Insured Funds Disclosure

Properly established share accounts in federally insured credit unions are insured up to $100,000. Generally, if a credit union member has more than one account in the same credit union, those accounts are added together and insured up to $100,000. There are exceptions, though. You may obtain additional insurance coverage on multiple accounts, but only if you have different ownership interests or rights in different types of accounts and you properly complete account forms and applications. For example, if you have a regular share account and an Individual IRA Account at the same credit union, each account is insured up to $100,000. However, if you have a regular share account, share certificate account and share draft account, all in your own name, you will not have additional coverage. Those accounts will be added together and insured up to $100,000 as your individual account.

Education and Roth IRAs: These are two new types of insured member accounts. Education IRAs are insured as irrevocable trust accounts and will be added to a member’s other irrevocable trust accounts and insured up to $100,000. See Question 16. Roth IRAs will be added together with traditional IRAs and insured up to $100,000. See Question 20.

Recent Changes (April 1999): Additional coverage is available on revocable trust or payable-on-death accounts. You can now name a parent or sibling as a beneficiary to get separate coverage. Previously, beneficiaries had to be a spouse, child or grandchild. The rules on joint accounts have been simplified. A co-owner’s interest in all joint accounts in the same credit union will be added together and insured up to $100,000

FOREWORD
The purpose of this article is to help you understand your share insurance protection. The National Credit Union Administration (NCUA) is an independent agency of the United States Government. NCUA regulates, charters, and insures the nation’s federal credit unions. In addition, NCUA insures state-chartered credit unions which desire and qualify for federal insurance. In some states, state-chartered credit unions are required by state law to be federally insured.

The shares in your credit union are insured by the National Credit Union Share Insurance Fund (NCUSIF) or the Fund, an arm of NCUA. Established by Congress in 1970 to insure member share accounts at federally insured credit unions, the Fund is managed by NCUA under the direction of the three-person NCUA Board. Your share insurance is similar to the deposit insurance protection offered by the Federal Deposit Insurance Corporation (FDIC). This article gives a more detailed explanation of insurance coverage.

Credit unions which are insured by the National Credit Union Share Insurance Fund must display, in their offices, the official NCUA insurance sign which appears on the cover of this article. All federal credit unions must be insured by NCUA, and no credit union may terminate its federal insurance without first notifying its members.

Here are some important facts to remember about your share insurance:

Not one penny of insured savings has ever been lost by a member of a federally insured credit union.

The federal insurance fund has several programs to help insured credit unions which may be experiencing problems, and liquidations or failures are usually done only as a last resort. If a federally insured credit union does fail, however, the NCUSIF will make any necessary payouts to the credit union’s members.

These payouts are usually done within 2 days from the time the credit union closes its doors. Insured credit unions are required to deposit and maintain one percent of their insured shares and deposits in the NCUSIF. The Fund is currently at the strongest and best reserved level in its history.

Historically, deposit insurance funds strive for a ratio of equity to insured savings of at least one percent. The NCUSIF ratio of equity to insured shares and deposits is normally 1.25 percent to 1.30 percent. As a member of an insured credit union, you do not pay directly for your share insurance protection. Your credit union pays into the NCUSIF a deposit, and an insurance assessment, based on the total amount of insured shares and deposits in the credit union.

QUESTIONS MOST FREQUENTLY ASKED ABOUT THE NATIONAL CREDIT UNION SHARE INSURANCE FUND

1. Which credit unions are insured by NCUSIF?

NCUSIF insures member shares in all federal credit unions (FCU) and those federally insured state-chartered credit unions (FISCU) that apply for and meet the insurance standards. Insured credit unions are required to indicate their insured status in their advertising and to display the official NCUSIF insurance sign at their offices. Some state credit unions are insured by private insurance or guaranty corporations which are separate and apart from NCUSIF.

2. How does NCUSIF share insurance protect credit union members against loss?

Each credit union approved for NCUSIF share insurance must meet high standards of safety and soundness in its operation. Adherence to these standards is determined regularly through credit union examinations by federal and state examiners. If an insured credit union gets into financial difficulties and must be closed, the NCUSIF acts immediately to protect each member’s share account.

3. Does NCUSIF share insurance protection apply only if a credit union is liquidated?

No. Liquidation is the only situation in which a member is directly provided share insurance protection by the payment of a check for his or her insured savings. However, indirect protection is provided when the NCUA Board, through the NCUSIF, authorizes financial assistance to a credit union to enable it to overcome a temporary financial setback. In a case where a credit union is unable to overcome its difficulty, financial assistance may be authorized to accomplish a merger that protects the continuing credit union from loss and provides continued credit union service to the members of the merging credit union.

4. How does NCUSIF pay members their shares when an insured credit union is liquidated?

Checks for each member’s shares (less any amounts due on outstanding loans) up to the insurance limit are mailed to the member’s last known address as shown in the records of the credit union. These checks are usually mailed several days after the credit union is placed into liquidation. In situations where on-site payment is more convenient, the NCUA liquidation team will give checks directly to members.

5. What happens to the member’s share account when an insured credit union is merged into another insured credit union?

Each member’s share account is transferred to the continuing credit union. Accrued dividend credit is also transferred. On the effective date of the merger, each merging credit union member has full member-ship rights to all the financial services provided by the continuing credit union.

6. Does NCUSIF share insurance protect the interest of creditors?

No. NCUSIF share insurance protects only credit union members.

SHARE INSURANCE COVERAGE
7. What is the basic NCUSIF share insurance coverage?

The basic insured amount for a credit union member under current law is $100,000. Share accounts maintained in different rights or capacities, or forms of ownership, may each be separately insured up to $100,000. Thus, a member may hold or have an interest in more than one separately insured share account in the same insured credit union.

8. What types of accounts are insured?

All types of member share accounts and deposits received by the credit union in its usual course of business, including regular shares, share certificates, and share draft accounts are insured. Investment products offered by a credit union to its members, such as mutual funds, annuities, and other non deposit investments are not insured by the NCUSIF.

9. Is NCUSIF share insurance coverage increased by placing funds in two or more of the same kind of share accounts in the same credit union?

No. NCUSIF share insurance is not increased merely by dividing funds owned by the same person or persons into one or more of the different kinds of share accounts available. For example, a regular share account, a share draft account and a share certificate account owned by the same member are added together and insured up to $100,000. Insurance can be increased by opening a different type of account - one that is held in a different right and capacity. For example, insurance on a single ownership account is separate from insurance on a joint account.

10. If a member has accounts in several different insured credit unions, will the accounts be added together for the purpose of insurance coverage?

No. The maximum insurance of $100,000 is applicable to share accounts in each insured credit union. A member who has share accounts in two or more different insured credit unions would have up to $100,000 insurance in each credit union. In the case of a credit union having one or more branches, the main office and all branch offices are considered as one credit union.

NCUSIF INSURANCE OF INDIVIDUAL AND JOINT ACCOUNTS

11. If a member has more than one individual account in the same insured credit union, is each account insured to $100,000?

No. Individual share accounts held by the same member are added together and are insured up to $100,000. An individual share account is an account solely owned by one individual without the right of withdrawal by another individual. IRA, Keogh, and Deferred Compensation accounts are insured separately up to $100,000. See the section on NCUSIF Insurance of Special Accounts for more details.

12. What types of joint accounts may be insured?

NCUSIF share insurance covers joint accounts owned in any manner conforming with applicable state law such as joint tenants with a right of survivorship, tenants by the entireties, tenants in common, or an account owned by a husband and wife as community property in states recognizing this particular form of joint ownership.

13. If two or more persons, such as husband and wife, have a joint account in the same credit union as well as their own individual accounts, is each account separately insured?

Yes. A person’s interests in joint accounts are insured separately from individual accounts up to a maximum of $100,000, provided that each of the co-owners has personally signed an account signature card and have a right of withdrawal on the same basis as the other co-owners. (If state law limits a minor’s right of withdrawal, the account will still be insured as a joint account. The signature of each co-owner is not required on a share certificate.). However, the insurance protection for a co-owner on joint accounts is not increased by rearranging the names of the owners, changing the style of names, or by establishing more than one joint account. The interests that a particular co-owner has in all joint accounts held in the same credit union will be added together and insured up to $100,000. In the example, the husband can have up to $100,000 coverage on his single or individual account, and so can the wife. In addition, the husband and wife can each have up to $100,000 of insurance on their portion of the joint account. They would have a total of up to $400,000 of coverage in this example.

14. Is the answer to question 13 the same if funds in the individual and joint accounts of husband and wife all consist of community property?

Yes. In those jurisdictions recognizing community property, community funds may be maintained in accounts in the individual names of each spouse or a joint account in the names of both. The individual account of the husband and the individual account of the wife will each be insured up to $100,000. As co-owners, the interest of the husband and wife in the joint account will each be insured up to $100,000. As in the previous question, they would have up to $400,000 of coverage.

15. If a person has an interest in more than one joint account, what is the extent of the insurance coverage?

A person holding an interest in more than one joint account may receive a maximum of $100,000 insurance coverage on the total of his/her interests in all of those joint accounts. For example, assume that H and W own a joint account containing $110,000 and H and C own a joint account containing $50,000. Since the interests of the co-owners of a joint account are deemed equal for insurance purposes (except in the case of a tenancy in common if unequal interests are shown on the account records of the credit union), H has an interest of $55,000 in the account with W, and an interest of $25,000 in the account with C. H would have insurance of $80,000. W would have insurance of $55,000 and C would have insurance of $25,000. In this example, all of the funds held in the two joint accounts would be insured. The following illustrations show how typical families may use multiple ownership of accounts to increase the insurance coverage for family funds. In all cases, the accounts illustrated must meet the share insurance coverage requirements as published in the code of Federal Regulations (12 C.F.R. 745).

Family of Two
Individual Husband Individual $100,000
Accounts Wife Individual 100,000

Joint Tenancy Husband & Wife (Joint) 200,000
Accounts

Testamentary
Revocable Husband as Trustee for Wife 100,000
Trust Accounts Wife as Trustee for Household 100,000

TOTAL $600,000
Family of Three
Individual Husband Individual $ 100,000
Accounts Wife Individual 100,000
Child Individual 100,000

Joint Tenancy Husband & Wife Joint 100,000
Accounts Husband & Child Joint 100,000
Wife & Child Joint 100,000

The Husband is insured to $100,000 on his two accounts with Wife and Child. The Wife is insured to $100,000 on her two accounts with Husband and Child. The Child is insured to $100,000 on his/her accounts with father and mother.

Testamentary Husband as Trustee for Wife 100,000
Revocable Husband as Trustee for Child 100,000
Trust Accounts Wife as Trustee for Husband 100,000
(for Spouse – Child - Wife as Trustee for Child 100,000
Grandchild – parent-
Sibling)

TOTAL $1,000,000
Family of Four
Individual Husband Individual $ 100,000
Accounts Wife Individual 100,000
Child #1 Individual 100,000
Child #2 Individual 100,000

Joint Tenancy Husband & Wife (Joint) 100,000
Accounts Husband & Child #1 (Joint) 100,000
Wife & Child #2 (Joint) 100,000
Child #1 & Child #2 (Joint) 100,000
As in the previous illustration, none of the co-owners has an interest of more than $100,000 in all of the joint accounts, so the total amount held by the each of the co-owners in all of the joint accounts is insured.
Testamentary Husband as Trustee for Wife 100,000
Revocable Wife as Trustee for Husband 100,000
Trust Account Husband as Trustee for Child #1 100,000
(for Spouse – Child- Wife as Trustee for Child #1 100,000
Grandchild-Parent- Husband as Trustee for Child #2 100,000
Sibling) Wife as Trustee for Child #2 100,000

TOTAL $1,400,000

NCUSIF INSURANCE OF SPECIAL ACCOUNTS

16. What is the insurance coverage on a trust account held under the provisions of an irrevocable express trust?

The trust interest of a beneficiary in a valid irrevocable trust, if capable of evaluation in accordance with published rules, is insured up to $100,000 separately from the individual accounts of the settlor (grantor), trustee, or the beneficiary. Either the settlor or the beneficiary must be a member to obtain insurance benefits. All trust interests created by the same settlor (grantor) in the same credit union for the same beneficiary (including Education IRAs) will be added together and insured in the aggregate to the maximum of $100,000.

17. What is the insurance coverage on a revocable trust account, a tentative or "Totten" trust account, or a "payable- on-death" account?

These accounts, or any similar accounts which evidence an intention that the funds shall pass on the death of the owner to a named beneficiary, are considered revocable trust accounts and are insured as a form of individual account. If the beneficiary is a spouse, child, grandchild, parent, brother or sister (whether through blood, adoption or by virtue of re-marriage, such as a step-mother) of the owner, the funds in such accounts are insured for the owner up to a total of $100,000 for each such beneficiary separately from any other individual accounts of the owner. If the beneficiary is not one of those listed relatives, the funds in the account are, for insurance purposes, added to any other individual accounts of the owner and insured to a total of $100,000. In the case of a revocable trust account, the person who holds the power of revocation is deemed to be the owner of the funds in the account.

18. Is the interest in a pension or profit sharing account insured any differently than a member’s individual account?.

Yes. For insurance purposes, pension and profit sharing accounts are considered to be trust accounts. The ascertainable interest of each participant (if a member of the credit union) in such account is insured to $100,000 separately from other accounts of the member.

19. May a person receive separate insurance on each of several pension or profit sharing plans established by the member’s employer with the same credit union?

No. Except as provided below with respect to Individual Retirement Accounts (IRA), Keogh, and Deferred Compensation accounts, if two or more pension plans, or a profit sharing and a pension plan, are established by an employer for the same individual who is a member of the credit union, the beneficiary’s interest in the two accounts will be added together and insured up to $100,000.

20. What insurance coverage is provided for IRA, Keogh and Deferred Compensation accounts?

IRA, Keogh, and Deferred Compensation accounts are insured separately to $100,000 from other accounts that the member maintains in the same credit union. However, a Roth IRA will be added to a regular or traditional IRA and insured in the aggregate to the maximum of $100,000.

21. Are accounts held by a person as executor, administrator, guardian, custodian, or in some other similar fiduciary capacity insured separately from his individual account?

Yes. If the records of the credit union indicate that the person is depositing the funds in a fiduciary capacity, such funds would be separately insured from the fiduciary’s individually owned account. Funds in accounts held by guardians, conservators, or custodians (whether court-appointed or not) are also insured separately from other accounts of the ward.

22. When an account is designated as held by a person as agent for the true owner of the funds, how is the account insured?

The account is insured as an account of the principal or true owner. The funds in the account are added to any other individual account owned by the true owner and the total is insured up to a maximum of $100,000.

23. Is an account held by a corporation, partnership, or unincorporated association insured separately from the individual accounts of the stockholders, partners, or members?

Yes. If the corporation, partnership, or unincorporated association has obtained membership in the credit union and is engaged in an independent activity, its account is separately insured to a total of $100,000. The term "independent activity" means an activity other than one directed solely at increasing insurance coverage.

OTHER QUESTIONS

24. Can a federal credit union terminate its NCUSIF share insurance?

No. A federal credit union cannot be chartered or retain its charter unless it is insured by the NCUSIF.

25. Can a state credit union terminate its NCUSIF share insurance?

Yes. A state-chartered credit union can terminate its NCUSIF share insurance, but it must obtain the approval of its members and the NCUA Board. When a state credit union converts its NCUSIF share insurance to another licensed share insurance program, NCUSIF share insurance terminates upon conversion. If the state credit union does not provide for another share insurance program, NCUSIF share insurance remains in effect for one year following the effective date of termination, but coverage may be reduced depending upon account activity during the one year period.

26. What publications covering the operations of the NCUSIF are available?

NCUA publishes an Annual Report which covers the operations of the NCUSIF. This report is sent to each insured credit union and is also available from each regional director. The report includes financial statements and an independent audit of the Fund’s records.

27. What happens to insured funds that are not claimed by the member at a liquidation payout?

At the end of the 18 month insurance period, unclaimed funds are no longer insured, and share account balances are paid based on liquidation and other recoveries. The funds are generally held by NCUA and are available as long as the records of the credit union are available or until the charter or insurance certificate is canceled. In some cases funds may be transferred to a state unclaimed property section for a period of time.

28. Where does a credit union member go for information about his credit union or specific questions about NCUSIF share insurance?

The member should first contact the credit union for the needed information. Credit union personnel, however, cannot bind the NCUSIF to provide more protection than is allowed under the Federal Credit Union Act or NCUA Regulations. They will be able to obtain information for you from NCUA. If the credit union cannot provide the information or is no longer in operation, the member should contact the appropriate regional director directly. The address of each regional director and the states in which he has supervisory jurisdiction are listed in the back of this article.

APPENDIX

EXAMPLES OF INSURANCE COVERAGE AFFORDED ACCOUNTS IN CREDIT UNIONS INSURED BY THE NATIONAL CREDIT UNION SHARE INSURANCE FUND

The following examples illustrate insurance coverage on accounts maintained in the same federally insured credit union. They are intended to cover various types of ownership interests and combinations of accounts which may occur in connection with funds invested in insured credit unions. The examples, as well as the rules which they interpret, are predicated upon the assumption that, (1) invested funds are actually owned in the manner indicated on the credit union’s records and (2) the owner of funds in an account is a credit union member or otherwise eligible to maintain an insured account in a credit union. If available evidence shows that ownership is different from that on the institution’s records, the Fund may pay claims for insured accounts on the basis of actual rather than ostensible ownership. Further, the examples and the rules which they interpret do not extend insurance coverage to persons otherwise not entitled to maintain an insured account or to account relationships that have not been approved by the NCUA Board as an insured account.

A. SINGLE OWNERSHIP ACCOUNTS

All funds owned by an individual member (or, in a community property state, by the husband-wife community of which the individual is a member) and invested by the member in one or more individual accounts are added together and insured to the $100,000 maximum. This is true whether the accounts are maintained in the name of the individual member owning the funds, in the name of the member’s agent or nominee, or in a custodial loan account on behalf of the member as a borrower. All such accounts are added together and insured as one individual account. Funds held in one or more accounts in the name of a guardian, custodian, or conservator for the benefit of a ward or minor are added together and insured up to $100,000. However, such an account or accounts will not be added to any other individual accounts of the guardian, custodian, conservator, ward, or minor for purposes of determining insurance coverage.

Example 1
Question: Members A and B, husband and wife,each maintain an individual account containing $100,000. In addition, they hold a qualifying joint account containing $100,000. What is the insurance coverage?

Answer: Each individual account is insured up to$100,000, and the interest of A and the interest of B in the joint account are each insured for $100,000 separately from their individual accounts. The total coverage is $400,000. The coverage would be the same whether the individual accounts contain funds owned as community property or as individual property of the spouses.

Example 2
Question: Members H and W, husband and wife, reside in a community property state. H maintains a $100,000 account consisting of his separately-owned funds and invests $100,000 of community property funds in another account, both of which are in his name alone. What is the insurance coverage?

Answer: The two accounts are added together and insured to a total of $100,000, leaving $100,000 uninsured.

Example 3
Question: Member A has $92,500 invested in an individual account, and his agent, Member B invests $25,000 of A’s funds in a properly designated agency account. B also holds a $100,000 individual account. What is the insurance coverage?

Answer: A’s individual account and the agency account are added together and insured to the $100,000 maximum, leaving $17,500 uninsured. The investment of funds through an agent does not result in additional insurance coverage for the principal. B’s individual account is insured separately from the agency account. However, if the account records of the credit union do not show the agency relationship under which the funds in the $25,000 account are held, the $25,000 in B’s name could, at the option of the NCUSIF, be added to his individual account and insured to $100,000 in the aggregate, leaving $25,000 uninsured.

Example 4
Question: Member A holds a $100,000 individual account. Member B holds two accounts in his own name, the first containing $25,000 and the second containing $92,500. In processing the claims for payment of insurance on these accounts, the NCUSIF discovers that the funds in the $25,000 account actually belong to A and that B had invested these funds as agent for A, his undisclosed principal. What is the insurance coverage?

Answer: Since the available evidence shows that A is the actual owner of the funds in the $25,000 account, those funds would be added to the $100,000 individual account held by A (rather than to B’s $92,500 account) and insured to the $100,000 maximum, leaving $25,000 uninsured. B’s $92,500 individual account would be separately insured.

Example 5
Question: Member C, a minor, maintains an individual account of $750. C’s grandfather makes a gift to him of $100,000, which is invested in another account by C’s father, designated on the credit union’s records as custodian under a Uniform Gifts to Minors Act. C’s father, also a member, maintains an individual account of $100,000. What is the insurance coverage?

Answer: C’s individual account and the custodian account held for him by his father are each separately insured: the $100,000 maximum on the custodian account, and $750 on the individual account. The individual account held by C’s father is also separately insured to the $100,000 maximum.

Example 6
Question: Member G, a court appointed guardian, invests in a properly designated account $100,000 of funds in his custody which belong to member W, his ward. W and G each maintain $25,000 individual accounts. What is the insurance coverage?

Answer: W’s individual account and the guardianship account in G’s name are each insured to $100,000 providing W with $125,000 in insured funds. G’s individual account is also separately insured.

Example 7
Question: X Credit Union acts as a servicer of FHA, VA, and conventional mortgage loans made to its members, but sold to other parties. Each month, X receives loan payments for remittance to the other parties from approximately 2,000 member mortgagors. The monies received each month total $1,000,000 and are maintained in a custodial loan account. What is the insurance coverage?

Answer: X Credit Union acts as custodian for the 2,000 individual mortgagors. The interest of each mortgagor is separately insured as his individual account (but added to any other individual accounts which the mortgagor holds in the credit union).

B. REVOCABLE TRUST ACCOUNTS
The term "revocable trust account" includes a testamentary account, tentative or "Totten’’ trust account, "payable-on-death’’ account, or any similar account which evidences an intention that the funds shall pass on the death of the owner of the funds to a named beneficiary. If the named beneficiary is a spouse, child, grandchild, parent, brother or sister (as defined in subsection 745.4(d)) of the owner, the funds in all such accounts are insured for the owner up to $100,000 in the aggregate as to each such beneficiary. If the beneficiary of such an account is other than the spouse, child, grandchild, parent, brother or sister of the owner, the funds in the account are, for insurance purposes, added to any other individual (single ownership) accounts of the owner and insured up to $100,000 in the aggregate. In the case of a revocable trust account, the person who holds the power of revocation is deemed to be the owner of the funds in the account. If a revocable trust account is held in the name of a fiduciary other than the owner of the funds, any other accounts held by the fiduciary are insured separately from such revocable trust account.

Example 1
Question: Member H invests $200,000 in a revocable trust account with his son, S, and his daughter, D, as named beneficiaries. What is the insurance coverage?

Answer: Since S and D are children of H, the owner of the account, the funds are insured up to $100,000 as to each beneficiary. Assuming that S and D have equal beneficial interests ($100,000 each), H is fully insured for this account.

Example 2
Question: Member H invests $100,000 in each of four "payable-on-death’’ accounts. Under the terms of each account contract, H has the right to withdraw any or all of the funds in the account at any time. Anyfunds remaining in the account at the time of H’s death are to be paid to a named beneficiary. The respective beneficiaries of the four accounts are H’s wife, his mother, his brother, and his nephew. H also holds an individual account containing $100,000. What is the insurance coverage?

Answer: The accounts payable on death to H’s wife, mother and brother are each separately insured to the $100,000 maximum (Sec. 745.4(b)). The account payable to H’s nephew is added to H’s individual account and insured to $100,000 in the aggregate, leaving $100,000 uninsured (Sec. 745.4(c)).

Example 3
Question: Members H and W jointly invest in a "payable-on-death" account for the benefit of their son, S, and daughter, D. The account is held by H and W with right of survivorship. What is the maximum insurance coverage available on the account?

Answer: Since S and D are the children of H and W, the account will be insured up to $100,000 as to each beneficiary separately from any accounts of the owners, H and W. H would be entitled to $100,000 insurance for S and $100,000 for D. W would be entitled to the same coverage for a total of $400,000 on the account. However, upon the death of either H or W, insurance coverage would be reduced to $200,000.

C. ACCOUNTS HELD BY EXECUTORS OR ADMINISTRATORS
All funds belonging to a decedent and invested in one or more accounts, whether held in the name of the decedent or in the name of his executor or administrator, are added together and insured to the $100,000 maximum. Such funds are insured separately from the individual accounts of any of the beneficiaries of the estate or of the executor or administrator.

Example 1
Question: Member A, administrator of Member D’s estate, sells D’s automobile and invests the proceeds of $12,500 in an account entitled "Administrator of the estate of D." A has an individual account in that same credit union containing $100,000. Prior to his death, D had opened an individual account of $100,000. What is the insurance coverage?

Answer: The $12,500 is added to D’s individual account and insured to $100,000, leaving $12,500 uninsured. A’s individual account is separately insured for $100,000.

D. ACCOUNTS HELD BY A CORPORATION, PARTNERSHIP OR UNINCORPORATED ASSOCIATION

All funds invested in an account or accounts by a corporation, a partnership, or an unincorporated association engaged in any independent activity are added together and insured to the $100,000 maximum. The term "independent activity" means any activity other than the one directed solely at increasing coverage. If the corporation, partnership, or unincorporated association is not engaged in an independent activity, any account held by the entity is insured as if owned by the persons owning or comprising the entity, and the imputed interest of each such person is added, for insurance purposes, to any individual account which he maintains.

Example 1
Question: Member X Corporation maintains a $100,000 account. The stock of the corporation is owned by members A, B, C, and D in equal shares. Each of these stockholders also maintains an individual account of $100,000 with the same credit union. What is the insurance coverage?

Answer: Each of the five accounts would be separately insured to $100,000 if the corporation is engaged in an independent activity and has not been established merely for the purpose of increasing insurance coverage. The same would be true if the business were operated as a bona fide partnership instead of as a corporation. However, if X corporation was not engaged in an independent activity, then $25,000 (1/4 interest) would be added to each account of A, B, C, and D. The accounts of A, B, C, and D would then each be insured to $100,000, leaving $25,000 in each account uninsured.

Example 2
Question: Member C College maintains three separate accounts with the same credit union under the titles: "General Operating Fund, "Teachers Salaries," and "Building Fund". What is the insurance coverage?

Answer: Since all of the funds are the property of the college, the three accounts are added together and insured only to the $100,000 maximum.

Example 3
Question: The men’s club of X Church carries on various social activities in addition to holding several fund-raising campaigns for the church each year. The club is supported by membership dues. Both the club and X Church maintain member accounts in the same credit union. What is the insurance coverage?

Answer: The men’s club is an unincorporated association engaged in an independent activity. If the club funds are, in fact, legally owned by the club itself and not the church, each account is separately insured to the $100,000 maximum.

Example 4
Question: The PQR Union, a member of the ABC Federal Credit Union, has three locals in a certain city. Each of the locals maintains an account containing funds belonging to the parent organization. All three accounts are in the same insured credit union. What is the insurance coverage?

Answer: The three accounts are added together and insured up to the $100,000 maximum.

E. PUBLIC UNIT ACCOUNTS
For insurance purposes, the official custodian of funds belonging to a public unit, rather than the public unit itself, is insured as the account-holder. All funds belonging to a public unit and invested by the same custodian in an insured credit union are added together and insured to the $100,000 maximum, regardless of the number of accounts involved and regardless of whether the funds are invested in accounts located in or outside the state. If there is more than one official custodian for the same public unit, the funds invested by each custodian are separately insured up to $100,000. If the same person is custodian of funds for more than one public unit, he is separately insured to $100,000 with respect to the funds of each unit held by him in properly designated account. The maximum coverage for an official custodian of funds of the United States would be $100,000.

For insurance purposes, a "political subdivision" is entitled to the same insurance coverage as any other public unit. "Political subdivision" includes any subdivision of a public unit or any principal department of such unit (1) the creation of which has been expressly authorized by state statute, (2) to which some functions of government have been allocated by state statute, and (3) to which funds have been allocated by statute or ordinance for its exclusive use and control.

Example 1
Question: As Comptroller of Y Consolidated School District, A maintains a $125,000 account in the credit union containing school district funds. He also maintains his own $100,000 member account in the same credit union. What is the insurance coverage?

Answer: The two accounts will be separately insured, assuming the credit union’s records indicate that the account containing the school district funds is held by A in a fiduciary capacity. Thus, $100,000 of the school’s funds and the entire $100,000 in A’s personal account will be insured.

Example 2
Question: A, as city treasurer, and B, as chief of the city police department, each have $100,000 in city funds invested in custodial accounts. What is the insurance coverage?

Answer: Assuming that both A and B have official custody of the city funds, each account is separately insured to the $100,000 maximum.

Example 3
Question: A is Treasurer of X County and collects certain tax assessments, a portion of which must be paid to the state under statutory requirement. A maintains an account for general funds which belong to the state treasurer. The credit union’s records indicate that the separate account contains funds held for the state. What is the insurance coverage?

Answer: Since two public units own the funds held by A, the account would each be separately insured to the $100,000 maximum.

Example 4
Question: A city treasurer invests city funds in each of the following accounts: "General Operating Account," "School Transportation Fund," "Local Maintenance Fund," and "Payroll Fund." By administrative direction the city treasurer has allocated the funds for the use of and control by separate departments of the city. What is the insurance coverage?

Answer: All of the accounts are added together and insured in the aggregate to $100,000. Because the allocation of the city’s funds is not by statute or ordinance for the specific use of and control by separate departments of the city, separate insurance coverage to the maximum of $100,000 is not afforded to each account.

Example 5
Question: A, the custodian of retirement funds of a military exchange, invests $1,000,000 in an insured credit union. The military exchange, a non-appropriated fund instrumentality of the United States, is deemed to be a public unit. The employees of the exchange are the beneficiaries of the retirement funds but are not members of the credit union. What is the insurance coverage?

Answer: Because A invested the funds on behalf of a public unit, in his capacity as custodian, those funds qualify for $100,000 share insurance even though A and the public unit are not within the credit union’s field of membership. Since the beneficiaries are neither public units nor members of the credit union, they are not entitled to separate share insurance. Therefore, $900,000 is uninsured.

Example 6
Question: A is the custodian of the County’s employee retirement funds. He deposits $1,000,000 in retirement funds with the credit union. The "beneficiaries" of the retirement fund are not themselves public units nor are they within the credit union’s field of membership. What is the insurance coverage?

Example 7
Question: A county treasurer deposits into an insured credit union $100,000 in each of the following accounts: "General Operating Fund" "County Roads Department Fund" "County Water District Fund" "County Public Improvement District Fund" "County Emergency Fund" What is the insurance coverage?

Answer: The "County Roads Department", "County Water District", and "County Public Improvement District" accounts would each be separately insured to $100,000 if the funds in each such account have been allocated by law for the exclusive use of a separate county department of subdivision expressly authorized by state statute. Funds in the "General Operating" and "Emergency Fund" accounts would be added together and insured in the aggregate to $100,000, if such funds are for countywide use and not for the exclusive use of any subdivision or principal department of the county, expressly authorized by state statute.

Example 8
Question: A, the custodian of Indian tribal funds, lawfully invests $1,000,000 in an account in an insured credit union on behalf of 15 different tribes; the records of the credit union show that no tribe’s interest exceeds $100,000. A, as official custodian, also invests $1,000,000 in the same credit union on behalf of 100 individual Indians, who are not members; each Indian’s interest is $10,000. What is the insurance coverage?

Answer: Because each tribe is considered a separate public unit, the custodian of each tribe, even though the same person, is entitled to separate insurance for each tribe. Since the credit union’s records indicate no tribe has more than $100,000 in the account, the $1,000,000 would be fully insured as 15 separate tribal accounts. If any one tribe had more than a $100,000 interest in the funds, it would be insured only to $100,000 and any excess would be uninsured. However, the $1,000,000 invested on behalf of the individual Indians would not be insured since the individual Indians are neither public units nor, in the example, members of the credit union. If A is the custodian of the funds in his capacity as an official of a governmental body that qualified as a public unit, then the account would be insured for $100,000 leaving $900,000 uninsured.

F. JOINT ACCOUNTS
The interest of a co-owner in all accounts held under any form of joint ownership valid under state law (whether as joint tenants with right of survivorship, tenants by the entireties, tenants in common, or by husband and wife as community property) is insured up to $100,000. This insurance is separate from that afforded individual accounts held by any of the co-owners. An account is insured as a joint account only if each of the co-owners has personally signed a membership card or an account signature card and possesses the same withdrawal rights as the other co-owners. (The signature requirement does not apply to share certificates, or to any accounts maintained by an agent, nominee, guardian, custodian or conservator on behalf of two or more persons. However, the records of the credit union must show that the account is being maintained for joint owners. There is also another exception in the case of a minor discussed below.) An account owned jointly which does not qualify as a joint account for insurance purposes is insured as if owned by the named persons as individuals. In that case, the actual ownership interest in the account of each person is added to any other accounts individually owned by such person and insured up to $100,000 in the aggregate. Any individual, including a minor, may be a co-owner of a joint account. Although, generally, each co-owner must have signed an account signature card and must have the same rights of withdrawal as other co-owners in order for the account to qualify for separate joint account insurance, there is an exception for minors. If state law limits or restricts a minor’s withdrawal rights — for example, a minimum age requirement to make a withdrawal — the account will still be insured as a joint account. The interests of a co-owner in all joint accounts that qualify for separate insurance coverage are insured up to the $100,000 maximum. For insurance purposes, the co-owners of any joint account are deemed to have equal interests in the account, except in the case of atenancy in common. With a tenancy in common, equal interests are presumed unless otherwise stated on the records of the credit union.

Example 1
Question: Members A and B maintain an account as joint tenants with right of survivorship and, in addition, each holds an individual account. Is each account separately insured?

Answer: If both A and B have signed the membership or signature card and possess equal withdrawal rights with respect to the joint funds, their interests in the joint account are separately insured from their interests in the individual accounts. If the joint account is represented by a share certificate, their individual signatures are not required for that account.

Example 2
Question: Members H and W, husband and wife, reside in a community property state. Each holds an individual account and, in addition, they hold a qualifying joint account. The funds in all three accounts consist of community property. Is each account separately insured?

Answer: Yes. An account in the individual name of a spouse will be insured up to $100,000 whether the funds consist of community property or separate property of the spouse. A joint account containing community property is separately insured. Thus, community property can be used for individual accounts in the name of each spouse and for a joint account in the name of both spouses. In this example, each individual account is insured up to $100,000, and the interests of both the husband and wife in the joint account are each insured up to $100,000.

Example 3
Question: Two accounts of $100,000 each are held by a member husband and his wife under the following names:

- John Doe and Mary Doe, husband and wife, as joint tenants with right of survivorship
- Mrs. John Doe and John Q. Doe (community property)

How much insurance do the husband and wife have?

Answer: They have $200,000 of insurance. Both the husband and wife are deemed to have a one half interest ($50,000) in each account. The husband’s interest in both accounts would be added together and insured for $100,000. The wife’s insurance coverage would be determined the same way.

Example 4
Question: The following accounts are held by members A, B and C, each of whom has personally executed signature cards for the accounts in which he has an interest. Each co-owner of a joint account possesses the necessary withdrawals rights.
1. A, as an individual—$100,000
2. B, as an individual—$100,000
3. C, as an individual—$100,000
4. A and B, as joint tenants w/r/o survivorship— $90,000
5. A and C, as joint tenants w/r/o survivorship— $90,000
6. B and C, as joint tenants w/r/o survivorship— $90,000
7. A, B and C, as joint tenants w/r/o survivorship—$ 90,000

What is the insurance coverage?

Answer: Accounts numbered 1, 2 and 3 are each separately insured for $100,000 as individual accounts held by A, B and C, respectively. The interest of the co-owners of each joint account are deemed equal for insurance purposes. A’s interest in accounts numbered 4, 5, and 7 are added together for insurance purposes. Thus, A has an interest of $45,000 in account No. 4, $45,000 in account No. 5 and $30,000 in account No. 7, for a total joint account interest of $120,000, of which $100,000 is insured. The interest of B and C are similarly insured.

Example 5(a)
Question: A, B and C hold accounts as set forth in Example 4. Members A and B are husband and wife; C, their minor child, has failed to sign the signature card for Account No. 7. In Account No. 5, according to the terms of the account, C cannot make a withdrawal without A’s written consent. (This is not a limitation imposed under state law.) In Account No. 6, the signatures of both B and C are required for withdrawal. A has provided all of the funds for Accounts numbered 5 and 7 and under state law has the entire actual ownership interest in these two accounts. What is the insurance coverage?

Answer: If any of the co-owners of a joint account have failed to meet any of the joint account requirements, the account is not a qualifying joint account. Instead, the account is treated as if it consisted of commingled individual accounts of each of the co-owners in accordance with his or her actual ownership interest in the funds, as determined under applicable state law. Account No. 5 is not a qualifying joint account because C does not have equal withdrawal rights with A. Based on the terms of the account, C can only make a withdrawal if he has A’s written consent. Account No. 7 is not a qualifying joint account because C did not personally sign the signature card. Therefore, all of the funds in Accounts 5 and 7 are treated as individually owned by A and added to A’s individual account, Account No. 1. For insurance purposes then, A has $280,000 in one individual account that is insured for $100,000, leaving $180,000 uninsured. Account 6 is a qualifying joint account for insurance purposes since each co-owner has the right to withdraw funds on the same basis. Account 4 is also a qualifying joint account. A’s interest in Account 4 is insured for $45,000. B’s interest of $45,000 in Account 4 is added to her interest of $45,000 in Account 6 and insured for $90,000. C’s interest in Account 6 is insured for $45,000.

Example 5(b)
Question: Assume the same accounts as Example5 (a) except that, on Account No. 5, C’s right to make a withdrawal is limited by state law which precludes a minor from making a withdrawal without the co-owner’s written consent. What is the insurance coverage?

Answer: In this situation, Accounts 4, 5, and 6 all qualify as joint accounts. A, B, and C will each have $90,000 of insured funds based on: A’s interest in Account 4 ($45,000) and 5 ($45,000), B’s interest in Accounts 4 ($45,000) and 6 ($45,000), and C’s interest in Accounts 5 ($45,000) and 6 ($45,000). As in Example 5(a), Account No. 7 does not qualify as a joint account and would be added to A’s individual account for insurance purposes.

G. TRUST ACCOUNTS AND RETIREMENT ACCOUNTS
A trust estate is the interest of a beneficiary in an irrevocable express trust, whether created by trust instrument or statue, that is valid under state law. Thus, funds invested in an account by a trustee under an irrevocable express trust are insured on the basis of the beneficial interest under such trust. The interest of each beneficiary in an account (or accounts) established under such a trust arrangement is insured to $100,000 separately from other accounts held by the trustee, the settlor (grantor), or the beneficiary. However, in cases where a beneficiary has an interest in more than one trust arrangement created by the same settlor, the interests of the beneficiary in all accounts established under such trusts are added together for insurance purposes, and the beneficiary’s aggregate interest derived from the same settlor is separately insured to the $100,000 maximum. A beneficiary’s interest in an account established pursuant to an irrevocable express trust arrangement is insured separately from other beneficial interests (trust estates) invested in the same account if the value of the beneficiary’s interest (trust estate) can be determined (as of the date of a credit union’s insolvency) without evaluation of contingencies except for those covered by the present worth tables and rules of calculation for their use set forth in Section 20.2031-10 of the Federal Estate Tax Regulations (26 C.F.R. 20- 2031-10). If any trust estates in such an account cannot be so determined, the insurance with respect to all such trust estates together shall not exceed the basic insured amount of $100,000. In order for insurance coverage of trust account to be effective in accordance with the foregoing rules, certain record keeping requirements must be met. In connection with each trust account, the credit union’s records must indicate the name of both the settlor and the trustee of the trust and must contain an account signature card executed by the trustee indicating the fiduciary capacity of the trustee. In addition, the interests of the beneficiaries under the trust must be ascertainable from the records of either the credit union or the trustee, and the settlor or beneficiary must be a member of the credit union. If there are two or more settlors or beneficiaries, then either all the settlors or all the beneficiaries must be members of the credit union.

Although each ascertainable trust estate is separately insured, it should be noted that in short-term trusts the insurable interest or interests may be very small, since the interests are computed only for the duration of the trust. Thus, if a trust is made irrevocable for a specified period of time, the beneficial interest will be calculated in terms of the length of time stated. A reversionary interest retained by the settlor is treated in the same manner as an individual account of the settlor. As stated, the trust must be valid under local law. A trust which does not meet local requirements, such as one imposing no duties on the trustee or conveying no interest to the beneficiary, is of no effect for insurance purposes. An account in which such funds are invested is considered to be an individual account. An account established pursuant to a revocable trust arrangement is insured as a form of individual account and is treated under Section B, supra, dealing with Testamentary Accounts. IRA, Keogh, and Deferred Compensation accounts are separately insured, each up to $100,000. Although credit unions may serve as trustees or custodians for self-directed IRA, Keogh, and Deferred Compensation accounts, once the funds are taken out of the credit union, they are no longer insured. In the case of an employee retirement fund where only a portion of the fund is placed in a credit union account, the amount of insurance available to an individual member/beneficiary on his interest in the account will be in proportion to his interest in the entire employee retirement fund. If, for example, the member’s interest represents ten percent of the entire plan funds, then he is presumed to have only a ten percent interest in the plan account. Said another way, if a member has vested interest of $10,000 in a municipal employees’ retirement plan and the trustee invested 25 percent of the total plan funds in a credit union, the member would be insured for only $2,500 on that credit union account. There is an exception, however. The member would be insured for $10,000 if the trustee can document, through records maintained in the ordinary course of business, that individual beneficiary’s interest are segregated and the total vested interest of the member was, in fact, invested in that account.

Example 1
Question: Member S invests $45,000 in trust for B, the beneficiary. S also has an individual account containing $90,000 in the same credit union. What is the insurance coverage?

Answer: Both accounts are fully insured. The trust account is separately insured from the individual account of S.

Example 2
Question: S invests funds in trust for A, B, C, D, and E. A, B, and C are members of the credit union, D, E, and S are not. What is the insurance coverage?

Answer: This is an uninsurable account. Where there is more than one settlor or more than one beneficiary, all the settlors or all the beneficiaries must be members to establish this type of account. Since D, E and S are not members, this account cannot legally be established or insured.

Example 3
Question: Member S invests $500,000 in trust for ABC Employees Retirement Fund. Some of the beneficiaries are members and some are not. What is the insurance coverage?

Answer: The account is insured as to the determinable interests of each member beneficiary to a maximum of $100,000 per member. Member interests not capable of evaluation and nonmember interests shall be added together and insured to a maximum of $100,000 in the aggregate.

Example 3(a)
Question: Member S is trustee for the ABC Employees Retirement Fund containing $1,000,000. Member A has a determinable interest of $90,000 in the fund (9 percent of the total). S invests $500,000 of the fund in trust in an insured credit union and the remaining $500,000 elsewhere. Some of the beneficiaries of the fund are members of the credit union and some are not. S does not segregate each employee’s interest in the fund. What is the insurance coverage?

Answer: The account is insured as to determinable interest of each member beneficiary, adjusted in proportion to the fund’s investment in the credit union. A’s insured interest in the account is $45,000, or 9 percent of $500,000. This reflects the fact that only 50 percent of the fund is in the account and A’s interest in the account is in the same proportion as his interest in the overall plan. Each beneficiary who is a member would be similarly insured. Members’ interests not capable of evaluation and nonmembers’ interests are added together and insured to a maximum of $100,000 in the aggregate.

Example 4
Question: Member A has an individual account of$100,000 and establishes an IRA and accumulates $50,000 in that account. Subsequently, A becomes self-employed and establishes a Keogh account in the same credit union and accumulates $100,000 in that account. What is the insurance coverage?

Answer: Each of A’s accounts would be separately insured for up to $100,000. In the example, A would be fully insured for $250,000.

Example 5
Question: Member A has a self-directed IRA account with $70,000 in it. The FCC is the trustee of the account. Member transfers $40,000 into a blue chip stock; $30,000 remains in the FCU. What is the insurance coverage?

Answer: Originally, the full $70,000 in A’s IRA account is insured. The $40,000 is no longer insured once it is moved from the FCU. The $30,000 remaining in the FCU is insured.

NATIONAL CREDIT UNION ADMINISTRATION REGIONAL OFFICES

REGION I (ALBANY)
Connecticut, New York, Maine, Rhode Island, Massachusetts, Vermont, New Hampshire
Regional Director
National Credit Union Administration
9 Washington Square
Washington Avenue Extension
Albany, NY 12205
(518) 862-7400

REGION II (CAPITAL)
Delaware, New Jersey, District of Columbia, Pennsylvania, Virginia, Maryland
Regional Director
National Credit Union Administration
1775 Duke Street
Suite 4206
Alexandria, VA 22314-3437
(703) 519-4600

REGION III (ATLANTA)
Alabama, Mississippi, Arkansas, North Carolina, Florida, Puerto Rico, Georgia, South Carolina, Kentucky, Tennessee, Louisiana, Virgin Islands
Regional Director
National Credit Union Administration
7000 Central Parkway
Suite 1600
Atlanta, GA 30328
(678) 443-3000

REGION IV (CHICAGO)
Illinois, Ohio, Indiana, West Virginia, Michigan, Wisconsin, Missouri
Regional Director
National Credit Union Administration
4225 Naperville Road
Suite 125
Lisle, Illinois 60532
(630) 955-4100

REGION V (AUSTlN)
Arizona, New Mexico, Colorado, North Dakota, Iowa, Oklahoma, Kansas, South Dakota, Minnesota, Texas, Nebraska
Regional Director
National Credit Union Administration
4807 Spicewood Springs Rd.
Suite 5200
Austin, Texas 78759
(512) 342-5600

REGION VI (PACIFIC)
Alaska, Montana, American Samoa, Nevada, California, Oregon, Guam, Utah, Hawaii, Washington, Idaho, Wyoming
Regional Director
National Credit Union Administration
2300 Clayton Road
Suite 1350
Concord, California 94520
(925) 363-6200

NOTICE
This article provides examples of insurance coverage under rules issued by the NCUA Board through the National Credit Union Share Insurance Fund (NCUSIF). Since the scope of this article is limited, credit union members may wish to contact NCUA for greater detail concerning the technical aspects of insurance coverage. Members or their counsel may also wish to consult the NCUA Rules and Regulations relating to share insurance coverage published in the Code of Federal Regulations (12 C.F.R. 745). You can find NCUA’s insurance regulations at www.ncua.gov under ‘reference information’. NCUA’s specific rules on insurance coverage control how accounts will be insured. Members are advised that no persons may, by representations or interpretations, effect the extent of insurance coverage provided by the Federal Credit Union Act as amended and the rules and regulations for insurance of share accounts. Also, members are advised to review their accounts annually and whenever they open new accounts or modify existing accounts to ensure that all of their funds continue to be insured.

NATIONAL CREDIT UNION ADMINISTRATION
ALEXANDRIA, VA 22314-3428

Insured Funds Disclosure

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