# Presentation: 216765

## FDIC’s National Telephone Conference on Deposit Insurance Coveragefor Retirement Accounts and Employee Benefit Plan Accounts 

**Session Dates – October 18 & November 8, 2007**

## Deposit Insurance Seminar

- Today’s  Speaker

## Eligible Ownership Categories

**EMPLOYEE**
**BENEFIT PLAN**

**GOVERNMENT**

**SINGLE**

**JOINT**

**REVOCABLE **
**TRUST**

**IRREVOCABLE**
**TRUST**

***CERTAIN ***
**RETIREMENT**

**CORPORATION**
**PARTNERSHIP**
**UNINCORPORATED **
**ASSOCIATIONS**

## Introductory Points

- Retirement accounts and employee benefit plan accounts come under two different account ownership categories, with different coverage amounts and rules
***Certain***** retirement accounts** qualify for coverage up to $250,000
**Employee benefit plan accounts** generally are insured up to $100,000 per participant’s interest in the plan

## “Floating” Questions

- Customer has $135,000 in IRA funds and would like to place those funds with your bank.  How much insurance coverage is available?
- Customer has $5 million in “pension money” and would like to place those funds with your bank.  How much insurance coverage is available?

## Eligible for the 
$250,000 category
IRAs
Self-directed defined contribution plan accounts 
Section 457 deferred compensation plan accounts
Self-directed Keogh plan accounts

_**$250,000 category**_
*IRAs*
*Self-directed* defined contribution plan accounts* *
- Section 457 deferred compensation plan accounts
*Self-directed* Keogh plan accounts

**Overview of Certain Retirement Accounts  & Employee Benefit Plan Accounts**

**Eligible for the $100,000**
_**per-participant category**_
- Defined benefit plan accounts
- Defined contribution plan accounts - not    *self-directed*
- Health & Welfare* *plan accounts
- Keogh plans - not      *self-directed*

## Certain Retirement Accounts

- Deposits owned by one participant in ***certain*** retirement accounts
- Coverage: up to $250,000 for ***certain*** retirement accounts

## Certain Retirement Accounts

- 	The most common type of account in this category is the Individual Retirement Account (IRA)
- 	The current types of IRAs are:
- Traditional IRAs
- Roth IRAs
- Simplified Employee Pension (SEP) IRAs
- Savings Incentive Match Plans for Employees (SIMPLE) IRAs

## Certain Retirement Accounts

- 	The other types of retirement accounts in this category are:
*Self-directed* defined contribution plan accounts – primarily 401(k) and *self-directed* profit-sharing accounts
- Section 457 deferred compensation plan accounts (whether or not *self-directed*)
*Self-directed* Keogh plan accounts

## Definition of Self-Directed 

- 	The owner, not a plan administrator, has the right to direct how the funds are invested, including the ability to direct that the funds be deposited at a specific FDIC-insured bank

## Accounts Not Eligible for $250,000 

- Defined benefit plan accounts
- Defined contribution plan accounts – not *self-directed*
- Health & welfare* *plan accounts
- Keogh plans – not *self-directed*

-  Health Savings Accounts
-  Coverdell IRAs (formerly known as Education IRAs)

## Important Point

**	****Insurance coverage is not increased by the number of beneficiaries named on a retirement account or in the applicable retirement plan **

## Example – Tom’s Deposit Accounts

**How much FDIC coverage does Tom have for his accounts at the bank?**

| Account  |  |
| --- | --- |
|  # 1 | Tom has an IRA with a balance of $150,000 |
| # 2 | Tom works at a company that has a 401(k) plan. His share in the plan is $125,000.  Each participant can choose where his or her funds are invested. Tom has chosen that his funds go to the same bank where he keeps his IRA money |
| # 3 | Tom also has his personal checking account at the same bank, with a balance of $80,000. |

## Tom’s Deposit Accounts

|  | 

Account 
Title | 

Balance | 
Certain Retirement Account | 

Single Account | 

Insured
Amount | 

Uninsured Amount |
| --- | --- | --- | --- | --- | --- | --- |
| # 1 | IRA | $150,000 |  
$ 275,000 |  | 
$ 250,000 | 
$ 25,000 |
| # 2 | 401(K) | 
$125,000 |  |  |  |  |
| # 3 | Personal Checking  | 
$  80,000 |  | 
$ 80,000 | 
$   80,000 | 
$          0 |
| 
Total  |  | 
$355,000 | 
$ 275,000 | 
$ 80,000 | 
$ 330,000 | 
$ 25,000 |

## Employee benefit plan accounts are deposits held by any 
plan that satisfies the definition of an employee benefit 
plan in section 3(3) of the Employee Retirement Income 
Security Act of 1974 (ERISA). 

Examples:
Defined benefit plan accounts 
Defined contribution plan accounts – not self-directed
Health & Welfare plan accounts 
Keogh plans - not self-directed 

- plan that satisfies the definition of an employee benefit
- plan in section 3(3) of the Employee Retirement Income
- Security Act of 1974 (ERISA).
**Examples:**
- Defined benefit plan accounts
- Defined contribution plan accounts – not *self-directed*
- Health & Welfare* *plan accounts
- Keogh plans - not *self-directed*

**Employee Benefit Plan Accounts**

## Employee Benefit Plan Accounts

- 	Parties will include:
-   Sponsor (employer)
-   Plan administrator (trustee/depositor)
-   Participants (employees/owners)

## Employee Benefit Plan Coverage

- Up to $100,000 for each participant ascertainable, non-contingent interest
- Referred to as “*pass-through*” coverage

## Valuation for “Pass-through” Coverage

- “**Pass-through” coverage is not determined by simply**
**multiplying $100,000 by the number of plan participants**
- Defined Contribution Plans 	   Employee’s Account 					   	   Balance
- Defined Benefit Plans 	     Actuarial Value of 						     Employee’s  Interest

## Example

| Account Title:  Happy Pet Vet Clinic
                           Defined Benefit Plan |  |
| --- | --- |
| Plan Participants | Share of Plan |
| Dr. Todd | 35%  |
| Dr. Jones | 25%    |
| Tech Barnes | 20% |
| Tech Evans | 10% |
| Tech Cassidy | 10% |
| Plan Totals | 100% |

## Example

| Account Title:  Happy Pet Vet Clinic 
                          Defined Benefit Plan                     $ 500,000
 |  |  |  |  |
| --- | --- | --- | --- | --- |
| Plan Participants | Share   of Plan  | Share of Deposit | Amount   Insured | Amount Uninsured |
| Dr. Todd | 35% | $   175,000 | $   100,000 | $    75,000 |
| Dr. Jones | 25% | 125,000 | 100,000 | 25,000 |
| Tech Barnes | 20% | 100,000 | 100,000 |  0 |
| Tech Cassidy | 10% | 50,000 | 50,000 | 0 |
| Tech Evans | 10% | 50,000 | 50,000 | 0 |
| Totals | 100% | $ 500,000 | $ 400,000 | $100,000 |

**Example**

## Maximum Deposit Amount Eligible for   Full Coverage - Formula

**Maximum coverage **
**per participant****	****	****        ****	****$ 100,000      **
**                                                      **
**	****	****Divided by  ****	**** ****	****	****	****	**
**Largest participant interest        ****.****35  ****(Dr. Todd)**
**Maximum Deposit Insurance**
**Amount Eligible for **
**Full Coverage ****	****	****	****              $ 285,714  ****	****	****	**

**÷**

**= **

## Example

| Account Title:  Happy Pet Vet Clinic 
                          Defined Benefit Plan                     $ 285,714
 |  |  |  |  |
| --- | --- | --- | --- | --- |
| Plan Participants | Share   of Plan  | Share of Deposit | Amount   Insured | Amount Uninsured |
| Dr. Todd | 35% | $   100,000 | $   100,000 |  $  0 |
| Dr. Jones | 25% | 71,429 | 71,429 | 0 |
| Tech Barnes | 20% | 57,143 | 57,143 |  0 |
| Tech Cassidy | 10% | 28,571 | 28,571 | 0 |
| Tech Evans | 10% | 28,571 | 28,571 | 0 |
| Totals | 100% | $ 285,714 | $ 285,714 | $ 0 |

**Example**

## Recordkeeping Requirements

- Account title must indicate the existence of an Employee Benefit Plan Account
- Plan administrator must be prepared to produce copies of the plan documents

## Eligible for the 
$250,000 category
IRAs
Self-directed defined contribution plan accounts 
Section 457 deferred compensation plan accounts
Self-directed Keogh plan accounts

_**$250,000 category**_
*IRAs*
*Self-directed* defined contribution plan accounts* *
- Section 457 deferred compensation plan accounts
*Self-directed* Keogh plan accounts

**Overview of Certain Retirement Accounts  & Employee Benefit Plan Accounts**

**Eligible for the $100,000**
_**per-participant category**_
- Defined benefit plan accounts
- Defined contribution plan accounts - not    *self-directed*
- Health & welfare* *plan accounts
- Keogh plans - not      *self-directed*

## “Floating” Questions – Answers 

- Customer has $135,000 in IRA funds and would like to place those funds with your bank.  How much insurance coverage is available?  **Full coverage, assuming the customer has no  other accounts categorized as certain retirement accounts at the bank.**
- Customer has $5 million in “pension money” and would like to place those funds with your bank.  How much insurance coverage is available?  **Need more information.  Assuming, for example, a non self-directed 401(k) plan with 1,000 participants and no one having an ownership interest over 2%, full coverage.  **

## Questions
and 
Answers

**and **
**Answers**