Just want to make sure I am thinking correctly...IOLTA accounts are not covered under section 343 and will not,after 12/31/2010, have unlimited FDIC coverage insurance, I get that; however, considering the FDIC general deposit insurance rules, the clients for whom the law firm holds funds can be insured up to the $250,000 limit individually. So as an example if the IOLTA account has $1 million balance and the funds are for multiple clients, as long as the clients themselves do not have other deposited funds with the bank for which their balances would exceed the $250,000 coverage (ownership for each account considered), the IOLTA account is essentially fully insured? (referring to 12 CFR 330.7)

The FDIC discussed this in the supplementary information section of the final rule they approved yesterday.

See page 6 of 29 of this PDF file. (The printed page number is 12.)
http://www.fdic.gov/news/board/NOV9no4.pdf

And yes, your understanding is correct. The pass-through coverage covers the beneficial owners of the funds, assuming the record keeping requirements of 330.7 are met.

I just had a TM Officer ask me the following: If an IOLTA customer wanted to move the account into a non-interest bearing transaction account, would it then receive unlimited FDIC Insurance coverage? I guess they are more interested in unlimited insurance versus earning interest. Thoughts? Thanks!

If the IOLTA account is held in a demand deposit account that does not pay interest, it would be fully insured under the provisions of §330.16, from 12/31/2010 through 12/31/2012.

However, the IOLTA program requirements of your state undoubtedly require that the funds be kept in interest-bearing accounts. Consider what the acronym stands for: INTEREST on Lawyers' Trust Accounts.

I understand. Thank you so much!