Dedicated to Deposits: Deals, Data, and Discussion

$250K Deposit Insurance Limit May Become Permanent

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Update 6/17/2010: There has been an update to the bill while in conference committee. Please refer to this post for more details.

The Senate has been working on several amendments to the financial overhaul reform. On Friday I mentioned one amendment that will likely hurt reward checking accounts. However, there's another amendment that should be appreciated by many readers of this blog. It was reported in this AP article of a Senate amendment that will make the $250,000 deposit insurance limit permanent. Here's an excerpt from the article:

As part of the government’s response to the financial crisis, the limit on Federal Deposit Insurance Corp. coverage for individual accounts was raised to $250,000 from $100,000 in an attempt to calm depositor’s fears and prevent runs on banks. The extension expires on Jan. 1, 2014. This amendment would make the higher limit permanent. Supported by both the banking industry and consumer advocates, it’s likely this amendment will make it through.

I was hoping I could provide more information on the amendment, but I'm not able to find any reference to this in any other news article or at the Congressional bill databases at thomas.loc.gov, gpoaccess.gov, opencongress.org. If you can find more details, please leave a comment.

The Current Deposit Insurance Coverage

Just over a year ago the President signed into law the deposit insurance change which extended the $250K standard coverage limit to December 31, 2013. According to the FDIC:

On January 1, 2014, the standard coverage limit will return to $100,000 for all deposit categories except Certain Retirement Accounts (includes IRAs), which will continue to be insured up to $250,000 per owner.

However, as a reader mentioned in my recent post on deposit insurance, it's a little more complicated than this. Back in 2006, the standard deposit insurance increased to $250K for IRAs. In addition, it set a plan to increase the $100K limit for non-retirement accounts based on inflation. Here's the FDIC description of this:

3. The insurance limits could rise in the future, but not until 2011, if at all.

The new law establishes a method for considering an increase in the insurance limits on all deposit accounts (including retirement accounts) every five years starting in 2011 and based, in part, on inflation.

So if the $250K limit is not changed and it expires on 12/31/2013, it's likely that the new standard limit would be over $100K. Hopefully, this will be a moot issue if the $250K limit can be made permanent.



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