Effective April 1, 2006, the FDIC insurance limits increased from $100,000 to $250,000 for certain retirement accounts maintained at banks and savings associations insured by the FDIC and at credit unions insured by the National Credit Union Administration.  These higher insurance limits applies to traditional and Roth IRAs, “457 plan” accounts for state government employees and defined contribution pension and profit-sharing plans which permit participants to direct the investment of their accounts.  The insurance coverage for non-retirement accounts, which remains unchanged at $100,000 is separate from the insurance coverage provided for retirement accounts

       Depositors do not have to take any action to be covered by the higher limit on retirement accounts.  However, the retirement account must be invested in a deposit account, such as a certificate of deposit.   The FDIC insurance does not cover mutual funds, securities, or annuities which are purchased through a bank.

       There are a number of rules which make it possible to increase the amount of FDIC coverage for multiple accounts at the same institution. An individual’s portion of an account owned jointly with someone else, such as a spouse, is separately insured up to $100,000.  A participant’s share of his employer’s pension/profit-sharing plan (which does not qualify for coverage up to the $250,000 limit as a retirement account because self-directed investments are not permitted) is also separately insured for $100,000 so long as the details of the participant’s beneficial interest in the account are ascertainable from the institution’s records or from the records of the plan. Applying these rules, a husband and wife could have the following FDIC insurance coverage for multiple accounts at the same institution:

• Each could have an IRA insured for up to $250,000;
• Each could have an individual account insured for up to $100,000;
• They could have a joint account insured for up to $200,000; and
• Each could have an account under their employer’s profit-sharing plan (for which they are not permitted to direct the investment) insured for up to $100,000.

       Under the assumptions in this example, the total FDIC insurance coverage available for these account is $1,100,000.

       If you are interested in more information about FDIC insurance coverage, visit the FDIC website at www.fdic.gov.