FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Application of Deposit Insurance Rules to Child Support Program Account
November 2, 1993
Joseph A. DiNuzzo, Counsel
This is in response to your October 19, 1993 letter on the deposit insurance coverage of the accounts maintained by the Department of Finance and Administration of the State of Arkansas ("Department") at the ("Bank").
You stated that the Child Support Program collects and disburses child support payments to parents of minor children who are Arkansas residents. The program funds are deposited in a demand deposit account at the Bank. The Department holds the funds in a fiduciary capacity which is indicated by the title of the account on the Bank's records. A portion of the balance of the Child Support Program account is directly attributable to child support payments collected from supporting parents and due directly to custodial parents or guardians. The remaining portion of the account consists of funds received from noncustodial parents used to reimburse federal and state costs of custodial parents or guardians who are public welfare recipients.
Pursuant to section 330.6(a) of the FDIC's regulation (12 C.F.R. § 330.6(a)), funds owned by a principal or principals and deposited into one deposit account in the name of an agent shall be insured to the same extent as if deposited in the name of the principals. You noted that the Department acts in a fiduciary capacity for the Child Support Program account. In addition, you stated that the record keeping requirements set forth in 12 C.F.R. § 330.4 have been met. As a result, the amounts held on behalf of the individual child support recipients would be insured as the individual funds of each such recipient. Thus, under section 330.6(a), each recipient's ownership interest in the program account would be added to any other deposits (if any) at the Bank owned by the recipient in that same capacity and would be insured up to a limit of $100,000. This analysis and conclusion is consistent with that provided in your letter.
Your letter also concludes that the portion of the Child Support Program accounts representing funds received to reimburse federal and state agencies would be subject to a single insured limit of $100,000 as a public unit account under section 330.14 of the FDIC's regulations (12 C.F.R. § 330.14). Please note, however, that section 330.14 applies to public unit funds deposited by "official custodians" of public units. The term "official custodian" is defined in section 330.14(b) of the FDIC's regulations as a custodian having "plenary authority, including control, over funds owned by the public unit which the custodian is appointed or elected to serve." Based on this definition, it is unlikely that the Department is the "official custodian" of the federal and state funds in issue. Conversely, it is more likely (based on the facts presented in your letter) that the Department is acting as an agent for each recipient/public unit (or official custodian of each recipient/public unit. As such, the insurance coverage on the portion of the program deposit account consisting of such funds would be insured per public unit under the principal/agency rules of section 330.6, discussed above, subject to the insurance coverage limits on public unit deposits in section 330.14 of the FDIC's regulations.
Finally, the title of the account, "State of Arkansas, Department of Finance and Administration, Child Support Enforcement IV D as agent for the Benefit of the Child Support Payment Recipients" adequately discloses the fiduciary relationship; however, the title does not expressly reflect that the account includes both federal and state funds. You may wish to amend the title to denote the fact that federal and state funds are maintained in the account.
Feel free to contact us with any other questions or comments. My direct telephone number is (202) 898-7349.