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Ownership Categories
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 $250,000 for each
participant's non-contingent interest in the plan.
This coverage is known as "pass-through" insurance because the insurance coverage passes through the 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 interests in the plan, insurance coverage cannot be
determined by simply multiplying the number of participants by $250,000.
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 $250,000 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 deposit and remain fully insured is $312,500.
($250,000/.80 = $312,500)
| Example - Employee benefit plan that qualifies for "pass-through" coverage |
| Account Title
|
Balance
|
| Happy Pet Clinic Benefit Plan |
$ 285,000 |
| Plan Participants |
Plan Share |
Share of Deposit |
Amount Insured |
Amount Uninsured |
| Dr. Todd |
35% |
$ 99,750 |
$ 99,750 |
$ 0 |
| Dr. Jones |
30% |
85,500 |
85,500 |
0 |
| Tech Evans |
20% |
57,000 |
57,000 |
0 |
| Tech Barnes |
15% |
42,750 |
42,750 |
0 |
| Plan Total |
100% |
$ 285,000
|
$ 285,000
|
$ 0 |
Explanation:
This employee benefit plan can deposit $285,000 in a single insured
bank and have all of its participants fully insured. The $285,000 deposit results
in Dr. Todd (the largest participant) being insured for $99,750 (35% of $285,000).
When Dr. Todd is fully insured, the rest of the participants will be insured,
since they have smaller shares of the plan.
To determine the maximum amount this
plan can have on deposit in a single bank and remain fully insured, first
identify the participant with the largest share of the plan assets, then divide
$250,000
by that percentage. In this example since Dr. Todd has a 35% share of the
plan assets, the most that can be on deposit and remain fully insured is $714,285.71.
($250,000/.35 = $714,285.71)
Plan participants who want to know more about how a plan's deposits are insured should consult with the plan administrator.
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