Employee Benefit Plan Deposits: Whose Interest Is Insured

A retirement or benefit plan may place money in a bank account controlled by a plan administrator, leaving participants unsure how deposit insurance applies. Coverage can depend on the participants' interests and the type of plan rather than the name shown on one pooled account. This guide explains the FDIC's employee-benefit-plan category and the information needed to assess coverage. It focuses on deposits held by a plan, not the market value of investments held inside it.

Adapted from public-domain educational material published by FDIC. Fynoptic has organized and edited the material and added introductory and practical guidance. Sources were reviewed on October 28, 2026; original publication dates, where available, are listed below.

Employee Benefit Plan Accounts¹ (12 C.F.R. § 330.14)

I. Definition

For purposes of deposit insurance coverage, the term “employee benefit plan” means an employee welfare benefit plan or an employee pension benefit plan (or a hybrid of the two). This definition is taken from Section 3(3) of the Employee Retirement Income Security Act of 1974 (ERISA).

The most common employee benefit plans include:

• Defined benefit plans – These plans pay participants a certain amount after they retire based on years of employment and their salary.
• Employee welfare plans or welfare benefit plans – These plans provide medical, health, and hospitalization benefits or income in the event of sickness, accident, or death.
• Defined contribution plans (e.g., 401(k), profit sharing plans) – These plans allow participants and/or employers to make tax-deferred contributions, that plan participants can access later (e.g., after they are 59½ years old).
• Keogh plans (defined benefit or defined contribution plans) – These plans are used by self-employed people who make tax-deferred contributions that plan participants can access later (e.g., after they are 59½ years old).

FDIC insurance coverage is based on deposited funds at the insured bank

Employee benefit plans can invest funds in deposit accounts in insured banks as well as in nondeposit products such as stocks, bonds, and other investments. FDIC deposit insurance only applies to the funds that are on deposit at the insured bank.

II. Investment Decisions Made By a Plan Administrator

Employee benefit plans have plan administrators who make investment decisions for the plan participants.

III. Insurance Limit

The deposits of an employee benefit plan are insured on a “pass-through” basis, meaning that the deposits are insured up to $250,000 for the “non-contingent interest” of each plan participant. A “non-contingent interest” is an interest capable of determination without evaluation of contingencies other than life expectancy. To the extent that any deposits represent contingent interests, the deposits are separately insured up to $250,000 in the aggregate. Finally, to the extent that any deposits represent an “overfunding” of the plan, the deposits are separately insured up to $250,000 in the aggregate.

Interests in defined contribution plans

An employee’s non-contingent interest in a defined contribution plan is deemed to be the “employee’s account balance as of the date of the failure of the insured depository institution regardless of whether said amount is derived in whole or in part from contributions of the employee and/or employer to the account.”
12 C.F.R. § 330.14(c)(1).

Interests in defined benefit plans

An employee’s non-contingent interest in a defined benefit plan “is deemed to be the present value of the employee’s interest in the plan evaluated in accordance with the method of calculation ordinarily used under such plan, as of the date of the default of the insured depository institution.” 12 C.F.R. § 330.14(c)(2).

Example 15

Facts:

Medical Services of Mainville, a small doctor’s office, has four employees, each of whom participates in the employee benefit plan. These employees do not participate in any other employee benefit plan sponsored by the same employer.

The plan administrator invested $700,000 in CDs from Anytown Bank. The employee benefit plan defines the interest of each plan participant. Under the terms of the plan documents, the interests of the participants are non-contingent. The respective interests of the participants are set forth below:

Rules:

1. The deposits of an employee benefit plan are insured up to $250,000 for each participant’s non-contingent interest.
2. To calculate each participant’s interest in a deposit account, multiply the deposit amount by each participant’s percentage share of the plan’s assets.

Answer:

In this example, Column A provides each plan participant’s percentage share of the plan. The interest of Dr. Moore, for example, is 40% of the plan assets. The plan has $700,000 on deposit. Therefore, Dr. Moore’s interest is 40% of $700,000, which equals $280,000 (Column B).

Since each plan participant’s non-contingent interest is insured up to $250,000 (Column C), Dr. Moore’s interest is uninsured in the amount of $30,000 (Column D).

Using this same calculation for each participant, the table shows every other participant’s non-contingent interest is less than $250,000. Therefore, the interests of the other employees are fully insured.

IV. Determining the Maximum Insurable Amount

The above example explained how the FDIC determines deposit insurance coverage when the funds already are on deposit at the insured bank.

Sometimes, a plan participant, an administrator, or an insured bank employee wants to know how much can be deposited in a plan account and be fully insured.

Example 16

Facts:

Before opening an employee benefit plan account at XYZ Bank, the plan administrator wants to know how much can be deposited and be fully insured. The facts in this example are the same as in Example 15.

Rule:

The maximum amount that can be deposited in an employee benefit plan account and be fully insured is calculated by dividing $250,000 by the largest non-contingent percentage interest in the plan.

Answer:

Dr. Moore has the largest non-contingent interest in the plan at 40%. When you divide $250,000 by 0.40, the result is $625,000 (Plan Total in Column B). This means the plan’s deposits can be fully insured for up to $625,000 at each insured bank.

Based on a balance of $625,000, Column B outlines the interest of each participant. For example, multiplying $625,000 by Mrs. Taylor’s 10% results in $62,500, which is her beneficial interest. This interest is fully insured because it is not greater than $250,000. Similarly, the interest of every other participant is fully insured because it does not exceed $250,000.

Footnotes

¹ Section 11(a)(1)(D)(ii) of the FDI Act, 12 U.S.C. § 1821(a)(1)(D)(ii) , provides that an insured bank may not accept deposits of an employee benefit plan unless the insured bank is well capitalized or adequately capitalized. Please note, however, that an undercapitalized insured bank’s violation of this prohibition will not affect the insurance coverage of the employee benefit plan’s deposits.

Putting this into practice

Ask the plan administrator which institution holds the deposits and how participants' interests are determined. A large pooled balance does not by itself show either full coverage or an uninsured loss. The plan structure and the records supporting each interest are central to the calculation.

Sources and further reading

• Employee Benefit Plan Accounts — FDIC