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4000 - Advisory Opinions

Trust Company Acting as Trustee or Custodian of Pension Plan or Other Employee Benefit Plans


March 30, 1990

Roger A. Hood, Assistant General Counsel

In your March 6 letter you described in some detail a transaction between your client, an insured bank ("Bank"), and a non-insured trust company ("Trust Company") acting sometimes as trustee or custodian of pension plans and sometimes on behalf of plan trustees for which the trust company performs administrative services. Funds awaiting investment are to be deposited by Trust Company with your client in two accounts and you have raised certain issues regarding the insurance coverage afforded to these accounts by FDIC. You have asked that I confirm the conclusions which you have posed with respect to these issues.

1.  FDIC will recognize a claim for separate deposit insurance coverage by each retirement plan customer of Trust Company with an interest in the deposit accounts maintained at Bank, if the accounts are designated on Bank's records in the manner described in your letter.

You stated in your letter that the accounts would each be designated, "Trust Company, as trustee for IRAs, Keogh Plans, and multi-beneficiary qualified employee benefit plans, and as trustee or custodian for trustees of Keogh Plans and multi-beneficiary qualified employee benefit plans." Section 330.1(b)(1) of FDIC's regulations (12 C.F.R. § 330.1(b)(1)) provides that the deposit account records of an insured bank shall be conclusive as to the existence of any relationship pursuant to which funds in an account are deposited and on which a claim for insurance coverage is founded.

The proposed designation of the accounts would satisfy the requirements of section 330.1(b)(1). Likewise it would be adequate to satisfy the requirements of section 330.4(b) of the proposed deposit insurance regulations were they to be adopted in their proposed form.

2.  FDIC will determine the amount of individual interests of retirement plan beneficiaries in the deposits from the records of Trust Company and other trustees identified on Trust Company's records.

Section 330.4(b)(2) of the proposed amendments of the deposit insurance regulations recognizes that the details of a custodial relationship upon which a deposit insurance claim is based may be on the records of the custodian "or by some person or entity that has undertaken to maintain such records for the depositor." 54 Fed. Reg. 52413 (1989). The preamble to the proposed regulation states that the above-quoted language codifies the current staff position in this regard.

The FDIC would look to the records of Trust Company or to the records of the trustees for whom Trust Company is acting to determine the details of the trust relationships involved in the deposits in question.

3.  Under FDIC's proposed regulations, the recordkeeping systems described would satisfy requirements for express disclosure of fiduciary relationships.

This is covered in item 1, above. Of course, no opinion is expressed with respect to the adequacy or accuracy of any such records.

4.  Deposit insurance coverage will pass through to the individual beneficiaries of the retirement plans under Part 330 of FDIC's regulations.

Deposit insurance will be measured by the interests of the individual plan beneficiaries if the following conditions are met:

a.  The employee benefit plan must be irrevocable.

b.  Bank's records must disclose the custodial relationship upon which the deposit insurance claim is based. (See item 1, above.)

c.  The records of Trust Company or the trustees for which Trust Company is acting, maintained in good faith and in the ordinary course of business, must disclose the details of the relationship and the interest of the other parties in the account.

5.  Under both existing and proposed regulations, separate deposit insurance coverage will apply to deposits of an individual (i) representing his or her interest as a beneficiary under a retirement plan and (ii) deposits held at Bank in his or her own capacity.

If the retirement plan is an irrevocable trust, the interest of the beneficiary is insured as a "trust interest" under section 330.10 of the existing regulations. That section provides that the insurance of such trust interests shall be separate from that afforded deposit accounts of the trustee of such trust funds or the settlor or beneficiary of such trust arrangement. The proposed regulations would specifically treat employee benefit plans and likewise provide separate coverage for the other types of accounts maintained by the employer, employee organization, trustee, administrator, or beneficiary of the plan at the same insured depository institution. 54 Fed. Reg. 52416 (1989), to be codified at 12 C.F.R. § 330.12(a).

6.  Trust company is not a deposit broker under section 304.6 or for purposes of the Report of Condition.

Trust Company, as trustee of pension or other employee benefit plans, or as trustee or contractor performing general managerial services for plan trustees, would not be deemed to be a deposit broker under 12 C.F.R. §§ 304.6 and 337.6. As you stated in your letter, persons or entities performing such services are specifically excluded from the term "deposit broker" in § 337.6(a)(2)(i). Persons or entities acting in such capacities have never been regarded as deposit brokers for purposes of § 304.6.

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