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4000 - Advisory Opinions

Pass-Through Coverage: Applicability to a Multi-Employer Health and Welfare Plan Funded Through Collective Bargaining Agreements


September 21, 1994

Joseph A. DiNuzzo, Counsel

This is in response to your letter of June 29, 1994, on the availability of "pass-through" deposit insurance coverage under section 11(a) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) and section 330.12 of the FDIC's insurance regulations (12 C.F.R. 330.12) to deposits of the ("Fund").

As described in your letter, the Fund is a multi-employer health and welfare plan funded through collective bargaining agreements between labor organizations and employers in the hotel and restaurant industry. The Fund consists of several "fund units" organized by geographic region, each of which provides its own individual plan of benefits. The overall administration of the Fund is conducted through one central fund office. The Fund sometimes maintains deposit account balances substantially over $100,000 in a single insured depository institution.

The specific question posed in your letter is whether the Fund's deposits in any single insured depository institution are eligible for "pass-through" insurance coverage or whether the total insured amount would be limited to $100,000 per institution. You argue that "pass-through" insurance coverage should be deemed available for such deposits because the FDIC Improvement Act of 1991 (Pub. L. No. 102--242) ("FDICIA") expanded the scope of employee benefit plans eligible for "pass-through" coverage to include welfare benefit plans. You note, however, that, although FDICIA does not apply the "present-vested-and-ascertainable-interest" restriction to welfare plans, the FDIC's amended insurance regulations fail to exempt plans from the "noncontingent interest" restriction.

This issue is addressed specifically in the Federal Register notice in which the FDIC issued the final rule adopting the revised deposit insurance regulations based on the applicable provisions in FDICIA (58 Fed. Reg. 29952, 29953 (May 25, 1993)). In the preamble to the final rule the FDIC Board of Directors noted that the definition of the term "employee benefit plans" in FDICIA was broader than the FDIC's then-current definition of that term; thus, the deposits of employee welfare benefit plans, which traditionally had been entitled to deposit insurance only up to $100,000 per plan, could be entitled to insurance up to $100,000 per participant. The preamble stated, however, that:

Whether or not a particular [employee welfare benefit] plan will actually be entitled to coverage on a per-participant basis will depend on whether the interests of the participants are ascertainable. This is because the FDIC has determined to retain its current requirement that the interest of each plan participant be a "non-contingent interest" in order to be recognized for deposit insurance purposes.

As noted in your letter, the "non-contingency" requirement also is stated in the regulation (12 C.F.R. 330.12(a)).

The FDIC's long-standing definition of "non-contingent interest" is provided in section 330.12(g)(3). It is a fairly finite definition requiring that a participant's interest be capable of determination (quantification) by utilizing the present worth tables in the Federal Estate Tax regulations issued by the Internal Revenue Service. It does not include the "insurance coverage benefit" discussed in your letter. Thus, the insurance coverage of the Fund's deposits would be based on whether each participant's interest satisfied the "non-contingency" requirement in section 330.12(a) of the FDIC's regulations.

We believe that the requirements for pass-through insurance coverage in section 330.12 of the FDIC's regulations (and the definitions provided therein) are fully consistent with the applicable FDICIA provisions. Feel free to contact us with any other questions or comments on this matter.

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