Member dividends may be paid in cash and/or any of the following forms of retained earnings, each of which is evidenced in a written notice form (usually in the member dividends distribution notice).
The Cash portion of your member dividend distribution may be issued to you by check or recorded on the association’s books in a special account. When any portion of a member dividend distribution is paid in cash, your board of directors may elect to set a minimum check amount as a means of controlling expenses. Cash distributions below the minimum check amount are recorded in a special account called Member Dividend Payable.
Nonqualified Retained Surplus is an amount retained by the Association in the member’s name. However, unlike Qualified and Nonqualified Allocated Surplus, the board of directors considers Nonqualified Retained Surplus as earnings permanently invested in the Association. As such, there is no plan to retire or redeem Nonqualified Retained Surplus, except upon liquidation of the Association. The association does not deduct Nonqualified Retained Surplus from its income for tax purposes. Consequently, the member does not have to recognize an allocation of Nonqualified Retained Surplus as taxable income.