[Federal Register Volume 65, Number 106 (Thursday, June 1, 2000)]
[Rules and Regulations]
[Pages 34921-34926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13510]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 745


Share Insurance and Appendix

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA is issuing a final rule amending its share insurance 
rules. The amendments simplify and clarify these rules and provide 
parity between them and the Federal Deposit Insurance Corporation's 
(FDIC) deposit insurance rules. Specifically, the amendments: increase 
available share insurance coverage on some revocable trust accounts; 
simplify the method for determining the insurance coverage a member has 
in one or more joint accounts; treat a revocable trust account held in 
connection with a living trust as any other revocable trust accounts, 
if the living trust meets all requirements pertaining to revocable 
trusts; provide separate insurance coverage for qualifying joint 
revocable trust accounts; treat Roth IRAs as traditional IRAs and 
Education IRAs as irrevocable trusts for insurance purposes; liberalize 
insurance coverage for some kinds of public unit accounts; clarify the 
degree of control state or local law has on share insurance 
determinations and revise the substance and format of the Appendix to 
part 745.

DATES: This rule is effective July 3, 2000.

ADDRESSES: National Credit Union Administration, 1775 Duke Street, 
Alexandria, VA 22314-3428.

FOR FURTHER INFORMATION CONTACT: Frank S. Kressman, Staff Attorney, 
Division of Operations, Office of General Counsel, at the above 
address, or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

A. Background

    In accordance with NCUA's regulatory review process, at year end 
1998, NCUA staff identified part 745 as one of its regulations in need 
of updating, clarification and simplification. On April 15, 1999, the 
NCUA Board issued an interim final rule adopting changes to its share 
insurance rules regarding joint accounts and revocable trust accounts. 
64 FR 19685 (April 22, 1999). The FDIC adopted similar changes to its 
deposit insurance rules on March 23, 1999. 64 FR 15653 (April 1, 1999). 
When issuing the interim rule, NCUA was aware that additional changes 
to part 745 were necessary and would be forthcoming,

[[Page 34922]]

but believed it was important to implement the interim rule at that 
time to maintain parity between NCUA's and FDIC's insurance programs. 
Subsequently, NCUA conducted a more comprehensive review of part 745. 
NCUA issued a proposed rule on November 18, 1999 that suggested 
additional amendments as discussed below. 64 FR 66812 (November 30, 
1999).
    The interim and proposed rules solicited comments from the public. 
Those comments have been given careful consideration and are reflected 
in the final amendments to the interim and proposed rules discussed 
below.

1. Interim Rule

    The interim rule amended the share insurance rules pertaining to 
revocable trust accounts and joint accounts. Revocable trust accounts 
are accounts that evidence an intention on the part of the owner to 
pass funds onto one or more beneficiaries upon the owner's death. They 
include payable-on-death accounts, and tentative or ``Totten'' trust 
accounts. Prior to the interim rule, these accounts were insured 
separately from other accounts of the owner only if the beneficiary was 
the owner's spouse, child or grandchild. If there were multiple 
beneficiaries, and each beneficiary was either a spouse, child or 
grandchild of the owner, then the account would have been insured up to 
$100,000 for each beneficiary. For example, if an account was held by a 
husband ``in trust for'' his wife and three children, then the account 
would have been insured for up to $400,000. That coverage was separate 
from any insurance the husband, wife or children may have had on their 
own accounts. For these accounts, insurance was provided on a per 
beneficiary basis for the spouse, child or grandchild. If, however, 
prior to the interim rule, a credit union member named a parent or 
sibling as a beneficiary, a common practice particularly for single 
individuals, then the account would have been added to the individual 
account of the owner and insured up to $100,000. There was no separate 
coverage for those beneficiaries even though there was a close familial 
relationship.
    The interim rule added parents and siblings to the list of family 
members who qualify as beneficiaries for separate coverage. The interim 
rule also clarified that the degree of kinship for named beneficiaries 
includes relationships through blood, adoption or by virtue of 
remarriage.
    Prior to the interim rule, NCUA's joint account regulation did not 
expressly refer to a two-step process in determining insurance coverage 
for those accounts, as did the FDIC's rule. Insurance coverage was 
determined, however, by applying two regulatory subsections where an 
individual had several joint accounts, some with different joint 
owners. First, under Sec. 745.8(d), joint accounts with the same 
combination of owners were added together and insured up to $100,000. 
Even though there was more than one account, if the owners were the 
same, the accounts were treated as one. Then, under Sec. 745.8(e), a 
person's interest in all joint accounts he or she owned with different 
combinations of owners was added together and insured up to $100,000. 
Thus, NCUA followed the same type of two-step process used by the FDIC.
    The application of this process resulted in certain inequities. If 
a person had ownership interests in several different joint accounts, 
each with a different combination of joint owners, his or her interest 
in each of those accounts would have been added together and insured to 
$100,000. The same would have been done for each of the other joint 
owners as well. If instead, that person had had one or more joint 
accounts with the same combination of joint owners, the maximum 
insurance available to all of those joint owners combined would have 
been limited to $100,000. Thus, in one instance, each joint owner's 
interest could have been insured up to $100,000, while in the other, 
total coverage on the account was limited to $100,000, notwithstanding 
the amount of each of the joint owner's interest.
    The interim rule simplified coverage on joint accounts. It is no 
longer necessary to add together all joint accounts owned by the same 
combination of individuals. Under the interim rule, each person's 
interest in all qualifying joint accounts will be added together and 
insured to a maximum of $100,000. The interim rule also eliminated the 
signature requirement for share certificates and accounts maintained by 
certain fiduciaries for joint owners as long as the credit union's 
records reflect that there are joint owners.

2. Proposed Rule

    The proposed rule suggested amendments to the share insurance rules 
regarding living trusts, joint revocable trusts, IRA accounts, public 
unit accounts, guardian accounts, the application of local law to share 
insurance determinations and the substance and format of the Appendix 
to part 745.
    A living trust is a formal trust that an owner creates and retains 
control over during his or her lifetime. NCUA proposed to treat a 
revocable trust account that is held in connection with a living trust 
in the same manner it treats all other revocable trust accounts, if the 
living trust otherwise meets all requirements pertaining to revocable 
trust accounts. Living trusts that include conditions that could 
prevent a beneficiary from acquiring a vested and non-contingent 
interest in the account funds upon the owner's death, however, would 
not qualify for this coverage.
    Joint revocable trust accounts are revocable trust accounts, as 
described in Sec. 745.4 of NCUA's regulations, established by more than 
one owner and held for the benefit of others. NCUA proposed to provide 
separate insurance coverage for qualifying accounts of this kind.
    NCUA also proposed to clarify the degree of control that state or 
local law has on share insurance determinations to maintain uniform 
national rules and consistent insurance determinations. When the 
proposed rule was issued, Sec. 745.2(a) provided that, to the extent 
local law enters into a share insurance determination, the law of the 
jurisdiction in which the insured credit union's principal office is 
located will govern. The proposal indicated that this meant the law of 
the jurisdiction in which the insured credit union's principal office 
is located will control over the law of other jurisdictions where the 
insured credit union may have branch offices or service facilities. It 
further clarified that this provision in no way effects the supremacy 
of federal law.
    NCUA proposed to include Roth IRAs and Education IRAs among member 
accounts eligible for share insurance. Federal tax laws first made 
these accounts available to consumers on January 1, 1998. The proposal 
also stated that although both are colloquially known as IRA accounts, 
only Roth IRAs would be treated as traditional IRAs, for share 
insurance purposes, under Sec. 745.9-2 of NCUA's regulations. Education 
IRAs would be treated as irrevocable trust accounts, for share 
insurance purposes, under Sec. 745.9-1 of NCUA's regulations.
    NCUA proposed to liberalize its share insurance coverage for some 
kinds of public unit accounts. At the time the proposal was issued, 
public funds were generally separately insured up to $100,000 if 
invested by an official custodian of funds of: (1) The United States; 
(2) any state of the United States or any county, municipality, or 
political subdivision thereof; (3) the District of

[[Page 34923]]

Columbia; (4) specified territories or possessions of the United 
States; and (5) tribal funds of any Indian tribe. NCUA proposed to 
distinguish share draft accounts from share certificate and regular 
share accounts in this context. The result would be to provide separate 
insurance coverage up to $100,000 for share draft accounts, and up to 
an additional $100,000 for share certificate and regular share accounts 
combined. This more liberal coverage would only be available where an 
official custodian establishes public unit accounts in an authorized, 
federally-insured credit union that is located within the jurisdiction 
from which the custodian's authority is derived. Accounts established 
outside of that jurisdiction would be limited to the current $100,000 
limit without regard to whether the funds are held in share draft 
accounts or share certificate and regular share accounts.
    Funds held in the name of a guardian, custodian or conservator for 
the benefit of a ward or minor are insured up to $100,000 in the 
aggregate, separately from any other accounts of the guardian, 
custodian, conservator, ward or minor. FDIC, however, treats these 
accounts as agency or nominee accounts and does not provide separate 
insurance coverage. Rather, FDIC adds the guardian account together 
with the individual accounts of the beneficiary of the guardian account 
and insures that aggregate up to $100,000. NCUA proposed to treat these 
accounts in a manner consistent with FDIC's treatment. This would have 
resulted in a reduction in insurance coverage.
    The Appendix to part 745 provides examples that illustrate the 
application of share insurance coverage. The Appendix is not expected 
to answer every share insurance question that could conceivably be 
asked. Rather, its function is to address and clarify the most common 
insurance coverage issues in a simple and manageable format. NCUA 
proposed to enhance the usefulness of the Appendix by incorporating 
additional information and examples and putting it into an easy to read 
question-and-answer format.

B. Summary of Comments

1. Interim Rule

    NCUA received twelve comment letters regarding the interim rule. 
Four from credit union trade associations, three from federal credit 
unions, two from banking trade associations, one from a state chartered 
credit union, one from an association of state credit union supervisors 
and one from a law firm. All of the commenters generally supported the 
interim rule. The commenters also raised other points.
    Eight commenters offered their opinions whether examples 
illustrating insurance coverage should be moved to the body of the 
regulations or kept in their present location in the Appendix to the 
regulations. There was an even split of opinion among the commenters. 
The examples will remain in the Appendix where they are easily 
accessible and cannot be confused as part of the regulatory language.
    Three commenters expressed concern over NCUA's use of the term 
``revocable trust account.'' They noted that there are many different 
terms used to describe this kind of account and that this might cause 
confusion among some credit unions. NCUA believes the language used in 
Sec. 745.4 of NCUA's rules will minimize any confusion in this context. 
Additionally, ``revocable trust account'' is the term used in the 
FDIC's deposit insurance rules and its use in NCUA's rules should avoid 
confusion for the public when comparing coverage.
    Several general comments pertaining to livings trusts and joint 
revocable trusts were also received in connection with the interim 
rule. Those comments have been considered in conjunction with the 
comments to the proposed rule as discussed below.

2. Proposed Rule

    NCUA received seventeen comment letters regarding the proposed 
rule. Eight from credit union trade associations, seven from federal 
credit unions, one from an association of state credit union 
supervisors and one from a banking trade association. All of the 
commenters generally supported the proposed rule. The commenters also 
raised other points.
    Three commenters expressed concern over the proposal to exclude 
from revocable trust insurance coverage any living trust that includes 
conditions that could prevent a beneficiary from acquiring a vested and 
non-contingent interest in the account funds upon the owner's death. 
Specifically, they noted that credit unions might have difficulty 
determining whether a living trust contains such a defeating 
contingency. NCUA does not intend for credit unions to make this kind 
of determination. The burden is on the member to create a living trust 
that qualifies for insurance coverage. Credit unions may choose to 
advise members to have their living trusts reviewed by private counsel 
for legal and regulatory sufficiency prior to account opening.
    Two commenters asked NCUA to clarify how a one-owner living trust 
account or other revocable trust account would be insured if there were 
qualifying and non-qualifying beneficiaries. Assuming the living trust 
is treated as any other revocable trust account and eligible for 
coverage, shares in the account attributable to the qualifying 
beneficiaries would be insured up to $100,000 for each qualifying 
beneficiary. Shares in the account attributable to the non-qualifying 
beneficiaries would be added to any individual accounts of the owner 
and insured up to $100,000.
    Two commenters questioned whether the Education IRA should be 
insured as an irrevocable trust because, under some circumstances, the 
beneficiary of an Education IRA could be changed to a member of the 
designated beneficiary's family. The structure and exclusive purpose of 
Education IRAs, and the restrictions imposed on them by the Internal 
Revenue Service, demonstrate that these trusts are irrevocable in 
nature. We do not believe a limited ability to change beneficiaries 
diminishes the irrevocable nature of these trusts or warrants treating 
them as anything other than irrevocable. The FDIC also insures 
Education IRAs as irrevocable trusts.
    Nine commenters strongly opposed the proposal to eliminate separate 
insurance coverage for guardian accounts. They contended that separate 
insurance for guardian accounts poses no threat to the National Credit 
Union Share Insurance Fund and that eliminating separate coverage would 
create more confusion and problems for credit union members than 
achieve good. They also noted that, while parity between NCUA's and 
FDIC's insurance is generally desirable, the two programs need not be 
identical especially to the detriment of credit union members. We find 
these arguments persuasive. Accordingly, NCUA has determined not to 
take action to eliminate the existing separate coverage for custodial 
accounts at this time.

C. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact any final regulation may 
have on a substantial number of small entities. For purposes of this 
analysis, credit unions under $1 million in assets will be considered 
small entities. As of June 30, 1999, there were 1,690 such entities 
with a total of $807.3 million in assets, with an average asset size of 
$0.5 million. These small entities make up 15.6 percent of all credit 
unions, but

[[Page 34924]]

only 0.2 percent of all credit union assets.
    The NCUA Board has determined and certifies that this final rule 
will not have a significant economic impact on a substantial number of 
small entities. The reason for this determination is that the final 
rule clarifies and simplifies the share insurance regulations. It does 
not impose any additional costs or significant regulatory requirements 
on small entities. Accordingly, the NCUA has determined that a 
Regulatory Flexibility Analysis is not required.

Paperwork Reduction Act

    NCUA has determined that the final amendments do not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their regulatory actions on state and local 
interests. In adherence to fundamental federalism principles, NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order. This rule will apply to 
all federally-insured credit unions, but it will not have substantial 
direct effect on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that this rule does not constitute a policy that has 
federalism implications for purposes of the executive order.

Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this rule will not affect family well-
being within the meaning of Section 654 of the Treasury and General 
Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 
(1998).

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) provides generally for congressional review of agency 
rules. A reporting requirement is triggered in instances where NCUA 
issues a final rule as defined by Section 551 of the Administrative 
Procedure Act. 5 U.S.C. 551. The Office of Management and Budget has 
determined that this rule is not a major rule for purposes of the Small 
Business Regulatory Enforcement Fairness Act of 1996.

List of Subjects

12 CFR Part 745

    Credit unions, Pension plans, Share insurance, Trustee.

    By the National Credit Union Administration Board, this 24th day 
of May 2000.
Becky Baker,
Secretary of the Board.

    For the reasons stated above, the interim final rule amending 12 
CFR part 745 that was published at 64 FR 19685 on April 22, 1999 is 
adopted as a final rule without change. NCUA also amends 12 CFR part 
745 as follows:

PART 745--SHARE INSURANCE AND APPENDIX

    1. The authority citation for part 745 continues to read as 
follows:

    Authority: 12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782, 
1787, 1789.


    2. Section 745.2(a) is amended by revising the last sentence to 
read as follows:


Sec. 745.2  General principles applicable in determining insurance of 
accounts.

    (a) * * * While the provisions of this part govern in determining 
share insurance coverage, to the extent local law enters into a share 
insurance determination, the local law of the jurisdiction in which the 
insured credit union's principal office is located will control over 
the local law of other jurisdictions where the insured credit union has 
offices or service facilities.
* * * * *

    3. Section 745.4 is amended by adding paragraphs (e) and (f) to 
read as follows:


Sec. 745.4  Revocable trust accounts.

* * * * *
    (e) Living trusts. Insurance treatment under this section also 
applies to revocable trust accounts held in connection with a so-called 
``living trust,'' meaning a formal trust that an owner creates and 
retains control over during his or her lifetime. If a named beneficiary 
in a living trust is a qualifying beneficiary under this section, then 
the share account held in connection with the living trust may be 
eligible for share insurance under this section, assuming compliance 
with all the provisions of this part. If the living trust includes a 
defeating contingency that relates to a beneficiary's interest in the 
trust assets, then insurance coverage under this section will not be 
provided. For purposes of this section, a defeating contingency is 
defined as a condition that would prevent the beneficiary from 
acquiring a vested and non-contingent interest in the funds in the 
share account upon the owner's death.
    (f) Joint revocable trust accounts. Where an account described in 
paragraph (a) of this section is established by more than one owner and 
held for the benefit of others, some or all of whom are within the 
qualifying degree of kinship, the respective interests of each owner 
held for the benefit of each qualifying beneficiary will be separately 
insured up to $100,000. The interest of each co-owner will be deemed 
equal unless otherwise stated in the share account records of the 
federally-insured credit union. Interests held for non-qualifying 
beneficiaries will be added to the individual accounts of the owners. 
Where a husband and a wife establish a revocable trust account naming 
themselves as the sole beneficiaries, the account will not be insured 
according to the provisions of this section, but will instead be 
insured in accordance with the joint account provisions of Sec. 745.8.

    4. Section 745.9-1 is amended by adding paragraph (c) to read as 
follows:


Sec. 745.9-1  Trust accounts.

* * * * *
    (c) This section applies to trust interests created in Education 
IRAs established in connection with section 530 of the Internal Revenue 
Code (26 U.S.C. 530).

    5. Section 745.9-2(a) is revised to read as follows:


Sec. 745.9-2  IRA/Keogh accounts.

    (a) The present vested ascertainable interest of a participant or 
designated beneficiary in a trust or custodial account maintained 
pursuant to a pension or profit-sharing plan described under section 
401(d) (Keogh account), section 408(a) (IRA) and section 408A (Roth 
IRA) of the Internal Revenue Code (26 U.S.C. 401(d), 408(a) and 408A) 
will be insured up to $100,000 separately from other accounts of the 
participant or designated beneficiary. For insurance purposes, IRA and 
Roth IRA accounts will be combined together and insured in the 
aggregate up to $100,000. A Keogh account will be separately insured 
from an IRA account, Roth IRA account or, where applicable, aggregated 
IRA and Roth IRA accounts.
* * * * *

    6. Section 745.10 is amended by revising paragraphs (a)(1) through 
(a)(5) and (b) and adding a second sentence to paragraph (c) to read as 
follows:

[[Page 34925]]

Sec. 745.10  Public unit accounts.

    (a) * * *
    (1) Each official custodian of funds of the United States lawfully 
investing the same in a federally-insured credit union will be 
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (2) Each official custodian of funds of any state of the United 
States or any county, municipality, or political subdivision thereof 
lawfully investing the same in a federally-insured credit union in the 
same state will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (3) Each official custodian of funds of the District of Columbia 
lawfully investing the same in a federally-insured credit union in the 
District of Columbia will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (4) Each official custodian of funds of the Commonwealth of Puerto 
Rico, the Panama Canal Zone, or any territory or possession of the 
United States, or any county, municipality, or political subdivision 
thereof lawfully investing the same in a federally-insured credit union 
in Puerto Rico, the Panama Canal Zone, or any such territory or 
possession, respectively, will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (5) Each official custodian of tribal funds of any Indian tribe (as 
defined in section 3(c) of the Indian Financing Act of 1974) or agency 
thereof lawfully investing the same in a federally-insured credit union 
will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (b) Each official custodian referred to in paragraphs (a)(2), (3), 
and (4) of this section lawfully investing such funds in share accounts 
in a federally-insured credit union outside of their respective 
jurisdictions shall be separately insured up to $100,000 in the 
aggregate for all such accounts regardless of whether they are share 
draft, share certificate or regular share accounts.
    (c) * * * Where an officer, agent or employee of a public unit has 
custody of certain funds which by law or under a bond indenture are 
required to be set aside to discharge a debt owed to the holders of 
notes or bonds issued by the public unit, any investment of such funds 
in an account in a federally-insured credit union will be deemed to be 
a share account established by a trustee of trust funds of which the 
noteholders or bondholders are pro rata beneficiaries, and the 
beneficial interest of each noteholder or bondholder in the share 
account will be separately insured up to $100,000.
* * * * *

    7. The appendix to part 745 is amended by:
    A. Adding a heading to the introductory text;
    B. Revising the heading of Part A;
    C. Revising the heading of Part B and adding Example 4;
    D. Revising the heading of Part C;
    E. Revising the heading of Part D;
    F. Revising the heading of Part E, the first introductory paragraph 
and Examples 4 through 7, and adding new Example 9;
    G. Revising the heading of Part F; and
    H. Revising the heading of Part G and the second sentence of the 
seventh introductory paragraph.
    The additions and revisions read as follows:

Appendix to Part 745--Examples of Insurance Coverage Afforded 
Accounts in Credit Unions Insured by the National Credit Union 
Share Insurance Fund

What Is the Purpose of This Appendix?

* * * * *

A. How Are Single Ownership Accounts Insured?

* * * * *

B. How Are Revocable Trust Accounts Insured?

* * * * *

Example 4

    Question: Member H invests $200,000 in a revocable trust account 
held in connection with a living trust with his son, S, and his 
daughter, D, as named beneficiaries. What is the insurance coverage?
    Answer: Since S and D are children of H, the owner of the 
account, the funds would normally be insured under the rules 
governing revocable trust accounts up to $100,000 as to each 
beneficiary (Sec. 745.4(b)). However, because this account is held 
in connection with a living trust whose named beneficiaries are 
qualifying beneficiaries under Sec. 745.4, it must be scrutinized to 
determine whether the account complies with all other provisions of 
this part and whether the living trust contains any defeating 
contingencies. Assuming there are no defeating contingencies and 
that the account complies with all other requirements of this part, 
then it will be treated as any other revocable trust. In this 
instance, it will be insured up to $100,000 as to each beneficiary 
(Sec. 745.4(e)). Assuming that S and D have equal beneficial 
interests ($100,000 each), H is fully insured for this account.

C. How Are Accounts Held by Executors or Administrators Insured?

* * * * *

D. How Are Accounts Held by a Corporation, Partnership or 
Unincorporated Association Insured?

* * * * *

E. How Are Public Unit Accounts Insured?

    For insurance purposes, the official custodian of funds 
belonging to a public unit, rather than the public unit itself, is 
insured as the account holder. All funds belonging to a public unit 
and invested by the same custodian in a federally-insured credit 
union are categorized as either share draft accounts or share 
certificate and regular share accounts. If these accounts are 
invested in a federally-insured credit union located in the 
jurisdiction from which the official custodian derives his 
authority, then the share draft accounts will be insured separately 
from the share certificate and regular share accounts. Under this 
circumstance, all share draft accounts are added together and 
insured to the $100,000 maximum and all share certificate and 
regular share accounts are also added together and separately 
insured up to the $100,000 maximum. If, however, these accounts are 
invested in a federally-insured credit union located outside of the 
jurisdiction from which the official custodian derives his 
authority, then insurance coverage is limited to $100,000 for all 
accounts regardless of whether they are share draft, share 
certificate or regular share accounts. If there is more than one 
official custodian for the same public unit, the funds invested by 
each custodian are separately insured. If the same person is 
custodian of funds for more than one public unit, he is separately 
insured with respect to the funds of each unit held by him in 
properly designated accounts.
* * * * *

Example 4

    Question: A city treasurer invests city funds in each of the 
following accounts: ``General Operating Account,'' ``School 
Transportation Fund,'' ``Local Maintenance Fund,'' and ``Payroll 
Fund.'' Each account is available to the custodian upon demand. By 
administrative direction, the city treasurer has allocated the funds 
for the use of and control by separate departments of the city. What 
is the insurance coverage?
    Answer: All of the accounts are added together and insured in 
the aggregate to $100,000. Because the allocation of the city's

[[Page 34926]]

funds is not by statute or ordinance for the specific use of and 
control by separate departments of the city, separate insurance 
coverage to the maximum of $100,000 is not afforded to each account 
(Secs. 745.1(d) and 745.10(a)(2)).

Example 5

    Question: A, the custodian of retirement funds of a military 
exchange, invests $1,000,000 in an account in an insured credit 
union. The military exchange, a non-appropriated fund instrumentally 
of the United States, is deemed to be a public unit. The employees 
of the exchange are the beneficiaries of the retirement funds but 
are not members of the credit union. What is the insurance coverage?
    Answer: Because A invested the funds on behalf of a public unit, 
in his capacity as custodian, those funds qualify for $100,000 share 
insurance even though A and the public unit are not within the 
credit union's field of membership. Since the beneficiaries are 
neither public units nor members of the credit union they are not 
entitled to separate share insurance. Therefore, $900,000 is 
uninsured (Sec. 745.10(a)(1)).

Example 6

    Question: A is the custodian of the County's employee retirement 
funds. He deposits $1,000,000 in retirement funds in an account in 
an insured credit union. The ``beneficiaries'' of the retirement 
fund are not themselves public units nor are they within the credit 
union's field of membership. What is the insurance coverage?
    Answer: Because A invested the funds on behalf of a public unit, 
in his capacity as custodian, those funds qualify for $100,000 share 
insurance even though A and the public unit are not within the 
credit union's field of membership. Since the beneficiaries are 
neither public units nor members of the credit union they are not 
entitled to separate share insurance. Therefore, $900,000 is 
uninsured (Sec. 745.10(a)(2)).

Example 7

    Question: A county treasurer establishes the following share 
draft accounts in an insured credit union each with $100,000:

    ``General Operating Fund''
    ``County Roads Department Fund''
    ``County Water District Fund''
    ``County Public Improvement District Fund''
    ``County Emergency Fund''
What is the insurance coverage?
    Answer: The ``County Roads Department,'' ``County Water 
District'' and ``County Public Improvement District'' accounts would 
each be separately insured to $100,000 if the funds in each such 
account have been allocated by law for the exclusive use of a 
separate county department or subdivision expressly authorized by 
State statute. Funds in the ``General Operating'' and ``Emergency 
Fund'' accounts would be added together and insured in the aggregate 
to $100,000, if such funds are for countywide use and not for the 
exclusive use of any subdivision or principal department of the 
county, expressly authorized by State statute (Secs. 745.1(d) and 
745.10(a)(2)).
* * * * *

Example 9

    Question: A, an official custodian of funds of a state of the 
United States, lawfully invests $250,000 of state funds in a 
federally-insured credit union located in the state from which he 
derives his authority as an official custodian. What is the 
insurance coverage?
    Answer: If A invested the entire $250,000 in a share draft 
account, then $100,000 would be insured and $150,000 would be 
uninsured. If A invested $125,000 in share draft accounts and 
another $125,000 in share certificate and regular share accounts, 
then A would be insured for $100,000 for the share draft accounts 
and $100,000 for the share certificate and regular share accounts 
leaving $50,000 uninsured (Sec. 745.10(a)(2)). If A had invested the 
$250,000 in a federally-insured credit union located outside the 
state from which he derives his authority as an official custodian, 
then $100,000 would be insured for all accounts regardless of 
whether they were share draft, share certificate or regular share 
accounts, leaving $150,000 uninsured (Sec. 745.10(b)).

F. How Are Joint Accounts Insured?

* * * * *

G. How Are Trust Accounts and Retirement Accounts Insured?

* * * * *
    * * * Although credit unions may serve as trustees or custodians 
for self-directed IRA, Roth IRA and Keogh accounts, once the funds 
in those accounts are taken out of the credit union, they are no 
longer insured.
* * * * *

[FR Doc. 00-13510 Filed 5-31-00; 8:45 am]
BILLING CODE 7535-01-P