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4000 - Advisory Opinions


Insurance Coverage Afforded Union Annuity Trust Fund Deposits Under New Rules

FDIC--93--37

July 1, 1993

Mark A. Mellon, Attorney

This is in response to your letter of June 14, 1993 concerning the insurance coverage of union annuity trust fund deposits.

In a letter to one of your colleagues, Ms. ***, dated March 3, 1990, I concluded that the bank deposits of the union annuity trust fund were the accounts of a defined contribution plan. Such deposits are currently entitled to "pass-through" or per-participant insurance if FDIC recordkeeping and disclosure requirements are met. See 12 C.F.R. § 330.4(b).

As of December 19, 1993, however, pursuant to amendments to the FDIC insurance regulations, the interest of a participant in deposits of a defined contribution plan which allows participants to direct their investments to accounts in specific insured depository institutions must be aggregated with his interest in: a. an IRA account; b. a 457 plan account; and c. a self-directed Keogh account; and insured up to $100,000 if the participant has any of these deposits in the same insured depository institution that holds his defined contribution plan deposits. 12 C.F.R. § 330.12(c)(2). Moreover, when determining how much deposit insurance is available for a participant in a self-directed defined contribution plan, the FDIC may only take into account the present vested and ascertainable interests of each participant in the plan. 12 C.F.R. § 330.12(d)(3).

If your plan does not permit its participants to direct investment to specific depository institutions, you need not be concerned about the possibility of aggregation with the deposits of the employee benefit plans referenced above. The amount of available deposit insurance for your deposits may still be affected, however. Pursuant to section 330.12(b), as of December 19, 1992, per-participant insurance coverage for employee benefit plan deposits is not available if an insured depository institution is not able to accept brokered deposits at the time that it accepts those employee benefit plan deposits. Deposits accepted prior to this date, however, will still be provided with per-participant insurance coverage as long as FDIC recordkeeping and disclosure requirements are met. For time deposits, this pass-through insurance will continue in effect subsequent to the December 19 effective date until the first maturity date of those deposits.

Institutions which are able to accept brokered deposits are: a. well-capitalized institutions and b. adequately-capitalized institutions which have received a waiver from the FDIC to accept brokered deposits. 12 C.F.R. § 337.6(b). Pass-through insurance for employee benefit plan deposits will still be available from an adequately-capitalized institution which does not have such a waiver, however, if the institution gives the depositor a written statement at the time when the deposit is accepted which states that the deposits are eligible for pass-through coverage. 12 C.F.R. § 330.12(b). Insured institutions in other capital categories are not able to accept brokered deposits and therefore cannot provide pass-through insurance to their employee benefit plan deposits.

I hope that this letter is responsive to your query. Please do not hesitate to contact me if you should have any questions about this or any other subject.


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