NCUA Share Insurance Coverage: Expectations and Disclosures January 25, 2012 January 25, 2012 2:00 p.m. – 4:00 p.m. EST Presented by: Steve Van Beek, Esq., NCCO JiJi Bahhur, Esq. National Association of Federal Credit Unions National Association of Federal Credit Unions l www.nafcu.org
Agenda • Importance of Share Insurance • Education of Existing Members and Potential Members • Share Insurance Coverage by Account Share Insurance Coverage by Account • Coverage in Special Situations • NCUA’s Share Insurance Calculator • Advertising of Insured Status National Association of Federal Credit Unions l www.nafcu.org
Importance • Focus on Share Insurance Since 2007-08 • Not Every Credit Union is Federally Insured – Shared Branching Disclosure – 12 CFR 740.4(c) – 12 CFR 740.4(c) • Instability of Financial Institutions • Aging Memberships – Reducing Stock Market Exposure • New Members; New to Credit Unions – Bank Transfer Day National Association of Federal Credit Unions l www.nafcu.org
Educating Members • NCUA Letter to Credit Unions 08-CU-18 • “During these uncertain times in the financial markets, it is important for credit unions to help members understand their NCUA-insured help members understand their NCUA-insured shares are backed by the full faith and credit of the United States Government. NCUA protects members against losses should a federally insured credit union fail. No member has ever lost insured funds.” National Association of Federal Credit Unions l www.nafcu.org
Educating Members • Structuring is Not Always a Bad Word • “In addition to informing members about NCUA insurance, credit unions should strive to educate members on how to structure their accounts in order members on how to structure their accounts in order to maximize the share insurance coverage available. NCUA offers several resources to help educate members.” • Credit Union should be able to help assure members that their funds are properly insured National Association of Federal Credit Unions l www.nafcu.org
Educating Members • Regulatory Requirement – 12 CFR 745.13 § 745.13 Notification to members/shareholders. § § § Each insured credit union shall provide notice to its members concerning NCUA insurance coverage of member accounts. This concerning NCUA insurance coverage of member accounts. This may be accomplished by placing either a copy of part 745 of these rules, the appendix, or one or more copies of the NCUA brochure “Your Insured Funds” in each branch office and main office of the credit union. Copies of these materials shall also be made available to members upon request. For purposes of this section, an automated teller machine or point of sale terminal is not a branch office. National Association of Federal Credit Unions l www.nafcu.org
Educating Members • Options for Notification – Copy of Section 745 of NCUA’s Rules & Regulations; – Copy of the Appendix to Part 745; or – One of More Copies of “Your Insured Funds” • Upon Request • The Above is the Bare Minimum – Other Options : Newsletter Articles; Blog Postings; Statement Inserts; Workshops; Disclosures at Account Opening; and more. National Association of Federal Credit Unions l www.nafcu.org
Educating Members • Members Want to Know Specifics – How are their accounts insured? – Are their accounts fully insured? – What if they added a new account? Still insured? – What if they added a new account? Still insured? • Brochures and Inserts can provide general information • NCUA’s Share Insurance Calculator provides an avenue for inputting a member’s specific information and creating a detailed report National Association of Federal Credit Unions l www.nafcu.org
Share Insurance by Account • The Basics: – Dodd-Frank made the increase to $250,000 permanent. Retirement accounts stay at $250k. – Ownership type determines the share insurance coverage (rather than account type) coverage (rather than account type) – Accounts with the same ownership type are combined. Examples: • Individual share account added with checking account • Joint accounts (Sue & Joe; Joe & Sue) added together – Share insurance coverage is per credit union National Association of Federal Credit Unions l www.nafcu.org
Individual Accounts • Individual Ownership Accounts – NCUA insures up to $250,000 – Includes any account owned individually • If Joe Member has 3 individual accounts: – Share: $100,000 – Checking: $20,000 – Certificate: $200,000 • Joe has $320,000; but only $250,000 insured • Note : If account has “POD” it is not individual National Association of Federal Credit Unions l www.nafcu.org
Joint Ownership Account • Joint Ownership Account • Up to $250,00 for each joint owner • If account has 3 joint owners, the account would be insured up to $750,000 account would be insured up to $750,000 • Each joint owner’s insurance is added together with any other joint account where he/she has an ownership interest National Association of Federal Credit Unions l www.nafcu.org
Joint Ownership Account • Example – Two Joint Accounts – Insured – Joe & Jane have $300,000 in a joint account – Joe & Bill have $200,000 in a joint account • Joe, Jane & Bill can each receive up to $250,000 in insurance coverage for joint accounts. in insurance coverage for joint accounts. – Jane’s ownership is $150,000; Bill’s is $100,000 and Joe’s is $250,000 ($150,000 + $100,000) • Each account is fully insured Note : Joe does not receive up to $500,000 National Association of Federal Credit Unions l www.nafcu.org
Joint Ownership Account • Example – Two Joint Accounts – Joe & Jane have $400,000 in a joint account – Joe & Bill have $300,000 in a joint account • Joe, Jane & Bill can each receive up to $250,000 in insurance coverage for joint accounts. in insurance coverage for joint accounts. – Jane’s ownership is $200,000; Bill’s is $150,000 and Joe’s is $350,000 ($200,000 + $150,000) • Jane and Bill are fully insured for their interests in the accounts. Joe has $100,000 that is uninsured National Association of Federal Credit Unions l www.nafcu.org
Joint Ownership Account • Example – Two Joint Accounts – Joe & Jane have $500,000 in a joint account – Want to add a second account with $500,000 but have the account be Jane & Joe • Joe and Jane can each receive $250,000 in Joe and Jane can each receive $250,000 in insurance coverage for joint accounts • Flipping the account names or the “primary” owner on the account does not impact the share insurance coverage • Joe and Jane will receive $500,000 total National Association of Federal Credit Unions l www.nafcu.org
Revocable Trust Accounts • Revocable Trust Accounts – Most common are Payable on Death (POD) or In Trust For (ITF) – Account records need to indicate intent to pass funds upon death to beneficiaries funds upon death to beneficiaries – Insurance coverage stems from beneficiaries – Up to $250,000 per beneficiary – Do not receive additional coverage by adding the same beneficiary to another POD account – Beneficiaries can be natural persons or nonprofit organizations (changed in 2009) National Association of Federal Credit Unions l www.nafcu.org
Revocable Trust Accounts • Example: Joe POD Sue, Sally & Bill – Account insured up to $750,000 as Joe receives up to $250,000 in coverage for each beneficiary • Example: Ray has 2 POD Accounts – Ray POD Nick and Jamie – Ray POD Nick and Jamie – Ray POD Jamie and Ray Jr. – Up to $750,000 in insurance (Jamie listed twice) • $1,000,000 in coverage for family of four? – Husband POD Son and Daughter ($500,000) – Wife POD Son and Daughter ($500,000) National Association of Federal Credit Unions l www.nafcu.org
Revocable Trust Accounts • Joint Revocable Trust Account – Mary and Frank POD Barry and Sue – Mary receives $250,000 each for Barry and Sue ($500,000) – Frank receives $250,000 each for Barry and Sue ($500,000) – Account insured up to $1,000,000 • General Rule for Joint Revocable Trust Accounts – Number of Owners X Number of Beneficiaries X $250,000 – 2 Owners X 3 Beneficiaries X $250,000 = $1,500,000 – 2 Owners X 4 Beneficiaries X $250,000 = $2,000,000 – 4 Owners X 2 Beneficiaries X $250,000 = $2,000,000 • Each Owner and Beneficiary Must be Unique National Association of Federal Credit Unions l www.nafcu.org
Revocable Trust Accounts • Complex Revocable Trust Accounts – More than $1,250,000 AND more than 5 beneficiaries – Instead of $250,000 per beneficiary, NCUA will review the interest assigned to each beneficiary – Special rule to prevent accountholders from adding beneficiaries solely to increase the share insurance coverage beneficiaries solely to increase the share insurance coverage • Example: Joe POD Jane and 10 Non-Profits – Account has $2,000,000 – Jane will receive 90% of the account; each non-profit will receive 1% of the account – Account insured for only $450,000 – Jane receives $250,000; each non-profit insured for $20,000 National Association of Federal Credit Unions l www.nafcu.org
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