Final Rule Summary

Share Insurance Coverage of IOLTA Accounts

Prepared by NASCUS Legislative & Regulatory Affairs Department
December 2015

The NCUA amended its share insurance regulations to reflect enactment of the Credit Union Share Insurance Parity Act (IPA).  The IPA required NCUA to provide enhanced, pass-through share insurance for Interest on Lawyers Trust Accounts (IOLTAs) and “other similar escrow accounts.”  The IPA is intended to ensure insurance parity for similar accounts under NCUA and Federal Deposit Insurance Corporation (FDIC) regulations. 

The final rule is effective Jan. 27, 2016 (30 days after publication in the Federal Register).

The final IOLTA rule may be accessed here.


The final rule addressed the following questions posed by NCUA for comment and adopted the following definitions:


  • “Interest on lawyers trust account and IOLTA” means a system in which lawyers place certain client funds in interest-bearing or dividend-bearing accounts, with the interest or dividends then used to fund programs such as legal service organizations that provide services to clients in need.

  • “Other similar escrow account” means an account where a licensed professional or other individual serving in a fiduciary capacity holds funds for the benefit of a client or principal as part of a transaction or business relationship.  Examples of such accounts include, but are not limited to, real estate escrow accounts and prepaid funeral accounts.”
  • “Pass-through share insurance” means, with respect to IOLTAs and other similar escrow accounts, insurance coverage based on the interest of each person on whose behalf funds are held in such accounts by an attorney administering the IOLTA or the escrow agent administering a similar escrow account, in accordance with NCUA regulations.

What escrow accounts should be included in the category “other similar escrow accounts” and provided pass-through share insurance under the IPA?

  • The IPA does not define or specify which “other similar escrow accounts” should be provided pass-through insurance.  NCUA determined that some escrow accounts are similar in nature and structure to IOLTA accounts (such as typical real estate escrow accounts and prepaid funeral accounts) and therefore should be eligible for pass-through share insurance.  NCUA highlighted common characteristics shared by IOLTAs and “other similar escrow accounts”:
    • The account is managed by a licensed professional or other serving in a fiduciary capacity
    • The account holds funds of a client of the professional
    • The funds are being held as part of a transaction or business relationship.
  • NCUA requested feedback regarding additional accounts that would fall within the definition of “other similar escrow accounts.”  Commenters suggested a number of other accounts that should be considered “other similar escrow accounts.” However, NCUA declined to include those additional accounts within the definition.  NCUA concluded that it would be difficult to provide regulations that specifically identified the universe of eligible escrow accounts.  As a result, the final rule noted that pass-through share insurance coverage would be provided to certain escrow accounts (in addition to real estate escrow accounts and prepaid funeral accounts) that satisfy the final rule’s definition of “other similar escrow accounts” on a case by case basis.

  • The final rule noted that an increase in an FICU’s total amount of insured shares as a result of the IPA enhanced share insurance coverage will require the credit union to increase proportionally the 1% deposit required to be maintained in the National Credit Union Share Insurance Fund (NCUSIF).

Whether prepaid card programs, such as payroll cards, should be considered IOLTAs or “other similar escrow accounts” for share insurance purposes?

  • The NCUA declined to include prepaid cards, including open loop cards such as payroll cards, within the definition of “other similar escrow accounts” because IOLTAs and prepaid card programs have drastically different structures and serve different purposes.  However, NCUA did note that the NCUSIF currently provides pass- through insurance for payroll cards that satisfy NCUA’s regular account and membership requirements.   

What recordkeeping requirements must be satisfied to receive share insurance on IOLTAs and “other similar escrow accounts”?

  • The final rule does not require any changes to the current recordkeeping requirements.  Currently, NCUA share insurance regulations require account records of an FICU to be conclusive as to the existence of any relationship pursuant to which the funds in the account are deposited and on which a claim for insurance coverage is founded. In addition, the regulations require that account records reflect the details of the relationship and that the interests of the other parties in the account must be ascertainable either from the records of the credit or the records of the member maintained in good faith and in the regular course of business.   

Does the enhanced share insurance coverage provided by the IPA affect Bank Secrecy Act (BSA) requirements for insured credit unions?

  • The final rule did not provide any additional BSA regulatory requirements with regard to IOLTAs and “other similar escrow accounts”.  However, FICUs are reminded of their continued BSA responsibility with regard to these accounts as there will be instances where accounts will contain funds from nonmembers, which are likely not to be known by the FICUs where the funds are being held.

  • NASCUS Note: The Federal Financial Institutions Examination Council (FFIEC) has warned financial institutions of additional risks that may be related to servicing accounts established and maintained by professional service providers such as attorneys, accountants and other third parties that act as financial liaisons for their clients.  IOLTAs fall within this category of accounts.  FFIEC advised financial institutions that these accounts may be more vulnerable to potential money laundering abuse because institutions have no direct relationship with or knowledge of the beneficial owners of the accounts.  FFIEC advised financial institutions to ensure they have effective due diligence programs in place to monitor such accounts.  Additional information may be found in:

Should nonmember funds kept in a federal credit union as a result of the enhanced share insurance coverage provided by the IPA count towards a federal credit union’s limit on the receipt of payments on shares from nonmembers pursuant to §701.32 of NCUA’s regulations?  

  • In accordance with the IPA, IOLTAs and “other similar escrow accounts” are considered member accounts if the attorney establishing the IOLTA or the escrow agent administering the escrow account is a member of the FICU in which the funds are held.  According to the final rule, IOLTA and “other similar escrow accounts” that satisfy the IPA membership requirements will be considered member accounts for purposes of § 701.32 of NCUA’s regulation and would not count towards an FICU’s limit on the receipt of payments on shares from nonmembers.