Frequently Asked Questions About the Elimination of Paper Payroll Savings Bonds

The U.S. Department of Treasury phased out the issuance of paper savings bonds through traditional employer-sponsored payroll savings plans. As of September 30, 2010, federal employees are no longer able to purchase paper savings bonds through payroll deduction. The end date for all other (non-federal) employees is January 1, 2011.

Why is Treasury discontinuing the issuance of paper bonds through payroll savings plans?

With TreasuryDirect, Treasury can continue to offer employees the convenience of payroll savings while reducing the cost of the savings bond program. Employees have the benefit of regularly investing in savings bonds or using their payroll contributions to purchase a broader range of securities. Savings bonds in TreasuryDirect are electronic securities in an account; they have all of the benefits of paper bonds but cant be misplaced or destroyed. Printing fewer paper bonds reduces the cost of the savings bond program and fits with our long-term goal of one day issuing all of our securities electronically. Technology makes it possible for us to sell and maintain savings bonds and other Treasury securities electronically, which lowers the expense to the taxpayer.

How does the change affect me?

To continue your payroll savings, youll need to open a TreasuryDirect account. You can continue purchasing savings bonds (or other Treasury securities) and hold them electronically in TreasuryDirect. You will not be able to purchase paper bonds through a payroll savings plan after the applicable end date.

What happens to the paper bonds I already own?

The bonds you own are valid issues of the U.S. Treasury. Treasury will continue to provide service and support to bond holders.

When will the paper payroll program end?

The paper payroll program ended for federal employees on September 30, 2010, and for all other (non-federal) employees on January 1, 2011. Treasury accepted payroll purchase orders for bonds with issue dates through September 2010 and December 2010, respectively. Your employer may choose to stop participating in the program before the established end dates.

Are you planning to eliminate all paper bonds?

The change discussed in this FAQ affects paper savings bonds issued through payroll savings plans. As of January 1, 2012, paper savings bonds are no longer available at financial institutions.

What happens to the partial amounts I contributed that havent yet been used?

The transition period were providing will in many cases allow deductions to accrue to the full issue price of a savings bond. At the end of the transition period, if there is a residual amount, it will be refunded. Of course, employers and employees can choose to end deductions at any time.

How can I buy paper bonds?

As of January 1, 2012, paper savings bonds are no longer available for purchase at financial institutions. If you receive a tax refund, you can use it to purchase paper Series I savings bonds by indicating the purchase on standard IRS forms when you file your return. For more information, visit www.treasurydirect.gov/indiv/research/faq/faq_irstaxfeature.htm .

What is TreasuryDirect?

TreasuryDirect is a secure web-based system that allows investors to establish accounts to purchase, hold, and conduct transactions online. Investors can purchase Series EE and I savings bonds, Treasury bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS) through TreasuryDirect. Paper savings bonds are not sold through TreasuryDirect.

What are the advantages of TreasuryDirect?

TreasuryDirect is a convenient way for you to save on a regular basis by purchasing electronic Treasury securities. With TreasuryDirect:

• You can buy, manage, and redeem Treasury securities online 24/7, all from the convenience of home, work, or wherever you have secure Internet access.
• You can diversify your holdings since TreasuryDirect also offers Treasury bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS).
• You can establish multiple registrations in one account.
• You can schedule recurring purchases for savings bonds up to five years in advance. Marketable securities purchases can also be scheduled in advance. If youre interested in this option, youll find more information on our web site, www.treasurydirect.gov and in your TreasuryDirect account.
• Savings bonds purchases are generally added to the account in just one business day.
• Since the securities are electronic, there is no paper to lose, nor do you need to go to your local bank to redeem them.
• When the funds are needed, and after the minimum holding period has been reached, you can redeem part or all of your savings bond(s). The payment will be deposited to the checking or savings account you choose. Redemption funds should reach your bank or credit union in just one business day.
• Details such as issue date and current value are tracked for you.
• You can even set up accounts for minor children and custom accounts for specific purposes such as education or vacations.
• A summary of account activity, including recent purchases, payments, and account balance, are provided for you.

How long does it take to open a TreasuryDirect account?

Setting up an online account is easy and can be accomplished in about 10 minutes.

What do I need to do to set up a payroll direct deposit for TreasuryDirect?

1. You open a TreasuryDirect account at www.treasurydirect.gov .

2. You submit a request to your employer for a payroll direct deposit (an instruction sheet is available in your TreasuryDirect account under ManageDirect — View My Funding Options ).

3. Your employer makes a direct deposit for the requested amount from each pay to your 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 your money until youre ready to purchase a security. Youll use the C of I to pay for the securities you purchase.

4. You can buy savings bonds or marketable securities (Treasury bills, notes, bonds, and TIPS) once you accumulate enough money in your C of I. For savings bonds, youll need at least $25 to make a purchase, and for marketable securities, at least $100. Once you make a purchase the securities will appear in your TreasuryDirect account. You can set up recurring purchases in TreasuryDirect in advance.

Individual account owners can now establish a Payroll Savings Plan and schedule automatic recurring purchases of electronic savings bonds. Funds from your payroll direct deposit result in the purchase of a Payroll Zero-Percent Certificate of Indebtedness (Payroll C of I), which earns no interest. Each time your Payroll C of I balance reaches the purchase amount you designate in your Payroll Savings Plan, a savings bond for that amount will be issued. See Learn more about the Payroll Savings Plan for more information.

To use TreasuryDirect, do I need to have a bank account, Internet access, and an e-mail account?

Yes. You will need to have an account at a financial institution to receive direct deposit payments and as a potential funding source for purchases. You also will need Internet access to view and use your account. Finally, an e-mail address is necessary so that you can receive important messages about your account.

I dont have a computer. Does my employer need to provide Internet access for me?

We encourage employers to consider providing access to TreasuryDirect at the employees workstation, in a break room, or through the payroll and benefits office. Such a decision, of course, is at the employers discretion.

If I dont receive a paper bond how will I know the purchase was made?

You can view your account purchases online 24/7.

Why do I have to enter a bank or credit union account when I open my TreasuryDirect account?

In TreasuryDirect, transactions occur electronically. When you redeem a security, TreasuryDirect will deposit the payment to the bank or credit union account you select. You can also request that your bank account be used as a source of funds to pay for securities purchases.

How long will it take to verify my information?

Your personal information will be processed in less than a minute after your TreasuryDirect account information has been submitted.

What if you are unable to verify my information?

If we are unable to verify your information, we will offer you the opportunity to complete a convenient, printable form to verify your identity. Just follow the instructions on the form and submit it to the address provided.

Is it safe to send all of this information over the Internet?

Yes. The infrastructure TreasuryDirect resides on is well protected and the TreasuryDirect system uses several features to ensure the safety of the information you provide and the transactions you perform. For example:

• Secure Sockets Layer Technology (SSL). TreasuryDirect uses SSL which is a common protocol for sending payment information securely over the Internet. SSL works by using a private, mathematical key to encrypt (or scramble) data transferred between your web browser and the website youre visiting.
• Personalized image and caption: You select an image and caption that identifies the account as yours when you login.
• Virtual Keyboard: TreasuryDirect uses a virtual keyboard to help protect your password.
• Password: You choose your own password and can change it any time.
• Customer Hold: As an added security feature, TreasuryDirect allows you to place a hold on your account if you feel your account access information has been compromised.
• Paper Forms: For your protection, changes to your bank information and certain security transfers require the submission of a signed and certified paper form.

Where do my payroll direct deposits go?

The amounts you have direct deposited from your pay are delivered to your TreasuryDirect account. They are used to buy a Certificate of Indebtedness (C of I), (or Payroll Certificate of Indebtedness if youve set up a Payroll Savings Plan) which is a non-interest-bearing security that serves as a holding place for your money. You’ll use the C of I or Payroll C of I to pay for the securities you purchase.

Amounts you keep in your C of I or Payroll C of I earn no interest and remain there until you use them to make a purchase or redeem them.

Can you tell me more about how the C of I works with my payroll direct deposit and purchases?

Here is an example. An employeewell call her Janeis paid on a Monday every other week. Jane requests that $15.00 per pay be directly deposited in her TreasuryDirect account. It generally takes one business day after an employer or payroll provider processes the direct deposit for the funds to post to the C of I in a TreasuryDirect account. In her TreasuryDirect account, Jane schedules the purchase of a $30 savings bond every four weeks, on Tuesday. Every four weeks, on Tuesday, $30 dollars is deducted from her C of I and a $30 savings bond is issued in her TreasuryDirect account. The newly purchased savings bond is added to her holdings in her account the next day.

In a Payroll Savings Plan, Jane schedules the purchase of a $50 I Bond. Each time the amount in her Payroll C of I reaches $50, a $50 I bond is issued in her account.

What is the smallest savings bond denomination I can buy in TreasuryDirect?

Electronic savings bonds are not sold by denomination. The minimum purchase amount for a savings bond in TreasuryDirect is $25 and the maximum is $10,000. In between, you can purchase any amountdown to the penny. There is a $10,000 annual limit per savings bond series per person.

If I want to buy Treasury bills, notes, bonds or TIPS is there a minimum purchase limit?

Yes. The minimum purchase amount for a Treasury bill, note, bond or TIPS is $100. There is no annual limit, but you can only buy $5 million per auction. To learn more, go to www.treasurydirect.gov/indiv/research/indepth/auctions/res_auctions_faq.htm .

What is the issue date established on savings bonds I buy in TreasuryDirect?

Savings bonds purchased in TreasuryDirect are posted to your account one business day after they are purchased. The issue date of the savings bond is the first day of the month in which the savings bond is posted.

What is the issue date on Treasury bills, notes, bonds, and TIPS?

The issue date and the maturity date of a Treasury bill, note, bond or TIPS is determined by the type of security and whether the current offering is an original issue or a reopening. To learn more about these securities, their terms and conditions, go to www.treasurydirect.gov/indiv/research/indepth/auctions/res_auctions_faq.htm .

What happens if I forget to schedule a purchase?

You must take action to schedule purchases in TreasuryDirect. Amounts you keep in your C of I earn no interest and remain there until you use them to make a purchase or redeem them. If you want to make recurring purchases you need to schedule them in TreasuryDirect. They wont occur automatically.

What happens if I stop my direct deposit, and the value of the C of I is not enough to buy a savings bond?

You can redeem the C of I at any time, directing the payment to a checking or savings account at your bank or credit union.

My employer will not send direct deposits to TreasuryDirect for me. Can I participate in TreasuryDirect on my own?

Yes. You can set up an account on your own, and use your savings or checking account as a source of funds.

Can I put my paper savings bonds in TreasuryDirect?

Yes. You can trade your paper savings bonds for electronic bonds in TreasuryDirect using a program called SmartExchange. With SmartExchange, you can convert Series E, EE, and I bonds to electronic securities and enjoy all the benefits of having online 24-hour access to manage your holdings. Plus, your bonds keep their original issue dates.

Questions Specific to Federal Sector Employees

Why are you ending paper payroll plans in phases starting with federal employees?

Treasurys long-term goal is to one day issue all of our securities electronically. Printing fewer paper bonds reduces the cost of the savings bond program. Using a phased approach will help us meet this goal in an orderly way and provide more control of the process. More than a third of the paper savings bonds issued last year were issued to federal employees.

The paper payroll program ended for federal employees on September 30, 2010, and for all other (non-federal) employees on January 1, 2011. Treasury accepted payroll purchase orders from federal payroll providers for bonds with issue dates through September 2010.

Does this mean I wont be able to buy savings bonds at all?

No. Weve been working for several years to promote the TreasuryDirect system as an alternative to paper bonds. With TreasuryDirect, Treasury can continue to offer employees the convenience of payroll savings while reducing the cost of the savings bond program. Employees have the benefit of regularly investing in savings bonds or using their payroll contributions to purchase a broader range of securities. Savings bonds in TreasuryDirect are electronic securities in an account; they have all of the benefits of paper bonds but cant be misplaced or destroyed. Printing fewer paper bonds reduces the cost of the savings bond program and fits with our long-term goal of one day issuing all of our securities electronically. Technology makes it possible for us to sell and maintain savings bonds and other Treasury securities electronically, which lowers the expense to the taxpayer.

Will federal employees still receive average dating of savings bonds in TreasuryDirect?

No. Average dating will not be available in TreasuryDirect. However, there are no fixed denominations, so you can begin to earn interest sooner in some cases. You can purchase a savings bond for as little as $25 and in any increments over $25 you choose. For example, you could make a purchase for $25.01 and begin earning interest immediately.

What happens to the partial amounts I contributed that havent yet been used?

Were providing a six-month transition period which will in many cases allow deductions to accrue to the full issue price of a savings bond. Were hoping by announcing this change early employees will take intervening steps (changing or ending allotments) to minimize the occurrence of unused amounts. At the end of the transition period, if there is a residual amount, it will be refunded. Of course, employers and employees can choose to end deductions at any time.

When will this change take place?

The paper payroll program ended for federal employees on September 30, 2010. Treasury accepted payroll purchase orders from federal payroll providers for bonds with issue dates through September 2010. Employees are encouraged to open an online TreasuryDirect account and continue saving through payroll direct deposit using electronic securities. For details on the TreasuryDirect payroll option visit www.treasurydirect.gov/indiv/products/prod_tdpayrollinfo.htm .

Questions Specific to Employers

When will the paper payroll program end?

The paper payroll program ended for federal employees on September 30, 2010, and for all other (non-federal) employees on January 1, 2011. Treasury accepted payroll purchase orders for bonds with issue dates through September 2010 and December 2010, respectively.

Can employers stop participating in the program earlier?

Were providing a transition period (six month for federal and nine months for non-federal) which will in many cases allow deductions to accrue to the full issue price of a savings bond. If any money remains, it should be refunded to the employees. Of course, employers and employees can choose to end deductions at any time.

Why should my company offer TreasuryDirect to our employees?

TreasuryDirect is an easy way for employees to save on a regular basis by purchasing electronic Treasury securities. With TreasuryDirect your employees enjoy the benefit of automatic savings with significantly less work and, therefore, less cost to you. You send each direct deposit to TreasuryDirect each payday; the direct deposit is handled just like one for a mortgage or car payment. With TreasuryDirect you dont accumulate funds toward the purchase price of a security, you dont request the issuance of securities, and you dont keep track of registrations.

How do we set employees up in TreasuryDirect?

1. First, each employee will need to open a TreasuryDirect account at www.treasurydirect.gov .

2. Then, each will submit a request to you for a payroll direct deposit, providing their TreasuryDirect account number and the amount they want to have deducted from each pay period. (An instruction sheet is available in TreasuryDirect to help your employees with this.)

3. You establish a direct deposit for the amount requested and deliver the funds to the employees TreasuryDirect account just as you would to any bank account. Its a standard ACH transaction, and you can classify the TreasuryDirect account as either checking (type 22) or savings (type 32). We will accept either type.

Delivery instructions:

• Receiving bank name TREASURYDIRECT (all caps, no space),
• ABA number 051736158
• Employees TreasuryDirect account number without hyphens

What are my responsibilities as an employer?

With TreasuryDirect you would be responsible for collecting the requested direct deposit amount and delivering it to the employees TreasuryDirect account, just like you would a direct deposit for a mortgage or car payment. Thats it. With TreasuryDirect payroll:

• You dont need to hold and accumulate funds toward the purchase price of a security,
• You dont request the issuance of securities, and
• You dont keep track of registrations.

Many companies provide employees with Internet access to valued sites. If your company is one of these, we encourage you to provide your employees with a link to www.treasurydirect.gov .

Do you have information we can provide to employees?

Yes. You can find payroll savings information at www.treasurydirect.gov/instit/savbond/mat/mat.htm. The website has materials you can download or print directly which describe the payroll option using TreasuryDirect. We also plan to provide a webcast you can show to employees to help with the transition. It should be available by September 2010. Also, your Treasury Retail Securities Site (Federal Reserve Bank) stands ready to support you in your outreach to your employees.

With TreasuryDirect, does the employee need a separate direct deposit for each registration?

No. One direct deposit can be used to cover all desired purchases.

Does a direct deposit need to be at least $25?

No. Direct deposits can be in any amount, though your payroll system may have a minimum dollar limit.

What should we do if we’ve made a mistake with an employee’s payroll direct deposit to TreasuryDirect?

Contact the Bureau of the Public Debt for assistance at 304-480-7711, and select option 2, and then option 3 from the menus.

Whenever possible, work with your employees to resolve these kinds of errors. Employees can redeem amounts from their Zero-Percent Certificate of Indebtedness and receive payment by ACH the next business day.

What if my payroll system will not accept account numbers that start with a letter?

TreasuryDirect account numbers begin with a letter. If your payroll system will not accommodate account numbers that begin with a letter for the purpose of payroll direct deposit, you will not be able to set up a direct deposit to TreasuryDirect. However, you can still tell your employees that they can open a TreasuryDirect account and use their bank accounts as a source of funds to purchase Treasury securities.