New FDIC Rule Extends IOLTA Accounts
Unlimited Insurance at Participating Banks for Six More Months
On November 21, 2008, the FDIC adopted a final rule creating the Temporary Liquidity Guarantee Program (TLGP), including the Transaction Account guarantee Program (TAG), in order to “strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.” In response to advocacy by the American Bar Association, the National Association of IOLTA Programs and many other organizations and individuals, the category of non-interest bearing transaction accounts included IOLTA and functionally equivalent accounts, and provided for unlimited insurance for such accounts held in participating financial institutions through December 31, 2009.
On September 1, 2009, the FDIC amended the Temporary Liquidity Guarantee Program (TLGP), extending the Transaction Account Guarantee Program (TAG) for six months, until June 30, 2010. Under the final Rule, funds in IOLTA accounts will continue to be fully guaranteed by the FDIC, without limit, for participating financial institutions. Additionally, the FDIC has increased the assessment for participating institutions. Institutions have until November 2 to opt out of the extended TAG program, which would begin on January 1, 2010.
IOLTA funds held in institutions that opt out of the extended TAG program (or that opted out of the initial TAG program) will be insured up to $250,000 per owner (i.e. client) until December 31, 2013. Institutions are required to prominently display their status as either participating or not participating.
The FDIC maintains a list of institutions that opted out of the current TAG coverage at: http://www.fdic.gov/regulations/resources/TLGP/optout.html. The FDIC will also publish on its website a list of eligible entities that have opted out of extended unlimited insurance coverage under the amended rule.
For more information regarding the TAG program, go to www.fdic.gov.
