IOLTA Guidelines
The IOLTA Committee (“Committee”)
provided for by Mass. R. Prof. C., 1.15 (g) (4) (v) (Rule 3:07), adopts the
following Guidelines, subject to the approval of the Court, to provide for the operation
of the comprehensive IOLTA program set forth in amendments to SJC Rule 3:07 and
4:02 adopted by Orders of the Court dated September 26, 1989, October 1, 1992,
April 6, 1993 and July 26, 2006.
A. Establishment and Maintenance of IOLTA Accounts
1. Method of establishing IOLTA accounts: A lawyer or
law firm shall establish an IOLTA account by completing an Attorney’s Notice of
Enrollment, and mailing or delivering the original Notice to the financial
institution where the account will be maintained and one copy of the Notice to
the IOLTA Committee.
2. Considerations affecting deposit in
IOLTA accounts:
(a) All client funds shall be deposited
promptly in an IOLTA account unless they are deposited (1) in an interest bearing
account for the benefit of the client; (2) in a conveyancing account as defined
in paragraph A(3); or (3) as otherwise required by law.
(b) All
client funds which in the judgment of the lawyer are nominal in amount, or are
to be held for a short period of time, shall be deposited in an IOLTA
account. In determining whether to
deposit funds into an IOLTA account or into an individual client account, a
lawyer shall consider the amount of interest likely to be earned during the
period the funds are expected to be deposited, as well as the estimated cost of
establishing and administering a separate client fund account, including
reasonable imputed overhead costs, and the estimated cost of preparing any tax
or other reports required for interest accruing to a client’s benefit.
3. Conveyancing accounts: A conveyancing account is an account in the
name of a lawyer in a lending bank used exclusively for depositing and
disbursing funds in connection with that bank’s loan transactions. A conveyancing account:
(a) consists solely of funds which will be used in
connection with transactions which the institution is financing; and
(b) is used by the lawyer to disburse funds in
connection with the institution’s loan transactions; and
(c) is used exclusively for the deposit and withdrawal
of money related to the institution’s loan transactions.
B. Characteristics of Accounts
Lawyers shall establish and maintain IOLTA accounts in
eligible financial institutions which
have the following characteristics:
1. Interest Rates: The financial institution pays
interest comparable to the highest yield the financial institution
offers to its non-IOLTA customers when the IOLTA account meets or exceeds the
same minimum balance and other eligibility requirements.
(a) Comparability Options
A financial institution shall pay on IOLTA accounts
the highest yield available among the following product option types (if the
product option is available from the financial institution to other non-IOLTA
customers) by either using the identified account option as an IOLTA account or
paying the equivalent yield on the existing IOLTA account in lieu of actually
using the highest yield bank product:
1. A business
checking account with an automated investment feature, such as an overnight
sweep and investment in repurchase agreements fully collateralized by
2. A government
(such as for municipal deposits) interest bearing checking account.
3. A checking account
paying preferred interest rates, such as money market or indexed rates.
4. An interest
bearing checking account such as a negotiable order of withdrawal (NOW)
account, or business checking account with interest.
5. Any other suitable interest bearing deposit account
offered by the institution to its non- IOLTA customers.
As an alternative, the financial institution may pay:
6. A Asafe harbor@
rate equal to 55% net yield of the
Federal Funds Target Rate. [*]
7. A yield
specified by the IOLTA Committee, if the Committee so chooses, which is agreed
to by the financial institution. Such
yield would be in effect for and remain unchanged during a period of no more
than twelve months from the inception of the agreement between the financial
institution and IOLTA.
(b) Implementation of Comparability
The
following considerations will apply to determinations of comparability:
Accounts which have limited check writing capability required
by law or government regulation may not be considered as comparable to IOLTA in
For the purpose of determining compliance with the
above provisions, all participating financial institutions shall report in a
form and manner prescribed by the IOLTA Committee the highest yield for each of
the accounts they offer within the above listed account types. The IOLTA
Committee will certify participating financial institutions compliance with these Guidelines on an
annual basis.
(c) Definitions.
An “eligible financial institution” for IOLTA accounts
is a financial institution that meets the requirements of Mass. R. Prof. C.
1.15 (g) (1), and has been certified by the Committee to be in compliance with
these guidelines.
A “safe harbor@ rate, as identified by the IOLTA Committee, is a rate
which if paid by the financial institution on
IOLTA accounts shall be deemed as
a comparable return, regardless of the highest yield available at the financial
institution. Such yield shall be
calculated based on 55% net yield of the Federal Funds Target Rate as reported
in the Wall Street Journal on the first business day of the calendar month.
“Net yield” is defined as the effective interest rate
earned on the IOLTA account after considering any fees assessed by the
financial institution against the interest earned. Allowable fees are defined
at IOLTA Guidelines, B (3) (a) and (b).
2. Minimum Balance: The financial institution pays
interest on all funds in the account. If
a lawyer chooses to use for IOLTA purposes an account which requires a minimum
balance to pay interest, the lawyer must maintain at least the minimum balance
in the account at all times, even if to do so requires the deposit of the
lawyer’s own funds.
3. Bank Charges: The financial institution either waives
all administrative and service charges on IOLTA accounts, or imposes reasonable
fees and charges as follows:
(a) IOLTA Fees:
The only fees deducted from IOLTA interest are the reasonable costs of
complying with the reporting requirements of the Guidelines.
(b) Normal Service Charges: The financial institution
does not assess against the interest earned on an IOLTA account, fees and
expenses which are normally imposed on business accounts. Such fees and expenses include but are not
limited to check withdrawal and deposit fees, fees for wiring funds, costs of
printing checks, charges for insufficient funds or check returns and a monthly
service charge. Such fees and expenses
are the responsibility of the lawyer or firm maintaining the account.
4.
Interest Remittance: The financial
institution complies with the following interest
transmittal and reporting provisions:
(a) The financial institution remits all net interest
monthly or quarterly to the IOLTA Committee.
The financial institution deducts IOLTA fees from the interest earned on
individual IOLTA accounts or aggregates all interest paid and deducts from the
total interest earned for each interest remittance period the IOLTA fees
imposed on all accounts. IOLTA fees
which exceed the interest earned in one remittance period may be carried
forward to succeeding remittance periods but may not be billed directly to the
Committee, the lawyer or the firm maintaining the account or deducted from the
principal in the account.
(b) Each remittance is accompanied by the information
required by the Interest Remittance Report for each IOLTA account maintained in
the financial institution whether or not any interest was earned on the
account. The financial institution
reports interest remittance information in any format it chooses so long as the
information required is conveyed in a reasonable manner.
(c) Remittances for multiple accounts are submitted
through a single check or other payment and are accompanied by a single report
containing the required information for each IOLTA account included in the
report. The financial institution makes
payments of interest (by check or otherwise) in the manner and to the address
specified by the Committee.
(d) The financial institution mails or delivers
interest remittance reports to the Massachusetts IOLTA Committee,
(e) In addition, the financial institution submits a copy
of each interest remittance report at the time of remittance to the depositor.
(f) The financial institution either does not prepare
W-9 forms and reports of income and IRS Forms 1099, or if the forms are
prepared they reflect the Committee, not the lawyer or client, as the recipient
and are forwarded to the Committee.
C. The Committee
1. Budgets:
Annually or more often, the Committee shall, in consultation with the
charities, adopt a budget for the operation of the Committee which shall be
funded by deducting from the amount received by the Committee on behalf of each
charity that charity’s proportionate share of the budget.
2. Staff:
Staffing and general operational support for the Committee shall be
provided by staff hired by the Committee for that purpose or by contract with
one or more of the charities.
D. The Charities
1. Definition:
The charities shall be those organizations which are named by the Court
as designated charitable entities from time to time to receive and disburse
funds earned on IOLTA accounts.
2. Additional Charities: [At the direction of the Court, the Committee
recommends the following criteria to the Court for use when considering the
application of an organization for designation as a charity.] An organization
applying to the Court for designation as a charity (“applicant”), shall
demonstrate that it has satisfied the following criteria. An applicant must:
(a) be organized in Massachusetts as a non-profit
corporation or trust, have §§501(c)(3) status under the Internal Revenue Code,
and include among its purposes providing funds for delivering civil legal
services to those who cannot afford them and/or for improving the
administration of justice;
(b) have adopted and demonstrated its ability to
administer competently a grants program including grant-making guidelines,
proposal criteria, an appropriate grant selection process and the capacity to
monitor the quality of the services delivered and the financial systems used by
recipients; and,
(c) agree to adhere to these Guidelines and to
cooperate with the Committee and the charities to ensure the smooth operation
of the program.
3. Expenses of Charities: There shall be two permissible
categories of IOLTA-related expenses which a charity may pay with or from IOLTA
funds; (a) Committee expenses and (b) compliance and operating expenses.
(a) Committee expenses shall mean and include only the
recipient’s share of the Committee’s expenses, as determined by the Committee
from time to time. The Committee’s
expenses shall be shared according to the proportion of net IOLTA income
received by the Committee on behalf of each charity.
(b) Compliance and operating expenses shall mean and
include only the costs, including overhead, reasonably attributable to
accounting for IOLTA funds, processing and evaluating grant requests,
monitoring the quality of the services delivered and the financial systems used
by recipients, preparing the reports required by Mass R. Prof. C. 1.15(g)(6) or
by the Committee, and handling and expending IOLTA funds for the charitable
purposes of the IOLTA program.
(c) The maximum amount of compliance and operating
expenses for which IOLTA funds may be used by any charity during or with
respect to any calendar year shall be 5% of the IOLTA funds received by that
recipient during that year; provided that, expenses in excess of such 5% limit
may be authorized by the Committee with respect to any calendar year upon
application and good cause shown by a charity.
4.
Record Keeping: Each charity directly or
by contract with another entity shall:
(a) Have its records of IOLTA receipts and
disbursements audited annually by a Certified Public Accountant and file a copy
of the audit report and the charity’s last annual report with the annual report
required by Mass R. Prof. C. 1.15(g); and,
(b) Prepare its IOLTA reports based on the charity’s
fiscal year.
5. Stabilization Funds: A charity may, in its discretion, reserve
IOLTA funds from current distribution to stabilize the amounts available for
distribution in future years.
(a) All reserved funds must be invested in United
States Treasury obligations or deposited in fully insured bank accounts.
(b) Consistent with the preceding paragraph, reserved
funds must be invested at competitive rates providing reasonable investment
yield.
(c) Income from investment of reserved funds may be used
only for the purposes approved by the Court for IOLTA funds.
(d) No more than 25% of the IOLTA income received by a
charity during that charity’s fiscal year may be reserved during that year.
(e) A charity establishing a stabilization fund shall
adopt criteria regarding the amounts to be reserved and the uses of the
reserved funds including the circumstances under which the principal of the
stabilization fund may be expended.
E. Disclosure of Confidential Information Prohibited
The IOLTA Committee, the Board of Bar
Overseers and the charities collect and retain confidential information on
lawyers who have established IOLTA accounts.
This information includes the name of the lawyer, the name of the client
fund account established by or on behalf of the lawyer, the account number, the
name of the bank in which the account is located and the amount of interest
earned on each such account. Such
confidential information, except as required by law or order of a court of
competent jurisdiction, shall not be disclosed by any person who serves on or
is employed by the IOLTA Committee, the charities and their governing
boards. The governing bodies of the
three charities shall adopt personnel policies and other policies and
procedures which will effectuate this non-disclosure policy. The Board of Bar Overseers is requested to
take such steps as it deems necessary and appropriate to insure the
confidentiality of information received under the IOLTA program.
F. Annual Reports
The Committee shall annually, within 90
days following the end of each calendar year, submit to the Court a report
containing the information required of the charities by Mass R. Prof. C.
1.15(g)(6) and based on the information supplied to the Committee by the
charities.
G. Interpretive Rulings
The Committee may from time to time
issue rulings interpreting and explaining Court Rules Mass R. Prof. C. 1.15
(3:07) and 4:02 and these Guidelines.
H. Recommendations to the Board of Bar Overseers
Upon the request of a lawyer or the
Board of Bar Overseers (Board), the Committee may make such recommendations to
the Board as the Committee deems appropriate upon the facts presented including
a recommendation that the Board take no action.
Recommendations may be requested on any issue concerning the
establishment or maintenance of an IOLTA account.
[*]
The IOLTA Committee will review and may revise
the safe harbor rate from time to time based on changing market conditions.