Your Fidelity 401(k) investments are insured by the Pension Benefit Guaranty Corporation (PBGC), a U.S. government agency. This insurance protects your retirement savings up to certain limits, ensuring that you won’t lose everything if your employer goes bankrupt. The PBGC insures most defined-benefit pension plans, which guarantee a specific retirement benefit at a certain age, but it also provides limited protection for 401(k) plans like yours. The coverage for 401(k)s is much lower than for pension plans, typically up to $12,352 per year, but it can still provide some peace of mind in the event of an employer bankruptcy.
Federal Deposit Insurance Corporation (FDIC) Coverage for Fidelity 401k Plans
Fidelity 401k plans are not insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC is a US government agency that provides deposit insurance to banks and other financial institutions. It insures deposits up to $250,000 per depositor, per insured bank.
401k plans are retirement savings plans offered by employers. They are not considered bank deposits, so they are not covered by FDIC insurance.
Securities Investor Protection Corporation (SIPC) Protection for Fidelity 401k Investments
The Securities Investor Protection Corporation (SIPC) is a non-profit, membership corporation that provides protection to investors in the event of a brokerage firm’s failure. SIPC coverage is available to customers of member brokerage firms who maintain accounts for cash, securities, and other financial instruments.
SIPC Coverage Limits
SIPC provides coverage up to $500,000 per customer, with a limit of $250,000 for cash claims. This coverage is provided for each separate account a customer has with a member brokerage firm.
Fidelity 401k Investments
Fidelity Investments is a member of SIPC. As such, Fidelity 401k investments are protected by SIPC up to the limits described above.
In the event of a Fidelity brokerage failure, SIPC would cover the following types of investments:
- Cash
- Stocks
- Bonds
- Options
- Mutual funds
- ETFs
Additional Protections
In addition to SIPC protection, Fidelity 401k investments may also be protected by the Employee Retirement Income Security Act (ERISA). ERISA is a federal law that sets minimum standards for employee benefit plans, including 401k plans.
ERISA provides the following protections for 401k investments:
- Vesting requirements
- Non-forfeitability of employer contributions
- Limits on investment options
- Fiduciary duties of plan administrators
| Type of Protection | Coverage Limit |
|---|---|
| SIPC | $500,000 per customer, including $250,000 for cash claims |
| ERISA | Vesting requirements, non-forfeitability of employer contributions, limits on investment options, fiduciary duties of plan administrators |
Plan Insurance from the Pension Benefit Guaranty Corporation (PBGC)
401(k) plans are employer-sponsored retirement plans that allow employees to save for retirement on a tax-advantaged basis. Fidelity is a financial services company that offers 401(k) plans to its clients. Employees who participate in a Fidelity 401(k) plan may be wondering if their plan is insured by the Pension Benefit Guaranty Corporation (PBGC).
The PBGC is a federal agency that insures pension plans in the private sector. If a pension plan fails, the PBGC may step in to pay benefits to participants. However, 401(k) plans are not pension plans. Instead, they are defined contribution plans. This means that the amount of money that participants receive in retirement depends on the amount of money that they contribute to the plan, plus any investment earnings.
Because 401(k) plans are not pension plans, they are not insured by the PBGC. However, Fidelity 401(k) plans are FDIC-insured up to $250,000. This means that the money that participants contribute to their plans is protected against loss in the event that Fidelity fails.
In addition to FDIC insurance, Fidelity 401(k) plans also offer a variety of other protections. These protections include:
- Vesting: Vesting means that participants have a legal right to the money that they contribute to their plans. Even if they leave their employer, participants will still be able to keep the money that they have vested in their plans.
- Portability: Portability means that participants can take their 401(k) plans with them when they leave their employer. Participants can either roll their 401(k) balances into an IRA or they can transfer them to a new employer’s 401(k) plan.
- Tax benefits: Contributions to 401(k) plans are made on a pre-tax basis. This means that participants can reduce their taxable income by contributing to their plans. Earnings on 401(k) plans are also tax-deferred. This means that participants do not have to pay taxes on their earnings until they withdraw the money from their plans.
Fidelity’s Own Insurance Coverage for 401k Plans
Fidelity offers its own insurance coverage for 401k plans, known as the Fidelity Employer 401(k) Bond, which protects against losses resulting from employee fraud or dishonesty. The bond provides coverage for:
- Embezzlement or theft of plan assets by an employee
- Unauthorized withdrawals or transfers from participant accounts
- Forgery of plan documents or signatures
- Breach of fiduciary duty by a plan sponsor or trustee
The amount of coverage provided by the Fidelity Employer 401(k) Bond is based on the assets of the plan. The minimum coverage amount is $100,000, and the maximum coverage amount is $10 million.
In addition to the Fidelity Employer 401(k) Bond, Fidelity also offers a variety of other insurance products to protect 401k plans, including:
- Plan Fiduciary Liability Insurance: Protects plan sponsors and trustees from liability for breach of fiduciary duty.
- Cyber Liability Insurance: Protects against losses resulting from a cyber attack on the plan’s computer systems.
- Participant Loan Default Insurance: Protects against losses resulting from a participant’s default on a loan from the plan.
| Insurance Product | Coverage |
|---|---|
| Fidelity Employer 401(k) Bond | Employee fraud or dishonesty |
| Plan Fiduciary Liability Insurance | Breach of fiduciary duty |
| Cyber Liability Insurance | Cyber attacks |
| Participant Loan Default Insurance | Participant loan defaults |
Well, folks, there you have it! Your Fidelity 401k is indeed insured, so you can sleep a little easier at night knowing your hard-earned savings are protected. Thanks for sticking with me through this financial adventure. If you’ve got any more burning money questions, be sure to check back soon. Until next time, keep your money safe and your dreams within reach!