We offer a variable rate IRA CD that we allow customers to make deposits to during the term of the CD. It is stated in our disclosure that deposits are allowed to be made to our variable rate CD's. My question is: would direct deposits be ok into these accounts since we do allow deposits. I can't think of a reason why we wouldn't allow a direct deposit to be set up, but really have never been asked this question before. As long as they are being coded correctly, any issues anyone sees?

Thanks!

If you accept electronic funds transfers into the certificate you would need to provide periodic statements in accordance with regulation E. Also, what action would you take (if any) when you received a direct deposit that exceeded the annual contribution limits? What if I initiated a direct deposit in April and you had no idea if it was for this year or last year's taxes?

Thank you Brian! I knew I was missing something - and the periodic statements never even crossed my mind. That's why I love this community! That point alone stops us from accepting it as we do not provide statements on CD's....

Thank you again - I appreciate all of your knowledge!

IRAs may not necessarily be covered by Regulation E based on the definition of "account." Are IRAs a "trust" account?

(b)(1) ``Account'' means a demand deposit (checking), savings, or other consumer asset account (other than an occasional or incidental credit balance in a credit plan) held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes.
(2) The term does not include an account held by a financial institution under a bona fide trust agreement.

Agreed.

Paragraph 2(b)(2)

2. Custodial agreements. An account held under a custodial agreement that qualifies as a trust under the Internal Revenue Code, such as an individual retirement account, is considered to be held under a trust agreement for purposes of Regulation E.

Ok - so then we are not required to send a periodic statement if we allow a direct deposit into the account? Our system can code the deposit as a contribution and it can also reject any amount over the contribution limit.

You are correct, periodic statements are not required for IRAs other than the one year-end Fair Market Value Statement. By direct deposit are you processing these transactions by ACH? If so, what ACH tran code are you using for the deposit? I've never seen a CD Deposit ACH Tran Code.