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PSA: Changes To FDIC Insurance Coverage Rules Involving Beneficiaries

MAKNYC
  |     |   54 posts since 2015

Today I received a communication from Ally bank detailing upcoming changes relating to FDIC requirements requiring banks to 'uniquely identify' beneficiaries on accounts to expedite insurance coverage determination in the event of a bank failure. While a quick read of the rule doesn't seem to explicitly require Ally's methodology, they are choosing to utilize social security numbers and/or tax ID's of the beneficiaries for this purpose. As they hadn't previously collected this information (they only required names), they are now requesting affected account holders update their profiles accordingly. Not sure if all other banks will go the same route, but it seems like its the most obvious way to go, so those of you that utilize beneficiary accounts such as P.O.D. accounts be on the lookout. Here is Ally's link as well as the specific FDIC rule:

https://www.ally.com/bank/fdic/

(pertinent issue is discussed near the bottom)

https://www.fdic.gov/regulations/resources/recordkeeping/index.html

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anon123
  |     |   13 posts since 2010
I got a similar email. Ally claims that it's not just to "expedite insurance" but to actually "receive" the insurance coverage.

I agree with your assessment of the rule - upon my reading I did not see why they now require SSN. I think this is dangerous for 2 reasons. First, I do NOT want my beneficiaries' SSN to be in yet another database, let alone 20 databases if I have them listed in 20 financial institutions. All these databases are prime hacker targets. Second, what if one of my beneficiaries is not a US resident and lives outside of the country? My understanding of the POD coverage rules is that they would still count for extending the 250k*NumberOfBeneficiaries formula.
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MAKNYC
  |     |   54 posts since 2015
While an inconvenience, I can't say it is an unreasonable request. By utilizing the unique identifier concept they avoid the issue of someone potentially using two variants of the same name (ie Rick vs. Richard) and having to reconcile that during a triggering coverage event. Upon the quick read this additional data is only sitting in the bank database...its not reported to any other entity until and if the triggering event happens.
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anon123
  |     |   13 posts since 2010
It is VERY unreasonable and dangerous. Unique ID could be ANYTHING. It does not have to be hacker-key-to-your-identity. In post Equifax world and with all the hacks into ALL kinds of institutions, I can't believe some people still think it's Ok for extra SSN numbers sitting in bank databases.

Further, more employees get to see these, which is another potential issue and exposure of information.

me1004 post below has another good point: e.g. why should I know my beneficiaries SSN? Some people will write it down and then forget to properly destroy this info. This opens up all kinds of risks.
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me1004
  |     |   930 posts since 2010
This is just wrong. A Social Security number is supposed to be a very dangerous thing to give out to people, because it is a key to identity theft. Just because you want to name someone your beneficiary does not mean you know their Social Security number, and it is not even appropriate to ask someone to give it to you.

If this becomes widespread, I will not be able to have any beneficiaries, I do not know their SS numbers.

If someone asked me for my SS number, even saying to be their beneficiary, I would not give it -- that is the perfect scam to get someone's SS number. It is inappropriate to even ask for it. MAKNYC, I'd like to make you my beneficiary. Would you please give me your SS number?

They can give it to the bank if circumstances arise to collect. They don't have to give it to ME. In fact, I don't even want my beneficiaries to know I am listing them, not until after I die. I don't want it to change their decisions in life accordingly.

In fact, a beneficiary does not even have to have a SS number in order to be my beneficiary.

I note, though, this is only FDIC, not NCUA.

The full regulation is at:

https://www.fdic.gov/regulations/laws/rules/2000-9200.html#fdic2000part370.4

I see not a single mention in there about the Social Security number. There is talk, possibly only about the actual account holder (a beneficiary is NOT an account holder) about a government ID and a unique identifier of who they are. But all I see about a beneficiary is a "unique identifier," which does not have to be an SS number, it can be name and birth date, maybe home address or even phone number, or other things -- just as it always has been.
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ocsteve
  |     |   22 posts since 2010
A possible work-around for this apparent "new requirement" for social security numbers of POD account beneficiaries, would be the use of a Living Trust. Living Trusts in Ca. cost about $500-$1,000 to generate with local attorneys. I have found that some CU's might ask about ultimate beneficiaries, but do not generally ask for their social security numbers. These CU's have stated that this information is needed for possible insurance determinations. Most CU's do NOT ask for an actual copy of the Living Trust, but may require a Trust Certification (covers subsequent trustee, apparent beneficiaries under Living Trust, and subsequent Trustee contact information). Most CU's do NOT NOT NOT want to be fully aware of any Living Trust particulars since they do not want to be held accountable for you following the terms/conditions of such Living Trust document. Hope this bit of information is helpful.

The FDIC website has an excellent bit of information about Living Trust insurance with 5 or more un-equal percentage beneficiaries--insured to a MINIMUM of $1.25 million.
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Ratesaver
  |     |   60 posts since 2013
All I have to offer is to be carful of scams,... If the communication is online don't click on anything... Go to the Banks site or call....
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paoli2
  |     |   2,584 posts since 2011
Thanks for sharing this important info. I use beneficiaries and "pods" on many accounts to avoid probate. I don't recall having to give their ssns. I recently found out my family and the person who is mainly the "pod" on all our accounts was a part of the Equifax Identity thief we discussed on DA recently. I am now concerned it may have happened because so many financial institutions have all the ssns. I will have to find time to contact these institutions and see if they can delete the ssns and use some other type of ID for the accounts.

I don't think this problem is going to be resolved easily or soon but we savers really need to take charge of this before it gets even worse. If any of our members is successful in finding a way to protect their accounts and beneficiaries without ssns, I do hope they will share it on DA so we can try it with our banks and financial institutions. Thanks in advance!
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me1004
  |     |   930 posts since 2010
paoli2, I have never given a SSN of my POD beneficiary. I can't even do it, I don't have their SSN number.

But to your issue, with it ending up on Equifax, that should not happen. For one thing, I would think it a privacy violation, the beneficiary has not signed to anything, might not even know they are beneficiary (I don't tell mine, I don't want it changing their choices in life and I don't want issues if I decide to stop using them as beneficiary), and their name should not end up on your credit report. There is no reason why their name should be at Equafax, and I would actually encourage them to sue over it. What goes on with your account should not involve them.

Re SSN number of beneficiary, just about all the places ask for it for the beneficiary. However, only few actually require it, although that seems to be a slowly growing number, at least I have run across the requirement more in the past couple years, but that could just be chance. If they require it, they lose all my business.

When they ask for the SSN number, I ask if it is mandatory or optional, tell I can provide date of birth, address, phone number some other, and point out they can require SSN if circumstances should arise that beneficiary seeks to claim the account. The vast majority of the time, it turns out it is optional, you just leave that space blank or maybe put in NA.

Of the rest, I go up the ranks, and much of the time they will do something to make it so we can proceed despite the computer system requiring it on the application. They don't really require it, its just some programmer made the program that way. I once went all the way to the CEO of the CU, and she had no idea why they would require that, was surprised to hear that, agreed it was not necessary, and she waived it for me. Yet, she did not tell anyone to change that requirement, it is still in place there.

I sometimes point out that I'm supposed to be able to make anyone my beneficiary, whether thy even have an SSN number not. Not everyone has one, especially children. And then I make my example and say: I want to make you my beneficiary, will you please give me your SSN number. (I get some funny responses sometimes, one really would like to do so and maybe get that money! But most get the point, they absolutely are not handing out their SSN number, no matter if it means they won't be beneficiary.)

I will note, years back the beneficiary had to be a relative, and I think sibling, spouse or, I know, in descending order (no cousins). But that requirement was eliminated long ago, and there is no reason it should should be required for anyone of your choice. I think that history has something to do with the idea that you must provide the SSN number, it might be a longtime holdover from the prior requirement about kids and spouse only. But gee, even back then, your kid did not necessarily have a SSN number. And why should an SSN be required up front if they are to inherit via POD, but not if they are to inherit via a will or living trust?
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unmesh
  |     |   39 posts since 2010
GTE Financial will accept as a POD beneficiary someone for whom you cannot provide a SSN but such a beneficiary does not show up under your account on their website. Beneficiaries with SSNs do.

CSR assures me that their in-house records do show the former category of beneficiaries; it is just an artifact of their customer facing software.
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