Skip Header

Federal Deposit
Insurance Corporation

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



Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations




FDIC Federal Register Citations

Independent Community Bankers of America

August 8, 2005

Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW.,
Washington, D.C. 20459

Dear Mr. Feldman:

The Independent Community Bankers of America (ICBA) appreciates the opportunity to offer comments on the FDIC’s proposal to revise its insurance regulations for accounts of qualified tuition savings programs under section 529 of the Internal Revenue Code.

Under the FDIC’s 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 FDIC’s 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.

ICBA’s 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 FDIC’s 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 FDIC’s 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 states—relying upon the advice from the FDIC staff—already 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 FDIC’s 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
Regulatory Counsel


 


Last Updated 08/10/2005 Regs@fdic.gov

Skip Footer back to content