05-20768. Extension of Corporate Powers

AGENCY:

Federal Deposit Insurance Corporation.

ACTION:

Interpretive rule; request for comments.

SUMMARY:

The Federal Deposit Insurance Corporation (FDIC) is amending an interpretative rule (12 CFR 333.101(b)) which states that insured State nonmember banks not exercising trust powers may offer self-directed traditional Individual Retirement and Keogh Plan accounts without the prior written consent of the FDIC. As amended, the interpretive ruling is expanded to expressly cover Coverdell Education Savings Accounts, Roth Individual Retirement Accounts, Health Savings Accounts, and other similar accounts.

DATES:

These amendments are effective October 18, 2005. Submit comments on or before January 17, 2006.

ADDRESSES:

Interested parties are invited to submit written comments to the FDIC by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• Agency Web Site: http://www.fdic.gov/​regulations/​laws/​federal/​propose.html. Follow the instructions for submitting comments on the FDIC Web site.
• E-mail: [e-mail]. Include “Part 333—Extension of Corporate Powers” in the subject line of the message.
• Mail: Robert E. Feldman, Executive Secretary, Attention: Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
• Hand Delivery/Courier: Comments may be hand-delivered to the guard station located at the rear of the FDIC's 550 17th Street building (accessible from F Street) on business days between 7 a.m. and 5 p.m.

Instructions: All submissions received must include the agency name and use the title “Part 333—Extension of Corporate Powers.” All comments will be posted without change to http://www.fdic.gov/​regulations/​laws/​federal/​propose.html, including any personal information provided. Comments may be inspected and photocopied in the FDIC Public Information Center, Room 100, 801 17th Street, NW., Washington, DC, between 9 a.m. and 4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT:

Anthony J. DiMilo, Examination Specialist, Division of Supervision and Consumer Protection, [phone], or Benjamin W. McDonough, Attorney, Legal Division, [phone], Federal Deposit Insurance Corporation, 550 17th St., NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

Section 333.2 of the FDIC's regulations (12 CFR 333.2) prohibits an insured nonmember bank from changing the general character of its business without the prior written consent of the FDIC. In general, exercising trust powers constitutes a change in the general character of the business of an insured nonmember bank that requires the prior written consent of the FDIC. FDIC interpretive rule at 12 CFR 333.101(b) (section 333.101(b)) makes clear, however, that an insured nonmember bank that does not have authority to exercise trust powers may act as trustee or custodian of specific retirement accounts so long as the bank does not exercise investment discretion or provide any investment advice with respect to the accounts. (50 FR 10754).

Prior to the issuance of amendments to section 333.101(b) in 1985, this interpretive rule stated that insured nonmember banks could act as trustee or custodian of Individual Retirement Accounts established pursuant to the Employee Retirement Income Security Act of 1974 (ERISA) ^[1] and Self-Employed Retirement Plans established pursuant to the Self-Employed Individuals Retirement Act of 1962 ^[2] (traditional IRAs and Keogh Plan accounts). However, a bank taking advantage of section 333.101(b) was permitted to invest the funds held in these accounts only in its own time or savings deposits. (41 FR 2375). The 1985 amendments revised section 333.101(b) to state that FDIC-regulated banks not exercising trust powers could offer self-directed traditional IRAs and Keogh Plan accounts where the customer could direct the bank to invest the funds from such plans in assets other than the bank's own deposits “at the direction of the customer provided the bank does not exercise any investment discretion or provided [sic] any investment advice with respect to such account assets.” (50 FR 10754).

Since 1985, Congress has introduced new accounts with tax-incentive features analogous to traditional IRAs and Keogh Plan accounts. These other accounts include: Coverdell Education Savings Accounts ^[3] and Roth Individual Retirement Accounts,^[4] both established pursuant to the Taxpayer Relief Act of 1997, and Health Savings Accounts,^[5] established pursuant to the Medicare Prescription Drug Improvement, and Modernization Act of 2003. Accordingly, the FDIC is amending section 333.101(b) to reflect the creation of these new accounts and to make clear in the text of section 333.101(b) that “other similar accounts” with tax-incentive features may be offered by banks that lack authority to exercise trust powers.^[6] The primary purpose of these amendments is to formally recognize the existence of these new accounts, which did not exist when the FDIC last amended section 333.101(b) in 1985.

The revision to section 333.101(b) retains the requirements that the bank's duties be custodial or ministerial, and that the acceptance of such accounts without trust powers be consistent with the applicable state law.^[7]

The revision also makes some minor technical amendments to the regulatory text to correct typographical errors in section 333.101(b).

II. Request for Comments

These amendments to part 333 will be effective upon publication. However, the FDIC is interested in receiving any comments that may improve the implementation of the rule. The FDIC therefore requests comments on all aspects of this interpretive rule. The FDIC is especially interested in learning whether there are other accounts that it would be appropriate to include expressly within the scope of the rule, and conversely, whether it would be appropriate to exclude any facially similar accounts from the scope of the rule. The FDIC will accept comments for 90 days from the date of publication.

III. Regulatory Analysis

a. Administrative Procedure Act

Public Comment Waiver and Effective Date. Pursuant to the Administrative Procedure Act, 5 U.S.C. 553(b) (“APA”), the FDIC is issuing this interpretation without prior notice and comment. Section 553(b) of Title 5, U.S. Code, does not apply to interpretive rules. The amendments to section 333.101(b) of the FDIC's regulations relate solely to an interpretive rule, and the Board of Directors of the FDIC has found that, because the primary purpose of the amendments is to formally recognize the creation of new accounts, notice and comment would be unnecessary. Moreover, pursuant to the APA, 5 U.S.C. 553(d), interpretive rules do not require thirty days prior notice before they may become effective; therefore, because section 333.101(b) is an interpretive rule, the amendments to it may have immediate effect.

b. Paperwork Reduction Act

The amendment to section 333.101(b) will not entail any new collections of information. Therefore, the Paperwork Reduction Act is not applicable.

c. Regulatory Flexibility Act

A regulatory flexibility analysis is required only when an agency must publish a notice of proposed rulemaking (5 U.S.C. 603, 604). Because the FDIC is revising an interpretive rule without notice and comment, no regulatory flexibility analysis is required.

d. Small Business Regulatory Enforcement Fairness Act

The Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 801 et seq.) (SBREFA) provides generally for agencies to report rules to Congress and for Congress to review these rules. Unless covered by an exception in SBREFA (5 U.S.C. 804(3)), the reporting requirement is triggered in instances where the FDIC issues a rule as defined by the APA. Because the FDIC is issuing an interpretive rule, which is not covered by one of the exceptions in SBREFA, the FDIC will file the reports required by SBREFA.

List of Subjects in 12 CFR Part 333

• Bank
• Banking
• State nonmember banks
• Trusts and trustees

For the reasons set forth in this preamble, the Board of Directors of the Federal Deposit Insurance Corporation hereby amends part 333 to Title 12 of the Code of Federal Regulations as follows:

PART 333—EXTENSION OF CORPORATE POWERS

1. The authority citation for part 333 continues to read as follows:

Authority: 12 U.S.C. 1816, 1818, 1819 (“Seventh”, “Eighth” and “Tenth”), 1828, 1828(m), 1831p-1(c).

2. Section 333.101 is amended by revising paragraph (b) to read as follows:

§ 333.101

Prior consent not required.

* * * * *

(b) An insured State nonmember bank, not exercising trust powers, may act as trustee or custodian of Individual Retirement Accounts established pursuant to the Employee Retirement Income Security Act of 1974 (26 U.S.C. 408), Self-Employed Retirement Plans established pursuant to the Self-Employed Individuals Retirement Act of 1962 (26 U.S.C. 401), Roth Individual Retirement Accounts and Coverdell Education Savings Accounts established pursuant to the Taxpayer Relief Act of 1997 (26 U.S.C. 408A and 530 respectively), Health Savings Accounts established pursuant to the Medicare Prescription Drug Improvement, and Modernization Act of 2003 (26 U.S.C. 223), and other similar accounts without the prior written consent of the Corporation provided:

(1) The bank's duties as trustee or custodian are essentially custodial or ministerial in nature,

(2) The bank is required to invest the funds from such plans only

(i) In its own time or savings deposits, or

(ii) In any other assets at the direction of the customer, provided the bank does not exercise any investment discretion or provide any investment advice with respect to such account assets, and

(3) The bank's acceptance of such accounts without trust powers is not contrary to applicable State law.

Dated at Washington, DC, this 6th day of October, 2005.

By order of the Board of Directors.

Robert E. Feldman,

Executive Secretary, Federal Deposit Insurance Corporation.

Footnotes

1.  See 26 U.S.C. 408.

2.  See 26 U.S.C. 401.

3.  See 26 U.S.C. 530.

4.  See 26 U.S.C. 408A.

5.  See 26 U.S.C. 223.

6.  Currently, national banks without fiduciary powers may act as custodian, but not as trustee, of retirement accounts. See 12 CFR 9.3. Institutions regulated by the Office of Thrift Supervision (OTS) may act as trustee or custodian of traditional IRAs and Keogh Plan accounts without the prior approval of the OTS. 12 CFR 550.580.

7.  These amendments to section 333.101(b) will not impact the FDIC's supervision of the trust and custodial activities of insured nonmember banks, including the trust and fiduciary services such banks provide to accounts with tax-incentive features. The FDIC will continue to supervise the trust and fiduciary activities of insured nonmember banks through regular examinations to ensure that banks comply with their fiduciary obligations to customers in accordance with applicable State and Federal law.