Retirement accounts including Solo 401k are federally insured up to $250,000 per bank. This limit was increased from $100,000 to $250,000 by Congress in 2006.
Video Slides: Are Solo 401k plans FDIC insured and SIPC Coverage
Key Points of FDIC Coverage for Solo 401k | Self-Directed 401k
The $250,000 limit for federal deposit protection applies to Solo 401ks at banks and savings associations insured by the FDIC, and credit unions insured by the NCUA.
Pursuant to FDIC/NCUA regulations, all of one’s retirement accounts (Traditional IRA, Roth IRA, SEP IRAs, etc.) held at the same insured bank are aggregated and insured up to $250,000.
Retirement accounts including Solo 401k plans are separately insured from other deposits held at the same bank. For example, if in addition to a $250,000 Solo 401k, the participant has a $60,000 non-Solo 401k owned CD in her own name at XYZ bank plus a $95,000 non-Solo 401k CD at the same bank in a joint account with her spouse, both of those accounts would be fully-insured because they’re under the $250,000-per-depositor-per-bank limit. The insurance for the non-Solo 401k accounts is in addition to the $250,000 of insurance for retirement accounts at XYZ Bank.
FDIC Protection is Not Extended to Investments
Keep in mind that FDIC/NCUA insurance applies only to deposits such as checking accounts, savings accounts and CDs. As such, there is no federal deposit insurance for Solo 401k investments such as stocks, bonds, real estate, notes, etc.; even if they are purchased from an FDIC or NCUA insured institution.
SIPC Coverage
However, there is some protection for investments through the Securities Investor Protection Corp. (SIPC). This is an organization to which virtually all securities brokers belong. SIPC members contribute to a reserve fund that will reimburse investors up to $500,000 in cash. These reimbursements occur in cases of broker theft or the failure of a brokerage firm.
