FDIC Increases Coverage for IRAs

Effective April 1, 2006, the Federal Deposit Insurance Corporation (FDIC) raised the limit on deposit insurance on certain retirement accounts (including IRAs) at insured banks and savings institutions.

The insurance limit for other deposit accounts, such as checking accounts, remains at $100,000.

Under the new rules, up to $250,000 in deposit insurance is provided for funds in retirement accounts. Specifically, the higher insurance coverage applies to IRAs (Traditional, Roth and SIMPLE IRAs). Also included are self-directed Keoghs, 457 plan accounts for state and local government employees, and employer-sponsored defined contribution plans such as 401(k)s that are self-directed. Generally, self-directed means that the employee can choose which insured institution maintains his or her retirement funds deposit account.

$250,000 Limit. Starting April 1, 2006, all of an individual’s deposits at the same insured bank that are in the same broad category of retirement accounts are added together and the total is insured up to $250,000.

Example: Larry has two IRAs with First National Bank, a Traditional IRA and a Roth IRA totaling $210,000. Both of Larry’s IRAs are now fully insured, because his total IRA balance does not exceed the $250,000 FDIC insurance limit.

Retirement Accounts Insured Separately. Retirement accounts are insured separately from other deposits (such as a checking account) at the same institution because an IRA is held in a different right or capacity (i.e. trust or custodial account). Insurance coverage for other deposit accounts remains at $100,000.

Example: Sally has two accounts at First National Bank, a checking account in her name worth $80,000 and her IRA worth $200,000. Both accounts are insured separately; the checking account is fully insured because it contains less than the $100,000 FDIC insurance limit for such accounts, and the IRA is fully insured because it contains less than the $250,000 FDIC insurance limit for IRAs.

Please give us a call at 215.860.9100 or stop into one of our branch locations with any questions you have on FDIC insurance coverage.