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FDIC Insurance – An Overview

updated January 27, 2010


All funds in a “noninterest-bearing transaction account” are insured in full by the Federal Deposit Insurance Corporation from December 31, 2010, through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDIC’s general deposit insurance rules.

The term “noninterest-bearing transaction account” includes a traditional checking account or demand deposit account on which the insured depository institution pays no interest. It also includes Interest on Lawyers Trust Accounts (“IOLTAs”). It does not include other accounts, such as traditional checking or demand deposit accounts that may earn interest, NOW accounts and money-market deposit accounts.


FDIC Insurance – An Overview

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.

The FDIC (Federal Deposit Insurance Corporation) insures deposits at most banks in the United States, protecting depositors against the loss of their deposits if an FDIC insured bank should fail.  FDIC insurance is backed by the full faith and credit of the United States government.


FDIC insurance covers all types of deposits received at an insured bank, including checking, savings, money market, and CDs.  It covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit.  FDIC insurance does not cover money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities.

The basic insurance amount is $250,000 per depositor, per insured bank (certain retirement accounts are insured up to $250,000).  Deposits in separate branches of the same bank are not separately insured.  Deposits in one insured bank are insured separately from deposits in another insured bank.  However, deposits maintained in different categories of legal ownership at the same bank can be separately insured.


Ownership Categories

Single Accounts:  a deposit owned by one person (including UTMA accounts, escrow accounts, sole proprietor accounts, and estate accounts).  All single accounts owned by the same person at the same insured bank are added together and the total is insured up to $250,000.

Certain Retirement Accounts:  deposits owned by one person and titled in the name of that person’s retirement account (including IRAs, Section 457 plan accounts, self-directed 401(k) plans, and self-directed Keogh plans).  All retirement accounts like those listed above owned by the same person and the same insured bank are added together and the total is insured to $250,000.

Joint Accounts:  a deposit owned by two or more people (corporations, trusts, estates, and partnerships are not eligible for joint account coverage; all co-owners must have equal rights to withdraw funds from the account; all co-owners must sign the deposit account signature card unless the account is a CD or is established by an agent, guardian, custodian, or executor).  If these requirements are met, each co-owner’s share of every account that is jointly held at the same insured bank is added together with the co-owners other shares and the total is insured up to $250,000.  Insurance coverage on joint accounts is not increased by rearranging owners’ names or by changing the styling of the names.


Revocable Trust Accounts:  a deposit owned by one or more people that indicates an intention that the deposits belong to one or more named beneficiaries upon the death of the owner(s). 

For informal revocable trusts, often called Payable-On Death (POD), Totten Trust, or In Trust For accounts, the owner of a POD account is insured up to $250,000 for each beneficiary providing the account title includes a commonly accepted term such as Payable-On-Death, In Trust For, or similar language; beneficiaries must be identified by name in the deposit account records.


For formal revocable trusts, known as Living or Family Trusts, the account is insured for $250,000 per owner for each named beneficiary provided the account title indicates the account title includes the terms Living Trust, Family Trust, or similar language.


Irrevocable Trust Accounts:  deposits held by a trust established by statute or written trust agreement in which the grantor (creator of the trust) contributes deposits or other property and gives up all power to cancel or change the trust.  The interests of a beneficiary in all deposit accounts established by the same grantor and held at the same insured bank under an irrevocable trust are added together and insured up to $250,000 provided the deposit account records disclose the existence of the trust relationship; the beneficiaries and their interests in the trust must be identifiable from the bank’s deposit account records or from the trustee’s records; the amount of each beneficiary’s interest must not be contingent as defined by FDIC regulations; the trust must be valid under state law (a beneficiary does not have to be related to the grantor to receive insurance coverage under the irrevocable trust account category).


Employee Benefit Plan Accounts:  deposits of a pension plan, profit-sharing plan, or other employee benefit plan.  Deposits are insured up to $250,000 for each participant’s non-contingent interest in the plan.  Coverage for a plan’s deposits is not based on the number of participants, but rather on each participant’s share of the plan.  Because plan participants normally have different interests in the plan, insurance coverage cannot be determined by simply multiplying the number of participants by $250,000.  To determine the maximum amount a plan can have on deposit and remain fully insured, first determine which participant has the largest share of the plan assets, then divide $250,000 by that percentage.  That figure is the most that each participant can have on deposit and remain fully insured (for more information on how your plan’s deposits are insured, consult your plan administrator).


Corporation/Partnership/Unincorporated Association Accounts:  deposits owned by a corporation, partnership, or unincorporated association (typically, unincorporated associations include churches and other religious organizations, community and civic organizations, and social clubs) are insured up to $250,000 at a single bank.  This category also includes not-for-profit organizations.  The number of partners, members, or account signatories that a corporation, partnership, or unincorporated association has does not affect coverage.


Government Accounts (also known as Public Unit Accounts):  This category includes the deposit accounts of the United States; any state, county, municipality (or a political subdivision of any state, county, or municipality); the District of Columbia, Puerto Rico, and other government possessions and territories; an Indian tribe.  Each official custodian of time and savings accounts of a public unit is insured up to $250,000.  In addition, demand deposits in an insured bank in the same state as the public unit are separately insured up to $250,000.

Structuring Large Deposits

 With the Certificate of Deposit Account Registry Service (CDARS), we can place your deposits larger than $250,000 into smaller-denomination ($250,000 or less) CDs at other institutions in the CDARS network to offer you FDIC protection on large balance CDs.  Funds will not be placed with any institution listed by the depositor at the opening of a CDARS account.  This is done to prevent a CDARS-placed deposit from putting the customer over the $250,000 threshold with an insured institution.

For more information about whether the CDARS service might be for you, contact your nearest Financial Center.


ACIB Bank Opts Out of FDIC’s Transaction Account Guarantee Program.

Beginning July 1, 2010 ACIB Bank will no longer participate in the FDIC’s Transaction Account Guarantee Program. Thus, after June 30, 2010, funds held in noninterestbearing transaction accounts will no longer be guaranteed in full under the Transaction Account Guarantee Program, but will be insured up to $250,000 under the FDIC’s general deposit insurance rules.

*This article is for informational purposes only.

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