FDIC Part 8: Certain Retirement Accounts

August 17, 2020


Dear clients and friends,


This LISTEN TO LAWRENCE installment introduces the fifth category of separate FDIC insurance, CERTAIN RETIREMENT ACCOUNTS at an insured bank. Remember, this insurance is in addition to the insurance you get from each of the other categories and these same rules apply to accounts in credit unions.

While not every retirement plan falls under this category, suffice it to say that most of the retirement plans that you control, do. Nevertheless, to be insured, the retirement plan must be found in the following list:

Individual Retirement Account (IRA):
Traditional IRA
Roth IRA
Simplified Employee Pension (SEP) IRA
Savings Incentive Match Plans for Employees (SIMPLE) IRA
Self-directed defined contribution plan account includes
Self-directed 401(k) plan
Self-directed SIMPLE IRA held in the form of a 401(k) plan
Self-directed defined contribution profit-sharing plan
Self-directed Keogh plan account (or H.R.10 plan account) designed for self-employed individuals
Section 457 deferred compensation plan account, such as an eligible deferred compensation plan provided by state and local governments regardless of whether the plan is self-directed

The way this works is that you add up all your retirement accounts listed above at the same insured bank and you are insured up to $250,000.

“Self-directed” means that you have the right to direct how the money is invested, including the ability to direct that deposits be placed at an FDIC-insured bank. The same will be true if a plan has deposit accounts at a particular insured bank as its default investment option because, by inaction, the participant has directed the placement of such deposits.

The following types of deposits do not qualify as Certain Retirement Accounts:
A plan for which the only investment vehicle is the deposit account of a particular bank so that participants have no choice of investments
Deposit accounts established under section 403(b) of the Internal Revenue Code (annuity contracts for certain employees of public schools, tax-exempt organizations and ministers), which are insured as Employee Benefit Plan accounts
Defined-benefit plan deposits (plans for which the benefits are determined by an employee’s compensation, years of service and age), which are insured as Employee Benefit Plan accounts
Defined contribution plans that are not self-directed, which are insured as Employee Benefit Plan Accounts
Coverdell Education Savings Accounts (formerly known as Education IRAs), Health Savings Accounts, or Medical Savings Accounts.

Note: Unlike the Revocable Trust category where naming beneficiaries expands coverage, the existence of beneficiaries does not increase the available insurance coverage. $250,000 is the limit!

Carol Brady has several accounts at an insured bank.
IRA $150,000
Roth IRA 150,000
Individual CD 150,000

Carol’s IRA and Roth IRA must be added together as they both qualify for insurance under the list above. $250,000 will be insured and $50,000 will be uninsured. The individual CD will be fully insured under the SINGLE ACCOUNT category where another $250,000 of insurance can be found.

I hope this helps.

Please forward this information to your friends and relatives.

As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.

Let’s stay connected.


Stay safe!