Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions


Deposit Insurance Coverage for Public Entity Self-Insurance Pools

FDIC-88-8

January 12, 1988

Patti C. Fox, Attorney

In your letter of October 9, 1987, you inquired about the deposit insurance coverage of three insurance pools operated by *** on behalf of its member counties. Subsequently, we received the enclosures of certain state statutes which had been inadvertently omitted from your letter. Based on the limited information received, we are unable to determine with certainty the insurance coverage of the funds in the three pools. We can provide some general principles with which to aid you or your counsel in determining coverage.

*** is an association of county governments funded by dues from the member counties. As one of its functions, *** administers three insurance pools for employee benefits, workmen's compensation, and casualty and property on behalf of the counties. The enclosures with your letter indicate that public entities, such as counties, are authorized to form self-insurance pools for workmen's compensation and casualty and property losses; it is presumed similar authority exists for employee benefits.

Funds belonging to *** in its capacity as an association and held in and FDIC-insured bank are added together and insured to $100,000. 12 C.F.R. § 330.6. Assuming *** acts in a fiduciary capacity as administrator of the three insurance pools, those funds would not be aggregated with *** own funds.

It appears that *** is administering mutual insurance programs on behalf of the counties, who have pooled their funds to lessen their collective risk of loss on worker's compensation and property and casualty claims. The pooling of funds for a mutual benefit, i.e., spreading the risk of loss to all participants does not result in separately administered insurance programs for each county. The underlying principle behind deposit insurance is ownership. Here, no county has individual ownership over the use of its contribution and is not entitled to separate insurance coverage. The counties, instead, collectively own two separate insurance pools (authorized as separate entities by statute), each of which is a distinct association entitled to separate insurance coverage.

Therefore, deposit accounts owned by the workmen's compensation pool would be recognized as the accounts of an unincorporated association engaged in independent activity pursuant to 12 C.F.R. § 330.6 and insured to $100,000. Similarly, the accounts owned by the casualty and property pool would be insured to $100,000.

Insurance coverage of the employees benefit insurance pool will depend upon the type of benefits covered. As a general principle, if the program consists of pension funds, they would be treated as trust funds and each employee-beneficiary's pro-rata interest would be separately insured to $100,000. 12 C.F.R. § 330.10. Trust interests in pension and profit-sharing plans are treated as having fully vested at the time the bank is closed. 12 C.F.R. § 330.1(c). If the funds in the account were based on an interest which could not be determined without the evaluation of contingencies, then the account would be insured to $100,000 in the aggregate. For example, death and disability benefits are contingent upon an event that may or may not occur and thus cannot be ascertained until that event occurs and the claim for benefits arises. I am assuming there is statutory authorization for public entities to form an insurance pool for employee benefits.

The conclusions reached in this letter are tentative and based upon the information provided. Should you wish to provide additional information please describe *** role more fully. Is *** an insurer who resolves claims, or does it simply perform accounting functions such as investing funds, and paying out adjusted claims? Any documents or detailed descriptions of the various pools would also be necessary. Please let me know if I can be of further assistance.


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