Changes to U.S. Savings Bonds

July 2012

Volume 13, Issue 5

Changes to U.S. Savings Bonds

As of December 31, 2011, paper savings bonds were no longer available for sale at financial institutions; however, this does not mean that U.S. Savings Bonds are no longer available. The Department of Treasury has created TreasuryDirect. This website allows members to buy, manage and redeem electronic bonds, convert paper bonds to electronic bonds, and purchase other types of United States securities. If you are interested in a video presentation containing more information about the changes to U.S. Savings Bonds click here.

Please Note: Michigan Credit Union League & Affiliates services are designed to provide accurate information with regard to the subject matter covered, with the understanding that the League does not render legal services. For specific legal advice, please consult with your credit union's attorney.

Q. 1. Why is the U.S. Department of Treasury discontinuing paper savings bonds? A. By discontinuing the paper savings bond program the Treasury Department will be able to save $70

million dollars over the next five years. The new electronic savings bond program, available through TreasuryDirect, offers members a secure way to manage their bonds online, anytime.

Q. 2. When does the law go into effect? A. As of January 1, 2012, credit unions can no longer accept applications for paper savings bonds.

Q. 3. Does this change end all sales of paper bonds? A. Yes, with the exception of the Tax Time Bond Program introduced in 2010. Tax filers can purchase

paper Series I Savings Bonds with their federal tax refunds. Otherwise, there will be no other way to buy paper savings bonds.

Q. 4. A.

What will happen with the current paper savings bonds that have been issued? There are currently more than 670 million savings bonds still outstanding. Existing paper savings bonds are still valid and will earn interest for 30 years from the issue date or until redeemed. Members who convert their paper bonds to electronic bonds at the TreasuryDirect website will be required to mail the paper bonds in to receive electronic credit for the bonds in their TreasuryDirect personal accounts.

Q. 5. What is TreasuryDirect? A. TreasuryDirect is a secure web-based system through which members can establish accounts to

purchase, hold and manage Treasury securities online at any time. In TreasuryDirect a member can purchase Series EE and I Savings Bonds, Treasury bills, notes, bonds and TIPS (Treasury Inflation-protected Securities).

Q. 6. Are there fees the member will have to pay for the TreasuryDirect account? A. TreasuryDirect accounts are free of charge and there is no fee to open or maintain the account.

Q. 7. What benefit will the member gain from having a TreasuryDirect account for their savings bonds?

A. Managing savings bonds on TreasuryDirect is secure and eliminates the possibility of bonds being lost, stolen or destroyed. Members can also buy and redeem bonds electronically at any time, which may be more convenient for them.

Q. 8. What is the credit union required to do? A. The National Credit Union Administration, in Letter Number 11-CU-15, offered guidelines to credit

unions on the new changes for U.S. Savings Bonds. Their guidance requests that as you respond to member questions and assist them through this transition that the credit union consider: members will need to be educated about the changes to the Department of Treasury's sale of U.S. Savings Bonds; credit unions should not accept applications from members for the purchase of bonds, and; credit unions should continue to redeem bonds for members as they have in the past.

Q. 9. Where can I get more information about U.S. Savings Bonds to help members? A. The U.S. Department of Treasury has created a Toolkit for financial institutions that provides

resources a credit union can use to educate members about TreasuryDirect. The Toolkit includes: ? Color and black and white fliers for members that explain the discontinuance of paper savings bonds. ? There are "How to" fliers that will assist your members in setting up their own TreasuryDirect accounts. ? Credit Unions can use prepared messages for account statements to alert members that paper savings bonds are no longer available and provide them with the web address to buy electronic savings bonds. ? The Treasury Department has prepared an article that could be placed in a credit union newsletter or on the intranet. ? You also have access to Web Banners that can be used on your credit union website, which can be animated. ? A frequently asked question for employees has also been designed and reviews the most common member questions and the answers that will help the member to understand the changes.

Q. 10. Does a credit union need permission to post the web banners on the credit union website? A. The materials in the TreasuryDirect Toolkit were designed for use by all financial institutions. A

credit union does not need to obtain special permission to use the materials that are available in the TreasuryDirect Toolkit.

Q. 11. Is it true that the US Treasury no longer pay credit unions to redeem US Savings Bonds? A. Yes, as of April 11, 2012 the US Treasury will no longer pay financial institutions 30? for each

redeemed savings bond submitted in a separately-sorted cash letter. By eliminating these fees the Treasury expects to realize significant savings. In addition, the transition to image-enabled processing provides financial institutions with a more streamlined and cost-effective alternative for processing redeemed bonds. While the use of the new image-enabled process for eligible savings bonds is strongly encouraged, it is not required. Please visit the Image-enabled Savings Bond Processing Resource Center for more information by clicking here.

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