Academy/Banking, Cash & Internal Controls
FDIC coverage
Your association's cash is insured as one depositor, not one account per signer.
FDIC insurance covers up to $250,000 total per bank for your association, not per board member, per signer, or per account. Your checking, savings, money market deposit accounts, and CDs at the same bank, under the association's own tax ID, are all added together toward that one limit, they do not each get their own $250,000.
What the $250,000 limit actually counts
The FDIC insures deposits by depositor, per bank, not by account or by signer. Your association is treated as a single depositor. If it holds a checking account, a savings account, and a CD at the same bank, all three balances are added together, and the total above $250,000 is not insured.
"The standard maximum deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category."
Source: Your Insured Deposits, FDIC
Adding more names to the signature card does not change this. Naming three officers as signers does not create three shares of coverage; the FDIC's own guidance is that "the number of partners, members, stockholders or account signatories...does not affect insurance coverage." To count as its own insured category rather than getting folded into an individual's personal accounts, the association only needs to be an ordinary going concern, collecting assessments and paying its own bills, which almost every HOA already is.
Money market account, or money market fund?
These two names get used interchangeably at board meetings, and only one of them is a bank deposit. A bank's money market deposit account is a deposit product, insured the same way as a savings account. A money market fund is a mutual fund that invests in short-term debt and cash equivalents.
"Money market funds are a type of mutual fund that invest in liquid, short-term debt securities, cash and cash equivalents."
Source: Money Market Fund, U.S. Securities and Exchange Commission
Because a money market fund is a security, not a deposit, it carries no FDIC insurance at all. Before your board assumes reserve money is protected, ask the bank or broker directly which of the two products you actually hold.
Once reserves grow past $250,000
Many associations eventually hold more in reserves than one bank can insure. A board can open accounts at several banks itself, but that means tracking multiple relationships and statements. A deposit placement service does the same thing without the extra overhead: the association keeps one banking relationship, and the service divides the balance across a network of other FDIC-insured banks so each slice stays under the limit.
"When your funds are placed through the services, they are divided into amounts under the standard FDIC maximum and placed with other network members, each an FDIC-insured institution."
Source: ICS and CDARS FAQs, IntraFi Network LLC
A separate option is moving large balances into Treasury bills, sold in terms from four to 52 weeks. Because they are backed by the federal government rather than by deposit insurance, they carry no $250,000 ceiling at all, though selling one before maturity is not guaranteed to return what you paid. How your board weighs one option against the other, and whether either fits your reserve strategy, belongs in a written investment policy your board adopts and reviews, not in a rule this page can set for you.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Your association keeps $600,000 across checking, savings, and a CD, all at the same bank, with four board members as signers. How much is FDIC insured?
Reserves have grown to $700,000. The board wants full FDIC protection without opening and tracking accounts at several banks itself. What should it look into?
The treasurer says the association's "money market account" is FDIC insured because it is a money market account. What is the accurate response?
Sources
- Your Insured Deposits, FDIC
- ICS and CDARS FAQs, IntraFi Network LLC
- Money Market Fund, U.S. Securities and Exchange Commission
- Treasury Bills, Bureau of the Fiscal Service, U.S. Department of the Treasury
Banking, Cash & Internal Controls
Next, see how a written investment policy sets rules for spreading reserves across banks, funds, and Treasury bills before you need one.
Whether your association uses a single bank, a deposit placement service, or Treasury bills for reserves above $250,000 is a choice for your board and investment policy, not something federal insurance decides for you. Confirm with your bank or broker which specific products you hold are deposit accounts versus securities, since only deposits are FDIC insured.