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FDIC Your Insured Deposit Retirement Accounts

FDIC: Your Insured Deposit - Retirement Accounts

Your Insured Deposit - Retirement Accounts
Retirement Accounts
35. How are funds deposited in Individual Retirement Accounts (IRAs) and Keoghs insured?

IRA and Keogh funds are separately insured from any non-retirement funds the depositor may have at an institution. But IRA and self-directed Keogh funds will be added together, and the combined total will be insured up to $100,000. IRA and self-directed Keogh funds will also be aggregated with certain other retirement funds, namely, those belonging to other self-directed retirement plans, and those belonging to so-called "457 Plan" accounts, if the deposits are eligible for pass-through insurance (see Question 37). The "457 Plans" are deferred compensation plans conforming to section 457 of the Internal Revenue Code that are established by state and local governments and nonprofit organizations.

IRA and Keogh time deposits made before December 19, 1993, are insured separately from each other and from any other funds of the depositor. Such funds, however, become subject to the aggregation rules explained above when the deposits mature, roll over, or are renewed.

36. How are the new Roth IRA and Education IRA insured?

Although subject to different tax treatment under the Internal Revenue Code, the new Roth IRA is treated the same as a traditional IRA for deposit insurance purposes. So, if a depositor has both a Roth IRA and a traditional IRA at an insured depository institution, the funds in those accounts would be added together and insured as explained in Question 35. The new "Education IRA," however, is not considered an IRA for deposit insurance purposes. Because of the required features of the account, an Education IRA is treated, for deposit insurance purposes, as an irrevocable trust account. So, the FDIC insures an Education IRA under the rules for irrevocable trust accounts explained in Question 33 of this pamphlet.

37. What is the deposit insurance coverage for pension plans and profit-sharing plans?

The general rule is that deposits belonging to pension plans and profit-sharing plans receive "pass-through insurance," meaning that each participant's ascertainable interest in a deposit-as opposed to the deposit as a whole-is insured up to $100,000.

In order for a pension or profit-sharing plan to receive pass-through insurance, the institution's deposit account records must specifically disclose the fact that the depositor (i.e., the plan itself or its trustee) holds the funds in a fiduciary capacity. In addition, the details of the fiduciary relationship between the plan and its participants, and the participants' beneficial interests in the account, must be ascertainable from the institution's deposit account records or from the records that the plan (or some person or entity that has agreed to maintain records for the plan) maintains in good faith and in the regular course of business.

The general rule applies to:

  • Any deposit made by a pension or profit-sharing plan in any institution if the deposit was made before December 19, 1992.
  • Any new deposit made by a plan on or after December 19, 1992, if the deposit is made in an institution that meets the FDIC's standards for "well-capitalized" institutions. Rollovers and renewed deposits are considered to be "new" deposits.
  • Any new deposit made by a plan on or after December 19, 1992, if the deposit is made in an institution that meets the FDIC's standards for "adequately capitalized" institutions, but only if the institution also satisfies either one of the following conditions:
  1. The institution has received a waiver from the FDIC to take "brokered deposits" - deposits that a depositor makes through an intermediary that is engaged in the business of placing funds for others; or
  2. The institution notifies the plan in writing, at the time the plan makes the deposit, that such deposits are eligible for pass-through coverage.

In all other cases, any deposit that a plan makes on or after December 19, 1992, does not receive pass-through insurance, but rather is insured as a whole up to a total of $100,000.

If a deposit has pass-through insurance when it is made into an account, the deposit does not lose its pass-through insurance, even if the institution falls out of compliance with the standards for pass-through insurance. But once the institution falls out of compliance, any subsequent deposits that are made into that same account (including ones that are rollovers and renewals of earlier deposits) will not have pass-through insurance.

THESE RULES ARE COMPLICATED. IF YOU ARE A PLAN PARTICIPANT AND WANT TO KNOW HOW YOUR PLAN'S DEPOSIT IS INSURED, WE SUGGEST THAT YOU CONSULT WITH YOUR PLAN ADMINISTRATOR FOR FURTHER DETAILS.

 

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