The feds’ latest announcement will change how your company handles employees’ payroll deductions.
The U.S. Treasury Department says it’ll stop issuing paper savings bonds through employer-sponsored payroll savings plans beginning:
- Sept. 30, 2010 for federal employees, and
- Jan. 1, 2011 for all other workers.
This change will reduce the costs associated with the U.S. Savings Bond Program and supports the Treasury’s long-term plan to issue all securities electronically. However, no date has been set for ending the sale of paper savings bonds. They remain available at financial institutions.
Employees will still be able to save through savings bonds, though. The procedure will just be different:
1. The person opens a TreasuryDirect account at www.treasurydirect.gov and waits for an access card to arrive in the mail.
2. The worker submits a request to the employer for a payroll direct deposit. An instruction sheet is available in the individual’s TreasuryDirect account under ManageDirect – View My Funding Options.
3. The employer makes a direct deposit for the requested amount each payday to the TreasuryDirect account, just like a direct deposit for a mortgage or car payment. The funds go into a Certificate of Indebtedness (C of I). The C of I is a non-interest-bearing security that serves as a holding place for the money until the employee purchases a security.
4. Employees can buy savings bonds or marketable securities (Treasury bills, notes, bonds, and TIPS) once they accumulate enough money in their C of I. For savings bonds, they’ll need at least $25 to make a purchase. Marketable securities cost at least $100. Once someone makes a purchase, the securities appear in his or her TreasuryDirect account.
