If you receive a notice from your bank regarding FDIC deposit insurance coverage changes for 2011, don't be overly concerned. This is separate from the standard $250K deposit insurance which is now permanent. A reader emailed me a notice he received from his bank with the title "year-end changes in temporary FDIC insurance coverage is coming that may affect the deposit insurance coverage on one or more accounts you have with us." For those who weren't closely following the FDIC rule changes, this notice might be confusing.
During the financial crisis the FDIC adopted the Transaction Account Guarantee Program (TAGP) to provide unlimited deposit insurance on non-interest-bearing transaction accounts. Bank participation into this program was optional. The temporary coverage was extended a few times, but it's now set to expire at the end of 2010.
The TAGP was intended to ease the concerns of businesses who may have millions of dollars in transactional accounts that are used for things like payroll. With this program, the chance of bank runs would be reduced.
Starting in 2011, the TAGP is being replaced by a new rule that's part of the recent financial reform act. This new rule extends unlimited coverage for 2 years. The coverage is similar, but it does not cover accounts which pay any interest. The original TAGP included NOW accounts that paid interest of up to 0.50%. Thus, if you had a checking account that had unlimited deposit insurance due to TAGP, it may lose this unlimited deposit insurance in 2011. However, the standard deposit insurance (for at least $250K) will still remain.
For most of us who keep our large deposits earning as much interest as possible, this change won't have any effect.