In today’s turbulent market there is a way to fully insure your savings, even though the sale of a home or a transactional account for a business may exceed the limits of federal insurance.
As most readers know, the National Credit Union Administration (the credit union equivalent of the Federal Deposit Insurance Corporation) insures deposits of up to $250,000 at credit unions. But consumers should also know that uninsured balances above $250,000 are at risk if their financial institution fails.
Massachusetts public policy, however, is unique in this area. All state-chartered credit unions and banks must fully insure all deposits. This means that in addition to federal insurance, Massachusetts state-chartered banks and credit unions must also carry excess deposit insurance if they wish to accept deposits above the $250,000 of federal insurance coverage.
What this means for consumers is that their funds are fully covered if their state-chartered financial institution should fail. The Cooperative Central Bank Share Insurance Fund and the Deposit Insurance Fund provide this service to customers of state-chartered banks. The Massachusetts Credit Union Share Insurance Corporation (MSIC) provides it for credit union members.
MSIC was incorporated by a special Act of the Massachusetts legislature 50 years ago as the first insurer in the nation for credit unions. Today, MSIC is the only insurer of excess deposits for state and federally chartered credit unions in Massachusetts.
Until recently, Massachusetts was the only state in the nation that restricted deposits at state-chartered credit unions. Legislation, which took effect last November, has changed that. Massachusetts state-chartered credit unions may now accept deposits with no limit, so long as they carry excess deposit insurance by MSIC.
Not all credit unions have taken the additional step of fully insuring their members’ deposits. It is critical that consumers concerned about fully protecting their deposits seek out credit unions that carry MSIC insurance.
“No consumer has ever lost a penny of their savings in an MSIC-insured credit union,” says Michael Hanson, MSIC president and chief executive, and also a former Massachusetts commissioner of banks.
$9.85 Million Rebate
In other good news for its member credit unions, MSIC recently provided an unprecedented $9.85 million rebate of excess assessments.
With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the NCUA permanently increased coverage at federally insured credit unions from $100,000 to $250,000. These excess deposits which were formerly insured by MSIC are now insured by the National Credit Union Share Insurance Fund. Each MSIC-member credit union has been repaid for assessments on this portion of coverage now being provided by the NCUSIF.
For some credit unions, MSIC returned all assessments paid during the past 16 years.
Over the past two years, MSIC has advocated for the $250,000 federal deposit insurance limit to become a permanent part of federal law, resolved complex tax issues related to the rebate, and obtained regulatory approval for the rebate in the midst of the global financial crisis. MSIC’s sole objective is to help our credit union members during these difficult economic times, so that they can better serve their members.
Dan Murphy is vice president of marketing and business development at Massachusetts Credit Union Share Insurance Corporation in Westborough. Email: dmurphy@msic.org
