Haris Ashley
Profit-sharing plans are a great way to incentivize and reward employees, and they can be implemented by businesses of any size. These plans offer flexibility, and employers can choose when and how much to contribute. However, it is important to ensure that these plans do not discriminate in favor of highly compensated employees. To implement a profit-sharing plan, businesses must fill out an Internal Revenue Service Form 5500 and disclose all participants. While these plans are beneficial, it is important to understand if they are insured. The National Credit Union Share Insurance Fund, established by Congress in 1970, insures member share accounts at federally insured credit unions. This insurance is provided automatically to credit union members, covering individual accounts up to $250,000 and joint accounts up to $250,000. Additionally, the Share Insurance Fund separately protects retirement accounts. To determine the insurance coverage for your profit-sharing plan, you can utilize resources provided by the National Credit Union Administration (NCUA), such as their Share Insurance Estimator and informative brochures.
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What You'll Learn
Share Insurance Coverage
The Share Insurance Fund insures individual accounts at federally insured credit unions up to a value of $250,000. Similarly, a member's interest in all joint accounts is insured up to $250,000. The Share Insurance Fund also separately protects IRA and KEOGH retirement accounts up to $250,000.
The NCUA does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investment or insurance products are sold at a federally insured credit union.
Members can calculate the amount of coverage their insured funds have at a federally insured credit union using the NCUA's Share Insurance Estimator. This tool is available on the NCUA's consumer website, MyCreditUnion.gov, and can be used for personal, business, or government accounts. Credit unions must also display the official NCUA insurance sign at each teller station and in all branches, as well as on their website.
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National Credit Union Share Insurance Fund
The National Credit Union Share Insurance Fund was created by Congress in 1970 to provide deposit insurance to protect the accounts of credit union members at federally insured institutions in the United States. The fund is administered by the National Credit Union Administration (NCUA), an independent federal financial regulator.
The Share Insurance Fund is funded entirely by participating credit unions, with each federal credit union contributing one percent of insured shares. As of 2023, the fund is worth approximately $13 billion, with $2.8 billion in retained earnings and $10 billion in contributed capital from credit unions. The majority of the fund is invested in United States treasury securities, with a portion of the earnings used to fund the NCUA's operations.
The Share Insurance Fund insures individual accounts at federally insured credit unions up to $250,000, and a member's interest in all joint accounts combined is insured up to the same amount. The fund also separately protects members' IRA and KEOGH retirement accounts up to $250,000 and provides additional coverage for members' trust accounts.
Credit union members can use the NCUA's Share Insurance Estimator to calculate the amount of coverage their insured funds have. This tool is available on the NCUA's consumer website, MyCreditUnion.gov, and can be used for personal, business, or government accounts. The NCUA also publishes a variety of resources, including brochures and videos, to help consumers understand their share insurance coverage.
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Credit union members
As a credit union member, your profit-sharing is insured through the National Credit Union Share Insurance Fund (NCUSIF), which is administered by the National Credit Union Administration (NCUA). This insurance is provided automatically when you join a federally insured credit union, so you don't need to worry about applying for coverage. The NCUSIF is similar to the deposit insurance coverage provided by the Federal Deposit Insurance Corporation (FDIC).
The standard insurance amount is $250,000 per share owner, per insured credit union, for each account ownership category. This includes individual accounts, joint accounts, and retirement accounts such as IRAs and KEOGH accounts. The NCUSIF covers members' accounts dollar-for-dollar, including principal and any accrued dividends up to the date of the insured credit union's closing. It's important to note that the insurance coverage is up to $250,000 in aggregate for all accounts you own at the same insured credit union.
If you have multiple accounts with different ownership structures at the same credit union, the insurance coverage may vary. For example, if you have both a single account and a joint account, each account would be insured up to $250,000 separately. Additionally, if you have irrevocable trust accounts, each named beneficiary who is a member of the credit union is insured up to $250,000, subject to certain limitations.
You can calculate the specific coverage of your insured funds using the NCUA's Share Insurance Estimator on their website, MyCreditUnion.gov. This tool allows you to input your account information and determine the exact insurance coverage for your personal, business, or government accounts. It's important to note that the Share Insurance Fund does not cover digital assets, cryptocurrencies, stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities.
To ensure your credit union is federally insured, you can use the NCUA's Credit Union Locator tool or their "Find a Credit Union" function. Federally insured credit unions are required to prominently display the official NCUA insurance sign at each teller station and on their website. Additionally, no credit union can end its federal insurance without first notifying its members.
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Share Insurance Estimator
The National Credit Union Administration's (NCUA) Share Insurance Estimator is a tool that helps consumers, credit unions, and their members understand how the share insurance rules apply to their member share accounts. It calculates and reports the insurance coverage of all types of share accounts offered by a federally insured credit union, including share draft accounts (checking accounts) and share savings accounts (regular, club, escrow, etc.). The estimator can be used for personal, business, or government accounts.
Personal accounts include individual ownership, joint ownership, payable-on-death (accounts with named beneficiaries), living trusts, and IRAs. The Share Insurance Estimator can also be used to calculate the insurance coverage of KEOGH retirement accounts. It is important to note that the estimator should not be used for investments, even if these investment or insurance products are sold at a federally insured credit union.
The Share Insurance Estimator is designed to provide an accurate share insurance calculation, assuming it is properly used and the account information is correctly entered. However, the results and conclusions generated by the estimator are strictly advisory. The estimator bases its computations for coverage on the rules in effect as of May 2013, and any subsequent changes will be updated as soon as possible.
To use the Share Insurance Estimator, enter your first account with the credit union. If you have a second account with the same credit union, click "Add New Account" and repeat the steps. The estimator only calculates coverage for one credit union at a time, so the credit union name you enter will be set for the duration of your session or until you create a new report. It is important to use identical names for each person in the report to ensure accuracy.
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Share Insurance Coverage Overview
Share Insurance Coverage refers to the insurance provided by the National Credit Union Administration (NCUA) to protect member share accounts at federally insured credit unions. Established by Congress in 1970, the NCUA's Share Insurance Fund is similar to the deposit insurance coverage provided by the Federal Deposit Insurance Corporation. This insurance coverage is automatically provided to members of federally insured credit unions, and there is no need for members to apply separately.
The Share Insurance Fund provides insurance coverage for various account ownership types, including individual and joint accounts. It insures individual accounts at federally insured credit unions up to $250,000, and a member's interest in all joint accounts combined is also insured for up to $250,000. Additionally, the Share Insurance Fund separately protects IRA and KEOGH retirement accounts up to $250,000 each.
It is important to note that the NCUA does not insure all types of investments or insurance products. For example, money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities is not insured by the NCUA, even if these products are sold by a federally insured credit union.
To help members understand their share insurance coverage, the NCUA provides several resources, including brochures, a one-page flyer, a two-page pamphlet, and a multi-page booklet, which are available in English and Spanish on their consumer website, MyCreditUnion.gov. The website also offers an online Share Insurance Estimator that members can use to calculate the amount of coverage their insured funds have at a federally insured credit union.
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Frequently asked questions
If you are a member of a federally insured credit union, your profit sharing is insured by the National Credit Union Share Insurance Fund. This insurance is provided automatically and covers individual accounts up to $250,000. You can also use the NCUA's Share Insurance Estimator to calculate the amount of coverage your insured funds have.
All federally insured credit unions are required to display the official NCUA insurance sign at each teller station, as well as on their website and wherever they accept share deposits or open accounts.
The Share Insurance Fund also separately protects IRA and KEOGH retirement accounts up to $250,000.
The NCUA does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investment or insurance products are sold at a federally insured credit union.
