IMPORTANT NEWS re: FDIC COVERAGE of IOLTA and LOW-INTEREST CLIENT TRUST NOW ACCOUNTS
In a nutshell: The FDIC is now offering unlimited deposit insurance coverage for all IOLTA accounts and any NOW accounts with interest rates no higher than 0.50 %, including Client Trust Accounts through December 31, 2009. Other Client Trust Accounts, both interest and non-interest bearing, continue to have the maximum pass-through coverage of $250,000 per client who has funds in the account.
The Program: The new fund protections are under the non-interest bearing transaction account guarantee component of the FDICís Temporary Liquidity Guarantee Program (the Program). For purposes of the transaction account guarantee program, the FDIC defines and limits the definition of a non-interest bearing transaction account in the following ways:
This coverage lasts through December 31, 2009. This coverage is over and above the $250,000 being provided to a customer already. For example, if a customer has $500,000 in a non-interest-bearing transaction account and $250,000 in a certificate of deposit, the FDIC would fully insure the entire $750,000.
Government and Public Funds: This coverage covers all non-interest bearing transaction accounts regardless of ownership. For example, municipal or government deposits are covered. Public funds held in non-interest bearing accounts that are collateralized with pledged securities will be included in the amount assessed for the guaranteed additional insurance.
Sweeps: The FDIC will treat funds in sweep accounts with the usual rules and procedures for determining sweep balances at a failed depository institution. The FDIC will treat the funds as being in the account to which the funds were transferred. One exception: The FDIC will treat funds swept from a non-interest bearing transaction account into a non-interest bearing savings account as being in the non-interest bearing transaction account for purposes of the guarantee.
REMINDER: CHECK FOR POSSIBLE CHANGES IN FUTURE FDIC COVERAGE LATER IN 2009.
For further information visit: http://www.fdic.gov/regulations/resources/TLGP/faq.html#deposits
Additional information regarding fiduciary coverage generally can be found at: http://www.fdic.gov/deposit/deposits/insured/faq3.html#fiduciary