Thursday, March 22, 2012

INOVA 6-Year CD: An Update

Update: INOVA has slashed its rates, so their 5-year and 6-year CDs no longer are competitive with the PenFed CU 5-year and 7-year CDs.

I discussed the INOVA Federal Credit Union 6-Year CD in my last post. In this post I share the conclusion of the process of transferring money from my existing IRAs into my new INOVA IRA, provide some contact information, and answer a few more questions about INOVA.

Conclusion of the Transfer Process

As mentioned in my last post, the check from my existing Vanguard IRA account already had arrived at INOVA, and the first CD had been funded. The check from my existing Fidelity IRA account has since arrived, and the second CD has been funded. The check from Fidelity arrived at INOVA 10 business days after mailing the transfer form to INOVA, and the CD was funded the next day (I didn’t return the other two forms before close of business on the day the check arrived, hence the extra one-day delay). I now see both CDs in my new INOVA IRA account when I log on, both earning 2.50% APY.

Contact Information

I asked my local branch contact, Rebecca, if people in other parts of the country should contact the closest branch, or if I could just refer them to her. She said I could refer them to her, and since she has provided fantastic service so far, that’s what I’ll do. Here are her contact details:

Rebecca Tenenbaum
Assistant Branch Manager
INOVA Federal Credit Union
phone: 510-705-5091
fax: 510-705-4718

Feel free to let Rebecca know I referred you, so that she’ll know her excellent customer service is being rewarded. Also, ask if she’ll guarantee the CD rate while you are in the process of opening your account and transferring the funds into it. She did this for me.

Fees To Transfer Out of INOVA and Close Account

A question that came up in my post about this CD in the Bogleheads forum was what fees INOVA might charge to transfer out of an INOVA IRA account to an IRA account at another financial institution; e.g., transferring back to an IRA at Vanguard after a few years. Here is Rebecca’s answer:

We charge no fee to do a direct IRA transfer out of INOVA. There is no fee to close an IRA account after 90 days. If the IRA account is closed completely within the first 90 days, there is a $50 account closure fee.

So, for example, when the CD matures in in six years (or sooner if I do an early withdrawal), I could reverse what I just did, and transfer the money back to Vanguard to invest in a bond fund—with no fees.

No Early Withdrawal Penalty if 59 1/2 or Older?

On this page on the INOVA website, there is a statement that I consider misleading:

No early withdrawal penalty applies if 59 ½ years of age or older and with qualified distribution.

To me this sounds like the policy that PenFed has; i.e., that if you are 59 1/2 or older, they will not charge you an early withdrawal penalty (EWP) if you do an early withdrawal from your CD. It turns out that this is not the case. Here is Rebecca’s reply to my question about this statement:

The statement refers to the IRS penalty. (We also would not charge a penalty for your required minimum distribution if all IRA funds were in certificates.) I agree this is unclear and will make change suggestions to that department.

The statement they make on the webpage is misleading because the IRS does not use the terminology “early withdrawal penalty” in referring to premature distributions from an IRA. They use the term “additional 10% tax” (at least in IRS Publication 590, which is all about IRAs). The term “early withdrawal penalty” is common terminology used in reference to the EWP charged by the bank or credit union. There is no reason for INOVA to be paraphrasing tax law (that applies to all financial institutions) on their webpage, using inaccurate terminology—and I told them so!

This is not that big of a deal, but I just wanted to make sure no one is mislead by the statement on the webpage.

Right to Change Terms

Most banks and credit unions include a clause in their Agreements and Disclosures document that allows them to change the terms of of the agreement. Here is the clause in the INOVA Agreements and Disclosures document :

CHANGE IN TERMS. We may change the terms and charges for the services shown in this Agreement and may amend this Agreement from time to time.

When I asked Rebecca if they would state in writing that they would not change the EWP and would not disallow me from doing an early withdrawal, this was her reply:

Unfortunately, we can not state that existing CD holders would absolutely never be effected [sic] by changes made to the terms and conditions concerning the EWP. I spoke directly with our Vice President of Sales and Service, and was told, legally we can make these changes, but in the history of the credit union it has never happened, and at this moment it is certainly not our intention to make changes of this nature.

It’s too bad that they wouldn’t agree to stick to the terms of the CD, but to be fair, I have never even asked this question of Ally Bank or PenFed CU. This just seems to be industry standard.

Problem Logging in With Google Chrome

In my last post I mentioned that I was not able to log in to my account using Google Chrome, the browser I use most often. When I tried again a few days later, I had no problems, and have logged in with Chrome several times since.

Rebecca received the configuration suggestion below from their IT department, and forwarded it to me. I haven’t had to do this, but will keep the info handy unless I have problems again:

Under the wrench>options>under the hood> content settings> cookies> manage exceptions> in the host name field

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