What Does FDIC Insured Mean For You?

Updated 12/1/2008

The FDIC is an independent agency of the US government that protects against the loss of customers' deposits if an FDIC-insured bank fails. FDIC Deposit Insurance is backed by the full faith and credit of the US government. Historically, insured deposits are available to customers of a failed bank within just a few days. Since the start of the FDIC in 1933, no depositor has ever lost a penny of insured deposits.

On October 3, 2008, President George W. Bush signed the Emergency Economic Stabilization Act of 2008, which temporarily raises the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor.  The temporary increase in deposit insurance coverage became effective immediately upon the President’s signature.  The legislation provides that the basic deposit insurance limit will return to $100,000 on January 1, 2010. Coverage for IRAs, which previously were insured up to $250,000 per depositor per insured bank, will remain at $250,000. Unlimited deposit insurance coverage is available through December 31, 2009, for non-interest-bearing transaction (checking) and IOLA accounts at institutions participating in the FDIC's Transaction Account Guarantee Program (TAGP). Canandaigua National Bank & Trust is a participant in the TLGP.

The FDIC provides separate insurance coverage for deposit accounts held in different categories of ownership. Common ownership categories include: single accounts, joint accounts, retirement accounts, and revocable trusts (often called "payable on death" – POD or "In Trust For" accounts). The FDIC adopted a new interim rule as of 9/26/08 that simplifies and modifies its rules for revocable trusts.  It eliminates the concept of qualifying beneficiaries.  That means, while prior rules stated that beneficiaries needed to be a spouse, child, grandchild, parent or sibling to qualify – these restrictions are now lifted.  "Beneficiary" now includes natural persons (e.g., nieces, nephews, in-laws, great-grandchildren, cousins, friends, etc.), as well as charitable organizations and other non-profit entities.  Coverage is the greater of $500,000 or the aggregate amount of all the beneficiaries’ interests in the trust, limited to $250,000 per beneficiary. This will result in faster deposit insurance determinations, as qualifications do not need to be scrutinized. The insurance amount is still $250K per beneficiary, with no additional insurance for the owner of the account.

For each account owner with combined revocable trust deposit balances of $1.25 million or less at a single bank, the maximum coverage will be determined by multiplying the number of different beneficiaries by $250,000. (This will apply to the vast majority of revocable trust accounts.) For each account owner with combined revocable trust deposit balances of more than $1.25 million and more than five named beneficiaries, coverage is the greater of $1.25 million or, as before, the aggregate of all beneficiaries' proportional interests in the trust deposits, limited to $250,000 per beneficiary.

Examples of extension of coverage based upon utilizing the different categories of ownership and CNB's participation in the TAGP:

Note: additional coverage possible if more qualifying POD accounts are set up (i.e., utilizing different beneficiaries - siblings, parent, charities). Also, IRAs are additionally covered to $250K per individual. Beneficiaries do not affect IRA coverage.

CDARS®

CDARS® is the Certificate of Deposit Account Registry Service®. This allows CNB to open a "consolidated" CD for our customers for the purpose of extended FDIC insurance coverage: $250K remains at CNB, and we direct the rest of the monies to accounts at other participating institutions at $250K max each**. The customer will receive a monthly statement from CNB, outlining where the deposits are maintained—without ever having to visit or negotiate with the other banks. The interest rates quoted are based on CNB’s rates, specific to the CD term selected (3 months, 6 months, 12 months, 24 months, 36 month maturities). This product is an important option for very wealthy individuals who have uninsured monies even after the FDIC extended coverage because of titling changes or companies or non-for-profit organizations that have uninsured exposure, and may be mandated because of their fiduciary responsibilities, to have every dollar covered by the FDIC.

** As the increase in coverage is temporary, the maximum amount of the CD will correspond with the maturity date of the deposit as well as the extension in coverage.