by John Burnett:
Yes, that would be a violation unless there is a monthly limit on the number of those sweeps back from the savings account. The Regulation D definition of savings account does not include an exception for municipal accounts. The sweep transfers from the savings account to the checking account would count toward the six-per-month transfer limit in that definition. Reference Regulation D, 12 CFR Part 204, section 204.2(d)(2).
by Ken Golliher:
If you are hellbent on the mechanism, you could sweep the funds into an interest bearing DDA nightly, but there simply has to be a better way. Giving them a NOW account?
by John Burnett:
Sweeping between a non-interest DDA and an interest-bearing DDA seems a waste of time and money. Why not just put the funds in an interest-bearing DDA and be done with it? On the other hand, FDIC coverage for government accounts works differently, so it makes sense sometimes to split between a NOW account and a DDA (the NOW account is deemed a savings account for government accounts under the insurance rules, and has a separate $250,000 insurance limit if it's an in-state account).