4000 - Advisory Opinions
Deposit Insurance Coverage for Multiple Accounts at Same Institution
March 30, 1995
Dirck A. Hargraves, Attorney
This is in response to your March 14, 1995 letter wherein you request clarification of FDIC insurance coverage of two accounts held in the same FDIC-insured depository institution. Specifically, you state that you are employed by a non-profit hospital called Hospital "A" ("Hospital") with Federal ID #*** and that the Hospital has established a non-profit foundation called Foundation "A" ("Foundation") with a Federal ID # of ***. The Hospital and Foundation both maintain accounts at the same FDIC-insured depository institution. You mention also that each entity has a separate board of directors, although it is my understanding that two individuals sit on both boards. You inquire whether each account would be separately insured for up to $100,000.
While you have not provided enough information for me to give you a conclusive answer, it would appear that the Hospital's account would most likely be insured separately from the Foundation's account at the same FDIC-insured depository institution. In order to understand why the two accounts may be separately insured for up to $100,000 each it is necessary to know a little about how the FDIC insures deposits. Under the FDIC's rules set forth at 12 C.F.R. § 330.3(a), deposits are insured according to the "right'' and "capacity'' in which they are held. The terms "right" and "capacity" refer to the manner in which the accounts are held, such as individually-owned accounts, jointly-owned accounts or trust accounts. All accounts owned by a depositor in the same right and capacity within the same insured institution will be added together and insured up to $100,000. Deposits maintained in different rights and capacities are separately insured up to $100,000. Accounts maintained by different legal entities are separately insured.
While you do not indicate whether the Hospital or Foundation are corporations, for the purposes of calculating deposit insurance, I will assume that the Hospital is a corporation and that the Foundation is an unincorporated association. Thus, deposit insurance coverage of both entities' funds would be governed by section 330.9 of our regulations. A corporation or an unincorporated association is engaged in an independent activity if the entity is operated primarily for some purpose other than to increase deposit insurance. An unincorporated association is deemed to exist whenever there is an association of two or more persons formed for some religious, educational, charitable, social or other noncommercial purpose.
Accordingly, the test for separate insurance coverage for the deposits held by the Hospital and the Foundation, is whether the Foundation is operated primarily for some purpose other than increasing deposit insurance coverage. If so, then the accounts of each entity in the same FDIC-insured depository institution would be separately insured for up to $100,000. If either entity owns deposits in more than one account in the same right and capacity in the same FDIC-insured depository institution, all such accounts would be added together and insured up to $100,000 in the aggregate, per entity.
The fact that the Hospital and Foundation have separate boards of directors and different tax identification numbers suggests that the Hospital and Foundation are separate entities which would be separately insured. However, these facts would not be conclusive.
I trust this letter has been responsive to your request. Should you have any additional questions or concerns, please do not hesitate to contact me at (202) 898-7049.