FDIC Deposit Insurance Coverage Audio Conference for Bankers July/August 2006 Including Recent...
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Transcript of FDIC Deposit Insurance Coverage Audio Conference for Bankers July/August 2006 Including Recent...
FDIC Deposit Insurance Coverage
Audio Conference for Bankers
July/August 2006
Including Recent legislation
2
Today’s Speakers
Kathleen Nagle
Deposit Insurance Outreach
(202) 898-6541
www2.fdic.gov/starsmail
Joe DiNuzzo
Counsel, Legal Division
(202) 898-7349
3
Overview
• Deposit Insurance Resources and Information
• Basic Concepts and Rules
• Recent Legislative Changes
• Questions and Answers
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Deposit Insurance Seminar
INFORMATION and
RESOURCES
5
FDIC Contact Information
• Call the FDIC toll-free 1-877-275-3342
Information specialists are available from
8 a.m. until 8 p.m. Eastern Time
Monday through Friday
• Hearing impaired: 1-800-925-4618
6
FDIC Contact Information
• Send your deposit insurance questions by email using the FDIC's online customer assistance form at: www2.fdic.gov/starsmail
• Mail your deposit insurance questions to FDIC Attention: Deposit Insurance Outreach 550 17th Street NWWashington DC, 20429
• Read more about FDIC insurance online at: www.fdic.gov
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(PAUSE)
• Your Insured Deposits (Comprehensive Guide)
• Financial Institution Employee’s Guide to Deposit Insurance
8
Deposit Insurance Seminar
BASIC CONCEPTS and RULES
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Deposit Types
FDIC insurance covers only bank deposits
• Checking Accounts
• NOW Accounts
• Savings Accounts
• Certificate of Deposits (CD’s)
• Money Market Deposit Accounts (MMDA)
10
Non-Deposit Products
• Stocks, Bonds, Municipal Bonds and Other Securities
• Mutual Funds (money market mutual funds and stock, bond, or other security mutual funds)
• Annuities
• Insurance Products (automobile and life insurance)
• U.S. Treasury Bills, Bonds or Notes
• Safe Deposit Box Contents
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Insurance Coverage
• Per Depositor and Per Ownership Category
• Per Insured Depository Institution – Per separately charter bank or savings association– Not per branch office
Basic Insurance Amount is $100,000 (Unchanged by Recent Legislation)
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Account Ownership Categories• Single Accounts
• Certain Retirement Accounts
• Joint Accounts
• Revocable Trust Accounts
• Irrevocable Trust Accounts
• Employee Benefit Plan Accounts
• Corporation, Partnership and Unincorporated Association Accounts
• Government Accounts
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Most Commonly Used Account Ownership Categories
JointAccounts
SingleAccounts
RevocableTrust
Accounts
CertainRetirementAccounts
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Single Accounts
• Deposits owned by one person
• Coverage: $100,000
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Joint Accounts
• Deposits owned by two or more natural persons
• Each owner’s shares of all joint accounts are added together
• FDIC assumes ownership is equal unless otherwise stated
• Each co-owner must have same withdrawal rights and sign signature card
• Coverage: $100,000 per owner
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Multiple Joint Accounts
Account Title Balance1) Jane Smith and Andrew Smith $200,000 2) Jane Smith and Harry Jones 100,000Total $300,000
Co-owner Balance Insured Uninsured
Jane SmithAcct 1: $100,000Acct 2: 50,000
$100,000 $50,000
Andrew Smith Acct 1: 100,000 100,000 0Harry Jones Acct 2: 50,000 50,000 0Total $300,000 $250,000 $50,000
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Revocable Trust Accounts
• Deposit accounts that evidence an intention that the funds will belong to one or more named beneficiaries upon the owner’s death
• Can be formal or informal trust
• Coverage: $100,000 per owner per qualifying beneficiary
• Each owner’s funds for each qualifying beneficiary in all revocable trust accounts are added together
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Informal (POD) Requirements
• Title must indicate the existence of a trust relationship
• Beneficiaries must be named in account records
• Beneficiaries must be “qualifying”
• If any requirements are not met the account or portion of the account will not qualify for deposit insurance coverage under the revocable trust ownership category
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Revocable Trust Beneficiaries
• Spouse• Children• Grandchildren• Parents• Siblings• Adopted and step
relationships
• Ex-spouse• In-laws • Great-grandchildren • Nieces, nephews, cousins• Friends• Grandparents• Organizations• Trusts• Other relationships not listed
Who qualifies Who does not qualify
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POD – One Owner
Example 1: • $ 200,000 CD
• John Jones POD to Sue and Mark• Sue and Mark – (John’s daughter and son)
John’s trustrelationship with
Sue: $100,000
John’s trustrelationship withMark: $100,000
John Jones $200,000
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POD – Multiple Owners
Example 2:• Jane and Andrew Smith POD
to Billy and Betty Smith $ 400,000
(Jane and Andrew – Husband and Wife)
(Billy and Betty – Jane and Andrew’s children)
Insurance Coverage?
22
Jane and Andrew Smith POD to Billy and Betty Smith
$400,000
Fully Insured
Jane’s ownership
interest$200,000
Andrew’s ownership
interest$200,000
Andrew’s trust relationship
with Billy$100,000
Andrew’s trust relationship with Betty$100,000
Jane’s trust relationship
with Billy$100,000
Jane’s trust relationship with Betty$100,000
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Maximum Deposit Insurance Coverage
Single Accounts
Self-Directed
RetirementAccounts
Joint Accounts
RevocableTrust
Accounts*Total
Coverage
Husband $100,000 $250,000 $100,000 $300,000* $ 750,000
Wife $100,000 $250,000 $100,000 $300,000* $ 750,000
Total $200,000 $500,000 $200,000 $600,000* $1,500,000
* Assumes husband and wife have named three qualifying beneficiaries in their revocable trust
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Living Trust Requirements
• Beneficiaries must be “qualifying”
• Account title at the bank must indicate the existence of a trust relationship
• Beneficiaries must become entitled to trust assets when owner dies
• The beneficiary’s interest must not depend on the death of another beneficiary
25
Living Trust – One Owner with Conditions
Example 1
A father has a living trust leaving all trust assets to his three children but only if they each graduate from college by age 25
1 Owner X $100,000 X 3 Qualifying = $300,000 Beneficiaries
26
Living Trust - Non-Qualifying Beneficiary
Example 2
A father has a living trust naming his son and nephew as beneficiaries of all assets (qualifying and non-qualifying beneficiary)
27
Maximum Coverage $200,000
Father’s trust relationship
with Son$100,000
Insured in Revocable Trust Account Category
Insured in Single
Account Category*
* Assumes Father has no single ownership accounts
Father’s trust relationship with Nephew
$100,000
Example 2 – Insurance Coverage
28
Deposit Insurance Seminar
Federal Deposit Insurance Reform Act of 2005
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• Maintains the basic amount of coverage at $100,000
• Establishes mechanism to index for inflation that could take effect on January 1, 2011, and every succeeding five years
• Increases coverage for “Certain Retirement Accounts” from $100,000 to $250,000 (also to be indexed for inflation adjustments)
Legislation Highlights
30
• Eliminates tie-in of a depository institution’s capital to the amount of coverage available on employee benefit plan accounts
• Institutions are no longer required to provide capital level disclosures to administrators of employee benefit plans
Legislation Highlights
31
Legislation Highlights
• Merges the Bank Insurance Fund and Savings Association Fund into the Deposit Insurance Fund
• Requires FDIC to establish a single “FDIC Official Sign” for the Deposit Insurance Fund. Eliminates separate signs for banks and savings associations
32
Certain Retirement Accounts
• Deposits owned by one person
• Coverage: $250,000
• Limit applies to combined total of all deposits the owner has in this category at the same bank
• Coverage is not increased by naming beneficiaries on retirement account or in the applicable retirement plan
33
• Traditional and Roth IRAs
• SEP IRAs
• SIMPLE IRAs
• “Section 457” Deferred Compensation Plan Accounts
• Self-directed Keogh Plan Accounts
• Self-directed Defined Contribution Plan Accounts
Certain Retirement Accounts
34
Self-Directed -- Definition
A self-directed retirement account is a retirement account for which the owner, not a plan administrator, has the right to direct how the funds are invested, including the ability to direct that the funds be deposited at a specific FDIC-insured bank.
35
Not Eligible for $250,000 Coverage
• Coverdell Education IRAs• Health Savings Accounts
• Defined Benefit Plan Accounts• Section 401(k)s -- Not Self-directed• Keoghs – Not Self-directed
36
Coverdell IRAs/Health Savings Accounts
• Coverdell IRAs – insured as:
Irrevocable Trust Accounts
• Health Savings Accounts – insured as either:
Single Ownership Accounts Revocable Trust Accounts
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Employee Benefit Plan Accounts
• Defined Benefit Plan Accounts• Section 401(k)’s – Not Self-directed• Non Self-Directed Keoghs – Not Self-directed
• Pass-through Coverage: Up to $100,000 for each participant’s “non-contingent” interest
38
Employee Benefit Plan Accounts
• A “non-contingent interest” is an interest subject to no contingencies, except life expectancy.
• “Pass-through” coverage is based on each participant’s non-contingent ascertainable interest in the plan.
• “Pass-through” coverage is not determined by simply multiplying $100,000 by the number of plan participants.
39
Official FDIC Sign
Deposit Insurance Reform Legislation requires:
• Replace existing official signs -- one for banks and one for savings associations -- with a single official FDIC sign
• New official FDIC sign must state that insured deposits are “backed by the full faith and credit of the U.S. Government”
Until New Rules Are Adopted:
• FDIC’s existing rules remain in effect
• All FDIC-insured banks and savings associations should continue to use their existing teller signs
40
Deposit Insurance Seminar
Questions and Answers