ALEXANDRIA, Va.-NCUA said that college savings 529 accounts may be insured by the National CU Share Insurance Fund either as public units or on a pass-through basis as a trust.
Because 529 account funds are maintained in a state-sponsored trust, NCUA may treat the state or, under certain conditions, a participant as the owner of the funds to determine share insurance coverage," said NCUA in a new legal opinion letter posted last week.
In 2006, NCUA amended its share insurance rules to permit pass-through share insurance coverage for 529 program participants.
If the participants are members of the credit union where a 529 account is held and each participant-member's interest can be ascertained from credit union or state records, the member's interest in the 529 account will be aggregated with the member's other single ownership account(s) and insured up to the standard maximum share insurance amount, NCUA said.
Alternatively, if participants are not members of the credit union holding the 529 accounts or each participant's interest cannot be ascertained, NCUA will insure the funds as public units or government deposits.
NCUA also said here is no limit on the number of custodians a state can have for its 529 program funds to receive share insurance coverage. However, the maximum amount of all public units a federally-insured credit union may accept cannot exceed the greater of 20% of its total shares or $1.5 million, unless the credit union has a waiver from the regional director.
