Monday, August 11, 2008

FDIC Part VI: Employee Benefit Plan Accounts

Employee benefit plan accounts are deposits of a pension plan, profit-sharing plan or other employee benefit plan.
Employee benefit plan deposits are insured up to $100,000 for each participant's non-contingent interest in the plan.

This coverage is known as "pass-through" insurance because the insurance coverage passes through he plan administrator to each participant's interest or share.
Coverage for a plan's deposits is not based on the number of participants, but rather on each participant's share of the plan. Because plan participants normally have different interest in the plan, insurance coverage cannot be determined by simply multiplying the number of participants by $100,000.
To determine the maximum amount a plan can have on deposit in a single bank and remain fully insured, first determine which participant has the largest share of the plan assets, then divide $100,000 by that percentage. For example, if a plan has 20 participants, but one participant has an 80% share of the plan assets the most that can be on deposits and remain fully insured is $125,000 ($100,000 /.80= $125,000).