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FDIC Federal Register Citations Independent Community Bankers of America August 8, 2005 Robert E. Feldman Dear Mr. Feldman: The Independent Community Bankers of America (ICBA) appreciates the opportunity to offer comments on the FDICs proposal to revise its insurance regulations for accounts of qualified tuition savings programs under section 529 of the Internal Revenue Code. Under the FDICs existing insurance regulations, a state public instrumentality that issues securities is treated as a corporation for deposit insurance purposes. As a result, the deposits of the state public instrumentality are insured up to a total of only $100,000 in the aggregate and the deposits are not insured on a pass-through basis to the holders of the securities. Under the FDICs proposal, the deposits of the state public instrumentality may be insured on a pass-through basis (i.e., up to $100,000 for the beneficial interest of each participant) if the deposits represent interests or accounts in a state public instrumentality that is part of a qualified tuition savings program under section 529 of the Internal Revenue Code. ICBAs Position ICBA agrees with the FDIC that bank deposits of a state public instrumentality that is an investment trust for a qualified tuition savings program under section 529 of the Internal Revenue Code should be insured on a pass-through basis. Even though such deposits are sometimes considered assets of the state public instrumentality, the funds are frequently invested by the state trust in certain bank deposits as instructed by the participants or investors. Furthermore, such programs are structured so that the funds held in accounts or representing interests of particular investors in the state public instrumentality can be traced to particular certificates of deposit. Accordingly, such deposits should be treated under the FDICs insurance regulations the same way that brokered deposits are treated and should be insured up to $100,000 on a pass-through basis. ICBA also agrees with the FDIC that bank deposits held by section 529 trust accounts should be treated differently from other investment trusts under the FDICs insurance rules. In providing tax benefits for state-sponsored qualified tuition savings programs, Congress intended to encourage persons to save to meet post-secondary educational expenses. Providing pass-through coverage for the deposits of qualified tuition savings programs is consistent with this purpose. ICBA also believes that the FDIC has established good cause under the Administrative Procedure Act for making the new rule effective immediately. The publication of a proposed rule would be contrary to the public interest since a few statesrelying upon the advice from the FDIC staffalready have established qualified tuition savings programs with bank deposit options. Publication of an interim final rule should immediately resolve any legal question over how these deposits should be insured. Conclusion ICBA supports the FDICs proposal to revise its insurance regulations for
accounts of qualified tuition savings programs under section 529 of the
Internal Revenue Code. If you have questions or need any additional
information, please do not hesitate to contact me at 202-659-8111 or at
Chris.Cole@icba.org. Sincerely, Christopher Cole
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Last Updated 08/10/2005 | Regs@fdic.gov |