25750 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

prepared in accordance with: (1) The

National Environmental Policy Act of

1969 (NEPA) (42 U.S.C. 4321 et seq.), (2)

Regulations of the Council on

Environmental Quality for

implementing the procedural provisions

of NEPA (40 CFR parts 1500–1508), (3)

USDA regulations implementing NEPA

(7 CFR part 1b), and (4) APHIS’ NEPA

Implementing Procedures (7 CFR part

372).

Copies of the environmental

assessment and finding of no significant

impact are available for public

inspection at USDA, room 1141, South

Building, 14th Street and Independence

Avenue, SW., Washington, DC, between

8 a.m. and 4:30 p.m., Monday through

Friday, except holidays. Persons

wishing to inspect copies are requested

to call ahead on (202) 690–2817 to

facilitate entry into the reading room. In

addition, copies may be obtained by

writing to the individual listed under

FOR FURTHER INFORMATION CONTACT.

Paperwork Reduction Act

This rule contains no information

collection or recordkeeping

requirements under the Paperwork

Reduction Act of 1995 (44 U.S.C. 3501

et seq.).

List of Subject in 7 CFR Part 301

Agricultural commodities,

Incorporation by reference, Plant

diseases and pests, Quarantine,

Reporting and recordkeeping

requirements, Transportation.

Accordingly, 7 CFR part 301 is

amended as follows:

PART 301—DOMESTIC QUARANTINE

NOTICES

1. The authority citation for part 301

continues to read as follows:

Authority: 7 U.S.C. 147a, 150bb, 150dd,

150ee, 150ff, 161, 162, and 164–167; 7 CFR

2.22, 2.80, and 371.2(c).

2. In § 301.78–3, paragraph (c), the

entry for Florida is revised to read as

follows:

§ 301.78–3 Quarantined areas.

* * * * *

(c) * * *

FLORIDA

Dade County. That portion of Dade County

beginning at the intersection of Northwest

87th Avenue and Northwest 103rd Street

(State Highway 932); then east along

Northwest 103rd Street (State Highway 932)

(also known as 49th Street) to the section line

dividing sections 4 and 5, T. 53 S., R. 41 E.;

then south along the section line dividing

sections 4 and 5, T. 53 S., R. 41 E., to

Northwest 36th Street (State Highway 948);

then west along Northwest 36th Street to

Northwest 87th Avenue; then north along

Northwest 87th Avenue to the point of

beginning.

Done in Washington, DC, this 5th day of

May 1998.

Charles P. Schwalbe,

Acting Administrator, Animal and Plant

Health Inspection Service.

[FR Doc. 98–12395 Filed 5–8–98; 8:45 am]

BILLING CODE 3410–34–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 330

RIN 3064–AB73

Simplification of Deposit Insurance

Rules

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Final rule.

SUMMARY: The FDIC is revising its

deposit insurance regulations by

adopting three substantive amendments

and numerous technical amendments.

The purpose of these amendments is to

increase the public’s understanding of

the regulations through simplification.

The substantive amendments in the

final rule will: Relax the FDIC’s

recordkeeping requirements for certain

agency or fiduciary accounts; create a

six-month ‘‘grace period’’ following the

death of a depositor for the restructuring

of accounts; and clarify the insurance

coverage of revocable trust accounts

when an account is held by the

depositor pursuant to a formal ‘‘living

trust’’ agreement.

EFFECTIVE DATE: July 1, 1998.

FOR FURTHER INFORMATION CONTACT:

Christopher L. Hencke, Counsel, (202)

898–8839, or Joseph A. DiNuzzo, Senior

Counsel, (202) 898–7349, Legal

Division, Federal Deposit Insurance

Corporation, 550 17th Street, N.W.,

Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

I. Background

Simplifying the deposit insurance

regulations is one of the FDIC’s

corporate operating projects under its

Strategic Plan. The purpose is to

promote public understanding of

deposit insurance and, particularly, to

clarify and illustrate rules that have

been misunderstood. The public’s

misunderstanding of certain of the rules

has been reflected in the large volume

of letters and phone calls received by

the FDIC concerning deposit insurance.

Also, this simplification effort is in

furtherance of section 303(a) of the

Riegle Community Development and

Regulatory Improvement Act of 1994, 12

U.S.C. 4803(a), requiring the federal

banking agencies to reduce regulatory

burden and improve efficiency.

The FDIC’s insurance regulations are

codified at 12 CFR part 330. In recent

years, the FDIC has revised these

regulations twice (not including a third

revision that dealt only with certain

disclosure requirements). In 1980,

following the termination of the Federal

Savings and Loan Insurance Corporation

(FSLIC), the FDIC issued uniform

regulations applicable to deposits in all

insured depository institutions

including those previously insured by

the FSLIC. The issuance of uniform

regulations was mandated by the

Financial Institutions Reform, Recovery,

and Enforcement Act of 1989 (FIRREA)

(Pub. L. 101–73 (1989)). In 1993, the

FDIC revised the rules applicable to the

deposits of employee benefit plans and

retirement plans. This revision was

mandated by the Federal Deposit

Insurance Corporation Improvement Act

of 1991 (FDICIA) (Pub. L. 102–242

(1991)). Notwithstanding these

relatively recent revisions, the Board of

Directors (Board) believes that the final

rule is necessary for the purpose of

simplification.

All revisions to the insurance

regulations must be consistent with

section 11(a) of the Federal Deposit

Insurance Act (FDI Act), 12 U.S.C.

1821(a). Section 11(a) provides that

deposits maintained by a depositor in

the same capacity and the same right at

the same insured depository institution

must be aggregated and insured up to

$100,000. The FDI Act does not define

‘‘depositor’’, ‘‘capacity’’ or ‘‘right’’.

Through the insurance regulations, the

FDIC has implemented these terms by

recognizing different categories of

accounts based on ownership. Each type

of account is entitled to separate

insurance up to the $100,000 limit if it

satisfies certain requirements. For

example, single ownership accounts

owned by a particular depositor are not

added to qualifying joint accounts partly

owned by the same depositor.

The final rule is the product of a

process that began in May of 1996. At

that time, the FDIC published an

Advance Notice of Proposed

Rulemaking (ANPR). See 61 FR 25596

(May 22, 1996). The ANPR was

followed, in May of 1997, by the

publication of a proposed rule. See 62

FR 26435 (May 14, 1997). The evolution

of the final rule is discussed in greater

detail below.

The final rule does not complete the

FDIC’s simplification efforts. As

discussed below, the FDIC is still

studying other possible revisions to its
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25751

insurance regulations pertaining to joint

accounts and ‘‘payable-on-death’’

accounts.

II. The Proposed Rule

Through the ANPR (61 FR 25596), the

FDIC broadly solicited comments on

how the insurance regulations could be

simplified. Also, the FDIC sought

comments on a number of specific

revisions. The comment period ended

on August 20, 1996. Almost all of the

comments (sixty-eight in number)

supported the FDIC’s simplification

efforts.

The FDIC did not include some of the

revisions mentioned in the ANPR in the

proposed rule (62 FR 26435). In

particular, the proposed rule did not

include revisions that would: (1)

Eliminate the first step in the two-step

process for determining the insurance

coverage of joint accounts under current

§ 330.7 (new § 330.9); and (2) expand

the list of qualifying beneficiaries for

revocable trust accounts under current

§ 330.8 (new § 330.10). In publishing the

proposed rule, the FDIC explained that

these revisions required additional

study. Before deciding on these

revisions, the Board wished to learn

more about the extent to which the

revisions would affect the scope of

deposit insurance coverage.

The proposed rule suggested three

substantive revisions to the insurance

regulations: (1) Relaxing the

recordkeeping rules for fiduciary

accounts; (2) providing a ‘‘grace period’’

following the death of a depositor; and

(3) clarifying the operation of the

revocable trust account rules in cases in

which an account is held by a depositor

in connection with a ‘‘living trust.’’

Each of these revisions is discussed in

detail below.

A. Recordkeeping Rules for Fiduciary

Accounts

The FDIC’s recordkeeping rules are

largely premised on the concept of

‘‘pass-through’’ insurance. If an agent on

behalf of a principal deposits funds at

an insured depository institution, the

FDIC does not treat the agent as the

owner of the deposit for purposes of the

$100,000 insurance limit. Rather, the

FDIC insures the funds to the principal

or actual owner. In other words, the

insurance coverage ‘‘passes through’’

the agent to the owner. See 12 CFR

330.6 (new 330.7).

The fact that agency accounts are

insured on a ‘‘pass-through’’ basis does

not mean that agency accounts represent

a separate category of ownership or that

agency accounts are entitled to

insurance up to $100,000 separate from

all other accounts. On the contrary,

agency accounts are subject to

aggregation with any other accounts

maintained by or for the principal in the

same right and capacity at the same

insured depository institution. For

example, funds in an account held by an

agent for a principal, in the principal’s

single ownership capacity, will be

aggregated with any single ownership

accounts held directly by the principal.

‘‘Pass-through’’ insurance as

described above is subject to an

important qualification. Under section

12(c) of the FDI Act (12 U.S.C. 1822(c)),

the FDIC is not required to recognize as

the owner of a deposit any person

whose interest is not disclosed on the

records of the failed depository

institution. In other words, in the

absence of adequate disclosure, an

account held by an agent is not entitled

to ‘‘pass-through’’ insurance coverage.

The FDIC has implemented section

12(c) by establishing certain

recordkeeping rules for accounts held

by agents or fiduciaries.

Under the FDIC’s recordkeeping rules,

the deposit account records of the failed

depository institution must expressly

disclose, by way of specific references,

the existence of any fiduciary

relationship including, but not limited

to, relationships involving a trustee,

agent, nominee, guardian, executor or

custodian, pursuant to which funds in

an account are deposited and on which

a claim for insurance coverage is based.

See 12 CFR 330.4(b)(1) (new

330.5(b)(1)). Assuming such disclosure,

the details of the relationship and the

interests of other parties in the account

must be ascertainable either from the

deposit account records of the insured

depository institution or from records

maintained, in good faith and in the

regular course of business, by the

depositor or by some person or entity

that has undertaken to maintain such

records for the depositor. See 12 CFR

330.4(b)(2) (new 330.5(b)(2)).

The rules quoted above are based

upon a basic principle: In paying

insurance, the FDIC is entitled to rely on

the account records of the failed

depository institution. If the FDIC, in its

sole discretion, determines that the

deposit account records of the insured

depository institution are clear and

unambiguous, those records are

considered binding on the depositor,

and no other records shall be

considered, as to the manner in which

the funds are owned. See 12 CFR

330.4(a)(1). In other words, under the

current regulations, the account records

must be unclear or ambiguous before the

FDIC will consider evidence outside of

the account records in determining the

ownership of an account.

The FDIC’s strict reliance on the

account records serves multiple

purposes. First, it enables the FDIC to

estimate the amount of insured deposits

when considering resolution options for

a failing insured depository institution.

Speed and accuracy in accounting for

the assets and liabilities of the failing

institution are critical when the

institution is resolved through a

purchase and assumption agreement

(i.e., a transfer of some assets and

liabilities, including the deposit

liabilities, to a healthy depository

institution). Second, strict reliance on

the account records enables the FDIC to

pay insurance very quickly following

the failure of an institution. If the FDIC

could not rely on the records, depositors

would not receive their insurance until

the FDIC had completed a lengthy

investigation as to the actual legal

ownership of the accounts. Third, strict

reliance on the records discourages the

making of fraudulent claims for

insurance. If depositors were not bound

by the account records, some depositors

over the $100,000 limit might be

tempted to fabricate outside evidence

(such as agency or trust agreements) as

to the actual ownership of their

accounts.

For the reasons stated above, the

insurance regulations purposefully

restrict the FDIC’s ability to consider

outside evidence (i.e., evidence outside

of the deposit account records) in

determining the ownership of an

account for insurance purposes. Again,

under the current or unrevised

regulations, outside evidence will not be

considered unless the FDIC

determines—in its own discretion—that

the account records are unclear or

ambiguous.

At times, the restrictions on the

FDIC’s ability to consider outside

evidence has produced results that

could be viewed as severe. At one failed

bank, for example, a deposit account

was held by a title company as agent for

customers who were buying or selling

houses. Because the bank’s deposit

account records did not indicate the

agency nature of the account, the funds

were deemed to be owned by the title

company and insured to a limit of

$100,000. The funds were not insured

up to $100,000 on a ‘‘pass-through’’

basis for the interest of each customer

(in aggregation with any other

account(s) that each customer might

have held at the same bank). This result

was severe because the name of the

agent by itself was suggestive of a

possible agency or fiduciary

relationship.

The proposed rule addressed the

problem by adding a provision to the
25752 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

regulations that would relax the FDIC’s

recordkeeping requirements in certain

situations. Specifically, the proposed

rule provided that the FDIC would be

free to consider outside evidence of

ownership if the titling of the deposit

account and the underlying deposit

account records sufficiently indicate the

existence of a fiduciary relationship.

Examples of accounts covered by the

proposed rule would be accounts in the

name of escrow agents or title

companies. In requesting comments on this part

of the proposed rule, the FDIC also

requested comments on the

recordkeeping requirements applicable

to accounts held by multiple levels of

fiduciaries. See 12 CFR 330.4(b)(3) (new

330.5(b)(3)). These requirements specify

two methods for disclosing such multitiered relationships. Under the second

method, according to the current

regulations, the deposit account records

must state that the depositor is acting in

a fiduciary capacity on behalf of certain

persons or entities who may, in turn, be

acting in a fiduciary capacity for others.

See 12 CFR 330.4(b)(3)(ii)(A). In

complying with this requirement,

fiduciaries have opened accounts with

awkward and unwieldy account titles.

To alleviate this problem, the FDIC

proposed to require—under the second

method—that the account records

merely indicate that there are multiple

levels of fiduciary relationships.

B. ‘‘Grace Period’’ Following the Death

of a Depositor

The second substantive revision

included in the proposed rule was the

creation of a ‘‘grace period’’ following

the death of a depositor. Under the

deposit contract or applicable state law,

the death of a depositor may result in an

immediate and automatic change in

ownership of the deposit account. This

is significant for insurance purposes

because deposit insurance is based

primarily on legal ownership. Though

ownership under state law is not

sufficient for, or decisive in,

determining deposit insurance coverage,

the regulations provide that ownership

under state law of deposited funds is a

necessary condition for deposit

insurance. See 12 CFR 330.3(h) (new

330.3(h)).

Under the current regulations, the

FDIC presumes—for certain types of

accounts—that the ownership of the

account changes immediately upon the

death of a depositor. This presumption

is applied to accounts characterized by

survivorship rights, i.e., joint accounts

and revocable trust or ‘‘payable-ondeath’’ (POD) accounts. For the sake of

uniformity, the FDIC applies this

presumption irrespective of the laws of

the state in which the depository

institution is located. In some cases,

following the death of a depositor, the

presumption will cause a dramatic

decrease in deposit insurance coverage. For example, a husband and wife

could hold a joint account, a joint

revocable trust (or POD) account for the

benefit of their child, and two

individual accounts in their respective

names. Assuming the satisfaction of all

applicable requirements, these four

accounts could be insured up to a total

of $500,000. Upon the death of either

the husband or wife, however, the

surviving spouse would become the sole

owner of the joint account and the joint

revocable trust account. Under the

FDIC’s established interpretation of the

current regulations, the joint account

would be transformed into a single

ownership account subject to

aggregation with the surviving spouse’s

individual account. (The single

ownership account in the name of the

deceased spouse would continue to be

insured separately from the other

accounts.) Moreover, the maximum

coverage of the joint revocable trust

account would be reduced from

$200,000 to $100,000 (i.e., $100,000 for

each combination of settlors and

qualifying beneficiaries). In total, the

maximum coverage of the four accounts

would be reduced—immediately upon

the death of the husband or wife—from

$500,000 to $300,000.

If the depository institution failed

before the surviving spouse restructured

the accounts or transferred funds to

another institution, in the example

above, the loss to the surviving spouse

could be very substantial. (For the single

ownership account in the name of the

deceased spouse, the insurance money

would be paid to the trustee of the

decedent’s estate.)

The interpretation described above

has been criticized as ‘‘penalizing’’ the

survivors of deceased depositors. Some

people have complained that the

immediate restructuring of an account

upon the death of a depositor may not

be practicable. For example, in order to

restructure an account, the survivor of

an accountholder may be required to

present proof of the accountholder’s

death to the depository institution. Also,

during a time of grief, the survivors may

not view the restructuring of bank

accounts as a matter of high priority. Another criticism of the FDIC’s

interpretation of the current regulations

is that some state laws might not

provide for the immediate change in

ownership presumed by the FDIC. In response to the criticisms and

concerns described above, the proposed

rule created a ‘‘grace period’’ of six

months following the death of a

depositor. During this ‘‘grace period,’’

the insurance coverage of the decedent’s

accounts would not change unless the

accounts were restructured by those

authorized to take such action. Because

the six-month ‘‘grace period’’ was not

intended to reduce coverage, the

proposed rule also provided that the

‘‘grace period’’ would not be applied if

its application would result in a

decrease in deposit insurance coverage.

The six-month ‘‘grace period’’

prescribed by the proposed rule was

consistent with a policy applied by the

former FSLIC. The rationale of that

policy was to ‘‘lessen hardship.’’

In publishing the proposed rule, the

FDIC specifically requested comments

as to whether six months was the

appropriate length of time for the ‘‘grace

period.’’

C. The Insurance Coverage of ‘‘Living

Trust’’ Accounts

The third substantive revision

included in the proposed rule was the

insertion into the regulations of

language clarifying the insurance

coverage of accounts held pursuant to

‘‘living trust’’ agreements. A ‘‘living

trust’’ is a formal revocable trust in

which the owner retains control of the

trust assets during his or her lifetime.

Upon the owner’s death, the trust

generally becomes irrevocable.

As a type of revocable trust account,

a ‘‘living trust’’ account is subject to the

rules prescribed by § 330.8 (new

§ 330.10). Subject to the requirements

discussed below, that section of the

regulations provides that funds

deposited in a revocable trust account

(also referred to as a ‘‘payable-on-death’’

or ‘‘POD’’ account or ‘‘Totten trust’’

account) shall be insured up to $100,000

for the prospective interest of each of

the owner’s designated beneficiaries.

Such insurance is separate from the

insurance coverage afforded to any

single ownership accounts held by the

owner or beneficiary at the same

insured depository institution. The

revocable trust account will not be

entitled to such separate insurance,

however, unless the account satisfies

certain requirements. First, each of the

designated beneficiaries must be the

owner’s spouse, child or grandchild.

Second, the beneficiaries must be

specifically named (i.e., named by

name) in the account records of the

depository institution. Third, the title of

the account must include a term such as

‘‘in trust for’’ or ‘‘payable-on-death to’’

(or any acronym therefor). Fourth, the

revocable trust agreement must provide

unequivocally that the funds shall

belong to the designated beneficiaries
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25753

upon the death of the owner. See 12

CFR 330.8(a) (new 330.10(a)).

In many cases, the trust agreement is

simply the signature card for the

account. Generally, in these cases, the

fourth requirement above does not

present a problem because the signature

card will not include any conditions

upon the interests of the designated

beneficiaries. In other words, the

signature card—in simple language—

will provide that the funds shall belong

to the beneficiaries upon the death of

the owner. In contrast, most formal

‘‘living trust’’ agreements provide that

the funds might belong to the

beneficiaries depending upon various

conditions. The FDIC refers to such

conditions as ‘‘defeating contingencies’’

if they create the possibility that the

beneficiaries or the estate or heirs of the

beneficiaries will never receive the

funds following the death of the owner.

In the presence of a ‘‘defeating

contingency,’’ the revocable trust

account will not be entitled to separate

insurance coverage under § 330.8 (new

§ 330.10). Rather, the account will be

aggregated with any single ownership

accounts held by the owner at the same

insured depository institution.

The subject of ‘‘defeating

contingencies’’ is explained at length in

FDIC Advisory Opinion 94–32 (May 18,

1994). That advisory opinion is entitled

‘‘Guidelines for Insurance Coverage of

Revocable Trust Accounts (Including

‘Living Trust’ Accounts).’’ Though this

advisory opinion is available upon

request, the FDIC continues to receive

numerous inquiries regarding the

insurance coverage of ‘‘living trust’’

accounts. Moreover, even people who

have read the Guidelines often remain

confused about the coverage of such

accounts.

In response to the public’s confusion,

the proposed rule inserted clarifying

language into the regulations.

Specifically, the proposed rule stated

that the presence of a ‘‘defeating

contingency’’ in a ‘‘living trust’’

agreement would prevent the account

from receiving separate insurance

coverage (i.e., separate from any single

ownership accounts held by the owner

at the same insured depository

institution).

III. The Final Rule

The FDIC received twenty-six written

comments on the proposed rule. Most of

the comments were submitted by

depository institutions or their holding

companies. Several comments were

submitted by bankers’ associations;

several others were submitted by

financial services companies. The FDIC

also received a small number of

comments from individuals and one

comment from a building company. The

comments are discussed below as they

relate to the various components of the

final rule.

A. Recordkeeping Rules for Fiduciary

Accounts

Sixteen commenters addressed the

proposed relaxation of the FDIC’s

recordkeeping requirements for agency

or fiduciary accounts. All of the

commenters expressed support for the

proposed rule but some also expressed

reservations. The concern expressed by

some commenters was that the proposed

rule might impose additional

recordkeeping obligations or other

regulatory burdens on insured

depository institutions. The FDIC does

not intend to create any such additional

burdens. The proposed rule was

directed at the FDIC itself and not at

depository institutions. As previously

explained, the proposed rule granted

greater flexibility to the FDIC in

considering outside evidence (i.e.,

evidence other than the deposit account

records) in determining the ownership

of an account. Specifically, the

proposed rule provided that the FDIC

would be free to consider outside

evidence if the FDIC determined, in its

sole discretion, that the titling of the

account and the underlying deposit

account records sufficiently indicate the

existence of a fiduciary relationship.

Examples are accounts in the names of

escrow agents, title companies or

entities (or nominees of such entities)

whose primary business is to hold—for

safekeeping reasons—deposits of others.

The Board has decided to adopt, in

the final rule, the proposed revision to

its recordkeeping requirements. As

revised, these requirements will be

codified at § 330.5. The revised

requirements will increase the FDIC’s

ability to pay insurance to the real

owners of some deposits without

undercutting the general rule that

unambiguous deposit account records of

a failed depository institution are

binding on depositors.

Also, the final rule includes two

revisions to the recordkeeping

requirements applicable to accounts

held by multiple levels of fiduciaries.

As revised, these requirements will be

codified at paragraph (b)(3) of § 330.5.

First, the FDIC has changed the

regulation to clarify that there are two

and not three methods of satisfying

these recordkeeping requirements.

Second, in connection with the second

method of satisfying the requirements,

the FDIC has removed the necessity of

stating in the account records that the

depositor is acting in a fiduciary

capacity on behalf of certain persons or

entities who may, in turn, be acting in

a fiduciary capacity for others. Instead,

the deposit account records must

expressly indicate that there are

multiple levels of fiduciary

relationships. The FDIC has made this

change in recognition of the fact that

fiduciaries have been placing the

required information in the titles of

deposit accounts. As a result of this

revision, the titles of multi-tiered

fiduciary accounts should be less

unwieldy. Several commenters

expressed support for this provision.

B. ‘‘Grace Period’’ Following the Death

of a Depositor

Nineteen commenters addressed the

proposed creation of a six-month ‘‘grace

period’’ following the death of a

depositor. As previously explained, this

‘‘grace period’’ primarily would affect

the insurance coverage of deposit

accounts with survivorship rights (i.e.,

joint accounts and revocable trust or

‘‘payable-on-death’’ accounts). During

this ‘‘grace period,’’ the insurance

coverage of such accounts would not

change unless the accounts are

restructured by those authorized to take

such action. The FDIC would apply the

‘‘grace period’’ only if its application

would increase rather than decrease

deposit insurance coverage.

Only one commenter opposed the

creation of a ‘‘grace period.’’ That

commenter stated that deposit insurance

should be based on the ownership of

accounts. If ownership changes upon

the death of a depositor, in the opinion

of this commenter, the insurance

coverage also should change. Another

commenter did not oppose a ‘‘grace

period’’ but expressed concern that it

would create additional recordkeeping

obligations on the depository

institution. A third commenter

supported a ‘‘grace period’’ but favored

a ninety-day period as opposed to a sixmonth period. With the exceptions

noted above, the commenters supported

the proposed rule.

The Board has decided to adopt the

proposed creation of a six-month ‘‘grace

period.’’ The rule will be codified at

paragraph (j) of § 330.3. The FDIC

believes that the ‘‘grace period’’ is

consistent with the general principle

that insurance coverage is based on

ownership but also based on the

satisfaction of recordkeeping

requirements. Following the death of a

depositor, the actual ownership of an

account will not be reflected by the

account records unless the account is

restructured. For example, a joint

account immediately following the

death of one of two co-owners will
25754 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

appear to remain a joint account. By

themselves, the account records will not

indicate that the account is a single

ownership account until the account

has been restructured by the survivor.

The FDIC’s strict reliance on ownership,

under these circumstances, contrasts

with the FDIC’s general reliance on the

account records.

The FDIC believes that a six-month

‘‘grace period’’ will create an equitable

balance between ownership and

recordkeeping in cases involving

deceased depositors. Also, the FDIC

does not believe that the ‘‘grace period’’

will create any recordkeeping burdens

on the depository institution because

the ‘‘grace period’’ is directed solely at

the FDIC itself and the survivors of

deceased depositors. The FDIC would

apply the ‘‘grace period’’ only after the

depository institution had failed.

In the case of a revocable trust

account, the ‘‘grace period’’ will be

triggered by the death of the owner but

not by the death of a beneficiary.

Similarly, in the case of an irrevocable

trust account, the ‘‘grace period’’ will be

triggered by the death of the legal owner

or settlor but not by the death of a

beneficiary. The death of the settlor may

or may not be significant under the

terms of the irrevocable trust agreement.

Under many ‘‘living trust’’ agreements

(discussed in greater detail below), a

revocable trust becomes irrevocable

upon the death of the owner. Through

the operation of the ‘‘grace period,’’

such ‘‘living trust’’ accounts that qualify

as revocable trust accounts for insurance

purposes could be insured up to six

months as revocable trust accounts—

rather than irrevocable trust accounts—

notwithstanding the death of the owner.

As mentioned above, only one

commenter thought that six months was

not the appropriate length of time for

the ‘‘grace period.’’ That commenter

favored a period of ninety days. As

noted by other commenters, however, a

six-month period is consistent with the

six-month period of ‘‘separate

insurance’’ following the assumption of

the deposits of one insured depository

institution by another insured

depository institution (e.g., a merger).

See 12 U.S.C. 1818(q). The FDIC agrees

with the majority of the commenters

that a period of six months is

reasonable.

C. The Insurance Coverage of ‘‘Living

Trust’’ Accounts

Twelve commenters addressed the

proposed insertion into the regulations

of language clarifying the insurance

coverage of revocable trust accounts

held pursuant to ‘‘living trust’’

agreements. As previously explained,

this language would state expressly that

the presence of a ‘‘defeating

contingency’’ in the ‘‘living trust’’

agreement would prevent the account

from receiving separate insurance

coverage (i.e., separate from any single

ownership accounts held by the owner

at the same insured depository

institution).

Ten commenters supported the

proposed revision as a means of

reducing depositors’ confusion

regarding the coverage of such accounts.

The other two commenters did not

oppose the insertion of clarifying

language into the regulations but urged

the FDIC to take stronger measures.

Specifically, they urged the FDIC to

abolish the concept of ‘‘defeating

contingencies’’ altogether so that a

‘‘living trust’’ account would be entitled

to separate insurance coverage

irrespective of any such contingencies.

The approach recommended by these

commenters would represent an abrupt

departure from the FDIC’s established

interpretation of the regulations. See

FDIC Advisory Opinion 94–32 (May 18,

1994), entitled ‘‘Guidelines for

Insurance Coverage of Revocable Trust

Accounts (Including ‘Living Trust’

Accounts).’’ Though this approach

would remove one source of confusion

regarding the operation of the insurance

regulations, the recommended approach

could create other problems. For

example, an owner’s ‘‘living trust’’

agreement with various contingencies

could specify that one qualifying

beneficiary could assume ownership of

the trust funds under one set of

circumstances but that two qualifying

beneficiaries (or no qualifying

beneficiaries) could assume ownership

of the funds under another set of

circumstances. Following the failure of

the depository institution, the FDIC

would be faced with the problem of

deciding whether the maximum

separate insurance coverage of the

account is $100,000 (one qualifying

beneficiary) or $200,000 (two qualifying

beneficiaries).

At this time, the FDIC is not prepared

to abandon its long-standing

interpretation of its regulations

regarding the insurance coverage of

‘‘living trust’’ accounts. As a means of

reducing some of the confusion

surrounding these accounts, however,

the Board has adopted—in the final

rule—the proposed clarifying language.

This language will be codified at

paragraph (f) of § 330.10.

IV. Comments on Other Aspects of the

Proposed Rule

In addition to addressing the three

substantive revisions discussed above,

some commenters addressed other

aspects of the proposed rule. For

example, several commenters

applauded the insertion into the

regulations of examples. Another

commenter criticized the renumbering

of the sections. Specifically, this

commenter stated that the renumbering

of the sections will affect the accuracy

of training materials. Though this

concern is understandable, the FDIC

believes that renumbering is necessary

as a means of increasing depositors’

understanding of certain rules. For

example, the placement of current

paragraph (g) of § 330.3 in new § 330.4

will highlight this rule governing the

continuation of separate deposit

insurance after merger of insured

depository institutions.

A number of commenters addressed

the revisions in the ANPR that were not

included in the proposed rule. Notably,

several voiced disappointment that the

FDIC had not included in the proposed

rule revisions to the joint account and

POD account rules. They emphasized

that the current joint account rules, in

particular, are very confusing to both

the industry and the public. The Board

is mindful of these comments and has

instructed the staff to continue studying

the policy, economic and other

implications of amending the joint

account and POD account rules. If the

Board determines that such

amendments are warranted, it will

authorize the issuance of a proposed

rule to obtain public comment on

specific changes to those rules.

A comment regarding the insurance

coverage of annuity contract accounts is

addressed below in connection with

new § 330.8.

V. Section-by-Section Discussion of the

Final Rule

Section 330.1—Definitions

This section has been expanded to

include some definitions currently

placed in other sections of part 330.

Also, ‘‘Corporation’’ has been defined as

the FDIC.

Section 330.2—Purpose

This section has been reduced by

eliminating a narrative description of

the FDIC’s authority to issue deposit

insurance regulations. This information

is unnecessary.

Section 330.3—General principles

This section has been amended in

several ways. First, examples have been

added to illustrate some of the general

principles. Second, in recognition of its

importance, current paragraph (g) of

§ 330.3 has been moved from this
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25755

section to new § 330.4 dealing with the

continuation of separate deposit

insurance after merger of insured

depository institutions. Third, current

§ 330.13 has been added to this section

as new paragraph (g) dealing with bank

investment contracts. Fourth, a new

provision has been added to provide the

survivors of deceased depositors with a

six-month ‘‘grace period’’ for the

restructuring of accounts. The provision

is new paragraph (j). It is discussed in

detail above.

Section 330.4—Continuation of separate

deposit insurance after merger of

insured depository institutions

This is a new section composed of the

provisions in current paragraph (g) of

§ 330.3. It addresses the deposit

insurance implications of bank mergers

and acquisitions. The placement of the

rule in a separate section of the

regulations should make the rule more

accessible.

Section 330.5—Recognition of deposit

ownership and recordkeeping

requirements

This section is current § 330.4 with

two substantive amendments. First, the

FDIC’s recordkeeping requirements have

been amended by adding an exception

to the general rule that the deposit

account records of a depository

institution must expressly disclose the

existence of a fiduciary relationship in

order for the FDIC to recognize the

fiduciary nature of the account. The

exception provides that the general

requirement would not apply if the

FDIC determines, in its sole discretion,

that the titling of the account and the

underlying deposit account records of

the depository institution indicate the

existence of a fiduciary relationship.

The section specifies that the exception

might apply, for example, where the

deposit account title or records indicate

that the account is held by an escrow

agent, title company, or an entity (or its

agent or nominee) whose business is to

hold, for safekeeping reasons, deposits

for others. Second, the recordkeeping

requirements for accounts held pursuant

to multi-tiered fiduciary relationships

(current paragraph (b)(3) of § 330.3 and

new paragraph (b)(3) of § 330.5) have

been modified so that the titles of such

accounts can be less unwieldy. These

revisions are discussed above.

Section 330.6—Single ownership

accounts

This section is current § 330.5. The

definition of a ‘‘sole proprietorship’’ has

been moved from this section to new

§ 330.1. Also, in the section dealing

with a decedent’s account, a crossreference has been added to new

paragraph (j) of § 330.3. The latter

provides a six-month ‘‘grace period’’ for

the restructuring of accounts following

the death of a depositor.

Section 330.7—Accounts held by an

agent, nominee, guardian, custodian or

conservator

This section is current § 330.6. The

provision on mortgage servicing

accounts has been clarified to indicate

that such accounts are not entitled to

separate insurance. Rather, they are

insured as custodial or agency accounts

subject to aggregation with other

accounts held by the owner at the same

insured depository institution. Also, the

provisions on annuity contract accounts

have been moved from this section to

new § 330.8.

Section 330.8—Annuity contract

accounts

This is a new section composed of the

provisions in current paragraph (f) of

§ 330.6. Under this section, funds held

by an insurance company for the sole

purpose of funding life insurance or

annuity contracts are insured up to

$100,000 per annuitant if certain

requirements are satisfied. The FDIC is

placing this rule in a separate section of

the regulations—rather than keeping the

rule in the section dealing with the

‘‘pass-through’’ coverage of agency

accounts—because annuity contract

accounts represent a separate category

of insurance. Also, in stating that such

accounts shall be insured separately in

the amount of up to $100,000 per

annuitant, the FDIC is adding the word

‘‘separately.’’

One commenter objected to the

addition of the word ‘‘separately.’’ In

the opinion of this commenter, the

addition of this word would result in a

windfall for insurance companies by

creating a new category of insured

deposits.

Subject to the requirements in the

regulation, the FDIC’s long-standing

staff position is that annuity contract

accounts represent a separate category

of insured deposits. In other words, the

revision does not create a new category

of insured deposits but simply clarifies

the existing coverage of such accounts.

The need for such clarification is

emphasized by the comment.

While adding the word ‘‘separately,’’

the FDIC has removed the phrase

‘‘different right and capacity.’’ The

phrase is unnecessary and confusing.

Section 330.9—Joint ownership

accounts

This section is current § 330.7.

Though it has not been changed

substantively, the section has been

clarified through the addition of several

examples.

Section 330.10—Revocable trust

accounts

This section is current § 330.8. For the

purpose of clarification, the section has

been rephrased and examples have been

added. Also, a paragraph has been

added to clarify the insurance coverage

of revocable trust accounts held

pursuant to formal ‘‘living trust’’

agreements. The paragraph states

specifically that the presence of a

‘‘defeating contingency’’ in the trust

agreement would prevent a beneficiary’s

interest from receiving separate

insurance under this section. The

addition of this new paragraph is

explained in detail above.

Section 330.11—Accounts of a

corporation, partnership or

unincorporated association

This section is current § 330.9. The

definition of ‘‘independent activity’’ has

been moved from this section to § 330.1.

Section 330.12—Accounts held by a

depository institution as the trustee of

an irrevocable trust

This section is current § 330.10. The

modifications are slight and not

substantive.

Section 330.13—Irrevocable trust

accounts

This section is current § 330.11. The

definitions of ‘‘trust interest’’ and ‘‘noncontingent trust interest’’ have been

moved from this section to § 330.1.

Section 330.14—Retirement and other

employee benefit plan accounts

This section is current § 330.12. It is

unchanged except for the deletion of

current paragraph (h)(2)(ii) of § 330.12,

which required a notice to certain

depositors within ten business days

after July 1, 1995. That provision is

obsolete.

Section 330.15—Public unit accounts

This section is current § 330.14. It is

essentially unchanged.

Section 330.16—Effective dates

Changes have been made to this

section to indicate that the designated

effective dates apply to former changes

to part 330. The FDIC has retained this

information in part 330 because the

effective dates might be relevant in

connection with time deposits issued

prior to December 19, 1991, until the

maturity date of such deposits.

In addition to the changes explained

above, two sections have been
25756 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

eliminated by the final rule. First,

current § 330.13 (‘‘Bank investment

contracts’’) has been reduced and

moved to new paragraph (g) of § 330.3.

Second, current § 330.15 (‘‘Notice to

depositors’’) has been removed

altogether as unnecessary.

VI. Paperwork Reduction Act

No collection of information pursuant

to the Paperwork Reduction Act is

contained in the final rule.

Consequently, no information has been

submitted to the Office of Management

and Budget for review.

VII. Regulatory Flexibility Act

The Board of Directors certifies that

the final rule will not have a significant

economic impact on a substantial

number of small businesses within the

meaning of the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.). The revisions

to the deposit insurance rules will

impose no new reporting, recordkeeping

or other compliance requirements upon

those entities. Accordingly, the Act’s

requirements relating to an initial and

final regulatory flexibility analysis are

not applicable.

VIII. Small Business Regulatory

Enforcement Fairness Act

The Office of Management and Budget

has determined that the final rule is not

a ‘‘major rule’’ within the meaning of

the relevant sections of the Small

Business Regulatory Enforcement

Fairness Act of 1996 (SBREFA) (5 U.S.C.

801 et seq.). As required by SBREFA,

the FDIC will file the appropriate

reports with Congress and the General

Accounting Office so that the final rule

may be reviewed. The effective date is

July 1, 1998.

List of Subjects in 12 CFR Part 330

Bank deposit insurance, Banks,

Banking, Reporting and recordkeeping

requirements, Savings and loan

associations, Trusts and trustees.

The Board of Directors of the Federal

Deposit Insurance Corporation hereby

revises part 330 of chapter III of title 12

of the Code of Federal Regulations to

read as follows:

PART 330—DEPOSIT INSURANCE

COVERAGE

Sec.

330.1 Definitions.

330.2 Purpose.

330.3 General principles.

330.4 Continuation of separate deposit

insurance after merger of insured

depository institutions.

330.5 Recognition of deposit ownership and

recordkeeping requirements.

330.6 Single ownership accounts.

330.7 Accounts held by an agent, nominee,

guardian, custodian or conservator.

330.8 Annuity contract accounts.

330.9 Joint ownership accounts.

330.10 Revocable trust accounts.

330.11 Accounts of a corporation,

partnership or unincorporated

association.

330.12 Accounts held by a depository

institution as the trustee of an

irrevocable trust.

330.13 Irrevocable trust accounts.

330.14 Retirement and other employee

benefit plan accounts.

330.15 Public unit accounts.

330.16 Effective dates.

Authority: 12 U.S.C. 1813(l), 1813(m),

1817(i), 1818(q), 1819(Tenth), 1820(f),

1821(a), 1822(c).

§ 330.1 Definitions.

For the purposes of this part:

(a) Act means the Federal Deposit

Insurance Act (12 U.S.C. 1811 et seq.).

(b) Corporation means the Federal

Deposit Insurance Corporation.

(c) Default has the same meaning as

provided under section 3(x) of the Act

(12 U.S.C. 1813(x)).

(d) Deposit has the same meaning as

provided under section 3(l) of the Act

(12 U.S.C. 1813(l)).

(e) Deposit account records means

account ledgers, signature cards,

certificates of deposit, passbooks,

corporate resolutions authorizing

accounts in the possession of the

insured depository institution and other

books and records of the insured

depository institution, including records

maintained by computer, which relate

to the insured depository institution’s

deposit taking function, but does not

mean account statements, deposit slips,

items deposited or cancelled checks.

(f) FDIC means the Federal Deposit

Insurance Corporation.

(g) Independent activity. A

corporation, partnership or

unincorporated association shall be

deemed to be engaged in an

‘‘independent activity’’ if the entity is

operated primarily for some purpose

other than to increase deposit insurance.

(h) Insured branch means a branch of

a foreign bank any deposits in which are

insured in accordance with the

provisions of the Act.

(i) Insured deposit has the same

meaning as that provided under section

3(m)(1) of the Act (12 U.S.C.

1813(m)(1)).

(j) Insured depository institution is

any depository institution whose

deposits are insured pursuant to the

Act, including a foreign bank having an

insured branch.

(k) Natural person means a human

being.

(l) Non-contingent trust interest

means a trust interest capable of

determination without evaluation of

contingencies except for those covered

by the present worth tables and rules of

calculation for their use set forth in

§ 20.2031–7 of the Federal Estate Tax

Regulations (26 CFR 20.2031–7) or any

similar present worth or life expectancy

tables which may be adopted by the

Internal Revenue Service.

(m) Sole proprietorship means a form

of business in which one person owns

all the assets of the business, in contrast

to a partnership or corporation.

(n) Trust estate means the

determinable and beneficial interest of a

beneficiary or principal in trust funds

but does not include the beneficial

interest of an heir or devisee in a

decedent’s estate.

(o) Trust funds means funds held by

an insured depository institution as

trustee pursuant to any irrevocable trust

established pursuant to any statute or

written trust agreement.

(p) Trust interest means the interest of

a beneficiary in an irrevocable express

trust (other than an employee benefit

plan) created either by written trust

instrument or by statute, but does not

include any interest retained by the

settlor.

§ 330.2 Purpose.

The purpose of this part is to clarify

the rules and define the terms necessary

to afford deposit insurance coverage

under the Act and provide rules for the

recognition of deposit ownership in

various circumstances.

§ 330.3 General principles.

(a) Ownership rights and capacities.

The insurance coverage provided by the

Act and this part is based upon the

ownership rights and capacities in

which deposit accounts are maintained

at insured depository institutions. All

deposits in an insured depository

institution which are maintained in the

same right and capacity (by or for the

benefit of a particular depositor or

depositors) shall be added together and

insured in accordance with this part.

Deposits maintained in different rights

and capacities, as recognized under this

part, shall be insured separately from

each other.

(Example: Single ownership accounts and

joint ownership accounts are insured

separately from each other.)

(b) Deposits maintained in separate

insured depository institutions or in

separate branches of the same insured

depository institution. Any deposit

accounts maintained by a depositor at

one insured depository institution are

insured separately from, and without

regard to, any deposit accounts that the

same depositor maintains at any other
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25757

separately chartered and insured

depository institution, even if two or

more separately chartered and insured

depository institutions are affiliated

through common ownership.

(Example: Deposits held by the same

individual at two different banks owned by

the same bank holding company would be

insured separately, per bank.)

The deposit accounts of a depositor

maintained in the same right and

capacity at different branches or offices

of the same insured depository

institution are not separately insured;

rather they shall be added together and

insured in accordance with this part.

(c) Deposits maintained by foreigners

and deposits denominated in foreign

currency. The availability of deposit

insurance is not limited to citizens and

residents of the United States. Any

person or entity that maintains deposits

in an insured depository institution is

entitled to the deposit insurance

provided by the Act and this part. In

addition, deposits denominated in a

foreign currency shall be insured in

accordance with this part. Deposit

insurance for such deposits shall be

determined and paid in the amount of

United States dollars that is equivalent

in value to the amount of the deposit

denominated in the foreign currency as

of close of business on the date of

default of the insured depository

institution. The exchange rates to be

used for such conversions are the 12 PM

rates (the ‘‘noon buying rates for cable

transfers’’) quoted for major currencies

by the Federal Reserve Bank of New

York on the date of default of the

insured depository institution, unless

the deposit agreement specifies that

some other widely recognized exchange

rates are to be used for all purposes

under that agreement, in which case, the

rates so specified shall be used for such

conversions.

(d) Deposits in insured branches of

foreign banks. Deposits in an insured

branch of a foreign bank which are

payable by contract in the United States

shall be insured in accordance with this

part, except that any deposits to the

credit of the foreign bank, or any office,

branch, agency or any wholly owned

subsidiary of the foreign bank, shall not

be insured. All deposits held by a

depositor in the same right and capacity

in more than one insured branch of the

same foreign bank shall be added

together for the purpose of determining

the amount of deposit insurance.

(e) Deposits payable solely outside of

the United States and certain other

locations. Any obligation of an insured

depository institution which is payable

solely at an office of such institution

located outside the States of the United

States, the District of Columbia, Puerto

Rico, Guam, the Commonwealth of the

Northern Mariana Islands, American

Samoa, the Trust Territory of the Pacific

Islands, and the Virgin Islands, is not a

deposit for the purposes of this part.

(f) International banking facility

deposits. An ‘‘international banking

facility time deposit,’’ as defined by the

Board of Governors of the Federal

Reserve System in Regulation D (12 CFR

204.8(a)(2)), or in any successor

regulation, is not a deposit for the

purposes of this part.

(g) Bank investment contracts. As

required by section 11(a)(8) of the Act

(12 U.S.C. 1821(a)(8)), any liability

arising under any investment contract

between any insured depository

institution and any employee benefit

plan which expressly permits ‘‘benefit

responsive withdrawals or transfers’’ (as

defined in section 11(a)(8) of the Act)

are not insured deposits for purposes of

this part. The term ‘‘substantial penalty

or adjustment’’ used in section 11(a)(8)

of the Act means, in the case of a

deposit having an original term which

exceeds one year, all interest earned on

the amount withdrawn from the date of

deposit or for six months, whichever is

less; or, in the case of a deposit having

an original term of one year or less, all

interest earned on the amount

withdrawn from the date of deposit or

three months, whichever is less.

(h) Application of state or local law to

deposit insurance determinations. In

general, deposit insurance is for the

benefit of the owner or owners of funds

on deposit. However, while ownership

under state law of deposited funds is a

necessary condition for deposit

insurance, ownership under state law is

not sufficient for, or decisive in,

determining deposit insurance coverage.

Deposit insurance coverage is also a

function of the deposit account records

of the insured depository institution, of

recordkeeping requirements, and of

other provisions of this part, which, in

the interest of uniform national rules for

deposit insurance coverage, are

controlling for purposes of determining

deposit insurance coverage.

(i) Determination of the amount of a

deposit—(1) General rule. The amount

of a deposit is the balance of principal

and interest unconditionally credited to

the deposit account as of the date of

default of the insured depository

institution, plus the ascertainable

amount of interest to that date, accrued

at the contract rate (or the anticipated or

announced interest or dividend rate),

which the insured depository institution

in default would have paid if the

deposit had matured on that date and

the insured depository institution had

not failed. In the absence of any such

announced or anticipated interest or

dividend rate, the rate for this purpose

shall be whatever rate was paid in the

immediately preceding payment period.

(2) Discounted certificates of deposit.

The amount of a certificate of deposit

sold by an insured depository

institution at a discount from its face

value is its original purchase price plus

the amount of accrued earnings

calculated by compounding interest

annually at the rate necessary to

increase the original purchase price to

the maturity value over the life of the

certificate.

(3) Waiver of minimum requirements.

In the case of a deposit with a fixed

payment date, fixed or minimum term,

or a qualifying or notice period that has

not expired as of such date, interest

thereon to the date of closing shall be

computed according to the terms of the

deposit contract as if interest had been

credited and as if the deposit could have

been withdrawn on such date without

any penalty or reduction in the rate of

earnings.

(j) Continuation of insurance coverage

following the death of a deposit owner.

The death of a deposit owner shall not

affect the insurance coverage of the

deposit for a period of six months

following the owner’s death unless the

deposit account is restructured. The

operation of this grace period, however,

shall not result in a reduction of

coverage. If an account is not

restructured within six months after the

owner’s death, the insurance shall be

provided on the basis of actual

ownership in accordance with the

provisions of § 330.5(a)(1).

§ 330.4 Continuation of separate deposit

insurance after merger of insured

depository institutions.

Whenever the liabilities of one or

more insured depository institutions for

deposits are assumed by another

insured depository institution, whether

by merger, consolidation, other statutory

assumption or contract:

(a) The insured status of the

institutions whose liabilities have been

assumed terminates on the date of

receipt by the FDIC of satisfactory

evidence of the assumption; and

(b) The separate insurance of deposits

assumed continues for six months from

the date the assumption takes effect or,

in the case of a time deposit, the earliest

maturity date after the six-month

period. In the case of time deposits

which mature within six months of the

date the deposits are assumed and

which are renewed at the same dollar

amount (either with or without accrued
25758 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

interest having been added to the

principal amount) and for the same term

as the original deposit, the separate

insurance applies to the renewed

deposits until the first maturity date

after the six-month period. Time

deposits that mature within six months

of the deposit assumption and that are

renewed on any other basis, or that are

not renewed and thereby become

demand deposits, are separately insured

only until the end of the six-month

period.

§ 330.5 Recognition of deposit ownership

and recordkeeping requirements.

(a) Recognition of deposit

ownership—(1) Evidence of deposit

ownership. Except as indicated in this

paragraph (a)(1) or as provided in

§ 330.3(j), in determining the amount of

insurance available to each depositor,

the FDIC shall presume that deposited

funds are actually owned in the manner

indicated on the deposit account

records of the insured depository

institution. If the FDIC, in its sole

discretion, determines that the deposit

account records of the insured

depository institution are clear and

unambiguous, those records shall be

considered binding on the depositor,

and the FDIC shall consider no other

records on the manner in which the

funds are owned. If the deposit account

records are ambiguous or unclear on the

manner in which the funds are owned,

then the FDIC may, in its sole

discretion, consider evidence other than

the deposit account records of the

insured depository institution for the

purpose of establishing the manner in

which the funds are owned. Despite the

general requirements of this paragraph

(a)(1), if the FDIC has reason to believe

that the insured depository institution’s

deposit account records misrepresent

the actual ownership of deposited funds

and such misrepresentation would

increase deposit insurance coverage, the

FDIC may consider all available

evidence and pay claims for insured

deposits on the basis of the actual rather

than the misrepresented ownership.

(2) Recognition of deposit ownership

in custodial accounts. In the case of

custodial deposits, the interest of each

beneficial owner may be determined on

a fractional or percentage basis. This

may be accomplished in any manner

which indicates that where the funds of

an owner are commingled with other

funds held in a custodial capacity and

a portion thereof is placed on deposit in

one or more insured depository

institutions without allocation, the

owner’s insured interest in the deposit

in any one insured depository

institution would represent, at any

given time, the same fractional share as

his or her share of the total commingled

funds.

(b) Recordkeeping requirements—(1)

Disclosure of fiduciary relationships.

The ‘‘deposit account records’’ (as

defined in § 330.1(e)) of an insured

depository institution must expressly

disclose, by way of specific references,

the existence of any fiduciary

relationship including, but not limited

to, relationships involving a trustee,

agent, nominee, guardian, executor or

custodian, pursuant to which funds in

an account are deposited and on which

a claim for insurance coverage is based.

No claim for insurance coverage based

on a fiduciary relationship will be

recognized if no fiduciary relationship

is evident from the deposit account

records of the insured depository

institution. The general requirement for

the express indication that the account

is held in a fiduciary capacity will not

apply, however, in instances where the

FDIC determines, in its sole discretion,

that the titling of the deposit account

and the underlying deposit account

records sufficiently indicate the

existence of a fiduciary relationship.

This exception may apply, for example,

where the deposit account title or

records indicate that the account is held

by an escrow agent, title company or a

company whose business is to hold

deposits and securities for others.

(2) Details of fiduciary relationships.

If the deposit account records of an

insured depository institution disclose

the existence of a relationship which

might provide a basis for additional

insurance (including the exception

provided for in paragraph (b)(1) of this

section), the details of the relationship

and the interests of other parties in the

account must be ascertainable either

from the deposit account records of the

insured depository institution or from

records maintained, in good faith and in

the regular course of business, by the

depositor or by some person or entity

that has undertaken to maintain such

records for the depositor.

(3) Multi-tiered fiduciary

relationships. In deposit accounts where

there are multiple levels of fiduciary

relationships, there are two methods of

satisfying paragraphs (b)(1) and (b)(2) of

this section to obtain insurance coverage

for the interests of the true beneficial

owners of a deposit account.

(i) One method is to:

(A) Expressly indicate, on the deposit

account records of the insured

depository institution, the existence of

each and every level of fiduciary

relationships; and

(B) Disclose, at each level, the name(s)

and interest(s) of the person(s) on whose

behalf the party at that level is acting.

(ii) An alternative method is to:

(A) Expressly indicate, on the deposit

account records of the insured

depository institution, that there are

multiple levels of fiduciary

relationships;

(B) Disclose the existence of

additional levels of fiduciary

relationships in records, maintained in

good faith and in the regular course of

business, by parties at subsequent

levels; and

(C) Disclose, at each of the levels, the

name(s) and interest(s) of the person(s)

on whose behalf the party at that level

is acting. No person or entity in the

chain of parties will be permitted to

claim that they are acting in a fiduciary

capacity for others unless the possible

existence of such a relationship is

revealed at some previous level in the

chain.

(4) Exceptions to recordkeeping

requirements—(i) Deposits evidenced by

negotiable instruments. If any deposit

obligation of an insured depository

institution is evidenced by a negotiable

certificate of deposit, negotiable draft,

negotiable cashier’s or officer’s check,

negotiable certified check, negotiable

traveler’s check, letter of credit or other

negotiable instrument, the FDIC will

recognize the owner of such deposit

obligation for all purposes of claim for

insured deposits to the same extent as

if his or her name and interest were

disclosed on the records of the insured

depository institution; provided, that

the instrument was in fact negotiated to

such owner prior to the date of default

of the insured depository institution.

The owner must provide affirmative

proof of such negotiation, in a form

satisfactory to the FDIC, to substantiate

his or her claim. Receipt of a negotiable

instrument directly from the insured

depository institution in default shall,

in no event, be considered a negotiation

of said instrument for purposes of this

provision.

(ii) Deposit obligations for payment of

items forwarded for collection by

depository institution acting as agent.

Where an insured depository institution

in default has become obligated for the

payment of items forwarded for

collection by a depository institution

acting solely as agent, the FDIC will

recognize the holders of such items for

all purposes of claim for insured

deposits to the same extent as if their

name(s) and interest(s) were disclosed

as depositors on the deposit account

records of the insured depository

institution, when such claim for insured

deposits, if otherwise payable, has been
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25759

established by the execution and

delivery of prescribed forms. The FDIC

will recognize such depository

institution forwarding such items for the

holders thereof as agent for such holders

for the purpose of making an assignment

to the FDIC of their rights against the

insured depository institution in default

and for the purpose of receiving

payment on their behalf.

§ 330.6 Single ownership accounts.

(a) Individual accounts. Funds owned

by a natural person and deposited in

one or more deposit accounts in his or

her own name shall be added together

and insured up to $100,000 in the

aggregate. Exception: Despite the

general requirement in this paragraph

(a), if more than one natural person has

the right to withdraw funds from an

individual account (excluding persons

who have the right to withdraw by

virtue of a Power of Attorney), the

account shall be treated as a joint

ownership account (although not

necessarily a qualifying joint account)

and shall be insured in accordance with

the provisions of § 330.9, unless the

deposit account records clearly indicate,

to the satisfaction of the FDIC, that the

funds are owned by one individual and

that other signatories on the account are

merely authorized to withdraw funds on

behalf of the owner.

(b) Sole proprietorship accounts.

Funds owned by a business which is a

‘‘sole proprietorship’’ (as defined in

§ 330.1(m)) and deposited in one or

more deposit accounts in the name of

the business shall be treated as the

individual account(s) of the person who

is the sole proprietor, added to any

other individual accounts of that

person, and insured up to $100,000 in

the aggregate.

(c) Single-name accounts containing

community property funds. Community

property funds deposited into one or

more deposit accounts in the name of

one member of a husband-wife

community shall be treated as the

individual account(s) of the named

member, added to any other individual

accounts of that person, and insured up

to $100,000 in the aggregate.

(d) Accounts of a decedent and

accounts held by executors or

administrators of a decedent’s estate.

Funds held in the name of a decedent

or in the name of the executor,

administrator, or other personal

representative of his or her estate and

deposited into one or more deposit

accounts shall be added together and

insured up to $100,000 in the aggregate;

provided, however, that nothing in this

paragraph (d) shall affect the operation

of § 330.3(j). The deposit insurance

provided by this paragraph (d) shall be

separate from any insurance coverage

provided for the individual deposit

accounts of the executor, administrator,

other personal representative or the

beneficiaries of the estate.

§ 330.7 Accounts held by an agent,

nominee, guardian, custodian or

conservator.

(a) Agency or nominee accounts.

Funds owned by a principal or

principals and deposited into one or

more deposit accounts in the name of an

agent, custodian or nominee, shall be

insured to the same extent as if

deposited in the name of the

principal(s). When such funds are

deposited by an insured depository

institution acting as a trustee of an

irrevocable trust, the insurance coverage

shall be governed by the provisions of

§ 330.13.

(b) Guardian, custodian or

conservator accounts. Funds held by a

guardian, custodian, or conservator for

the benefit of his or her ward, or for the

benefit of a minor under the Uniform

Gifts to Minors Act, and deposited into

one or more accounts in the name of the

guardian, custodian or conservator

shall, for purposes of this part, be

deemed to be agency or nominee

accounts and shall be insured in

accordance with paragraph (a) of this

section.

(c) Accounts held by fiduciaries on

behalf of two or more persons. Funds

held by an agent, nominee, guardian,

custodian, conservator or loan servicer,

on behalf of two or more persons jointly,

shall be treated as a joint ownership

account and shall be insured in

accordance with the provisions of

§ 330.9.

(d) Mortgage servicing accounts.

Accounts maintained by a mortgage

servicer, in a custodial or other

fiduciary capacity, which are comprised

of payments by mortgagors of principal

and interest, shall be insured in

accordance with paragraph (a) of this

section for the interest of each owner

(mortgagee, investor or security holder)

in such accounts. Accounts maintained

by a mortgage servicer, in a custodial or

other fiduciary capacity, which are

comprised of payments by mortgagors of

taxes and insurance premiums shall be

added together and insured in

accordance with paragraph (a) of this

section for the ownership interest of

each mortgagor in such accounts.

(e) Custodian accounts for American

Indians. Paragraph (a) of this section

shall not apply to any interest an

individual American Indian may have

in funds deposited by the Bureau of

Indian Affairs of the United States

Department of the Interior (the ‘‘BIA’’)

on behalf of that person pursuant to 25

U.S.C. 162(a), or by any other disbursing

agent of the United States on behalf of

that person pursuant to similar

authority, in an insured depository

institution. The interest of each

American Indian in all such accounts

maintained at the same insured

depository institution shall be added

together and insured, up to $100,000,

separately from any other accounts

maintained by that person in the same

insured depository institution.

§ 330.8 Annuity contract accounts.

(a) Funds held by an insurance

company or other corporation in a

deposit account for the sole purpose of

funding life insurance or annuity

contracts and any benefits incidental to

such contracts, shall be insured

separately in the amount of up to

$100,000 per annuitant, provided that,

pursuant to a state statute:

(1) The corporation establishes a

separate account for such funds;

(2) The account cannot be charged

with the liabilities arising out of any

other business of the corporation; and

(3) The account cannot be invaded by

other creditors of the corporation in the

event that the corporation becomes

insolvent and its assets are liquidated.

(b) Such insurance coverage shall be

separate from the insurance provided

for any other accounts maintained by

the corporation or the annuitants at the

same insured depository institution.

§ 330.9 Joint ownership accounts.

(a) Separate insurance coverage.

Qualifying joint accounts, whether

owned as joint tenants with right of

survivorship, as tenants in common or

as tenants by the entirety, shall be

insured separately from any

individually owned (single ownership)

deposit accounts maintained by the coowners.

(Example: If A has a single ownership

account and also is a joint owner of a

qualifying joint account, A’s interest in the

joint account would be insured separately

from his or her interest in the individual

account.) Qualifying joint accounts in the

names of both husband and wife which are

comprised of community property funds

shall be added together and insured up to

$100,000, separately from any funds

deposited into accounts bearing their

individual names.

(b) Determination of insurance

coverage. Step one: all qualifying joint

accounts owned by the same

combination of individuals shall be

added together; the aggregate amount is

insurable up to a limit of $100,000.

(Example: A qualifying joint account

owned by ‘‘A&B’’ would be added to a
25760 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

qualifying joint account owned by ‘‘B&A’’

and the insurable limit on the combined

balances in those accounts would be

$100,000. Moreover, the insurable limit on a

single qualifying joint account owned by

‘‘A&B’’ would be $100,000. Thus, any

qualifying joint account (or group of

qualifying joint accounts owned by the same

combination of persons) with a balance over

$100,000 will be over the insurance limit.)

Step two: the interests of each coowner in all qualifying joint accounts,

whether owned by the same or different

combinations of persons, shall then be

added together and the total shall be

insured up to $100,000.

(Example: ‘‘A&B’’ have a qualifying joint

account with a balance of $100,000; ‘‘A&C’’

have a qualifying joint account with a

balance of $150,000; and ‘‘A&D’’ have a

qualifying joint account with a balance of

$100,000. The balance in the account owned

by ‘‘A&C’’ exceeds $100,000, so under step

one the excess amount, $50,000, would be

uninsured. A’s combined ownership interests

in the insurable amounts in the accounts

would be $150,000, of which under step two

$100,000 would be insured and $50,000

would be uninsured; B’s ownership interest

would be $50,000, all of which would be

insured; C’s insurable ownership interest

would be $50,000, all of which would be

insured; and D’s ownership interest would be

$50,000, all of which would be insured.)

(c) Qualifying joint accounts. (1) A

joint deposit account shall be deemed to

be a qualifying joint account, for

purposes of this section, only if:

(i) All co-owners of the funds in the

account are ‘‘natural persons’’ (as

defined in § 330.1(k)); and

(ii) Each co-owner has personally

signed a deposit account signature card;

and

(iii) Each co-owner possesses

withdrawal rights on the same basis.

(2) The signature-card requirement of

paragraph (c)(1)(ii) of this section shall

not apply to certificates of deposit, to

any deposit obligation evidenced by a

negotiable instrument, or to any account

maintained by an agent, nominee,

guardian, custodian or conservator on

behalf of two or more persons.

(3) All deposit accounts that satisfy

the criteria in paragraph (c)(1) of this

section, and those accounts that come

within the exception provided for in

paragraph (c)(2) of this section, shall be

deemed to be jointly owned provided

that, in accordance with the provisions

of § 330.5(a), the FDIC determines that

the deposit account records of the

insured depository institution are clear

and unambiguous as to the ownership of

the accounts. If the deposit account

records are ambiguous or unclear as to

the manner in which the deposit

accounts are owned, then the FDIC may,

in its sole discretion, consider evidence

other than the deposit account records

of the insured depository institution for

the purpose of establishing the manner

in which the funds are owned. The

signatures of two or more persons on the

deposit account signature card or the

names of two or more persons on a

certificate of deposit or other deposit

instrument shall be conclusive evidence

that the account is a joint account

(although not necessarily a qualifying

joint account) unless the deposit records

as a whole are ambiguous and some

other evidence indicates, to the

satisfaction of the FDIC, that there is a

contrary ownership capacity.

(d) Nonqualifying joint accounts. A

deposit account held in two or more

names which is not a qualifying joint

account, for purposes of this section,

shall be treated as being owned by each

named owner, as an individual,

corporation, partnership, or

unincorporated association, as the case

may be, and the actual ownership

interest of each individual or entity in

such account shall be added to any

other single ownership accounts of such

individual or other accounts of such

entity, and shall be insured in

accordance with the provisions of this

part governing the insurance of such

accounts.

(e) Determination of interests. The

interests of the co-owners of qualifying

joint accounts, held as tenants in

common, shall be deemed equal, unless

otherwise stated in the depository

institution’s deposit account records.

This section applies regardless of

whether the conjunction ‘‘and’’ or ‘‘or’’

is used in the title of a joint deposit

account, even when both terms are

used, such as in the case of a joint

deposit account with three or more coowners.

§ 330.10 Revocable trust accounts.

(a) General rule. Funds owned by an

individual and deposited into an

account evidencing an intention that

upon the death of the owner the funds

shall belong to one or more qualifying

beneficiaries shall be insured in the

amount of up to $100,000 in the

aggregate as to each such named

qualifying beneficiary, separately from

any other accounts of the owner or the

beneficiaries. For purposes of this

provision, the term ‘‘qualifying

beneficiaries’’ means the owner’s

spouse, child/children or grandchild/

grandchildren.

(Example: If A establishes a qualifying

account payable upon death to his spouse,

two children and one grandchild, assuming

compliance with the requirements of this

provision, the account would be insured up

to $400,000 separately from any other

different types of accounts either A or the

beneficiaries may have with the same

depository institution.)

Accounts covered by this provision

are commonly referred to as tentative or

‘‘Totten trust’’ accounts, ‘‘payable-ondeath’’ accounts, or revocable trust

accounts.

(b) Required intention. The required

intention in paragraph (a) of this section

that upon the owner’s death the funds

shall belong to one or more qualifying

beneficiaries must be manifested in the

title of the account using commonly

accepted terms such as, but not limited

to, ‘‘in trust for,’’ ‘‘as trustee for,’’

‘‘payable-on-death to,’’ or any acronym

therefor. In addition, the beneficiaries

must be specifically named in the

deposit account records of the insured

depository institution. The settlor of a

revocable trust account shall be

presumed to own the funds deposited

into the account.

(c) Interests of nonqualifying

beneficiaries. If a named beneficiary of

an account covered by this section is not

a qualifying beneficiary, the funds

corresponding to that beneficiary shall

be treated as individually owned (single

ownership) accounts of such owner(s),

aggregated with any other single

ownership accounts of such owner(s),

and insured up to $100,000 per owner.

(Examples: If A establishes an account

payable upon death to his or her nephew, the

account would be insured as a single

ownership account owned by A. Similarly, if

B establishes an account payable upon death

to her husband, son and nephew, two-thirds

of the account balance would be eligible for

POD coverage up to $200,000 corresponding

to the two qualifying beneficiaries (i.e., the

spouse and child). The amount

corresponding to the non-qualifying

beneficiary (i.e., the nephew) would be

deemed to be owned by B in her single

ownership capacity and insured

accordingly.)

(d) 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 (which shall be

deemed equal unless otherwise stated in

the insured depository institution’s

deposit account records) held for the

benefit of each qualifying beneficiary

shall be separately insured up to

$100,000. However, where a husband

and a wife establish a revocable trust

account naming themselves as the sole

beneficiaries, such account shall not be

insured according to the provisions of

this section but shall instead be insured
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25761

in accordance with the joint account

provisions of § 330.9.

(e) Definition of ‘‘children’’ and

‘‘grandchildren’’. For the purpose of

establishing the qualifying degree of

kinship set forth in paragraph (a) of this

section, the term ‘‘children’’ includes

any biological, adopted and stepchildren of the owner and

‘‘grandchildren’’ includes biological,

adopted, or step-children of any of the

owner’s children.

(f) Living trusts. This section also

applies to revocable trust accounts held

in connection with a so-called ‘‘living

trust,’’ a formal trust which 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 deposit account held

in connection with the living trust may

be eligible for deposit insurance under

this section, assuming compliance with

all the provisions of this part. If,

however, for example, the living trust

includes a ‘‘defeating contingency’’

relative to that beneficiary’s interest in

the trust assets, then insurance coverage

under this section would not be

provided. For purposes of this section,

a ‘‘defeating contingency’’ is defined as

a condition which would prevent the

beneficiary from acquiring a vested and

non-contingent interest in the funds in

the deposit account upon the owner’s

death.

§ 330.11 Accounts of a corporation,

partnership or unincorporated association.

(a) Corporate accounts. (1) The

deposit accounts of a corporation

engaged in any ‘‘independent activity’’

(as defined in § 330.1(g)) shall be added

together and insured up to $100,000 in

the aggregate. If a corporation has

divisions or units which are not

separately incorporated, the deposit

accounts of those divisions or units

shall be added to any other deposit

accounts of the corporation. If a

corporation maintains deposit accounts

in a representative or fiduciary capacity,

such accounts shall not be treated as the

deposit accounts of the corporation but

shall be treated as fiduciary accounts

and insured in accordance with the

provisions of § 330.7.

(2) Notwithstanding any other

provision of this part, any trust or other

business arrangement which has filed or

is required to file a registration

statement with the Securities and

Exchange Commission pursuant to

section 8 of the Investment Company

Act of 1940 or that would be required

so to register but for the fact it is not

created under the laws of the United

States or a state or but for sections 2(b),

3(c)(1), or 6(a)(1) of that act shall be

deemed to be a corporation for purposes

of determining deposit insurance

coverage.

(b) Partnership accounts. The deposit

accounts of a partnership engaged in

any ‘‘independent activity’’ (as defined

in § 330.1(g)) shall be added together

and insured up to $100,000 in the

aggregate. Such insurance coverage shall

be separate from any insurance

provided for individually owned (single

ownership) accounts maintained by the

individual partners. A partnership shall

be deemed to exist, for purposes of this

paragraph, any time there is an

association of two or more persons or

entities formed to carry on, as coowners, an unincorporated business for

profit.

(c) Unincorporated association

accounts. The deposit accounts of an

unincorporated association engaged in

any independent activity shall be added

together and insured up to $100,000 in

the aggregate, separately from the

accounts of the person(s) or entity(ies)

comprising the unincorporated

association. An unincorporated

association shall be deemed to exist, for

purposes of this paragraph, whenever

there is an association of two or more

persons formed for some religious,

educational, charitable, social or other

noncommercial purpose.

(d) Non-qualifying entities. The

deposit accounts of an entity which is

not engaged in an ‘‘independent

activity’’ (as defined in § 330.1(g)) shall

be deemed to be owned by the person

or persons owning the corporation or

comprising the partnership or

unincorporated association, and, for

deposit insurance purposes, the interest

of each person in such a deposit account

shall be added to any other deposit

accounts individually owned by that

person and insured up to $100,000 in

the aggregate.

§ 330.12 Accounts held by a depository

institution as the trustee of an irrevocable

trust.

(a) Separate insurance coverage.

‘‘Trust funds’’ (as defined in § 330.1(o))

held by an insured depository

institution in its capacity as trustee of

an irrevocable trust, whether held in its

trust department, held or deposited in

any other department of the fiduciary

institution, or deposited by the fiduciary

institution in another insured

depository institution, shall be insured

up to $100,000 for each owner or

beneficiary represented. This insurance

shall be separate from, and in addition

to, the insurance provided for any other

deposits of the owners or the

beneficiaries.

(b) Determination of interests. The

insurance for funds held by an insured

depository institution in its capacity as

trustee of an irrevocable trust shall be

determined in accordance with the

following provisions:

(1) Allocated funds of a trust estate.

If trust funds of a particular ‘‘trust

estate’’ (as defined in § 330.1(n)) are

allocated by the fiduciary and

deposited, the insurance with respect to

such trust estate shall be determined by

ascertaining the amount of its funds

allocated, deposited and remaining to

the credit of the claimant as fiduciary at

the insured depository institution in

default.

(2) Interest of a trust estate in

unallocated trust funds. If funds of a

particular trust estate are commingled

with funds of other trust estates and

deposited by the fiduciary institution in

one or more insured depository

institutions to the credit of the

depository institution as fiduciary,

without allocation of specific amounts

from a particular trust estate to an

account in such institution(s), the

percentage interest of that trust estate in

the unallocated deposits in any

institution in default is the same as that

trust estate’s percentage interest in the

entire commingled investment pool.

(c) Limitation on applicability. This

section shall not apply to deposits of

trust funds belonging to a trust which is

classified as a corporation under

§ 330.11(a)(2).

§ 330.13 Irrevocable trust accounts.

(a) General rule. Funds representing

the ‘‘non-contingent trust interest(s)’’ (as

defined in § 330.1(l)) of a beneficiary

deposited into one or more deposit

accounts established pursuant to one or

more irrevocable trust agreements

created by the same settlor(s) (grantor(s))

shall be added together and insured up

to $100,000 in the aggregate. Such

insurance coverage shall be separate

from the coverage provided for other

accounts maintained by the settlor(s),

trustee(s) or beneficiary(ies) of the

irrevocable trust(s) at the same insured

depository institution. Each ‘‘trust

interest’’ (as defined in § 330.1(p)) in

any irrevocable trust established by two

or more settlors shall be deemed to be

derived from each settlor pro rata to his

or her contribution to the trust.

(b) Treatment of contingent trust

interests. In the case of any trust in

which certain trust interests do not

qualify as non-contingent trust interests,

the funds representing those interests

shall be added together and insured up

to $100,000 in the aggregate. Such

insurance coverage shall be in addition

to the coverage provided for the funds
25762 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

representing non-contingent trust

interests which are insured pursuant to

paragraph (a) of this section.

(c) Commingled accounts of

bankruptcy trustees. Whenever a

bankruptcy trustee appointed under

Title 11 of the United States Code

commingles the funds of various

bankruptcy estates in the same account

at an insured depository institution, the

funds of each Title 11 bankruptcy estate

will be added together and insured up

to $100,000, separately from the funds

of any other such estate.

§ 330.14 Retirement and other employee

benefit plan accounts.

(a) ‘‘Pass-through’’ insurance. Except

as provided in paragraph (b) of this

section, any deposits of an employee

benefit plan or of any eligible deferred

compensation plan described in section

457 of the Internal Revenue Code of

1986 (26 U.S.C. 457) in an insured

depository institution shall be insured

on a ‘‘pass-through’’ basis, in the

amount of up to $100,000 for the noncontingent interest of each plan

participant, provided that the FDIC’s

recordkeeping requirements, as

prescribed in § 330.5, are satisfied.

(b) Exception. ‘‘Pass-through’’

insurance shall not be provided

pursuant to paragraph (a) of this section

with respect to any deposit accepted by

an insured depository institution which,

at the time the deposit is accepted, may

not accept brokered deposits pursuant

to section 29 of the Act (12 U.S.C. 1831f)

unless, at the time the deposit is

accepted:

(1) The institution meets each

applicable capital standard; and

(2) The depositor receives a written

statement from the institution indicating

that such deposits are eligible for

insurance coverage on a ‘‘pass-through’’

basis.

(c) Aggregation—(1) Multiple plans.

Funds representing the non-contingent

interests of a beneficiary in an employee

benefit plan, or eligible deferred

compensation plan described in section

457 of the Internal Revenue Code of

1986 (26 U.S.C. 457), which are

deposited in one or more deposit

accounts shall be aggregated with any

other deposited funds representing such

interests of the same beneficiary in other

employee benefit plans, or eligible

deferred compensation plans described

in section 457 of the Internal Revenue

Code of 1986, established by the same

employer or employee organization.

(2) Certain retirement accounts. (i)

Deposits in an insured depository

institution made in connection with the

following types of retirement plans shall

be aggregated and insured in the amount

of up to $100,000 per participant:

(A) Any individual retirement

account described in section 408(a) of

the Internal Revenue Code of 1986 (26

U.S.C. 408(a));

(B) Any eligible deferred

compensation plan described in section

457 of the Internal Revenue Code of

1986 (26 U.S.C. 457); and

(C) Any individual account plan

defined in section 3(34) of the Employee

Retirement Income Security Act (ERISA)

(29 U.S.C. 1002) and any plan described

in section 401(d) of the Internal

Revenue Code of 1986 (26 U.S.C.

401(d)), to the extent that participants

and beneficiaries under such plans have

the right to direct the investment of

assets held in individual accounts

maintained on their behalf by the plans.

(ii) The provisions of this paragraph

(c) shall not apply with respect to the

deposits of any employee benefit plan,

or eligible deferred compensation plan

described in section 457 of the Internal

Revenue Code of 1986, which is not

entitled to ‘‘pass-through’’ insurance

pursuant to paragraph (b) of this section.

Such deposits shall be aggregated and

insured in the amount of $100,000 per

plan.

(d) Determination of interests—(1)

Defined contribution plans. The value of

an employee’s non-contingent interest

in a defined contribution plan shall be

deemed to be the employee’s account

balance as of the date of default of the

insured depository institution,

regardless of whether said amount was

derived, in whole or in part, from

contributions of the employee and/or

the employer to the account.

(2) Defined benefit plans. The value of

an employee’s non-contingent interest

in a defined benefit plan shall be

deemed to be the present value of the

employee’s interest in the plan,

evaluated in accordance with the

method of calculation ordinarily used

under such plan, as of the date of

default of the insured depository

institution.

(3) Amounts taken into account. For

the purposes of applying the rule under

paragraph (c)(2) of this section, only the

present vested and ascertainable

interests of each participant in an

employee benefit plan or ‘‘457 Plan,’’

excluding any remainder interest

created by, or as a result of, the plan,

shall be taken into account in

determining the amount of deposit

insurance accorded to the deposits of

the plan.

(e) Treatment of contingent interests.

In the event that employees’ interests in

an employee benefit plan are not

capable of evaluation in accordance

with the provisions of this section, or an

account established for any such plan

includes amounts for future participants

in the plan, payment by the FDIC with

respect to all such interests shall not

exceed $100,000 in the aggregate.

(f) Overfunded pension plan deposits.

Any portion of an employee benefit

plan’s deposits which is not attributable

to the interests of the beneficiaries

under the plan shall be deemed

attributable to the overfunded portion of

the plan’s assets and shall be aggregated

and insured up to $100,000, separately

from any other deposits.

(g) Definitions of ‘‘depositor’’,

‘‘employee benefit plan’’, ‘‘employee

organization’’ and ‘‘non-contingent

interest’’. Except as otherwise indicated

in this section, for purposes of this

section:

(1) The term depositor means the

person(s) administering or managing an

employee benefit plan.

(2) The term employee benefit plan

has the same meaning given to such

term in section 3(3) of the Employee

Retirement Income Security Act of 1974

(ERISA) (29 U.S.C. 1002) and includes

any plan described in section 401(d) of

the Internal Revenue Code of 1986.

(3) The term employee organization

means any labor union, organization,

employee representation committee,

association, group, or plan, in which

employees participate and which exists

for the purpose, in whole or in part, of

dealing with employers concerning an

employee benefit plan, or other matters

incidental to employment relationships;

or any employees’ beneficiary

association organized for the purpose, in

whole or in part, of establishing such a

plan.

(4) The term non-contingent interest

means an interest capable of

determination without evaluation of

contingencies except for those covered

by the present worth tables and rules of

calculation for their use set forth in

§ 20.2031–7 of the Federal Estate Tax

Regulations (26 CFR 20.2031–7) or any

similar present worth or life expectancy

tables as may be published by the

Internal Revenue Service.

(h) Disclosure of capital status—(1)

Disclosure upon request. An insured

depository institution shall, upon

request, provide a clear and

conspicuous written notice to any

depositor of employee benefit plan

funds of the institution’s leverage ratio,

Tier 1 risk-based capital ratio, total riskbased capital ratio and prompt

corrective action (PCA) capital category,

as defined in the regulations of the

institution’s primary federal regulator,

and whether, in the depository

institution’s judgment, employee benefit
Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations 25763

plan deposits made with the institution,

at the time the information is requested,

would be eligible for ‘‘pass-through’’

insurance coverage under paragraphs (a)

and (b) of this section. Such notice shall

be provided within five business days

after receipt of the request for

disclosure.

(2) Disclosure upon opening of an

account. An insured depository

institution shall, upon the opening of

any account comprised of employee

benefit plan funds, provide a clear and

conspicuous written notice to the

depositor consisting of an accurate

explanation of the requirements for

‘‘pass-through’’ deposit insurance

coverage provided in paragraphs (a) and

(b) of this section; the institution’s PCA

capital category; and a determination of

whether or not, in the depository

institution’s judgment, the funds being

deposited are eligible for ‘‘passthrough’’ insurance coverage.

(3) Disclosure when ‘‘pass-through’’

coverage is no longer available.

Whenever new, rolled-over or renewed

employee benefit plan deposits placed

with an insured depository institution

would no longer be eligible for ‘‘passthrough’’ insurance coverage, the

institution shall provide a clear and

conspicuous written notice to all

existing depositors of employee benefit

plan funds of its new PCA capital

category, if applicable, and that new,

rolled-over or renewed deposits of

employee benefit plan funds made after

the applicable date shall not be eligible

for ‘‘pass-through’’ insurance coverage

under paragraphs (a) and (b) of this

section. Such written notice shall be

provided within ten business days after

the institution receives notice or is

deemed to have notice that it is no

longer permitted to accept brokered

deposits under section 29 of the Act and

the institution no longer meets the

requirements in paragraph (b) of this

section.

(4) Definition of ‘‘employee benefit

plan’’. For purposes of this paragraph

(h), the term ‘‘employee benefit plan’’

has the same meaning as provided

under paragraph (g)(2) of this section

but also includes any eligible deferred

compensation plans described in

section 457 of the Internal Revenue

Code of 1986 (26 U.S.C. 457).

§ 330.15 Public unit accounts.

(a) Extent of insurance coverage—(1)

Accounts of the United States. Each

official custodian of funds of the United

States lawfully depositing such funds in

an insured depository institution shall

be separately insured in the amount of:

(i) Up to $100,000 in the aggregate for

all time and savings deposits; and

(ii) Up to $100,000 in the aggregate for

all demand deposits.

(2) Accounts of a state, county,

municipality or political subdivision. (i)

Each official custodian of funds of any

state of the United States, or any county,

municipality, or political subdivision

thereof, lawfully depositing such funds

in an insured depository institution in

the state comprising the public unit or

wherein the public unit is located

(including any insured depository

institution having a branch in said state)

shall be separately insured in the

amount of:

(A) Up to $100,000 in the aggregate

for all time and savings deposits; and

(B) Up to $100,000 in the aggregate for

all demand deposits.

(ii) In addition, each such official

custodian depositing such funds in an

insured depository institution outside of

the state comprising the public unit or

wherein the public unit is located, shall

be insured in the amount of up to

$100,000 in the aggregate for all

deposits, regardless of whether they are

time, savings or demand deposits.

(3) Accounts of the District of

Columbia. (i) Each official custodian of

funds of the District of Columbia

lawfully depositing such funds in an

insured depository institution in the

District of Columbia (including an

insured depository institution having a

branch in the District of Columbia) shall

be separately insured in the amount of:

(A) Up to $100,000 in the aggregate

for all time and savings deposits; and

(B) Up to $100,000 in the aggregate for

all demand deposits.

(ii) In addition, each such official

custodian depositing such funds in an

insured depository institution outside of

the District of Columbia shall be insured

in the amount of up to $100,000 in the

aggregate for all deposits, regardless of

whether they are time, savings or

demand deposits.

(4) Accounts of the Commonwealth of

Puerto Rico and other government

possessions and territories. (i) Each

official custodian of funds of the

Commonwealth of Puerto Rico, the

Virgin Islands, American Samoa, the

Trust Territory of the Pacific Islands,

Guam, or The Commonwealth of the

Northern Mariana Islands, or of any

county, municipality, or political

subdivision thereof lawfully depositing

such funds in an insured depository

institution in Puerto Rico, the Virgin

Islands, American Samoa, the Trust

Territory of the Pacific Islands, Guam,

or The Commonwealth of the Northern

Mariana Islands, respectively, shall be

separately insured in the amount of:

(A) Up to $100,000 in the aggregate

for all time and savings deposits; and

(B) Up to $100,000 in the aggregate for

all demand deposits.

(ii) In addition, each such official

custodian depositing such funds in an

insured depository institution outside of

the commonwealth, possession or

territory comprising the public unit or

wherein the public unit is located, shall

be insured in the amount of up to

$100,000 in the aggregate for all

deposits, regardless of whether they are

time, savings or demand deposits.

(5) Accounts of an Indian tribe. Each

official custodian of funds of an Indian

tribe (as defined in 25 U.S.C. 1452(c)),

including an agency thereof having

official custody of tribal funds, lawfully

depositing the same in an insured

depository institution shall be

separately insured in the amount of:

(i) Up to $100,000 in the aggregate for

all time and savings deposits; and

(ii) Up to $100,000 in the aggregate for

all demand deposits.

(b) Rules relating to the ‘‘official

custodian’’—(1) Qualifications for an

‘‘official custodian’’. In order to qualify

as an ‘‘official custodian’’ for the

purposes of paragraph (a) of this section,

such custodian must have plenary

authority, including control, over funds

owned by the public unit which the

custodian is appointed or elected to

serve. Control of public funds includes

possession, as well as the authority to

establish accounts for such funds in

insured depository institutions and to

make deposits, withdrawals, and

disbursements of such funds.

(2) Official custodian of the funds of

more than one public unit. For the

purposes of paragraph (a) of this section,

if the same person is an official

custodian of the funds of more than one

public unit, he or she shall be separately

insured with respect to the funds held

by him or her for each such public unit,

but shall not be separately insured by

virtue of holding different offices in

such public unit or, except as provided

in paragraph (c) of this section, holding

such funds for different purposes.

(3) Split of authority or control over

public unit funds. If the exercise of

authority or control over the funds of a

public unit requires action by, or the

consent of, two or more officers,

employees, or agents of such public

unit, then they will be treated as one

‘‘official custodian’’ for the purposes of

this section.

(c) Public bond issues. 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

deposit of such funds in an insured
25764 Federal Register / Vol. 63, No. 90 / Monday, May 11, 1998 /Rules and Regulations

depository institution shall be deemed

to be a deposit 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 deposit

shall be separately insured up to

$100,000.

(d) Definition of ‘‘political

subdivision’’. The term ‘‘political

subdivision’’ includes drainage,

irrigation, navigation, improvement,

levee, sanitary, school or power

districts, and bridge or port authorities

and other special districts created by

state statute or compacts between the

states. It also includes any subdivision

of a public unit mentioned in

paragraphs (a)(2), (a)(3) and (a)(4) of this

section or any principal department of

such public unit:

(1) The creation of which subdivision

or department has been expressly

authorized by the law of such public

unit;

(2) To which some functions of

government have been delegated by

such law; and

(3) Which is empowered to exercise

exclusive control over funds for its

exclusive use.

§ 330.16 Effective dates.

(a) Prior effective dates. Former

§§ 330.1(j), 330.10(a), 330.12(c),

330.12(d)(3) and 330.13 (see 12 CFR part

330, as revised January 1, 1998) became

effective on December 19, 1993.

(b) Time deposits. Except with respect

to the provisions in former § 330.12 (a)

and (b) (see 12 CFR part 330, as revised

January 1, l998) and current § 330.14(a)

and (b), any time deposits made before

December 19, 1991 that do not mature

until after December 19, 1993, shall be

subject to the rules as they existed on

the date the deposits were made. Any

time deposits made after December 19,

1991 but before December 19, 1993,

shall be subject to the rules as they

existed on the date the deposits were

made. Any rollover or renewal of such

time deposits prior to December 19,

1993 shall subject those deposits to the

rules in effect on the date of such

rollover or renewal. With respect to time

deposits which mature only after a

prescribed notice period, the provisions

of this part shall be effective on the

earliest possible maturity date after June

24, 1993 assuming (solely for purposes

of this section) that notice had been

given on that date.

By order of the Board of Directors.

Dated at Washington, D.C., this 28th day of

April, 1998.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 98–11987 Filed 5–8–98; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 165

[Docket No. 98N–0294]

Beverages: Bottled Water

AGENCY: Food and Drug Administration,

HHS.

ACTION: Direct final rule.

SUMMARY: The Food and Drug

Administration (FDA) is amending its

regulations to lift the stay of the

effective date for the allowable levels in

the bottled water quality standard for

nine chemical contaminants, i.e.,

antimony, beryllium, cyanide, nickel,

thallium, diquat, endothall, glyphosate,

and 2,3,7,8–TCDD (dioxin), that was

imposed in a final rule published on

March 26, 1996. By lifting the stay of the

effective date, bottled water

manufacturers will be required to

monitor source waters and finished

bottled water products at least once a

year for these nine chemical

contaminants under the current good

manufacturing practice (CGMP)

regulations for bottled water. FDA is

required to issue monitoring

requirements for the nine chemical

contaminants under the Safe Drinking

Water Act Amendments of 1996 (SDWA

Amendments). FDA is using direct final

rulemaking for this action because the

agency expects that there will be no

significant adverse comment on the

rule. Elsewhere in this issue of the

Federal Register, FDA is publishing a

companion proposed rule under FDA’s

usual procedure for notice-andcomment rulemaking to provide a

procedural framework to finalize the

rule in the event the agency receives

significant adverse comments and

withdraws this direct final rule. The

companion proposed rule and direct

final rule are substantively identical.

DATES: The regulation is effective

November 9, 1998. Submit written

comments by July 27, 1998. If no timely

significant adverse comments are

received, the agency will publish a

notice in the Federal Register no later

than August 6, 1998, confirming the

effective date of the direct final rule. If

timely significant adverse comments are

received, the agency will publish a

notice of significant adverse comment in

the Federal Register withdrawing this

direct final rule no later than August 6,

1998.

ADDRESSES: Submit written comments

to the Dockets Management Branch

(HFA–305), Food and Drug

Administration, 12420 Parklawn Dr.,

rm. 1–23, Rockville, MD 20857.

FOR FURTHER INFORMATION CONTACT:

Henry Kim, Center for Food Safety and

Applied Nutrition (HFS–306), Food and

Drug Administration, 200 C St. SW.,

Washington, DC 20204, 202–260–0631.

SUPPLEMENTARY INFORMATION:

I. Background

Before the enactment of the SDWA

Amendments on August 6, 1996, section

410 of the Federal Food, Drug, and

Cosmetic Act (the act) (21 U.S.C. 349)

required that, whenever the

Environmental Protection Agency (EPA)

prescribed interim or revised National

Primary Drinking Water Regulations

(NPDWR’s) under section 1412 of the

Public Health Service Act (SDWA) (42

U.S.C. 300f through 300j–9)), FDA

consult with EPA and either amend its

regulations for bottled drinking water in

§ 165.110 (21 CFR 165.110) or publish

in the Federal Register its reasons for

not making such amendments.

In accordance with section 410 of the

act, FDA published in the Federal

Register of March 26, 1996 (61 FR

13258), a final rule (hereinafter ‘‘the

March 1996 final rule’’) that amended

the quality standard for bottled water by

establishing or revising the allowable

levels for 5 inorganic chemicals (IOC’s)

and 17 synthetic organic chemicals

(SOC’s), including 3 synthetic volatile

organic chemicals (VOC’s), 9 pesticide

chemicals, and 5 nonpesticide

chemicals. This action was in response

to EPA’s issuance of NPDWR’s

consisting of maximum contaminant

levels (MCL’s) for the same 5 IOC’s and

17 SOC’s in public drinking water (see

57 FR 31776, July 17, 1992).

However, in the March 1996 final

rule, FDA stayed the effective date for

the allowable levels for the five IOC’s

(antimony, beryllium, cyanide, nickel,

and thallium) and four of the SOC’s

(diquat, endothall, glyphosate, and

dioxin). This action was in response to

bottled water industry comments

(responding to the August 4, 1993,

proposal (58 FR 41612)) which asserted

that additional monitoring for these

nine chemicals required under the

bottled water CGMP regulations would

pose an undue economic burden on

bottlers. If the agency had not stayed the

effective date for the allowable levels,