Deposit Insurance for Not-for-Profit Organizations

The recent credit crisis has brought on a justified emphasis on the periodic assessment of the safety of an organization's assets on deposit at financial institutions. A key aspect of this is understanding what deposit insurance is available and how it applies to your organization.

Deposit insurance is most commonly available through the Federal Deposit Insurance Corporation (FDIC), a regulatory government agency. The FDIC operates insurance programs funded by fees assessed to participating member banks and other financial institutions.

On October 3, 2008, the FDIC's general deposit insurance limit was increased from $100,000 to $250,000 per account at any single bank and to $250,000 for certain retirement accounts. The increased deposit insurance limit of $250,000 was set to expire on December 31, 2009, but on May 20, 2009, the FDIC extended the current bank deposit insurance limit of up to $250,000 per account through December 31, 2013. The deposit insurance limit would return to the standard $100,000 amount on January 1, 2014 barring any permanent changes to these limits.

This change was one component of the FDIC's Temporary Liquidity Guarantee Program (TLGP) established in October 2008. One other component of the TLGP was the Transaction Account Guarantee (TAG) which provides full coverage separate from that described above on typical checking accounts or specifically noninterest-bearing transaction accounts at all participating Insured Deposit Institutions (IDI). The TAG program was due to expire December 31, 2009, but was extended on August 26, 2009 for six months through June 30, 2010.

The TLGP also provides funds for the FDIC to support the higher coverage by establishing additional fees to participating institutions. Banks and other financials participating in each of the programs are required to provide clear disclosure for depositors and it is recommended that you confirm your financial institution's participation in these programs before assuming the coverage applies to your deposits.

For not-for-profit organizations the FDIC's general deposit insurance is limited to all accounts titled for each depositing entity per institution. For example, ABC, Inc. is limited to $250,000 in any combination of interest-bearing checking, savings, money markets and certificates of deposits.

Additional coverage is available under TAG and any balances in a noninterest bearing checking accounts will be fully insured separately through the expiration of that program. For ABC, Inc. to get more deposited funds insured by the FDIC it will need to open accounts at more than one IDI.

An alternative to the FDIC's institutional coverage is similar coverage available through Credit Unions. Credit Unions may offer deposit insurance through the National Credit Union Administration (NCUA) through its National Credit Union Share Insurance Fund (NCUSIF). The NCUA is a government agency like the FDIC and deposit insurance is limited and expandable in the same manner as we have described in the ABC, Inc. example above.

The Helping Families Save Their Homes Act of 2009, signed into law on May 20, 2009, continued an increased level of NCUSIF insurance coverage on all accounts of up to $250,000 through December 31, 2013. This levels the new limits for commercial financial institutions and credit unions through current expiration.

There are a few other sources of deposit insurance in the market place that are not provided by regulating government agencies. These will be available through specific arrangements between financial institutions and non regulatory insurance companies. The security offered by these arrangements should