Frequently Asked Questions Regarding Changes to FDIC Coverage

With recent changes in FDIC coverage, employees and customers have raised several questions about specifics of the changes and how they impact deposits. Below are some of the commonly asked questions and the answers.

We will periodically update this list as we receive more questions.

Also, answers to general FDIC questions can be found on the agency’s website:
http://www.fdic.gov/deposit/deposits/insured/faq.html.

Q: The new rules say the increase for FDIC insurance coverage expires on December 31, 2009. If the customer buys a CD today with a term beyond that date, will they still have increased coverage until the CD matures?

A: No. The FDIC confirmed that the coverage will expire on December 31, 2009, therefore if the customer is concerned about loosing the increased coverage they should choose a term shorter than that date, or they may come in on 12/31/09 and restructure the CDs at that time.

Q: Can a corporation or other business account name a beneficiary and receive increased insurance coverage?

A: A business account that is a legal entity (corporation, LLC, partnership, etc.) can not name a beneficiary on the account. The only exception to business account coverage is a sole proprietorship (D/B/A), which may name a beneficiary. Sole proprietorships are included with the owner’s “single account” category when determining FDIC coverage limits, or with the owner’s other POD or formal revocable trust accounts when naming a beneficiary.

Q: If a customer exceeds $250,000 for one beneficiary in a POD account, is that money then added to the owner’s other joint account or single account coverage?

A: No, if the total funds on deposit for one owner and beneficiary exceed $250,000, the funds in excess of $250,000 are uninsured.

Q: If the coverage is now 250,000 per account ownership, does that mean joint accounts are insured for a total of $500,000?

A: Keep in mind that insurance coverage is not applied at the “account” level, but at the “account ownership” level. What that means is that the customer’s ownership interest in all accounts where he is listed as a “joint owner” is added together and the total for that customer is insured up to $250,000.

Example 1: Customer John has 4 accounts with your bank where he is listed as a joint owner. The balance in each account is divided by the number of account owners and John’s ownership interest in each account is then added together. If his total is below $250,000 then he is fully insured. Any amount above $250,000 would not be insured.

Example 2: Now let’s say John is a co-owner on a savings account with three other people. None of the customers have additional accounts with your bank. In this instance this one account could have $1,000,000 in it and be fully insured ($250,000 x 4 joint owners).

Q: On 9/29/08, Gray Williams sent out an email stating the FDIC was changing what was acceptable as a beneficiary. Would you please explain to me what this means?

A: Previously for POD and living trusts, the beneficiary had to be spouse, child, grandchild, parent, or sibling. Under the new rule the relationship to the owner does not matter. Now the beneficiary can be:

• Person-any person regardless of their relationship to the owner(s)
• Charity-recognized by the IRS
• Other Non-Profit Organization-recognized by the IRS

Q: If you have an account with one owner and two POD beneficiaries, is that the same as having a separate account for each beneficiary?

A: Yes. An owner can name multiple beneficiaries on one account and have up to $250,000 coverage per beneficiary.

Q: Can we add POD beneficiary addenda's or POD & beneficiary name to a name line on an account?

A: No. We prefer not to put beneficiary information on the account. The owner can change the beneficiary at any time and if the account is not changed properly funds could be paid out to the wrong person. The signature card is our contract and should always be used in determining ownership and beneficiary information.

Q: Are we going to be getting new FDIC Literature since the limits changed?

A: The FDIC has not revised their brochures at this time, and may not since this increase is only temporary. We will keep monitoring their website to see when/if new materials are available.