# Presentation: 454802

## FDIC Deposit Insurance Coverage Audio Conference for Bankers  July/August 2006

** ****Including Recent legislation**

## Today’s Speakers

- Kathleen Nagle
- Deposit Insurance Outreach
- (202) 898-6541
**www2.fdic.gov/starsmail**

- Joe DiNuzzo
- Counsel, Legal Division
- (202) 898-7349

## Overview

- Deposit Insurance Resources and Information
- Basic Concepts and Rules
- Recent Legislative Changes
- Questions and Answers

## Deposit Insurance Seminar

**INFORMATION **
**and **
**RESOURCES**

## FDIC Contact Information

- Call the FDIC toll-free  1-877-275-3342
- 	Information specialists are available from
- 	8 a.m. until 8 p.m. Eastern Time
- 	Monday through Friday
- Hearing impaired: 1-800-925-4618

## FDIC Contact Information

- Send your deposit insurance questions by email using the FDIC's online customer assistance form at: **www2.fdic.gov/starsmail**
- Mail your deposit insurance questions to FDIC Attention: Deposit Insurance Outreach
- 	550 17th Street NW
- 	Washington DC, 20429
- Read more about FDIC insurance online at: **www.fdic.gov**

## (PAUSE)

**•  **_**Your Insured Deposits**_** **(Comprehensive Guide)

**•  **_**Financial Institution Employee’s Guide to Deposit Insurance**_

## Deposit Insurance Seminar

**BASIC CONCEPTS **
**and RULES**

## Deposit Types

**FDIC insurance covers only bank deposits**
- Checking Accounts
- NOW Accounts
- Savings Accounts
- Certificate of Deposits (CD’s)
- Money Market Deposit Accounts (MMDA)

## Non-Deposit Products

- Stocks, Bonds, Municipal Bonds and Other Securities
- Mutual Funds (money market mutual funds and stock, bond, or other security mutual funds)
- Annuities
- Insurance Products (automobile and life insurance)
- U.S. Treasury Bills, Bonds or Notes
- Safe Deposit Box Contents

## Insurance Coverage 

- Per Depositor and Per Ownership Category
- Per Insured Depository Institution
- Per separately charter bank or savings association
_***Not***_ per branch office

**Basic Insurance Amount is $100,000 **
***(Unchanged by Recent Legislation)***

## Account Ownership Categories

- Single Accounts
- Certain Retirement Accounts
- Joint Accounts
- Revocable Trust Accounts
- Irrevocable Trust Accounts
- Employee Benefit Plan Accounts
- Corporation, Partnership and Unincorporated Association Accounts
- Government Accounts

## Most Commonly Used Account Ownership Categories

**Joint**
**Accounts**
**  **

**Single**
**Accounts**

**Revocable**
**Trust**
**Accounts**

**Certain**
**Retirement**
**Accounts**

## Single Accounts

- Deposits owned by one person
- Coverage: $100,000

## Joint Accounts

- Deposits owned by two or more natural persons
- Each owner’s shares of all joint accounts are          added together
- FDIC assumes ownership is                                         equal unless otherwise stated
- Each co-owner must have 				  same withdrawal rights and 				    sign signature card
- Coverage: $100,000 per owner

## Multiple Joint Accounts

| Account Title                                                           Balance |
| --- |
| 1) Jane Smith and Andrew Smith                            $200,000  |
| 2) Jane Smith and Harry Jones                                 100,000 |
| Total                                                                        $300,000 |

| Co-owner | Balance | Insured | Uninsured |
| --- | --- | --- | --- |
| Jane Smith | Acct 1: $100,000
Acct 2:     50,000 | $100,000 | $50,000 |
| Andrew Smith | Acct 1:   100,000 | 100,000 | 0 |
| Harry Jones | Acct 2:     50,000 | 50,000 | 0 |
| Total | $300,000 | $250,000 | $50,000 |

## Revocable Trust Accounts

**Revocable Trust Accounts**

- Deposit accounts that evidence an intention that the funds will belong to one or more named beneficiaries upon the owner’s death
- Can be formal or informal trust
- Coverage: $100,000 per owner per 		       qualifying beneficiary
- Each owner’s funds for each qualifying 	     beneficiary in all revocable trust 		         accounts are added together

## Informal (POD) Requirements

- Title must indicate the existence of a trust relationship
- Beneficiaries must be named in account records
- Beneficiaries must be “qualifying”
- If any requirements are not met the account or portion of the account will not qualify for deposit insurance coverage under the revocable trust ownership category

## Revocable Trust Beneficiaries

- Spouse
- Children
- Grandchildren
- Parents
- Siblings
- Adopted and step relationships

- Ex-spouse
- In-laws
- Great-grandchildren
- Nieces, nephews, cousins
- Friends
- Grandparents
- Organizations
- Trusts
- Other relationships not listed

**Who qualifies**

**Who does not qualify**

## POD – One Owner

**Example  1:   **
**$ 200,000 CD**
**John Jones POD to Sue and Mark**
**Sue and Mark – (John’s daughter and son)**

**John’s trust**
**relationship with**
**Sue:  $100,000**

**John’s trust**
**relationship with**
**Mark:  $100,000**

**John Jones **
**$200,000**

## POD – Multiple Owners

**Example  2:**
**Jane and Andrew Smith POD **
**	****to Billy and Betty Smith  $ 400,000**

**(Jane and Andrew – Husband and Wife)**
**(Billy and Betty – Jane and Andrew’s children)**
**Insurance Coverage?**

## Jane and Andrew Smith POD to Billy and Betty Smith 

**$400,000**

**Fully Insured**

**Jane’s **
**ownership **
**interest**
**$200,000**

**Andrew’s **
**ownership **
**interest**
**$200,000**

**Andrew’s trust **
**relationship **
**with Billy**
**$100,000**

**Andrew’s trust **
**relationship **
**with Betty**
**$100,000**

**Jane’s trust **
**relationship **
**with Billy**
**$100,000**

**Jane’s trust **
**relationship **
**with Betty**
**$100,000**

## Maximum Deposit Insurance Coverage

| 

 | 

  Single 
  Accounts | Self-
Directed
Retirement
Accounts | 

Joint 
Accounts | 
Revocable
Trust
Accounts* | 

Total
Coverage |
| --- | --- | --- | --- | --- | --- |
| 
Husband | 
$100,000 | 
$250,000 | 
$100,000 | 
$300,000* | 
$   750,000 |
| 
Wife | 
$100,000 | 
$250,000 | 
$100,000 | 
$300,000* | 
$   750,000 |
| 
Total | 
$200,000 | 
$500,000 | 
$200,000 | 
$600,000* | 
$1,500,000 |

*** ****Assumes husband and wife have named three qualifying     **
**   ****beneficiaries in their revocable trust**

## Living Trust Requirements

- Beneficiaries must be “qualifying”
- Account title at the bank must indicate the existence of a trust relationship
- Beneficiaries must become entitled to trust assets when owner dies
- The beneficiary’s interest must not depend on the death of another beneficiary

## Living Trust – One Owner with Conditions

_**Example  1**_
**A father has a living trust leaving all trust assets to his three children but only if they each graduate from college by age 25**

**1 Owner  X  $100,000  X  3 Qualifying   =   $300,000**
**                     ****Beneficiaries**

## Living Trust - Non-Qualifying Beneficiary

_**Example  2**_
**A father has a living trust naming his son and nephew as beneficiaries of all assets (qualifying and non-qualifying beneficiary)**

## Example 2 – Insurance Coverage

**Father’s trust **
**relationship **
**with Son**
**$100,000**

**Insured in Revocable Trust  Account Category**

** ****Insured  in Single Account Category*******

*** Assumes Father has no single ownership accounts**

**Father’s trust **
**relationship **
**with Nephew**
**$100,000**

**Example 2 – Insurance Coverage**

## Deposit Insurance Seminar

**Federal Deposit Insurance **
**Reform Act of 2005**

## Maintains the basic amount of coverage at $100,000

Establishes mechanism to index for inflation that could take effect on January 1, 2011, and every succeeding five years

Increases coverage for “Certain Retirement Accounts” from $100,000 to $250,000 (also to be indexed for inflation adjustments)

- Establishes mechanism to index for inflation that could take effect on January 1, 2011, and every succeeding five years
- Increases coverage for “Certain Retirement Accounts” from $100,000 to $250,000 (also to be indexed for inflation adjustments)

**Legislation Highlights**

## 
Eliminates tie-in of a depository institution’s capital to the amount of coverage available on employee benefit plan accounts

Institutions are no longer required to provide capital level disclosures to administrators of employee benefit plans

- Eliminates tie-in of a depository institution’s capital to the amount of coverage available on employee benefit plan accounts
- Institutions are no longer required to provide capital level disclosures to administrators of employee benefit plans

**Legislation Highlights**

## Legislation Highlights

- Merges the Bank Insurance Fund and Savings Association Fund into the Deposit Insurance Fund
- Requires FDIC to establish a single “FDIC Official Sign” for the Deposit Insurance Fund.  Eliminates separate signs for banks and savings associations

## Certain Retirement Accounts

- Deposits owned by one person
- Coverage: $250,000
- Limit applies to combined total of all deposits the owner has in this category at the same bank
- Coverage is not increased by naming beneficiaries on retirement account or in the applicable retirement plan

## 
Traditional and Roth IRAs

SEP IRAs

SIMPLE IRAs

“Section 457” Deferred Compensation Plan Accounts

Self-directed Keogh Plan Accounts 

Self-directed Defined Contribution Plan Accounts 

- Traditional and Roth IRAs
- SEP IRAs
- SIMPLE IRAs
- “Section 457” Deferred Compensation Plan Accounts
- Self-directed Keogh Plan Accounts
- Self-directed Defined Contribution Plan Accounts

**Certain Retirement Accounts**

## Self-Directed -- Definition

- 	A self-directed retirement account is a retirement account for which the owner, not a plan administrator, has the right to direct how the funds are invested, including the ability to direct that the funds be deposited at a specific FDIC-insured bank.

## Not Eligible for $250,000 Coverage

- Coverdell Education IRAs
- Health Savings Accounts
- Defined Benefit Plan Accounts
- Section 401(k)s -- Not Self-directed
- Keoghs – Not Self-directed

## Coverdell IRAs/Health Savings Accounts

- Coverdell IRAs – insured as:
- Irrevocable Trust Accounts
- Health Savings Accounts – insured as either:
- Single Ownership Accounts
- Revocable Trust Accounts

## Employee Benefit Plan Accounts

- Defined Benefit Plan Accounts
- Section 401(k)’s – Not Self-directed
- Non Self-Directed Keoghs – Not Self-directed
**Pass-through Coverage**: Up to $100,000 for each participant’s “non-contingent” interest

## Employee Benefit Plan Accounts

- A **“non-contingent interest”** is an interest subject to no contingencies, except life expectancy.
**“****Pass-through” coverage** is based on each participant’s non-contingent ascertainable interest in the plan.
**“****Pass-through” coverage** is not determined by simply multiplying $100,000 by the number of plan participants.

## Official FDIC Sign

**Deposit Insurance Reform Legislation requires:**
- Replace existing official signs -- one for banks and one for savings associations -- with a single official FDIC sign
- New official FDIC sign must state that insured deposits are “backed by the full faith and credit of the U.S. Government”
**Until New Rules Are Adopted:   **
- FDIC’s existing rules remain in effect
- All FDIC-insured banks and savings associations should continue to use their existing teller signs

## Deposit Insurance Seminar

- Questions and Answers