FDIC Deposit Insurance Coverage

Audio Conference for Bankers

July/August 2006

Including Recent legislation

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Today’s Speakers

Kathleen Nagle

Deposit Insurance Outreach

(202) 898-6541

www2.fdic.gov/starsmail

Joe DiNuzzo

Counsel, Legal Division

(202) 898-7349

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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

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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

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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

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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)

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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?

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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

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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

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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)

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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

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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

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• 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

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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

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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

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• 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

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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.

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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

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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

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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.

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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

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Deposit Insurance Seminar

Questions and Answers