Dedicated to Deposits: Deals, Data, and Discussion

It's Official: Basic Deposit Insurance Limit is $250K Through 2013


As I mentioned yesterday, the President signed the Helping Families Save Their Homes Act which includes the provision to extend the $250K deposit insurance limit to 2013. The FDIC now has this in their Changes in FDIC Deposit Insurance Coverage Page:
May 20, 2009

Deposits at FDIC-insured institutions are now insured up to at least $250,000 per depositor through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and other certain retirement accounts which will remain at $250,000 per depositor. (This supersedes the October 3, 2008 changes.)

Note, this also applies to the NCUA which covers credit unions. However, I don't see it mentioned at the NCUA website as of 5/21/09. Update 5/22/09: The NCUA website does mention the new $250K limit (see NCUA document), but the NCUA has not yet changed the end date from 12/31/2009 to 12/31/2013. Update 5/28/09: The NCUA now has a press release which confirms this extension.

I'm not sure how exactly they arrived at the 4-year extension. It seemed like for much of this year, bills were written to make the increased coverage permanent. As I mentioned in my May 7th post, an earlier version of this bill actually was written to make the increase permanent.

One thing that isn't mentioned by the FDIC is the effect of the law that was passed in 2006 which raised the IRA limit to $250K. The 2006 law didn't raise non-IRA limits, but it did establish a method for considering an increase in the insurance limits starting in 2011. Here's what the FDIC stated in 2006:
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.

I don't know how this will factor in the decision about the insurance limits in 2014. Hopefully, it won't go back to $100K. It's possible that after 5 years with a $250K insurance limit, there will be strong backing to just keep the $250K limit. Unfortunately, we'll have to live with this uncertainty. A good marketing tactic for banks would be to agree to allow penalty-free early withdrawals on CDs that mature after 2013 if the insurance limit is reduced. That would at least be one less worry for those who plan to open long-term CDs. I'm surprised I didn't see any banks come out with this kind of feature this year.

Remember that it's possible to extend coverage past the basic insurance limit via joint accounts and revocable trust accounts. But there are risks related to this (see my post on extending FDIC/NCUA coverage).

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Comments
8 comments.
Comment #1 by Anonymous posted on
Anonymous
"A good marketing tactic for banks would be to agree to allow penalty-free early withdrawals on CDs that mature after 2013 if the insurance limit is reduced."

Great idea. I'm going to send this suggestion to my various financial institutions.

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Comment #2 by Anonymous posted on
Anonymous
This entire 2013 debacle might turn out to be moot. As every late night radio listener knows, there's an excellent chance the world will end before 2013, perhaps with the end of the Mayan calendar which falls on December 21, 2012.

I can hear the laughter, chuckles, and snickers out there. And I would agree with you that the Mayans, on their own, were in no position whatsoever to know when the world would end. It would have been guesswork for them as it would be for ourselves. Even today we are a long, long way from having scientific smarts sufficient to tell us when the world will end.

But based on their glyphs the Mayans likely had help, possibly a lot of help, from entities with far greater knowledge than ours.

So bottom line perhaps Congress, in its wisdom, is offering us all of the FDIC and NCUA insurance protection we ever will need. They're even providing us a small cushion in case the Mayans, or their helpers, were off by just a smidge on their timing. Rely on Congress to go the extra mile to ensure we can pass into oblivion completely financially intact.

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Comment #3 by Anonymous posted on
Anonymous
So they don't want us to buy 5-year CDs, I guess.

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Comment #4 by Anonymous posted on
Anonymous
That is the time when we all will be broke, so the insurance will be moot and unnecessary.

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Comment #5 by Anonymous posted on
Anonymous
Speaking of 2012. There was a recent televangelist program that I saw on late night TV and the show's host said that the second coming was going to occur late in 2012 and then a titanic struggle between the forces of good and evil will ensue that will last for 7 years (until 2019). At that time, the forces of good will be victorious and a new age of global peace that will last for many millennia will reign on the earth. So, I guess that all evildoers and non-believers have about 10 years left before the time of reckoning comes around.

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Comment #6 by Anonymous posted on
Anonymous
I'm glad you're all in such a good mood..If I were to put in my 2 cents...I'd say that the date of the next presidential election (2012) and all the political "BS" that goes with it has more than anything else as to why the FDIC ins. was extended just 4 years...

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Comment #7 by Anonymous posted on
Anonymous
In four years, your $250k will probably only buy $100k worth of stuff in today's dollars ;)

That's kind of a joke. Hopefully price inflation won't be that bad when it finally catches up to us.

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Comment #8 by Anonymous posted on
Anonymous
Still no post on NCUA as of now,about the increase of max coverage.

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