FDIC Raises Deposit Insurance Coverage for Retirement Accounts
The Federal Deposit Insurance Corp. (FDIC) approved rules that, effective April 1, raised deposit insurance coverage on certain retirement accounts at a bank or savings institution to $250,000 from $100,000.
Increased coverage applies to certain accounts
The increased coverage applies to a variety of retirement accounts, primarily individual retirement accounts (IRAs), Keogh accounts, employer-sponsored 401(k) accounts, and some retirement accounts for state government employees. The basic insurance coverage for other deposit accounts remains at the $100,000 limit.
Under the new rules, an individual’s deposits at an FDIC-insured bank or National Credit Union Administration-insured credit union that fall into the covered categories are added together, and that total is insured up to $250,000. Retirement accounts are insured separately from other deposits that an individual holds at the same financial institution.
Coverage may increase
The new rule also establishes a method to allow for increases in insurance coverage limits on all deposit accounts (including retirement accounts) although the first opportunity to raise the limit will not come until 2011. Additional increases in deposit insurance limits may then occur every five years and would be based on inflation.
The FDIC said the increased coverage was necessary because Americans are saving more money for their retirement. By raising the limit, the FDIC hopes to allow bank customers to consolidate their savings and reduce the fees and expenses that accumulate with holding accounts at multiple depository institutions.