Are you and your company prepared for the FDIC (Federal Deposit Insurance Corporation) insurance limit changes set to occur January 1, 2013?
On January 1, 2013, non-interest bearing transaction accounts such as checking accounts or savings accounts will no longer be fully insured by the FDIC. Accordingly, non-interest bearing transaction accounts will fall under the standard deposit insurance amount of $250,000 per depositor, per insured bank, for each account ownership category.
So what is the risk to you? The general risk is that your bank fails to continue as a business, and you do not have the adequate insurance to recover all monetary deposits you have with that bank. For many companies, this could be a significant hardship and loss of cash, putting the company and/or customers in financial hardship. Accordingly, if you hold greater than $250,000 at any one time in a single insured bank under one of the account ownership categories, you should start considering what you will do to limit your risk subsequent to December 31, 2012. This may include dividing your deposits up between multiple banks or monitoring your banks more regularly and in further detail.
If you issue financial statements with disclosures, whether compiled, reviewed or audited, this may lead to a change in the disclosure of your uninsured cash balance. Disclosure requirements for financial statements include information regarding significant concentrations of credit risk arising from cash deposits in excess of federally insured limits. Under the temporary unlimited insurance coverage for non-interest bearing transaction accounts (12/31/2010 – 12/31/2012), you would disclose that no cash was uninsured if all the company’s cash was in qualifying non-interest bearing transaction accounts. However, for fiscal year ends ending after 12/31/2012, you will need to disclose the amount of cash deposits in excess of the standard $250,000 deposit insurance amount. Accordingly, if the uninsured amount is significant, users of your financial statements might be inquisitive as to what will be done to limit such exposure.
So what can be done to limit such risk? And how can you make a better determination of how much of your cash is insured vs. not insured? Visit the FDIC website at www.fdic.gov, and navigate to the EDIE (Electronic Deposit Insurance Estimator) link, which lets consumers and bankers know, on a per-bank basis, how the insurance rules applies to a bank users specific group of deposit accounts.