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FDIC Insurance Rules Update

Posted: Wed Jan 15, 2020 10:43 pm
by LeftCoastIV
I received this notice today from Ally Bank, where we have FDIC insured accounts. Sharing with others as an FYI.

FDIC rule requires us to ask for more beneficiary information

The FDIC has made updates, effective April 1, 2020, to its regulatory requirements for paying deposit insurance. To make sure you receive the maximum insurance coverage you’re entitled to, you’ll need to provide a valid Social Security number or Tax Identification number for each of your beneficiaries. Check out FDIC’s Part 370 Rule, recordkeeping requirements in section 370.4, for further details.

We want to help make sure you’re covered. Update your beneficiary information now, or log in to your account later, select the Profile icon, then Beneficiaries. Select Edit beneficiary to add the Tax ID or SSN to each of your beneficiaries.

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 12:46 am
by Katietsu
I have used the multiple beneficiary feature to increase my FDIC coverage for short transition periods. So I read this with interest.


I searched for the referenced rule and found this.
Q: For informal revocable trusts, such as payable-on-death accounts, covered institutions often have limited information for non-customer beneficiaries. Part 370 indicates certain fields are required fields in the Account Participant File, such as the AP_GOV_ID. Will a covered institution need to file an exception request for these accounts where there is missing government identification for beneficiaries?

Where limited information on non‐customer beneficiaries and government identification is available, a covered institution should use its best efforts to create a unique identifier for these beneficiaries, notwithstanding the missing information. This should allow the covered institution’s systems to perform an accurate deposit insurance calculation for these types of accounts. If a covered institution cannot assign unique identifiers for beneficiaries for informal revocable trust accounts, then it will need to file an exception request for the affected accounts.
So, I can see why the bank would want SSNs. But I think the rule is does not exclude coverage without them. Someone smarter than I might be able to interpret this better.

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 9:58 am
by Dottie57
My brother and I use the same bank. If he inherits my accounts, he might surpass the FDIC limit. Perhaps this is why SSNs might be necessary. Funds that are insured can become uninsured.

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 11:06 am
by puc_ytpme
Bump

Does this apply to formal trust accounts as it does for informal(Transfer on death)?

Read up on this last night coming into play in April this year & a laymen’s explanation would be helpful

All the best

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:04 pm
by puc_ytpme
Follow up:


I called the FDIC to get a better understanding for anyone interested.

What I gathered was the FDIC is setting it’s preferred method in April of 2020 to streamline, in case of bank failure or death to make sure proper insurance limits are provided based off the number of beneficiaries under any given account

It is up to the banks to set their standards on the information needed. It is up to the grantor or owners of the account to make sure names & addresses of beneficiaries are all correct & updated with time. If the banks don’t require a beneficiaries social# it would not exclude one from increased FDIC coverage

Hope this helps

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:09 pm
by sport
What about brokerage CDs? The banks don't even know the name of the CD owner. Are brokerages required to get information on beneficiaries?

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:12 pm
by beehivehave
I haven't heard of this. Suspicion confirmed: Ally decides they want more SSNs and implicitly blames the FDIC.
I wonder how the beneficiaries feel about that?
This may be a reason to change banks, unless they all do it.

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:16 pm
by ResearchMed
I was wondering about what if one wants to leave something to a beneficiary, but doesn't want to announce that in advance.
How would one insert into casual conversation, "Oh, by the way, what does your SS # happen to be!?"

This is more than an academic question for us.

RM

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:27 pm
by puc_ytpme
ResearchMed wrote: Thu Jan 16, 2020 1:16 pm I was wondering about what if one wants to leave something to a beneficiary, but doesn't want to announce that in advance.
How would one insert into casual conversation, "Oh, by the way, what does your SS # happen to be!?"

This is more than an academic question for us.

RM
+1

My initial thoughts too. I would feel uncomfortable to ask “Hey your in my trust, I need your 9 digits per FDIC.” Time will tell! We will see if the NCUA(National Credit Union Association) heads the same route

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:39 pm
by deikel
I don't understand the purpose behind this ?

I thought your individual account is 'insured' by the FDIC - why would it matter what SSN any beneficiary has ? The insurance kicks in if the underlying bank goes under and I need to get my money paid back - not in case of my untimely departure ?

If I pass on the money to my beneficiary, maybe their overall account value goes over the limit - but why does the bank or the FDIC care ?

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 1:42 pm
by sport
deikel wrote: Thu Jan 16, 2020 1:39 pm I don't understand the purpose behind this ?

I thought your individual account is 'insured' by the FDIC - why would it matter what SSN any beneficiary has ? The insurance kicks in if the underlying bank goes under and I need to get my money paid back - not in case of my untimely departure ?

If I pass on the money to my beneficiary, maybe their overall account value goes over the limit - but why does the bank or the FDIC care ?
The FDIC limit is multiplied by the number of beneficiaries. If you have two beneficiaries on your account, the account is insured for 500K instead of "only" 250K.

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 4:18 pm
by puc_ytpme
Bump

Spoke to Ally to clarify further

1) Formal Trusts( Family or Living) already have the tax ID as it provided for by the Trust. So the beneficiaries tax identification # or social is not needed

2) Informal revocable trust accounts such as payable on death, do need to provide tax ID #’s or Social#’s for each beneficiary.

This is per Ally’s stance. YMMV with other financial institutions

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 5:39 pm
by dm200
Yes - this "debate" has been going on for several year - for both FDIC insured banks and NCUA insured credit unions.

It is the position of NCUA and FDIC that named POD beneficiaries have a "claim" (or similar relationship) with the bank or credit union, while the banks and credit unions say their is no such relationship unless and until the owner(s) die.

I see this as a big problem for many depositors. Can the depositor obtain this information from the desired beneficiary or not? If it is supplied, then that beneficiary assumes he/she continues as the beneficiary - even though he/she can be removed at any time.

Re: FDIC Insurance Rules Update

Posted: Thu Jan 16, 2020 6:56 pm
by F150HD
Got the same Ally email.

will all/any brokerage type accounts (& 401/457/403 etc) w/ a beneficiary now need all this info too?

I am never comfortable providing someone elses SS# to a company.

Re: FDIC Insurance Rules Update

Posted: Fri Jan 17, 2020 5:26 pm
by maxq
I ran into this earlier this week when I went into a local credit union (I have used it many years) to renew a maturing six-figure CD. The account rep insisted I needed to provide the POD's SSN due to new rules. I asked her to verify this with management, but she insisted there was no exception. I told her that such being the case, I'd just like the CD balance in a cashier's check and I'd go down the street to another credit union I use and deposit it into a new CD there. She decided on the spot that the rule didn't really apply and efficiently processed the CD renewal. I probably wouldn't have made a big deal of it, except the POD for this CD is a foreign national with no SSN or TIN. I did later check with the other credit union, who advised they require only a name and current address for a named POD

Re: FDIC Insurance Rules Update

Posted: Fri Jan 17, 2020 9:33 pm
by AAA
I seem to recall always having to provide Social Security numbers for my children when naming them as beneficiaries.

I think in general that this is actually useful as it uniquely identifies the beneficiary.

Re: FDIC Insurance Rules Update

Posted: Sun Jan 19, 2020 2:27 pm
by dm200
I do not believe there are actually "new rules", but rather more enforcement of existing rules.

Re: FDIC Insurance Rules Update

Posted: Sun Jan 19, 2020 3:01 pm
by Wiggums
maxq wrote: Fri Jan 17, 2020 5:26 pm I ran into this earlier this week when I went into a local credit union (I have used it many years) to renew a maturing six-figure CD. The account rep insisted I needed to provide the POD's SSN due to new rules. I asked her to verify this with management, but she insisted there was no exception. I told her that such being the case, I'd just like the CD balance in a cashier's check and I'd go down the street to another credit union I use and deposit it into a new CD there. She decided on the spot that the rule didn't really apply and efficiently processed the CD renewal. I probably wouldn't have made a big deal of it, except the POD for this CD is a foreign national with no SSN or TIN. I did later check with the other credit union, who advised they require only a name and current address for a named POD
While credit unions aren't covered by the FDIC, their deposits are insured as well. All federal credit unions and many state-chartered credit unions are federally insured by the NCUA.

Are you saying that NCUA has the same rule?

Re: FDIC Insurance Rules Update

Posted: Sun Jan 19, 2020 6:06 pm
by UncleLeo
sport wrote: Thu Jan 16, 2020 1:42 pm
deikel wrote: Thu Jan 16, 2020 1:39 pm I don't understand the purpose behind this ?

I thought your individual account is 'insured' by the FDIC - why would it matter what SSN any beneficiary has ? The insurance kicks in if the underlying bank goes under and I need to get my money paid back - not in case of my untimely departure ?

If I pass on the money to my beneficiary, maybe their overall account value goes over the limit - but why does the bank or the FDIC care ?
The FDIC limit is multiplied by the number of beneficiaries. If you have two beneficiaries on your account, the account is insured for 500K instead of "only" 250K.
What if one has only one beneficiary without SSN (does not live in the U.S and is not a U.S resident)?
Is the 250K insurance always "guaranteed" for FDIC insured accounts?

Re: FDIC Insurance Rules Update

Posted: Sun Jan 19, 2020 6:09 pm
by stan1
puc_ytpme wrote: Thu Jan 16, 2020 4:18 pm 2) Informal revocable trust accounts such as payable on death, do need to provide tax ID #’s or Social#’s for each beneficiary.
Did Ally tell you what would happen if you decline to provide? Will the existing PoD designation be cancelled or the account closed or nothing?

Re: FDIC Insurance Rules Update

Posted: Mon Jan 20, 2020 12:26 am
by puc_ytpme
stan1 wrote: Sun Jan 19, 2020 6:09 pm
puc_ytpme wrote: Thu Jan 16, 2020 4:18 pm 2) Informal revocable trust accounts such as payable on death, do need to provide tax ID #’s or Social#’s for each beneficiary.
Did Ally tell you what would happen if you decline to provide? Will the existing PoD designation be cancelled or the account closed or nothing?
Stan1,

The rep answered only the questions that I did ask. A suggestion might be to give Ally a call as to gain a better understanding on what you will need to do

All the best

Re: FDIC Insurance Rules Update

Posted: Tue Jan 21, 2020 9:59 am
by dm200
UncleLeo wrote: Sun Jan 19, 2020 6:06 pm
sport wrote: Thu Jan 16, 2020 1:42 pm
deikel wrote: Thu Jan 16, 2020 1:39 pm I don't understand the purpose behind this ?
I thought your individual account is 'insured' by the FDIC - why would it matter what SSN any beneficiary has ? The insurance kicks in if the underlying bank goes under and I need to get my money paid back - not in case of my untimely departure ?
If I pass on the money to my beneficiary, maybe their overall account value goes over the limit - but why does the bank or the FDIC care ?
The FDIC limit is multiplied by the number of beneficiaries. If you have two beneficiaries on your account, the account is insured for 500K instead of "only" 250K.
What if one has only one beneficiary without SSN (does not live in the U.S and is not a U.S resident)?
Is the 250K insurance always "guaranteed" for FDIC insured accounts?
Yes, currently for FDIC and NCUA.

In my opinion, I would usually not try to multiply this $250k by using multiple POD beneficiaries. There is always the chance that the bank or credit union does not have its records 100% accurate and up to date. To avoid potential future hassles, if the bank or credit union goes belly up, I would stick with $250k individual, another $500k joint with one other person.

From being involved with this beneficiary/SSN issue with a credit union, I believe that any differences in how this is enforced at different banks or credit unions is due to how closely the federal bank and credit union regulators are looking at each institution.

Re: FDIC Insurance Rules Update

Posted: Wed Mar 18, 2020 11:29 am
by LeftCoastIV
This topic has felt a bit more "real" given recent events. I double-checked my Ally accounts to ensure social security # for beneficiaries, to avoid getting caught in a loophole if FDIC actually needs to be triggered at some point.

Re: FDIC Insurance Rules Update

Posted: Wed Mar 18, 2020 11:58 am
by skepticalobserver
dm200 wrote: Tue Jan 21, 2020 9:59 am In my opinion, I would usually not try to multiply this $250k by using multiple POD beneficiaries. There is always the chance that the bank or credit union does not have its records 100% accurate and up to date. To avoid potential future hassles, if the bank or credit union goes belly up, I would stick with $250k individual, another $500k joint with one other person.
I second this. In my experience when opening up CDs at many banks upon reviewing the applications before handing over my checks, clerical errors abound: incorrect SS, titling, maturity dates, %rates, etc.

Setting upon multiple PODs to enhance FDIC coverage will only increase the likelihood of multiple problems; the bank guy is focused on lunch, you're counting every dollar.

Re: FDIC Insurance Rules Update

Posted: Wed Mar 18, 2020 12:57 pm
by neoptolemus412
There was no update and Ally Bank should have contacted each account owner to clarify. 12 C.F.R. Part 370 is the Rule in question. It applies to Banks with 2 million or more deposit accounts and is a recordkeeping rule. For PODs, informal revocable trusts, the rule requires each institution to provide a unique identifier for each beneficiary for an informal revocable trust.

Ally Bank, mistakenly, interpreted this requirement to mean that the FDIC requires SS#s or government ids from customers, when in fact the rule only requires the Bank to provide each beneficiary with a unique ID. No other institution, to my knowledge, sent such communication and we're talking about JP Morgan Chase, Citibank, Wells Fargo, etc.

Since the crisis, the FDIC has not updated its deposit insurance rules in any material way. They are very transparent in their communication of such changes and give the public a chance to comment. For those interested, 12 C.F.R. Part 330 covers insured deposits.