WBA Comments on Changes to Deposit Insurance Coverage Calculations for Trusts

WBA filed comments yesterday with FDIC regarding proposed amendments to its regulation governing deposit insurance coverage, Part 330. WBA offered general support to FDIC to provide depositors and bankers with a rule for trust account coverage that is easy to understand and to facilitate the prompt payment of deposit insurance in accordance with the Federal Deposit Insurance Act.

FDIC has proposed to change rules for informal revocable trusts (a/k/a payable on death, POD), formal revocable trust, and irrevocable trusts. In particular, FDIC has proposed to combine these two sections of regulation, Part 330.10 and 330.13, to create a new “trust account” category. The proposal also provides uniform insurance calculation rules across the two categories for trusts. The number of “eligible beneficiaries” for purposes of calculating deposit insurance for such trusts would be limited to no more than five natural persons, charitable organizations, or other non-profit entities recognized under the Internal Revenue Code. If a trust were to have more than five beneficiaries, the deposit insurance available for such trust would be computed on the basis of a maximum of five without regard to the actual number of beneficiaries.

WBA recommended a substantial implementation period for banks to incorporate changes to operating and infrastructure systems, train staff, and update policies and procedures —recommending no less than two years before mandatory compliance with new Part 330 rules and no Part 370 examinations until at least three years after initial certification.

Read comment letter here.