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4000 - Advisory Opinions

After December 19, 1992, "Pass-Through" Insurance Cannot Be Provided to Participants in Employee Benefit Plan Deposits Accepted by Insured Depository Institutions Which May Not Accept Brokered Deposits Under Section 29 of the FDI Act


June 4, 1992

J. William Via, Jr., Counsel

This is to confirm, in response to your letter of May 27, 1992 (to Mr. Hood), that the acceptance of brokered deposits by an insured depository institution in violation of section 29 of the Federal Deposit Insurance Act (12 U.S.C. § 1831f) does not presently affect the deposit insurance coverage for those deposits. A copy of a 1989 staff opinion (FDIC--89--55) on this subject is enclosed.

Your attention is invited, however, to a change in the law, effective after December 19, 1992, pursuant to section 311(b) of the FDIC Improvement Act of 1991, which amends section 11(a) of the FDI Act (12 U.S.C. § 1821(a)). Under the new rule, the FDIC can not provide pro rata, or "pass-through'', insurance to a participant in, or beneficiary of, an employee benefit plan in the case of deposits by such plans accepted by a depository institution which, at the time, may not accept brokered deposits under section 29 of the FDI Act. There is an exception, which provides that employee benefit plan deposits are eligible for pro rata, or "pass-through", insurance coverage if at the time such a deposit is accepted, (i) the depository institution "meets each applicable capital standard" and (ii) the depositor receives a written statement from the institution that such deposits at such institution are eligible for insurance coverage on a pro rata, or "pass-though", basis. The exception relates to adequately capitalized depository institutions that have not applied for a waiver entitling them to receive brokered deposits, per section 29(c) of the FDI Act (12 U.S.C. § 1829f(c)).

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