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Guidelines for Financial Institutions: DC IOLTA Account Requirements
DC Bar IOLTA Rules
Relevant provisions governing Interest on Lawyers’ Trust Accounts have been moved to Rule 1.15 of the D.C. Bar Rules of Professional Conduct and to new Section 20 of Rule XI of the Rules Governing the District of Columbia Bar.
Guidelines for Financial Institutions: DC IOLTA Account Requirements
The IOLTA Rules issued by the DC Court of Appeals were revised effective August 2010. As a result, DC lawyers can no longer ‘opt out’ of participating in IOLTA, and are only authorized to hold funds in financial institutions that have agreed to pay IOLTA account customers the highest interest rate or dividend generally available at their own institution to similarly situated non‐IOLTA customers (called interest rate comparability) to charge only allowable reasonable fees (as defined in the Rule) and to meet other requirements of the revised Rules.
Financial institutions should observe the following procedures in opening and operating IOLTA accounts in the District of Columbia.
DC Bar Foundation Approval
Prior to opening an IOLTA account, financial institutions must be approved by the District of Columbia Bar as eligible to hold IOLTA accounts for DC lawyers. Information about the required steps to receive approval can be found in the DC Bar Foundation’s website. One important first step is to obtain DC Bar Foundation approval of your DC IOLTA account rate. (See below for further details). Approved institutions are listed on the DC Bar Foundation’s website.
Approval of IOLTA Account Rate
Under the IOLTA rules, financial institutions must provide comparable interest rates on the DC IOLTA accounts they hold. This means IOLTA accounts may not receive an interest rate less than that available to a similarly situated non-IOLTA account. Banks need to submit to the DC Bar Foundation the Financial Institution Compliance Statement (electing one of the comparable rate options. Banks can receive automatic approval of their DC IOLTA interest rate by electing the “Benchmark Rate” set by the Foundation or by becoming a DC IOLTA Prime Partner. Alternatively, banks can propose a comparable rate and provide substantiating documentation. Proposed comparable rates are subject to review and approval by the Foundation. Banks with further questions on interest rate comparability can contact the DC Bar Foundation (firstname.lastname@example.org)
Opening IOLTA Accounts & Converting Existing non-IOLTA Pooled Accounts
Lawyers who need to either open an IOLTA account for the first time, or convert a non-IOLTA pooled client trust account should complete the DC Bar Foundation’s one-page IOLTA Account Registration form. For full instructions on opening an IOLTA account, see our Information for Attorneys page.
Financial institutions are encouraged to keep copies of this form available for attorneys or law firm representatives who need to open IOLTA accounts. Financial institutions are authorized to provide a direct link to this form on their websites to facilitate this process. More details on opening IOLTA accounts are available on the IOLTA page of the DC Bar Foundation’s website.
The account title must contain the name of the lawyer or law firm that controls the account, and the words “DC IOLTA Account” or “IOLTA Account.”
All DC IOLTA accounts, wherever located, must bear the taxpayer identification number (TIN) of the DC Bar Foundation: 52-1109547. The lawyer’s or law firm’s TIN must not appear on the IOLTA account. The accounts are exempt from backup withholding because the Foundation is a tax-exempt 501(c)(3) organization. The tax identification number will not match the name on the account. That is because neither the lawyer nor the law firm is required to report the interest earned in the IOLTA account. No IRS Form 1099 need be issued for IOLTA accounts: the DC Bar Foundation, a tax-exempt organization, is the beneficial owner of the interest on these accounts. Under no circumstances should a Form 1099 be sent to the lawyer or law firm for an IOLTA account.
Interest on IOLTA accounts should be calculated on the average monthly balance in the account, or as otherwise computed in accordance with the bank’s standard procedures. All rates paid must comply with the rate comparability requirements, as set out in the Financial Institution Compliance Statement and the Revised Rules. D.C. Bar Rule XI, §20, and with the bank’s Compliance Statement on file with DCBF.
Financial institutions providing the highest rates at the lowest cost to the DC Bar Foundation may be eligible for participation in the Foundation’s new DC Prime Partners Program.
Interest Remittance Procedures
Most financial institutions remit interest to the DC Bar Foundation on a monthly basis. Banks are required to remit interest at least quarterly. A single remittance payment may be made for multiple IOLTA accounts. The accompanying interest remittance report must include an itemization of interest and charges (if any) for each account, as specified in ‘Interest Remittance Reports,’ below. Electronic remittance and reporting are highly preferred. The Remittance Report template is located on our website here.
Contact email@example.com for details. Any remittances made by check should be mailed to the DC Bar Foundation.
Interest Remittance Reports
Financial institutions are required to report the following information for each DC IOLTA account at the institution when interest is remitted to the DC Bar Foundation:
Name of lawyer or law firm holding the account.
Address of lawyer or law firm holding the account.
Applicable interest rate on the account.
Average monthly balance in each account.
Fees and charges for each account, if any.
Total interest earned for each account during the reporting period.
Total interest remitted.
Total number of DC IOLTA accounts held at institution.
Note that this report can be provided electronically (preferred) or in hard copy. A copy of the report template can be downloaded from our website here. Contact the DC Bar Foundation (firstname.lastname@example.org) for more information.
Account Fees & Charges
Under the revised Rules, only allowable reasonable fees/service charges can be assessed on IOLTA accounts. Allowable reasonable fees for IOLTA accounts are per check charges, per deposit charges, a fee in lieu of a minimum balance, federal deposit insurance fees, sweep fees, and a reasonable IOLTA account administrative or maintenance fee. These fees and charges cannot exceed the bank’s customary practices for non-IOLTA accounts. No fees or service charges other than the allowable reasonable fees defined above may be assessed against the interest or dividends on a DC IOLTA account. Any fees and service charges other than allowable reasonable fees shall be the sole responsibility of, and may only be charged to, the lawyer or law firm maintaining the IOLTA account. Allowable reasonable fees in excess of the interest or dividends earned on one DC IOLTA account for any period shall not be taken from interest or dividends earned on any other IOLTA account or accounts or from the principal of any IOLTA account.
Many institutions waive all fees on IOLTA accounts to maximize the benefit of the interest income for the funded programs.
When a DC IOLTA Account is closed, please inform DCBF by email or fax. NOTE: Before DC IOLTA funds are escheated you must contact the DC Office of Bar Counsel, to determine whether further action is required to locate the owner(s) of the funds.
IOLTA Prime Partner Program Rules
While the provisions of interest rate comparability described above determine the minimum rate that eligible financial institutions may pay on IOLTA accounts, leadership institutions in DC have historically gone above and beyond the minimum requirements to insure the laudable goals of the IOLTA program are achieved.
The D.C. Bar Foundation recognizes financial institutions that exceed the minimum requirements of participation and qualify for the IOLTA Prime Partner Program. This program is open to any financial institution that:
Receives and maintains D.C. Bar approval, and
Agrees to pay an interest rate, net of allowable reasonable fees, that is the higher of 1) 75% or more of the Fed Funds Target Rate; or 2) a minimum of 1.00% on all IOLTA accounts. Additional details are in the Prime Partner Package. Rate subject to change.
This program builds on the highly successful DC Preferred Bank Program, by responding to the new rules and carrying forward our strong appreciation and support of banks that go above and beyond the minimum requirements to support DC IOLTA. The DC Bar Foundation will list the DC Prime Partner Banks on its website, and in regular IOLTA ads in The Washington Lawyer, a monthly magazine received by all members of the D.C. Bar, and is undertaking other activities to recognize the significant contributions our Prime Partners make to the DC community.
Financial institutions interested in learning more about the DC Prime Partner Program can download the Prime Partner Enrollment Form from our website, or contact Alison Putnam at the DC Bar Foundation (IOLTA@dcbarfoundation.org).