Raised FDIC insurance coverage limit does not apply to retirement accounts

Everywhere I go I can feel the tension. People are concerned about their investment portfolios but increasingly they're worried about the safety of their cash.

An elderly couple wrote "Can you help us understand the limits on insurance for CDs, money market accounts, and checking accounts in banks, S&Ls, and credit unions?"

On Oct. 3, President Bush signed the Emergency Economic Stabilization Act of 2008 that raised the amount in bank and savings accounts that the Federal Deposit Insurance Corp. covers from $100,000 to $250,000 per depositor.

But, the increase is only temporary. The basic FDIC deposit insurance limit will return to $100,000 after Dec. 31, 2009. The legislation did not raise coverage for retirement accounts, which is still $250,000.

If you have questions about coverage, go to www.myfdic insurance.gov. There you will find EDIE, a calculator to tell you how much cash is covered.

The new law also temporarily increased the insurance limit to $250,000 on accounts in federal credit unions and the majority of state-chartered credit unions.

Federal credit unions are regulated by the National Credit Union Administration, an independent federal agency. NCUA operates and manages the National Credit Union Share Insurance Fund, which insures nearly 89 million accounts in all federal credit unions and the overwhelming majority of state-chartered credit unions.

Before the FDIC limits were raised, the Treasury Department said it would provide protection for cash stashed in money market mutual funds, which are offered by mutual fund companies. These funds are not the same as money market accounts offered by banks, which are FDIC-insured.

Under recently released details of this program, the federal government says it will guarantee to investors they will receive $1 for each money market fund share held as of close of business on Sept. 19, 2008.

The program only covers money market funds regulated under Rule 2a-7 of the Investment Company Act of 1940, are publicly offered, are registered with the Securities and Exchange Commission, and maintain a stable share price of $1. This includes both taxable and nontaxable funds.

The guarantee will be triggered if a participating fund's net asset value falls below $0.995, commonly referred to as breaking the buck.

Ah, but the program will exist initially for three months, after which the Treasury secretary has the option to extend the program up to the close of business on Sept. 18, 2009.

Under what conditions will it be extended?

"We will examine market conditions," said Jennifer Zuccarelli, a Treasury spokeswoman.

Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com.