BANK
GUIDELINES
|
BANK
GUIDELINES |
|
| GUIDELINES FOR DEPOSITORY INSTITUTIONS |
February 2006
Act 59 of 1988 enacted the "Lawyers' Trust Accounts Act" and created a nonprofit charitable/educational corporation to administer a fund to provide legal services for the indigent and further access to the justice system. In July, 1996 the Supreme Court of Pennsylvania assumed jurisdiction for the IOLTA program and required that all Pennsylvania licensed attorneys use IOLTA accounts for all qualifying funds they handle in their practice of law. The "IOLTA" ("Interest on Lawyer Trust Accounts") Program receives the interest generated by qualified funds deposited by attorneys and law firms in unsegregated interest-bearing accounts designated IOLTA accounts.
The basic guidelines and forms contained in this document have been prepared by the Pennsylvania Interest on Lawyers Trust Account Board in consultation with representatives from the Pennsylvania Bankers Association and the Pennsylvania Association of Savings Institutions.
The guidelines are designed to answer questions regarding the IOLTA program. The operations outlined are not necessarily the only means of compliance with IOLTA requirements; however, financial institutions should consult with the Pennsylvania Interest on Lawyers Trust Account Board staff or their own counsel before choosing procedures other than those outlined.
If you have any questions after reviewing this material, please direct them to the Pennsylvania Interest on Lawyers Trust Account Board, P.O. Box 1025, Harrisburg, Pennsylvania 17108-1025; #717/238-2001.
WHICH INSTITUTIONS MAY OFFER IOLTA ACCOUNTS?
HOW WILL ATTORNEYS ESTABLISH IOLTA ACCOUNTS?
All attorneys licensed to practice in Pennsylvania will receive information about the IOLTA program and their duty to establish IOLTA accounts. Attorneys or law firms - sole practitioners, partnerships or professional corporations - should send an enrollment form (see attached Enrollment Form for Lawyers and Law Firms) to their financial institution with a copy to the Pennsylvania Interest on Lawyers Trust Account Board located in Harrisburg.
It is not necessary for each attorney in a law firm to establish his or her own IOLTA account. In order to minimize service charges and maximize interest to the Program, law firms are encouraged to open a single IOLTA account for use by the entire firm.
Attorneys can establish IOLTA accounts at financial institutions either by converting an existing unsegregated, non-interest-bearing client escrow account to an interest-bearing IOLTA account or opening a new interest-bearing IOLTA account for this purpose using either the form provided by the Pennsylvania Interest on Lawyers Trust Account Board or a similar form designed and supplied for this purpose by the financial institution.
HOW SHOULD THE BOARD BE NOTIFIED OF AN ACCOUNT OPENING?
The Pennsylvania Interest on Lawyers Trust Account Board wishes to have in its records a confirmation that an attorney or law firm has opened an account with a given financial institution. A copy of the enrollment form used by the financial institution to open an IOLTA account must be mailed by the financial institution with the next remittance report to the Pennsylvania Interest on Lawyers Trust Account Board in Harrisburg for its records.
HOW SHOULD IOLTA ACCOUNTS BE REGISTERED?
An attorney may establish and maintain an IOLTA account by designating the account as "(name of attorney or law firm) IOLTA account". The term "IOLTA" need not be placed on checks or deposit slips.
WHAT ARE THE TAX CONSEQUENCES OF IOLTA ACCOUNTS?
The Internal Revenue Service has concluded that the IOLTA Program is the beneficial owner of the interest accrued and that as a non-profit organization under section 501 (c)(3) of the Internal Revenue Code, there is no tax liability to the Program. Therefore, it is not necessary that either Forms W-9 or 1099 be used in connection with IOLTA accounts. If your institution's system requires the entry of a TIN, please use the TIN assigned to the Pennsylvania Interest on Lawyers Trust Account Board (25-1802119), not the TIN of the attorney or firm which established the account nor that of a client. If your system cannot suppress issuance of Form 1099's, then please send the forms issued to the Pennsylvania Interest on Lawyers Trust Account Board, not to the participating attorney or law firm.
WHO DETERMINES WHETHER FUNDS ARE "QUALIFIED" FOR DEPOSIT?
Attorneys are required to use their good faith judgment to determine whether funds are qualified for deposit in an IOLTA account. Financial institutions have no duty to inquire or determine whether deposits consist of qualified funds.
Payment from an IOLTA account to or upon the order of the attorney maintaining the account shall be a valid and sufficient release of any claims by any person or entity against any financial institution for any payments so made. Any remittance of interest to the IOLTA Program by a financial institution under this section shall be a valid and sufficient release and discharge of any claims by any person or entity against the financial institution for any payment so made, and no action shall be maintained against any financial institution solely for opening, offering or maintaining an account, or for remitting any interest to the IOLTA Program.
WHAT RATE OF INTEREST MUST BE PAID ON IOLTA ACCOUNTS BY LAW?
The rate of interest paid on IOLTA accounts shall not be less than the highest rate of interest generally available from the financial institution to depositors generally for accounts with the same minimum balance and other account eligibility requirements. Under no circumstances may the rate of interest payable on an IOLTA Account be less than the rate paid by the depository institution on negotiable order of withdrawal accounts or super negotiable order of withdrawal accounts.
Except for forms which are required for submission to the Board and the attorney or law firm that maintains the account, all papers, records, documents or other information identifying an attorney, client or beneficial owner of an IOLTA account shall be confidential and shall not be disclosed by a financial institution except with the consent of the attorney maintaining the account or as permitted by law or Supreme Court rule.
Institutions may use whatever calculation method they employ for other interest-bearing accounts with check writing capability as they normally use for other customers of the financial institution.
Each financial institution which maintains IOLTA accounts must remit at least quarterly any interest earned on the account to the IOLTA Program. Institutions should remit interest on a consolidated basis from all IOLTA accounts maintained either in the form of a check, automated clearinghouse (ACH) transfer or wire transfer to the Pennsylvania Interest on Lawyers Trust Account Board on or before the 10th business day following the close of the period. The Program maintains its principal account with WACHOVIA BANK, Philadelphia, Pennsylvania.
For further information, please contact Pennsylvania Interest on Lawyers Trust Account Board, P.O. Box 1025, Harrisburg, PA 17108-1025; #717/238-2001. Our web site is www.paiolta.org.
At the time interest is remitted, a statement showing at least the name and account number of the account, gross interest earned, service charges or fees deducted, if any, and the amount of interest remitted from the account must be sent to the IOLTA Program, as well as to the attorney who maintains the IOLTA account. Additionally, the report should indicate the rate of interest credited for the IOLTA account. If available, the IOLTA Program requests the average daily collected balance for the account
-3-
for the reporting period and a total of the number of accounts reported for the reporting period. Institutions which maintain multiple IOLTA accounts should issue a consolidated report to the IOLTA Program. (See attached "Interest Remittance Report" for suggested reporting format.)
MAY IOLTA ACCOUNTS BE ASSESSED SERVICE CHARGES?
Financial institutions may impose reasonable service charges for the administration of IOLTA Accounts. A financial institution may not deduct service charges from the principal balance in an IOLTA Account. Reasonable service charges, as well as regular account maintenance fees and transaction charges, can be deducted against the total amount of interest to be paid on the IOLTA Account to which the service charges apply.
Interest remitted to the IOLTA Program should be net of any service charges assessed. For certain accounts, deducting service charges from interest accrued may result in a deficiency of interest. In such cases, institutions may not deduct the balance of the unpaid service charge from the principal in the account, nor may the excess service charges be deducted from the IOLTA interest earned on other accounts at the financial institution.
All costs associated with check printing, overdraft charges, charges for a temporary extension of credit and similar bank charges shall not be assessed against the principal balance in or interest earned on any accrued interest earned on an IOLTA Account. The lawyer maintaining the account shall be responsible for these costs. Costs for services such as overdrafts on deposited items, stopped payments, certified checks, and wire transfers at the request of the lawyer or a beneficial owner shall not be assessed against principal balance in or interest earned on an IOLTA Account. The lawyer or the beneficial owner shall be responsible for these costs.
MUST NEW CHECKS BE ISSUED IF AN EXISTING ACCOUNT IS CONVERTED?
No. The revised account title can be printed on the next check order. If an attorney receives new checks for whatever reason, financial institutions should request payment for the checks from the attorney.
Should an institution discover an overpayment or other error in its remittance, it should write to the Board concerning the error as soon as possible. Reconciliation of the problem will be prompt, however, since the Board awards grants annually, refunds will not be made for periods of time longer than twelve months from the date of the written request.
Your institution's participation in the IOLTA program is vital to the success of this much-needed effort to supplement funds to provide civil legal services and enhance access to the justice system for those who would otherwise be denied. The data outlined above are guidelines. Feel free to contact the IOLTA Program's staff if you have problems or suggestions which would improve the operations of this program. The IOLTA Program will strive to accommodate whatever modifications and changes which will not jeopardize the intent of the program.
Pennsylvania Interest on Lawyers Trust Account Board
PO BOX 1025 - HARRISBURG, PA 17108-1025
GUIDELINES FOR FINANCIAL INSTITUTIONS
Financial institutions maintaining Interest on Lawyers' Trust Accounts (IOLTA) must remit, at least quarterly, the interest earned from these accounts to the Pennsylvania Interest on Lawyers Trust Account Board.
The remittance can be made by check, wire transfer, or automated clearinghouse (ACH) credit. The remittance must be made on or before the 10th business day following the close of the period.
Please contact the PA IOLTA Board for instructions for remittance.
PROCEDURES FOR INSTITUTIONS USING THE PA IOLTA ACH TRANSFER SERVICE TO REMIT INTEREST TO THE BOARD
Financial institutions that maintain fifty IOLTA accounts or less and do not assess service charges on IOLTA accounts can take advantage of an ACH transfer procedure initiated by the Board. This procedure simplifies the financial institution’s responsibilities by allowing the Board to transfer the interest thus, eliminating the need for the financial institution to dispense a check or wire the funds to the program.
Each IOLTA account newly established by the financial institution must be accompanied by an enrollment form (see attached). This enrollment form serves as the basis to establish the account on the Board’s database. Interest must be reported for each open account monthly as described in the following paragraphs.
The Board will transmit the account numbers and titles as they appear on the Board’s database for the period to be reported by the 5th day of the month. The financial institution’s contact person must verify the account numbers and titles and make any changes. If an account has been opened since the previous reporting period and it does not appear on the listing, the account number and title must be added in the space provided at the bottom of the interest remittance report (be sure the Board receives an enrollment form for each new account). If an account has been closed since the previous reporting period, the remaining interest being remitted must be entered and the date of closure must be noted in the far right column of the report. The interest remittance form must be returned to the Board within five days to allow enough processing time for the transfer of funds to occur.
For each interest remittance report for the ACH transfer service (see attached), the financial institution’s IOLTA contact person must complete the following: the period for which interest is being remitted; the current interest rate; the interest paid for each account (zero interest must be noted); any account number and/or title modifications; along with any new accounts and/or account closures as mentioned above. Once this information is entered onto the interest remittance form, the column must be totaled at the bottom of the form to indicate the total amount of interest being remitted to the Board. When the information is complete, the form should be faxed back to the Board to the attention of Jean M. Myers using the fax number (717)238-2003. The Board will process this information and the funds will be transferred by mid-month from the individual IOLTA account to the Board’s account.
PENNSYLVANIA IOLTA PROGRAM
INTEREST REMITTANCE REPORT FOR ACH TRANSFER SERVICE
FOR PERIOD: |
CURRENT INTEREST RATE: |
|
|||
| TO: | JANE
DOE XYZ BANK 123 ANY STREET ANYWHERE, PA 0000 |
FAX: PHONE: ROUTING: |
FROM: | JEAN M.
MYERS P.O. BOX 1025 115 STATE STREET HARRISBURG, PA 17108 |
FAX#: (717)238-2003 PHONE: (717)238-2001 |
|
ACCOUNT |
ACCOUNT |
INTEREST PAID |
SERVICE CHARGES |
NET INTEREST |
DATE
CLOSED (OR OTHER NOTES) |
|
| 123456789 | JOHN SMITH | $ | $ | $ | ||
| 987654321 | MARY JONES | $ | $ | $ |
ADD NEW ACCOUNTS BELOW. BE SURE TO SEND ENROLLMENT FORMS.
| TOTALS | $ | $ | $ |
Please complete legibly and FAX this form within 5 days to (717)238-2003. No cover sheet required.
| INTEREST REMITTANCE REPORT *
Pennsylvania Interest on Lawyers Trust Account Board (PENNSYLVANIA IOLTA) PHONE (717) 238-2001 |
FROM:___________________________________________ (Name of Depository Institution) ___________________________________________ (Address) ___________________________________________ (City) (Zip) CONTACT PERSON: ______________________________ TEL./EXT: ( )______________ DATE: _____________ |
| Instructions: Send this report with remittance (ACH encouraged) to: | ||
| CHECKS: PA IOLTA Board PO Box 8500-3260 Philadelphia, PA 19178-3260 |
AUTOMATED CLEARINGHOUSE (ACH)
CREDITS: Wachovia Bank Philadelphia, PA Transit Routing #031000503 Account #2000003281866
|
WIRE TRANSFERS: Wachovia Bank Philadelphia, PA For the credit of: PA IOLTA Board Transit Routing #031201467 Account #2000003281866 |
| PERIOD COVERED: From ___________________ to____________________ | CURRENT INTEREST RATE: __________ % |
| Account Name (Specify if Closed) |
Account Number |
Amount of Interest |
Service Charges |
Net Interest |
Avg. Daily Balance** |
| 1. |
| 2. |
| 3. |
| 4. |
| 5. |
| 6. |
| 7. |
| 8. |
| 9. |
| 10. |
| 11. |
| 12. |
| 13. |
| 14. |
| 15. |
| 16. |
| 17. |
| 18. |
| 19. |
| 20. |
| 21. |
| 22. |
| 23. |
| 24. |
| 25. |
| TOTAL# Accts (if more than 25) ** _______ |
TOTALS |
$ | $ | $ | $ |
* Depository Institutions may design and use their own forms provided they include the information specified by this sample form.
** Optional, but recommended.
Pennsylvania IOLTA Program
Federal I.D. #25-1802119
TO: _______________________________________________________________________________
(Name of Financial Institution)
_______________________________________________________________________________
(Street Address)
FROM:____________________________________________________________________________
(Lawyer or Law Firm)
_____________________________________________________________________________
(Street Address)
DATE: ______________ TELEPHONE: __________________________ E-MAIL:______________
This enrollment form may be used to open a new Pennsylvania IOLTA account or it may be used to convert an existing Pennsylvania escrow account to an interest bearing IOLTA checking account. The new account number, or the converted account number, is _______________________________ and is titled ________________________________________. You are hereby authorized and directed to transmit immediate notice to the Pennsylvania Lawyers Fund for Client Security* of any check drawn on the trust/escrow account(s) listed above which is presented for payment against insufficient funds. Please contact ____________________________ from the law office if additional information is needed. You are authorized to send a copy of this enrollment form to the Pennsylvania IOLTA Board.
ATTN:
Lawyer or law firm administrator:Attach a LIST of all LAWYERS who use this escrow account in the regular course of their practice and their PA SUPREME COURT IDENTIFICATION NUMBERS before mailing it to the PA IOLTA Board.
ORIGINAL - Financial Institution
COPY-
IOLTA Board
P. O. Box 1025 • 115 State Street
Harrisburg, PA 17108-1025
Fax: (717) 238-2003
* For overdraft reporting instructions contact (800) 962-4618
BY:__________________________________
Authorized Signature should also be an authorized
check signer for the listed account(s)