The Federal Deposit Insurance Corporation (“FDIC”) Board of Directors last week approved final rules that will raise the deposit insurance coverage on certain retirement accounts at a bank or savings institution from $100,000 to $250,000. The increase will become effective on April 1.
Access the Press Release here–FDIC Insurance for Retirement Accounts Increased to $250,000–and a special two-page bulletin of the agency’s consumer newsletter which provides a summary of the higher coverage for retirement accounts here–What You Should Know About Higher FDIC Coverage for Retirement Accounts. Summary of the new rules from the bulletin:
The higher insurance coverage applies primarily to traditional and Roth IRAs (Individual Retirement Accounts). Also included are self-directed Keogh accounts, “457 Plan” accounts for state government employees, and employer-sponsored “defined contribution plan” accounts that are self-directed, which are primarily 401(k) accounts. In general, self-directed means that the consumer chooses how and where the money is deposited.Under the FDIC’s new rules, which take effect on April 1, 2006, all of your deposits at the same insured bank that are in this broad category of retirement accounts are added together and the total is insured up to $250,000. Your retirement accounts also are separately insured from any other deposits you may have at the same institution.
This increase to $250,000 for retirement accounts is important because many people saving money for their retirement have accumulated well in excess of $100,000. With the higher FDIC coverage, more Americans who rely on banking institutions for safety and easy access will know that more of their money for retirement will be completely protected if their banking institution were to fail. There’s also the added convenience for people who, previously, might have gone to more than one institution to get full coverage of retirement deposits of more than $100,000.
Access the Board’s Distribution Draft here.
Learn more about deposit insurance for retirement plans on the FDIC website. Read about coverage for self-directed accounts here and coverage for other employee benefit plans here. See also this article here.