, it is required to comply with the various affirmative action program requirements. See 41 CFR 60-2.1 et seq. The laws, regulations, and Department of Labor guidance documents that apply to AAPs can be found here.

If you decide that the AAP requirements apply to your bank, there are several resources available to help you:

The Department of Labor has a summary of the AAP requirements and a Sample Affirmative Action Plan (pdf).

The federal regulations governing AAPs are found at 41 CFR 60-2.