[Federal Register Volume 71, Number 56 (Thursday, March 23, 2006)]
[Rules and Regulations]
[Pages 14631-14636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2754]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 745

RIN 3133-AD18


Share Insurance and Appendix

AGENCY: National Credit Union Administration (NCUA).

ACTION: Interim final rule with request for comments.

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SUMMARY: NCUA is amending its share insurance rules to implement 
amendments to the Federal Credit Union Act (FCU Act) made by the 
Federal Deposit Insurance Reform Act of 2005 (Reform Act) and the 
Federal Deposit Insurance Reform Conforming Amendments Act of 2005 
(Conforming Amendments Act). In this regard, the

[[Page 14632]]

interim final rule: Defines the ``standard maximum share insurance 
amount'' as $100,000 and provides that beginning in 2010, and in each 
subsequent 5-year period thereafter, NCUA and the Federal Deposit 
Insurance Corporation (FDIC) will jointly consider if an inflation 
adjustment is appropriate to increase that amount; increases the share 
insurance limit for certain retirement accounts from $100,000 to 
$250,000, subject to the above inflation adjustments; and provides 
pass-through coverage to each participant of an employee benefit plan, 
but limits the acceptance of shares in employee benefit plans to 
insured credit unions that are well capitalized or adequately 
capitalized. Additionally, NCUA is amending its share insurance rules 
to clarify insurance coverage for qualified tuition programs, commonly 
referred to as 529 plans, and share accounts denominated in foreign 
currencies.

DATES: This interim final rule is effective April 1, 2006. Comments 
must be received by NCUA on or before May 22, 2006.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web site: http://www.ncua.gov/news/proposed_regs/proposed_regs.html. Follow the instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on Interim Final Part 745'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Staff Attorney, Office 
of General Counsel, or Moisette Green, Staff Attorney, Office of 
General Counsel, at the above address or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

A. Federal Deposit Insurance Reform Act of 2005 and Federal Deposit 
Insurance Reform Conforming Amendments Act of 2005

    The Reform Act and Conforming Amendments Act, (Pub. L. 109-171) and 
(Pub. L. 109-173), amended the share insurance provisions of the FCU 
Act in a number of ways. 12 U.S.C. 1781-1790d. Specifically, Section 
2103(a) of the Reform Act provides that beginning April 1, 2010, and 
each subsequent 5-year period thereafter, NCUA and the FDIC will 
jointly consider if an inflation adjustment is appropriate to increase 
the NCUA's current ``standard maximum share insurance amount'' (SMSIA), 
which is defined in 12 U.S.C. 1787(k) as $100,000, and the ``standard 
maximum deposit insurance amount'' (SMDIA), the FDIC equivalent. Any 
increase to the SMSIA or SMDIA will be calculated using a formula 
comparing, over time, the published annual values of the Personal 
Consumption Expenditures Chain-Type Price Index, published by the 
Department of Commerce, and rounded down to the nearest $10,000. The 
Reform Act also requires NCUA and FDIC to consider certain other 
factors in determining whether to increase the SMSIA and SMDIA. 
Additionally, if an adjustment is warranted, NCUA and FDIC are required 
to publish information in this regard in the Federal Register and 
provide a corresponding report to Congress by April 5, 2010, and every 
succeeding fifth year. Subsequently, under those circumstances, an 
inflation adjustment will take effect on January 1st of the year 
immediately succeeding the year in which the adjustment is calculated 
unless an Act of Congress provides otherwise.
    Section 2(d)(1)(C) of the Conforming Amendments Act mandates that 
NCUA provide ``pass-through'' share insurance coverage for shares in 
any employee benefit plan account on a per-participant basis. This type 
of coverage is called ``pass-through'' because it passes through the 
employee benefit plan administrator to each of the participants in the 
plan. The employee benefit plans this section refers to includes those 
described in: (1) Section 3(3) of the Employee Retirement Income 
Security Act of 1974; (2) section 401(d) of the Internal Revenue Code 
(IRC); and (3) section 457 of the IRC. This section, however, limits 
the acceptance of employee benefit plan shares only by insured credit 
unions that are ``well capitalized'' or ``adequately capitalized'' as 
those terms are defined in Section 216(c) of the FCU Act. 12 U.S.C. 
1790d(c).
    Section 2(d)(2) of the Conforming Amendments Act amended 12 U.S.C. 
1787(k)(3) of the FCU Act to increase the share insurance limit for 
certain retirement accounts from $100,000 to $250,000. The increased 
limit is also subject to the inflation adjustments discussed above. The 
types of accounts within this category of coverage include those 
specifically enumerated in 12 U.S.C. 1787(k)(3): Individual retirement 
accounts (``IRAs'') described in section 408(a) of the IRC and any plan 
described in section 401(d) of the IRC (Keogh accounts).
    Additionally, the Conforming Amendments Act created the term 
``Government Depositor'' in connection with public funds described in 
and insured under 12 U.S.C. 1787(k)(2). It also provides that the 
shares of a government depositor are insured in an amount up to the 
SMSIA, subject to the inflation adjustment described above. The below 
amendments to NCUA's share insurance rules in part 745 implement the 
share insurance coverage revisions made by the Reform Act and the 
Conforming Amendments Act.

B. Standard Maximum Share Insurance Amount

    The interim final rule adds a definition of SMSIA to section 745.1, 
the definitions section of the share insurance rules. 12 CFR 745.1. The 
definition of SMSIA tracks the language of the Conforming Amendments 
Act and reads ``$100,000, adjusted as provided under section 
11(a)(1)(F) of the Federal Deposit Insurance Act.'' 12 U.S.C. 1821 
(a)(1)(F). Revised section 11(a)(1)(F) of the Federal Deposit Insurance 
Act details how every five years, the NCUA and FDIC will consider and 
calculate the inflation adjustment to the SMSIA and SMDIA, as discussed 
in more detail above. Also, the definition of SMSIA notes: (1) The 
current SMSIA is $100,000; (2) the acronym SMSIA is used throughout the 
regulatory text of part 745; and (3) all examples of share insurance 
coverage in part 745 use the current SMSIA of $100,000, unless a higher 
limit is presented and specifically noted. Accordingly, all references 
to the current insurance amount of $100,000 in the appendix to part 
745, except for the examples in the appendix, are replaced by the 
acronym SMSIA. Examples in the appendix to part 745, which NCUA 
believes are helpful in illustrating a member's insurance coverage, 
will continue to provide the dollar amount of insurance for the 
particular example so members can calculate and know the insurance 
available on their accounts. The use of the acronym SMSIA throughout 
the regulatory text of part 745, instead of an actual number, will 
allow NCUA to avoid having to change the numerical limit of share 
insurance throughout the rule each time the SMSIA is adjusted for 
inflation.

[[Page 14633]]

C. Retirement and Other Employee Benefit Plan Accounts

    The interim final rule consolidates Sec. Sec.  745.9-2 and 745.9-3, 
which address share insurance coverage for IRA/Keogh accounts and 
deferred compensation accounts, in implementing amendments to the FCU 
Act by the Conforming Amendments Act. As discussed in more detail in 
Section A above, this includes establishing pass-through insurance 
coverage for employee benefit plan accounts and increased share 
insurance coverage to $250,000 for certain retirement accounts.
    Although the Conforming Amendments Act prohibits insured credit 
unions that are not ``well capitalized'' or ``adequately capitalized'' 
from accepting employee benefit plan shares, pass-through coverage will 
be granted even to shares in employee benefit plan accounts accepted by 
insured credit unions prohibited from accepting them due to their 
capital levels. This applies to all employee benefit plan shares, 
including those placed before the effective date of this rule.
    Generally, full share insurance coverage in an employee benefit 
plan, such as a deferred compensation account, has been limited to plan 
participants who are also members of the credit union in which the 
account is maintained. NCUA intends to insure employee benefit plan 
participants in accordance with the example for retirement funds 
currently provided in the appendix to NCUA's insurance rule. 12 CFR 
Appendix A, Part G, Example 3 and 3(a). This means participants in an 
employee benefit plan who are credit union members receive up to 
$100,000 as to their determinable interest and member interests not 
capable of evaluation and non-member interests are added together and 
are insured up to $100,000 in the aggregate. The language of the 
Conforming Amendments Act suggests greater NCUA authority to provide 
pass-through coverage on a per-participant basis, regardless of 
membership status. Specifically, the Conforming Amendments Act defines 
pass-through insurance as ``insurance coverage based on the interest of 
each participant'' without including any limitations or qualifications 
requiring the membership status of each participant. Federal Deposit 
Insurance Reform Conforming Amendments Act of 2005, Public. Law. 109-
173. Also, while not conclusive, the legislative history of the Reform 
Act evidences congressional intent to advance a national priority of 
enhancing retirement security for all Americans. H.R. Rep. No. 109-67 
at 22 (2005). On those bases, NCUA believes it may be appropriate to 
extend full coverage to all participants in an employee benefit plan if 
a plan trustee or the employer sponsoring the plan is a member or if 
some percentage of plan participants are members, for example, 25%. 
NCUA further believes extending full coverage to all participants, 
regardless of membership status, is both fair and reasonable for two 
reasons. First, it is extremely likely that employers or trustees will 
only establish employment benefit plans at a credit union if there is 
already some membership connection, for example, the employee group is 
within the field of membership of the credit union. Second, 
participants may not be able to control or readily determine where 
their interests in an employee benefit plan are maintained and, 
therefore, as a matter of fairness to participants, all should be 
assured of full, pass-through coverage.
    Accordingly, NCUA seeks comment on whether this pass-through 
coverage should be: (1) Provided as it is currently, meaning non-member 
interests will have limited aggregate insurance; (2) extended to 
provide full coverage to non-member participants; or (3) extended to 
provide full coverage to non-member participants as long as there is a 
membership connection such as the employer or trustee is a member or if 
some percentage of plan participants are members.

D. Public Unit Accounts

    The interim final rule changes the heading of Sec.  745.10 from 
``Public Unit Accounts'' to ``Accounts Held By Government Depositors'' 
to reflect the amendments to 12 U.S.C. 1787(k)(2) by the Conforming 
Amendments Act. The interim rule does not make any substantive changes 
to Sec.  745.10 other than replacing references to $100,000 with 
references to the SMSIA.

E. 529 Plans

    Section 529 of the IRC provides tax benefits for qualified tuition 
programs (529 programs). 26 U.S.C. 529(a). These programs include 
prepaid tuition programs, which educational institutions may create, as 
well as tuition savings programs that states or public 
instrumentalities sponsor. 26 U.S.C. 529(b)(1). Section 529 defines a 
tuition savings program as a program under which a person ``may make 
contributions to an account which is established for the purpose of 
meeting the qualified higher education expenses of the designated 
beneficiary of the account,'' and which meets certain requirements. 26 
U.S.C. 529(b)(1)(A)(ii). A participant in a 529 program acquires an 
interest in a state trust and does not directly deposit funds with a 
financial institution. Assuming that the assets of a 529 program 
include deposits with a credit union, the state investment trust could 
be viewed as the custodian of the deposits. While the National Credit 
Union Share Insurance Fund could insure a state investment trust as a 
public unit account, treating 529 program accounts as public unit 
accounts leads to an undesired result. Under the NCUA's insurance 
regulation, public units are insured in the aggregate up to $100,000 
per custodian for regular share accounts and share certificates. See 12 
CFR 745.10.
    In April 2005, a state contacted NCUA about share insurance 
coverage for its tuition savings plan established under section 529 of 
the IRC. 26 U.S.C. 529. The state asked NCUA to adopt a rule similar to 
the FDIC's interim final rule to allow pass-through coverage for 
participants in the 529 program. 70 FR 33689 (June 9, 2005). The FDIC's 
interim final rule provided pass-through coverage to each participant 
aggregated with the participant's other single ownership accounts at 
the same financial institution up to $100,000, provided that each 
deposit may be traced to one or more particular investors and the 
FDIC's disclosure rules for pass-through coverage had been satisfied. 
70 FR at 33691.
    NCUA's Office of General Counsel (OGC) issued a legal opinion 
concluding that NCUA's insurance rules provide pass-through coverage to 
a 529 program participant if the participant is a member of the 
federally insured credit union where the 529 program account is 
maintained and if the account is properly titled. OGC Legal Opinion 05-
0630 (July 1, 2005). This interpretation of the NCUA rule reached the 
same result in terms of coverage and maintained parity with the account 
insurance provided by the FDIC in its interim rule, although on a 
slightly different basis. The legal opinion also noted that NCUA would 
consider amending its insurance rule when FDIC issued a final one. Id. 
In October 2005, FDIC finalized its interim rule without any 
substantive changes. Thus, NCUA is incorporating OGC Legal Opinion 05-
0630 into part 745 to clarify that share insurance coverage is 
available for 529 program participants.
    In 529 programs of which NCUA is aware, the state holds 529 program 
funds as an agent for the participants. Accordingly, these accounts are 
insured as single ownership accounts under NCUA's share insurance rule 
covering

[[Page 14634]]

accounts held by agents or nominees. 12 CFR 745.3(a)(2).
    Agent or nominee accounts are insured as individual accounts and 
are aggregated with all other individual accounts a participant has at 
the same credit union up to the SMSIA. To be fully insured, the 
participant's interest must be ascertainable from the credit union's or 
state's records. 12 CFR 745.2(c)(2). Therefore, careful titling of the 
accounts and proper records are necessary to ensure each participant 
receives individual account coverage. NCUA insurance regulations 
require a participant to be a member of the credit union or otherwise 
eligible to maintain an insured account in the credit union. 12 CFR 
745.0.

F. Share Accounts Denominated in a Foreign Currency

    The FCU Act authorizes the NCUA Board to limit the type of share 
payments a credit union may accept and to determine the types of funds 
that will be insured. 12 U.S.C. 1766, 1782, 1782(h)(3). If NCUA permits 
federal credit unions (FCUs) to accept member accounts denominated in a 
foreign currency, then NCUA must insure them. 12 U.S.C. 1781(a). Under 
the FCU Act's nondiscrimination provision, NCUA must provide the same 
coverage for member accounts of state-chartered credit unions that 
comply with the FCU Act and NCUA regulations. Id.; 12 U.S.C. 1790.
    Under the incidental powers rule, FCUs can provide monetary 
instrument services that enable members to purchase, sell, or exchange 
various currencies. 12 CFR 721.3(i). FCUs can use their accounts in 
foreign financial institutions to facilitate transfers and negotiations 
of members' share drafts denominated in foreign currencies or engage in 
monetary transfer services. FCU funds deposited in a foreign financial 
institution are not insured by NCUA and may not be insured by the 
foreign country. Consequently, NCUA has highlighted the need for FCUs 
to exercise due diligence to ensure the foreign financial institutions 
with which it has accounts are financially sound, suitably regulated, 
and authorized to accept its transactions before opening any accounts. 
OGC Legal Opinion 99-1031 (December 9, 1999). FCUs assume the risk of 
currency fluctuations when they maintain an account in a foreign 
financial institution. NCUA recognized this risk and, before adopting 
Sec.  721.3(i), had recommended FCUs either purchase or deposit only 
the amount of foreign currency needed to satisfy immediate short-term 
needs of their members. OGC Legal Opinions 99-1031 (December 9, 1999); 
90-0637 (June 29, 1990).
    While the FCU Act does not prohibit FCUs from accepting foreign-
denominated shares, potential safety and soundness concerns associated 
with currency fluctuations have kept FCUs from offering these accounts. 
Accordingly, NCUA has only permitted FCUs to provide foreign currency 
services as an incidental powers activity rather than allowing FCUs to 
maintain shares in foreign currency. See OGC Legal Opinions 89-0822 
(September 15, 1989); 89-0613 (July 31, 1989). Simply accepting shares 
denominated in a foreign currency presents little risk, if any, to 
credit unions. NCUA believes federally insured credit unions can 
effectively manage the risks associated with accepting shares 
denominated in foreign currency and is issuing a rule similar to the 
FDIC. Lending or investing funds in foreign currency still presents an 
increased risk to credit unions due to currency fluctuations that 
cannot be easily ameliorated, so this rule does not permit lending or 
investing funds denominated in a foreign currency.
    Before now, NCUA has not expressly addressed the insurability of 
member accounts denominated in foreign currency except in the foreign 
branching regulation, where NCUA has limited the insurability of member 
accounts at foreign branches of an insured credit union to accounts 
denominated in U.S. dollars. 12 CFR 741.11(e). This rule provides share 
insurance coverage for shares denominated in a foreign currency and for 
conversion of foreign currency to U.S. dollars before an insurance 
payout in the event a credit union is liquidated similarly to the FDIC.
    The FDIC provides insurance coverage for deposits at insured banks 
denominated in a foreign currency equal to the amount of U.S. dollars 
equivalent in value to the amount of the deposit denominated in the 
foreign currency up to the SMDIA. 12 CFR 330.3(c). Under the FDIC rule, 
if an insured bank is liquidated, the value of the foreign currency 
deposit is determined using the rate of exchange quoted by the Federal 
Reserve Bank of New York at noon on the day the bank defaults, unless 
the deposit agreement states otherwise. Id. Deposits payable solely 
outside of the U.S. and its territories are not insurable deposits. 12 
CFR 330.3(e).
    As noted above, accepting shares denominated in a foreign currency 
presents little risk. If a credit union is able to fund an operation 
that is fully integrated and supportable in foreign currency, it will 
have minimized its exposure to risk of loss due to currency 
fluctuation. Actually, the risk would shift to the members who deposit 
and withdraw funds denominated in the foreign currency.
    This interim final rule permits credit unions to accept shares 
denominated in foreign currency and provides share insurance coverage 
of those shares. By accepting shares denominated in foreign currencies, 
credit unions can better serve members who, for example, receive 
payments in foreign currencies. Additionally, members who deposit 
shares denominated in a foreign currency will have the same share 
insurance coverage that is available for share accounts denominated in 
U.S. dollars. Credit unions must carefully consider any risk associated 
with maintaining members' shares denominated in foreign currencies 
before offering this service to their members. Federally insured credit 
unions that maintain members' shares denominated in a foreign currency 
will receive instructions on how to report these deposits on 5300 call 
reports.
    This rule does not permit insured credit unions to make loans or 
invest funds denominated in foreign currencies. These transactions may 
require credit unions to participate in trading currency, also called 
hedging or currency swaps, to manage the risk of potential loss due to 
currency fluctuations. While hedging may help credit unions protect 
against risks associated with changing currency rates, NCUA rules 
currently prohibit natural person FCUs from investing in derivatives 
like currency swaps. 12 CFR 703.16(a). FCUs that wish to engage in 
swaps to hedge against currency fluctuation must apply for NCUA 
approval as a part of a properly designed investment pilot program. 12 
CFR 703.19.

G. Interim Final Rule

    The NCUA Board is issuing this rule as an interim final rule 
because there is a strong public interest in having in place 
advantageous and consumer oriented share insurance rules that enhance 
share insurance coverage for members, clarify legal positions already 
taken by NCUA, and maintain parity with the FDIC. This interim final 
rule is consistent with the regulatory changes FDIC must make under the 
Reform Act and Conforming Amendments Act. Additionally, this rule 
clarifies and incorporates prior interpretations of the share insurance 
rules that provide coverage for 529 programs and share accounts 
denominated in foreign currencies. Accordingly, for good cause, the 
Board finds that, pursuant to 5

[[Page 14635]]

U.S.C. 553(b)(3), notice and public procedures do not apply or are 
impracticable, unnecessary, and contrary to the public interest; and, 
pursuant to 5 U.S.C. 553(d)(3), the rule will be effective April 1, 
2006, which is less time than the ordinarily required 30 days advance 
notice of publication. Although the rule is being issued as an interim 
final rule and is effective on April 1, 2006, the NCUA Board encourages 
interested parties to submit comments.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a rule may have on a 
substantial number of small credit unions, defined as those under ten 
million dollars in assets. This rule only clarifies and improves the 
share insurance coverage available to credit union members, without 
imposing any regulatory burden. The interim final amendments would not 
have a significant economic impact on a substantial number of small 
credit unions, and, therefore, a regulatory flexibility analysis is not 
required.

Paperwork Reduction Act

    NCUA has determined that the interim final rule would not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. The interim final rule would not have 
substantial direct effects on the states, on the connection between the 
national government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that this rule does not constitute a policy that has 
federalism implications for purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this interim final rule would not 
affect family well-being within the meaning of section 654 of the 
Treasury and General Government Appropriations Act, 1999, Public Law 
105-277, 112 Stat. 2681 (1998).

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) provides generally for congressional review 
of agency rules. A reporting requirement is triggered in instances 
where NCUA issues a final rule as defined by Section 551 of the 
Administrative Procedure Act. 5 U.S.C. 551. NCUA has requested a SBREFA 
determination from the Office of Management and Budget, which is 
pending. As required by SBREFA, NCUA will file the appropriate reports 
with Congress and the General Accounting Office so that the interim 
rule may be reviewed.

List of Subjects in 12 CFR Part 745

    Credit unions, Share insurance.

    By the National Credit Union Administration Board on March 16, 
2006.
Mary F. Rupp,
Secretary of the Board.

0
Accordingly, NCUA amends 12 CFR part 745 as follows:

PART 745--SHARE INSURANCE AND APPENDIX

0
1. The authority citation for part 745 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782, 
1787, 1789.

0
2. Section 745.1 is amended by adding a new paragraph (e) to read as 
follows:


Sec.  745.1  Definitions.

* * * * *
    (e) The term ``standard maximum share insurance amount'' or 
``SMSIA'' means $100,000, adjusted pursuant to subparagraph (F) of 
section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(a)(1)(F)). The current SMSIA is $100,000. All examples in this 
regulation (12 CFR part 745) and appendix, unless otherwise noted, use 
the current SMSIA of $100,000.


Sec.  745.2  [Amended]

0
3. Section 745.2(d)(2) is amended by removing ``basic insured amount of 
$100,000'' and adding in its place ``SMSIA.''
0
4. Section 745.3(a) and (b) are amended by removing ``$100,000'' each 
time it appears and adding in its place ``the SMSIA'', and paragraph 
(a)(2) is amended by adding a sentence to the end to read as follows:


Sec.  745.3  Single Ownership Accounts.

    (a) * * *
    (2) * * * This applies to interests created in qualified tuition 
savings programs established in connection with section 529 of the 
Internal Revenue Code (26 U.S.C. 529).
* * * * *


Sec.  745.4  [Amended]

0
5.Section 745.4 is amended as follows:
0
a. Paragraph (b) is amended by removing ``$100,000'' and adding in its 
place ``the SMSIA''.
0
b. Paragraph (c) is amended by removing ``$100,000'' and adding in its 
place ``the SMSIA'' and by removing ``$200,000'' and adding in its 
place ``twice the SMSIA''.
0
c. Paragraph (e) is amended by removing ``$100,000'' and adding in its 
place ``the SMSIA''.
0
d. Paragraph (f) is amended by removing ``$100,000'' and adding in its 
place ``the SMSIA''.


Sec.  745.5  [Amended]

0
6. Section 745.5 is amended by removing ``$100,000'' and adding in its 
place ``the SMSIA''.


Sec.  745.6  [Amended]

0
7. Section 745.6 is amended by removing ``$100,000'' each time it 
appears and adding in its place ``the SMSIA''.
0
8. Section 745.7 is added to read as follows:


Sec.  745.7  Shares accepted in a foreign currency.

    An insured credit union may accept shares denominated in a foreign 
currency. Shares denominated in a foreign currency will be insured in 
accordance with this part to the same extent as shares denominated in 
U.S. dollars. Insurance for shares denominated in foreign currency will 
be determined and paid in the amount of United States dollars that is 
equivalent in value to the amount of the shares denominated in the 
foreign currency as of close of business on the date of default of the 
insured credit union. The exchange rates to be used for such 
conversions are the 12 p.m. rates (the ``noon buying rates for cable 
transfers'') quoted for major currencies by the Federal Reserve Bank of 
New York on the date of default of the insured credit union, unless the 
share agreement provides that some other widely recognized exchange 
rates are to be used for all purposes under that agreement.

[[Page 14636]]

Sec.  745.8  [Amended]

0
9. Section 745.8 is amended by removing ``$100,000'' each time it 
appears and adding in its place ``the SMSIA''.


Sec.  745.9-1  [Amended]

0
10. Section 745.9-1 is amended by removing ``$100,000'' and adding in 
its place ``the SMSIA''.
0
11. Section 745.9-2 is revised to read as follows:


Sec.  745.9-2  Retirement and other employee benefit plan accounts.

    (a) Pass-through share insurance. Any shares of an employee benefit 
plan in an insured credit union shall be insured on a ``pass-through'' 
basis, in the amount of up to the SMSIA for the non-contingent interest 
of each plan participant, in accordance with Sec.  745.2 of this part. 
An insured credit union that is not ``well capitalized'' or 
``adequately capitalized'', as those terms are defined in 12 U.S.C. 
1790d(c), may not accept employee benefit plan deposits. The terms 
``employee benefit plan'' and ``pass-through share insurance'' are 
given the same meaning in this section as in 12 U.S.C. 1787(k)(4).
    (b) Treatment of contingent interests. In the event that 
participants' interests in an employee benefit plan are not capable of 
evaluation in accordance with the provisions of this section, or an 
account established for any such plan includes amounts for future 
participants in the plan, payment by the NCUA with respect to all such 
interests shall not exceed the SMSIA in the aggregate.
    (c)(1) Certain retirement accounts. Shares in an insured credit 
union made in connection with the following types of retirement plans 
shall be aggregated and insured in the amount of up to $250,000 (which 
amount shall be subject to inflation adjustments as provided under 
section 11(a)(1)(F) of the Federal Deposit Insurance Act, except that 
$250,000 shall be substituted for $100,000 wherever such term appears 
in such section) per account:
    (i) Any individual retirement account described in section 408(a) 
(IRA) of the Internal Revenue Code (26 U.S.C. 408(a)) or similar 
provisions of law applicable to a U.S. territory or possession;
    (ii) Any individual retirement account described in section 408A 
(Roth IRA) of the Internal Revenue Code (26 U.S.C. 408A) or similar 
provisions of law applicable to a U.S. territory or possession; and
    (iii) Any plan described in section 401(d) (Keogh account) of the 
Internal Revenue Code (26 U.S.C. 401(d)) or similar provisions of law 
applicable to a U.S. territory or possession.
    (2) Insurance coverage for the accounts enumerated in paragraph 
(c)(1) of this section is based on the present vested ascertainable 
interest of a participant or designated beneficiary. For insurance 
purposes, IRA and Roth IRA accounts will be combined together and 
insured in the aggregate up to $250,000 (which amount shall be subject 
to inflation adjustments as provided under section 11(a)(1)(F) of the 
Federal Deposit Insurance Act, except that $250,000 shall be 
substituted for $100,000 wherever such term appears in such section). A 
Keogh account will be separately insured from an IRA account, Roth IRA 
account or, where applicable, aggregated IRA and Roth IRA accounts.


Sec.  745.9-3  [Removed]

0
12. Section 745.9-3 is removed.
0
13. Section 745.10 is amended by revising the section heading as set 
forth below and by removing ``$100,000'' each time it appears and 
adding in its place ``the SMSIA''.


Sec.  745.10  Accounts held by government depositors.

* * * * *

0
14. The Appendix to Part 745 is amended as follows:
0
a. Section E is amended by removing the heading ``How are Public Unit 
Accounts Insured?'' and adding in its place ``How are Accounts Held by 
Government Depositors Insured?''
0
b. The last sentence of the second paragraph of Section G is amended by 
removing the words ``the basic insured amount of''.
0
c. The seventh paragraph of Section G is amended by removing 
``$100,000'' and adding in its place ``$250,000''.
0
d. Example 3(a) of Section G is amended by removing ``(Sec.  745.9-1)'' 
and adding in its place ``(Sec.  745.9-2)''.
0
e. Example 3(b) of Section G is amended by removing ``(Sec.  745.9-1)'' 
and adding in its place ``(Sec.  745.9-2)''.
0
f. Example 4 of Section G is revised to read as follows:

Appendix to Part 745--Examples of Insurance Coverage Afforded Accounts 
in Credit Unions Insured by the National Credit Union Share Insurance 
Fund

* * * * *

G. How are Trust Accounts and Retirement Accounts Insured?

* * * * *
Example 4
    Question: Member A has an individual account of $100,000 and 
establishes an IRA account and accumulates $250,000 in that account. 
Subsequently, A becomes self-employed and establishes a Keogh 
account in the same credit union and accumulates $250,000 in that 
account. What is the insurance coverage?
    Answer: Each of A's accounts would be separately insured as 
follows: The individual account for $100,000, the maximum for that 
type of account; the IRA account for $250,000, the maximum for that 
type of account; and the Keogh account for $250,000, the maximum for 
that type of account. (Sec. Sec.  745.3(a)(1) and 745.9-2).

* * * * *
[FR Doc. 06-2754 Filed 3-22-06; 8:45 am]
BILLING CODE 7535-01-P