Deposit Insurance Regulations; Inflation Index; Certain Retirement Accounts and Employee Benefit Plan Accounts, 14629-14631 [06-2779]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 71, Number 56 (Thursday, March 23, 2006)]
[Rules and Regulations]
[Pages 14629-14631]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-2779]



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Federal Register / Vol. 71, No. 56 / Thursday, March 23, 2006 / Rules 
and Regulations

[[Page 14629]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AD01


Deposit Insurance Regulations; Inflation Index; Certain 
Retirement Accounts and Employee Benefit Plan Accounts

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The FDIC is amending its deposit insurance regulations to 
implement applicable revisions to the Federal Deposit Insurance Act 
made by the Federal Deposit Insurance Reform Act of 2005 and the 
Federal Deposit Insurance Reform Conforming Amendments Act of 2005. The 
interim rule: Provides for consideration of inflation adjustments to 
increase the current standard maximum deposit insurance amount of 
$100,000 on a five-year cycle beginning in 2010; increases the deposit 
insurance limit for certain retirement accounts from $100,000 to 
$250,000, also subject to inflation adjustments; and provides per-
participant insurance coverage to employee benefit plan accounts, even 
if the depository institution at which the deposits are placed is not 
authorized to accept employee benefit plan deposits.

DATES: The interim rule is effective on April 1, 2006. Written comments 
must be received by the FDIC on or before May 22, 2006.

ADDRESSES: You may submit comments by any of the following methods:
     Agency Web site: https://www.FDIC.gov/regulations/laws/
federal/propose.html. Follow the instructions for submitting comments.
     E-mail: comments@fdic.gov.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429.
     Hand Delivered/Courier: The guard station at the rear of 
the 550 17th Street Building (located on F Street), on business days 
between 7 a.m. and 5 p.m.
     Public Inspection: Comments may be inspected and 
photocopied in the FDIC Public Information Center, 3501 North Fairfax 
Drive, Room E-1002, Arlington, Virginia 22226, between 9 a.m. and 5 
p.m. on business days.
     Internet Posting: Comments received will be posted without 
change to https://www.FDIC.gov/regulations/laws/federal/propose.html, 
including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Counsel, (202) 898-
7349, Legal Division, Federal Deposit Insurance Corporation, 
Washington, DC 20429.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Federal Deposit Insurance Reform Act of 2005 (``Reform Act'') 
(Pub. L. 109-171) made three substantive changes to the insurance 
coverage provisions of the Federal Deposit Insurance Act (12 U.S.C. 
1813-1835a). First, section 2103(a) of the legislation provides for an 
inflation index to be applied to the current maximum deposit insurance 
amount of $100,000, defined in the Reform Act as the ``standard maximum 
deposit insurance amount'' (``SMDIA''). Beginning April 1, 2010, and 
every succeeding five years, subject to approval by the Board of 
Directors of the FDIC and the National Credit Union Administration 
Board (``NCUA''), the current SMDIA could be increased by a cost-of-
living adjustment. This adjustment is to be calculated according to the 
Personal Consumption Expenditures Chain-type Index published by the 
Department of Commerce and rounded down to the nearest $10,000. The 
statute requires the FDIC and the NCUA to consider certain factors in 
determining whether to increase the SMDIA. If the agencies determine 
that an increase is warranted, the FDIC and the NCUA are required to 
publish the new SMDIA in the Federal Register and provide a 
corresponding report to Congress by April 5, 2010, and every succeeding 
fifth year. Thereafter, the approved adjustment will automatically 
occur unless a Congressional act provides otherwise and will take 
effect on January 1st of the year immediately succeeding the year in 
which the new amount is calculated.
    Second, section 2103(c) of the Reform Act increases the deposit 
insurance limit for certain retirement accounts from $100,000 to 
$250,000, also subject to inflation adjustments, as described above. 
The types of accounts within this category of coverage continue to be 
comprised of: Individual retirement accounts (``IRAs'') described in 
section 408(a) of the Internal Revenue Code (``IRC'') (26 U.S.C. 
408(a)); eligible deferred compensation plan accounts described in 
section 457 of the IRC (26 U.S.C. 457); and individual account plan 
accounts 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 IRC, to the extent that participants and 
beneficiaries under such plans have a right to direct the investment of 
assets held in individual accounts maintained on their behalf by the 
plans.
    Third, section 2103(b) of the Reform Act provides per-participant 
coverage to employee benefit plan accounts, even if the depository 
institution at which the deposits are placed is not authorized to 
accept employee benefit plan deposits. This coverage is referred to as 
``pass-through'' coverage because the insurance passes through the 
employee benefit plan administrator to each of the participants in the 
plan. As discussed below, the Reform Act eliminates the former 
requirement that an insured depository institution meet prescribed 
capital requirements before employee benefit plan deposits accepted by 
that institution would be eligible for pass-through coverage. As a 
result of the legislation, pass-through coverage for employee benefit 
deposits is no longer dependent on the capital level of the institution 
where such deposits are placed.
    Also, the Federal Deposit Insurance Reform Conforming Amendments 
Act of 2005 (Pub. L. 109-173) (``Conforming Amendments Act'') created 
the term ``government depositor'' in connection with public funds 
described in and insured pursuant to section 11(a)(2) of the FDI Act. 
12 U.S.C. 1821(a)(2). The Conforming Amendments Act provides that the 
deposits of a government depositor shall be insured in an amount

[[Page 14630]]

up to the SMDIA, subject to the inflation adjustment described above.
    The purpose of this rulemaking is to implement by regulation the 
deposit insurance coverage revisions made by the Reform Act and the 
Conforming Amendments Act. The interim rule amends the applicable 
provisions of Part 330 of the FDIC's regulations, entitled Deposit 
Insurance Regulations (12 CFR part 330).

II. The Interim Rule

A. The SMDIA

    The interim rule adds a definition of ``standard maximum deposit 
insurance amount'' to section 330.1 of the FDIC's regulations (12 CFR 
330.1). Tracking the language of the Reform Act, the definition is 
``$100,000 adjusted pursuant to subparagraph (F) of section 11(a)(1) of 
the FDI Act (12 U.S.C. 1821 (a)(1)(F)).'' The revised subparagraph (F) 
of section 11(a)(1) of the FDI Act provides the details of how, every 
five years, the FDIC and the NCUA will consider and calculate the 
inflation adjustment to the SMDIA. The new definition in section 330.1 
also indicates that the current SMDIA is $100,000 and that the acronym 
``SMDIA'' is used in Part 330 for the SMDIA. In addition, the 
definition notes that all the examples of deposit insurance coverage in 
Part 330 use the current SMDIA of $100,000.
    In accordance with the addition of this definition, all references 
in Part 330 to the current insurance amount of $100,000 are replaced by 
the acronym ``SMDIA.'' This will avoid having to change the actual 
SMDIA in each provision of the regulation whenever the SMDIA is 
adjusted for inflation.

B. Retirement and Employee Benefit Plan Accounts

    Section 330.14 is amended to reflect that pass-through coverage for 
employee benefit plan accounts no longer hinges on the capital level of 
the depository institution where such deposits are placed. Under the 
former law, pass-through coverage for employee benefit plan deposits 
was not available if the deposits were placed with an institution not 
permitted to accept brokered deposits. Under section 29 of the FDI Act 
(12 U.S.C. 1831f), only institutions that meet prescribed capital 
requirements may accept brokered deposits. The Reform Act takes a 
different approach. It prohibits insured institutions that are not 
``well capitalized'' or ``adequately capitalized'' from accepting 
employee benefit plan deposits. But, under the Reform Act, employee 
benefit plan deposits accepted by any insured depository institution, 
even those prohibited from accepting such deposits, are nonetheless 
eligible for pass-through deposit insurance coverage.
    This change in the deposit insurance rules will apply to all 
employee benefit plan deposits, including employee benefit plan 
deposits placed before the effective date of the interim rule and 
irrespective of whether such deposits would have been eligible for 
pass-through coverage under the former statute and rules. The other 
requirements in section 330.14 of the FDIC's rules on the eligibility 
of employee benefit plan deposits for pass-through insurance coverage 
continue to apply. In particular, only the ``non-contingent'' interests 
of plan participants in an applicable plan are eligible for pass-
through coverage. A ``non-contingent'' interest is an interest that can 
be determined without the evaluation of contingencies other than life 
expectancy.
    Section 330.14 also is amended to indicate that the maximum 
coverage for certain retirement accounts is now $250,000. These 
retirement accounts continue to be comprised of IRAs (both traditional 
IRAs and Roth IRAs); section 457 deferred compensation plan accounts; 
``self-directed'' Keogh plan accounts (or ``HR 10'' accounts); and 
``self-directed'' defined contribution plan accounts, which are 
primarily 401(k) plan accounts. The term ``self-directed'' continues to 
mean that the plan participants have the right to direct how their 
funds are invested, including the ability to direct that the funds be 
deposited at an FDIC-insured institution.
    The regulatory burden associated with the capital-status 
information requirements in Part 330 (section 330.14(h)) has been 
eliminated because the insurance coverage of employee benefit plan 
deposits no longer hinges on a depository institution's capital level.

C. Technical Revisions

    The heading for section 330.15 has been changed from ``Public unit 
accounts'' to ``Accounts held by government depositors'' to reflect the 
technical change to the corresponding statutory provision made by the 
Conforming Amendments Act (12 U.S.C. 1821(a)(2)). No substantive 
changes are made to section 330.15.
    Section 330.16 of Part 330 provides effective dates for past 
revisions to Part 330. Although unrelated to the deposit insurance 
reform legislation, section 330.16 is deleted because it is obsolete.

III. Rationale for Interim Rulemaking

    The changes to the deposit insurance rules implemented by this 
rulemaking will benefit depositors by increasing coverage for 
retirement accounts and removing a limitation on the availability of 
pass-through insurance coverage for employee benefit plan accounts. As 
such, the FDIC wishes to amend its regulations to effect these changes 
as soon as possible. Thus, the FDIC has determined that the public 
notice and participation that ordinarily are required by the 
Administrative Procedure Act (5 U.S.C. 553) before a regulation may 
take effect would, in this case, be contrary to the public interest and 
that good cause exists for waiving the customary 30-day delayed 
effective date. Nevertheless, the FDIC desires to have the benefit of 
public comment before adopting a permanent final rule and thus invites 
interested parties to submit comments during a 60-day comment period. 
In adopting a final regulation, the FDIC will revise the interim rule, 
if appropriate, in light of the comments received on the interim rule.

IV. Paperwork Reduction Act

    The interim rule will implement statutory changes to the FDIC's 
deposit insurance regulations. It will not involve any new collections 
of information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 
et seq.). Consequently, no information collection has been submitted to 
the Office of Management and Budget for review.

V. Regulatory Flexibility Act

    A regulatory flexibility analysis is required only when an agency 
must publish a notice of proposed rulemaking (5 U.S.C. 603, 604). 
Because the revisions to Part 330 are published in interim final form 
without a notice of proposed rulemaking, no regulatory flexibility 
analysis is required.

VI. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the interim rule will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

VII. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the interim 
rule is

[[Page 14631]]

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 interim rule may be reviewed.

List of Subjects in 12 CFR Part 330

    Bank deposit insurance, Banks, banking, Reporting and recordkeeping 
requirements, Savings and loan associations, Trusts and trustees.

0
For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation hereby amends part 330 of chapter III of 
title 12 of the Code of Federal Regulations as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

0
1. The authority citation for part 330 continues to read as follows:

    Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 1819 
(Tenth), 1820(f), 1821(a), 1822(c).


0
2. Section 330.1 paragraphs (n), (o) and (p) are redesignated as (o), 
(p) and (q), respectively, and a new paragraph (n) is added to read as 
follows:


Sec.  330.1  Definitions.

* * * * *
    (n) Standard maximum deposit insurance amount, referred to as ``the 
SMDIA'' hereafter, means $100,000 adjusted pursuant to subparagraph (F) 
of section 11(a)(1) of the FDI Act (12 U.S.C. 1821(a)(1)(F)). The 
current SMDIA is $100,000. All the examples in this regulation use the 
current SMDIA of $100,000.


Sec.  330.6  [Amended]

0
3. Section 330.6 paragraphs (a), (b), (c) and (d) are amended by 
removing ``$100,000'' in each paragraph and adding in its place ``the 
SMDIA''.


Sec.  330.7  [Amended]

0
4. Section 330.7 paragraph (e) is amended by removing ``$100,000'' and 
adding in its place ``the SMDIA''.


Sec.  330.8  [Amended]

0
5. Section 330.8 paragraph (a) is amended by removing ``$100,000'' and 
adding in its place ``the SMDIA''.

0
6. Section 330.9 paragraph (a) is amended by removing ``$200,000'' and 
adding in its place ``twice the SMDIA'', and the first sentence in 
paragraph (b) is revised to read as follows:


Sec.  330.9  Joint ownership accounts.

* * * * *
    (b) Determination of insurance coverage. The interests of each co-
owner in all qualifying joint accounts shall be added together and the 
total shall be insured up to the SMDIA. * * *
* * * * *


Sec.  330.10  [Amended]

0
7. Section 330.10 paragraphs (a), (c), (d) and (f)(3) are amended by 
removing ``$100,000'' and adding in its place ``the SMDIA''.


Sec.  330.11  [Amended]

0
8. Section 330.11 is amended by removing ``$100,000'' in the four 
places it appears and adding in its place ``the SMDIA''.


Sec.  330.12  [Amended]

0
9. In Section 330.12 paragraph (a) is amended by removing ``$100,000'' 
and adding in its place ``the SMDIA'', the reference to ``Sec.  
330.1(o)'' in paragraph (a) is removed and ``Sec.  330.1(p)'' is added 
in its place, and the reference in paragraph (b)(1) to ``Sec.  
330.1(n)'' is removed and ``Sec.  330.1(o)'' is added in its place.


Sec.  330.13  [Amended]

0
10. Section 330.13 is amended by removing ``$100,000'' in the three 
places it appears and adding in its place ``the SMDIA'' and the 
reference in paragraph (a) to ``Sec.  330.1(p)'' is removed and ``Sec.  
330.1(q)'' is added in its place.

0
11. In Sec.  330.14 paragraph (a) is revised, paragraphs (b) and (h) 
are removed, and paragraphs (c), (d), (e), (f) and (g) are 
redesignated, respectively, as (b), (c), (d), (e) and (f); newly 
designated paragraphs (d) and (e) are amended by removing ``$100,000'' 
and adding in its place ``the SMDIA''; the reference to ``(c)(2)'' in 
newly designated paragraph (c)(3) is removed and ``(b)(2)'' is added in 
its place; and newly designated paragraph (b)(2) is revised.
    The revisions read as follows:


Sec.  330.14  Retirement and other employee benefit plan accounts.

    (a) ``Pass-through'' insurance. Any deposits of an employee benefit 
plan or 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 the SMDIA for the non-contingent interest of each 
plan participant, provided the rules in Sec.  330.5 are satisfied.
    (b) * * *
    (2) Certain retirement accounts. 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 $250,000 
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 (12 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.
* * * * *


Sec.  330.15  [Amended]

0
12. Section 330.15 is amended by removing the heading ``Public unit 
accounts'' and adding in its place ``Accounts held by government 
depositors''; and ``$100,000'' is removed in the thirteen places it 
appears and ``the SMDIA'' is added in its place.


Sec.  330.16  [Removed]

0
13. Section 330.16 is removed.

    By order of the Board of Directors.

    Dated at Washington DC, this 14th day of March, 2006.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 06-2779 Filed 3-22-06; 8:45 am]
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