4000 - Advisory Opinions
Clarification of "Pass-Through" Insurance Prohibition Pertaining to Employee Benefit Plan Deposits with Respect to Date of Acceptance
December 18, 1992
Douglas H. Jones, Deputy General Counsel
You have requested clarification of Mr. Byrne's letter of December 17, 1992, concerning "pass-through" federal deposit insurance coverage for self-directed defined contribution plans. In his letter, Mr. Byrne indicated that, beginning December 20, 1992, the FDIC is prohibited from providing "pass-through" or per participant insurance coverage to certain employee benefit plan deposits, including self-directed defined contribution plan funds, that are accepted by an institution which at the time the deposits are accepted (a) was not eligible to receive brokered deposits (12 U.S.C. § 1821(a)(1)(D)(ii)) and (b) did not meet all of its applicable capital standards and had not provided a written statement to the depositor that such deposits are eligible for pass-through insurance (12 U.S.C. § 1821(a)(1)(D)(iii)).
The prohibition applies to deposits "accepted" after the operative date. If the prohibition is applicable on December 20, 1992 (the first effective date of the legislation), then any deposits "accepted" or received after that date are subject to the prohibition. (For an institution that was unable to accept brokered deposits before December 20, the operative date of the prohibition and pass-through limitation is the effective date of the legislation, December 20, 1992.) Therefore, existing deposits (i.e. deposits held by the bank as of December 19, 1992) will continue to be eligible for pass-through insurance coverage under the provisions of the Federal Deposit Insurance Act. If an existing deposit has a stated maturity and the deposit is renewed or "rolled over" after the prohibition is applicable, it is considered newly accepted at the time of renewal and no longer eligible for pass-through insurance. Funds deposited with no stated maturity will continue to be eligible for pass-through insurance until withdrawn. (If the bank becomes subject to the prohibition subsequent to December 20, 1992, then the operative date to measure the "acceptance" of deposits and "existing" deposits will be the date the prohibition applies).