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Savings Bond Information Center > Savings Bond Payroll Deduction Plan

Savings Bond Payroll Deduction Plan

Why Should the Payroll Savings Plan be Part of Your Benefits Package?
EFFECTIVE: 1/1/2012 The Payroll Savings Plan, offered by the U.S. Treasury’s Bureau of the Public Debt and administered by the Federal Reserve, provides an employee benefit for any size organization. The Payroll Savings Plan allows your employees to purchase electronic Series EE/I savings bonds only, in denominations ranging from $25 to $10,000. Note: The Treasury has discontinued the ability to purchase Series EE bonds at half their face value. All electronic savings bonds must be purchased at full face value. The program can complement an existing investment plan, such as a 401K, or can serve as a stand-alone savings vehicle. The program is inexpensive and easy for your organization to administer. Learn more about the Payroll Savings Plan here.

Here are some of the reasons why people participate in the Savings Bond Payroll Deduction Plan:

Savings Bonds are a safe investment backed by the full faith and credit of the United States.
Savings Bonds are a convenient and painless way to save because the cost of a bond is deducted automatically from an employee’s pay.
Savings Bonds are flexible and can be used to satisfy short or long-term savings goals (for retirement, children’s education, a home purchase, or as an emergency reserve).
Savings Bonds offer tax advantages. The interest earned from a savings bond, which is deferred until the bond is redeemed, is exempt from state and local taxes. When savings bonds are used to pay for higher education, some or all of the interest may be excluded from federal taxation.
Savings Bonds require a low minimum investment.

How Does the Payroll Savings Plan Work?
More than 40,000 employers have incorporated the Payroll Savings Plan into their normal payroll procedures and have found the program requires little time and effort to maintain.

To initiate the program, each participating employee signs an authorization card designating the amount to be deducted each pay period for the purchase of savings bonds and providing bond ownership information. At the end of each pay period, savings bonds are purchased for employees who have accumulated the purchase price. [The purchase price also can be accrued by the deduction of small amounts over time.]

The order and payment are then submitted to the Federal Reserve, which processes the orders and issues the electronic bonds. This process continues until an employee gives written notice to cancel the arrangement or leaves your employment.

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