Reg. D – Are there any exceptions to the early withdrawal penalties mandate for a “time deposit?”

Compliance > Regulation D - Reserve Requirements
Q:  Are there any exceptions to the early withdrawal penalties mandate for a “time deposit?”  
 
A: Yes.  Exceptions include, for example, death of any owner of the time deposit or when any owner is determined to be legally incompetent.  The exceptions are contained in footnote 1 of the regulation’s definition of time deposit, which includes the following: 
 
1A time deposit, or a portion thereof, may be paid during the period when an early withdrawal penalty would otherwise be required under this part without imposing an early withdrawal penalty specified by this part:
 
(a) Where the time deposit is maintained in an individual retirement account established in accordance with 26 U.S.C. 408 and is paid within seven days after establishment of the individual retirement account pursuant to 26 CFR 1.408-6(d)(4), where it is maintained in a Keogh (H.R. 10) plan, or where it is maintained in a 401(k) plan under 26 U.S.C. 401(k); Provided that the depositor forfeits an amount at least equal to the simple interest earned on the amount withdrawn;
 
(b) Where the depository institution pays all or a portion of a time deposit representing funds contributed to an individual retirement account or a Keogh (H.R.10) plan established pursuant to 26 U.S.C. 408 or 26 U.S.C. 401 or to a 401(k) plan established pursuant to 26 U.S.C. 401(k) when the individual for whose benefit the account is maintained attains age 5912 or is disabled (as defined in 26 U.S.C. 72(m)(7)) or thereafter;
 
(c) Where the depository institution pays that portion of a time deposit on which federal deposit insurance has been lost as a result of the merger of two or more federally insured banks in which the depositor previously maintained separate time deposits, for a period of one year from the date of the merger;
 
(d) Upon the death of any owner of the time deposit funds;
 
(e) When any owner of the time deposit is determined to be legally incompetent by a court or other administrative body of competent jurisdiction; or
 
(f) Where a time deposit is withdrawn within ten days after a specified maturity date even though the deposit contract provided for automatic renewal at the maturity date.
 
 
This can be found in the FRB’s Regulation D, 12 CFR 204, which you may find here: https://www.ecfr.gov/cgi-bin/text-idx?SID=9fe1569d2f900094418aab62bb9a4680&mc=true&node=pt12.2.204&rgn=div5#se12.2.204_12
 

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