Interim regulations on expansion of deposit insurance coverage for certain retirement accounts were published by the Federal Deposit Insurance Corporation in today’s Federal Register. [12 CFR 330, 71 FR 14629] The interim rules are effective April 1, 2006.
The FDIC interim rule implements changes enacted by the Federal Deposit Insurance Reform Act of 2005 (P.L. 109-171; S.1932), which in §2103 included two provisions relevant to deposit insurance for retirement accounts, both provisions originally scheduled to take effect upon publication of final regulations -
- Deposit Insurance Limit Increased to $250,000 – The deposit insurance limit for certain retirement accounts is increased from $100,000 to $250,000. The increase applies to individual retirement accounts, eligible §457 deferred compensation plan accounts, and self-directed Keogh plan accounts or self-directed defined contribution plan (e.g., 401(k) plan) accounts. In 2010 and each fifth succeeding year, the $250,000 limit may be increased by a cost-of-living adjustment.
- Pass-Through Coverage Relaxation – Pass-through deposit insurance coverage no longer depends on the capital level of the institution where the accounts are deposited. The change applies to all employee benefit plan deposits, including those place before the 4/1/06 effective date of the FDIC’s interim regulation. Remaining FDIC rules on pass-through coverage continue to apply, including restriction of pass-through coverage to a plan participant’s non-contingent interests (i.e., those interests determined without the evaluation of contingencies other than life expectancy).
Comments on the FDIC’s interim regulations are sought by 5/22/06. See Benefitsblog for additional links of interest on this issue.