Section 81.109. Exclusion and Exemptions from IOLTA Participation

(a) A lawyer who does not receive Rule 1.15 Funds is excluded from IOLTA. Examples include lawyers employed full time in a corporate capacity, by local, state or federal government, as a law clerk, professor, or as a member of the judiciary. A lawyer who does not have an office in Pennsylvania, does not receive Rule 1.15 Funds in the Commonwealth, and who is not otherwise required to maintain Rule 1.15 Funds in a Trust Account in the Commonwealth is not subject to IOLTA. A lawyer who is retired or no longer practices law need not maintain an IOLTA Account.

(b) Pa.R.P.C. 1.15(n) permits limited exemptions from the requirement that all Qualified Funds must be maintained in an IOLTA Account. No exemption is automatic, although exemptions will be routinely granted under specified circumstances. The IOLTA Board may declare a lawyer exempt from the requirement of maintaining an IOLTA Account; alternatively, a lawyer may submit a written request for exemption.

(c) Nonqualified Funds are to be deposited in a Non-IOLTA Account or in another investment vehicle specifically agreed upon by the lawyer and Third Party Owner, and the IOLTA Board is without power to grant an exemption from this requirement. If a lawyer is exempt from the requirement of maintaining an IOLTA Account, the lawyer must still deposit Qualified Funds in a Non-IOLTA Account or in another investment vehicle specifically agreed upon by the lawyer and the Third Party Owner. Fiduciary Funds remain subject to the provisions of Pa.R.P.C. 1.15(l) and Section 81.104(c).

(d) Under the following circumstances, the IOLTA Board will routinely grant an exemption from the requirement that a lawyer maintains all Qualified Funds in an IOLTA Account:

(i) Low balance account: Any Trust Account which historically, generally based upon 12 consecutive months of activity, has an average daily balance of $5,000 (or such other amount as the IOLTA Board announces from time to time) will be exempt from being an IOLTA Account. The IOLTA Board may exempt from IOLTA, without application, a low balance account. A lawyer requesting an exemption based on a low balance account must, as a part of the written request for exemption, include an account analysis or written statement that demonstrates the amount of the average daily balance.

(ii) Account service charges routinely exceed income: Some Trust Accounts may have an average daily balance of more than $5,000, but because of the account service charges or the interest or dividend rates of the Eligible Institution, the charges would routinely exceed income earned on the Trust Account. In these cases, an exemption may be requested. A lawyer requesting an exemption based on these circumstances must, as part of the written request for exemption, include an account analysis or written statement that clearly shows the income earned, or the income that would have been earned, on the account each month for the past 12 months, plus the account service charges imposed on the account for each of the last 12 months.

(iii) Extreme impracticality or undue hardship: Under limited circumstances it would be unduly burdensome for a lawyer to maintain a Trust Account as an IOLTA Account. When claiming extreme impracticality or undue hardship, the lawyer should provide appropriate details demonstrating undue hardship. An example includes the lack of an Eligible Institution that offers IOLTA Accounts in the lawyer’s geographical location.

(iv) Other compelling and necessitous reasons: There may be compelling and necessitous reasons justifying an exemption from the requirement that the lawyer maintain a Trust Account as an IOLTA Account. A lawyer who demonstrates a compelling and necessitous reason for not complying with IOLTA may request an exemption. A philosophical objection to IOLTA does not constitute a compelling and necessitous reason for an exemption.

(e) An exemption from the requirement that a lawyer shall maintain Qualified Funds in an IOLTA Account will remain in effect until the first to occur of:

(i) Three (3) years from the date that the exemption was granted; or

(ii) A change in the circumstances that formed the basis for the exemption, such that under Pa.R.P.C. 1.15 and these regulations the lawyer must deposit Qualified Funds in an IOLTA Account.

(f) A lawyer to whom an exemption has been granted and who desires to maintain the exemption must reapply for an exemption within six (6) months prior to the expiration of the exemption.

(g) A lawyer who has been granted an exemption and who has experienced a change in circumstances as described in Section 81.109(e)(ii) shall notify the IOLTA Board of that fact promptly and shall comply with the requirement that Qualified Funds be maintained in an IOLTA Account.

(h) Income waived by a Third Party Owner: An exemption from the requirement that a Trust Account be maintained as an IOLTA Account will not be granted based on an agreement between a lawyer and Third Party Owner purportedly waiving the Third Party Owner’s right to income or granting the lawyer the power to direct income earned on Rule 1.15 Funds to the lawyer or to another person of the lawyer’s choice.