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In 2008 the Federal Deposit Insurance Corporation made changes to its insurance programs that provide you, your family, and your company greater protection for your funds at FDIC-insured banks. In the last few months, the FDIC extended the time these coverages are in effect.
The insurance you are probably familiar with is that on deposit accounts. These include checking, savings, and money market deposit accounts, and certificates of deposit. The limit on this coverage was raised last year from $100,000 to $250,000 per depositor at each financial institution. This coverage has been extended through December 31, 2013. Special rules are in place for IRAs and other retirement accounts. This insurance is mandatory for all FDIC-insured financial institutions.
The second additional insurance coverage was put in place in October 2008 in response to the financial crisis. This temporary Transaction Account Guarantee Program provides full coverage to all personal and business noninterest-bearing transaction deposit accounts (with no limit on the balance). This program has been extended to June 30, 2010. Banks were given the option of not providing this coverage for their depositors, and some banks have opted out. Banks have another opportunity to opt out for the extended period January 1, 2010 through June 30, 2010. A partial list of banks opting out of the program can be found here. Please call your bank to find out if they are continuing to participate in the program.
How does this affect you?
1) Call your bank and confirm that they either are or are not participating in the additional FDIC insurance coverage through June 30th.
2) If they are not participating in the additional program through June 30th, then you need to be aware that your account is only covered up to $250,000. If you have an operating account that is more than $250,000, you need to set up a sweep account and have these funds invested in federal securities overnight. This is a procedure that banks used previously, and I am sure that the banks which have opted out have programs available. You need to make sure this is done by January 1, 2010.
3) If your bank is participating in the extended program through June 30, 2010, then it means that an account bearing interest is insured up to $250,000, and an account not bearing interest is covered by FDIC insurance regardless of the amount in the account.
I would recommend that regardless of which bank you use, you call them and find out if they are participating in this program. Then take the appropriate actions.
The FDIC also provides a calculator, Electronic Deposit Insurance Estimator (EDIE), on its website that you can use to estimate insurance coverage at each institution where you have accounts. The FDIC website provides complete information, or call us and we’ll be happy to help you.
We know that you have worked hard for your money. It is our desire that you retain your funds in a safe and secure environment. If we can be of any help, please do not hesitate to contact us.
Thank you
In this season of Thanksgiving, we want to remind you how much we appreciate having you as our client. We are humbled and gratified by the trust you place in us as your business, financial, and tax advisors. We sincerely and warmly wish you a Happy Thanksgiving.
Yours truly,
Van
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