Winter 2005/2006

Update on FDIC Insurance

Increase in $100,000 Limit Under Consideration for Retirement Accounts

As FDIC Consumer News went to print, Congress was close to adopting legislation that would raise the federal insurance limit for certain retirement accounts (Individual Retirement Accounts and other retirement accounts for which you choose the FDIC-insured bank or thrift that gets the deposit) from $100,000 to $250,000. Under the pending legislation, coverage limits for all other consumer accounts would NOT be changed — the standard insurance limit would remain at $100,000 per depositor. Any changes in the insurance rules and their effective dates will be noted on the FDIC Web site at www.fdic.gov.

(Editor’s Note: After FDIC Consumer News went to print, Congress passed the legislation and President Bush signed it into law on February 8, 2006. The current FDIC insurance coverage remains the same until the FDIC adopts the necessary rule changes later in 2006. Watch for more information in future issues of FDIC Consumer News.)

Expanded FDIC Insurance for College Savings Accounts

A new rule from the FDIC provides that people who place "529-plan" college savings into bank deposits are better protected against loss if the bank were to fail. State-sponsored 529 plans (named after section 529 of the Internal Revenue Code) are tax-advantaged accounts that help families and individuals save for higher education expenses. Under the new rule, deposits that a 529-plan administrator places at a bank on behalf of many different individuals are federally insured up to $100,000 for each participant, not to $100,000 for all of the participants combined. While most states don't allow participants to have their 529-plan money placed in bank deposits — they instead limit the choices to investments such as stocks and bonds — several states have begun adding bank deposits as an option. The rule took effect December 27, 2005.