Savings Bonds

 

The State’s current payroll system allows employees to purchase $100, $200, $500, $1,000, $5,000 and $10,000 U.S. savings bonds to earmark minimum deductions as low as $5 per pay period.The purchase price of the bond is half of the face value.  Bonds are issued and begin to earn interest after the full purchase price has been accumulated through payroll deductions.

The interest on savings bonds is exempt from state and local income taxes, and federal tax is deferred until the bonds are redeemed or until maturity.  The investment accumulates steadily to provide a savings reserve for an employee’s future needs.  

Bonds purchased prior to May 1, 1997, but after May 1, 1995 earn market based rates from the date of purchase.  Bonds purchased prior to May 1, 1995 but after March 1, 1993 and held for six months up to five years from issue earn four percent interest.  Bonds held for five to 18 years from issue earn an average market-based rate or four percent, whichever is higher.  Bonds can continue to earn interest for 30 years. On April 30, 1997, the Secretary of the Treasury announced three important changes in the U.S. Savings Bond Program that affect Series EE bonds purchased on or after May 1, 1997.  These changes are summarized below: 

• Series EE bonds issued on or after May 1, 1997 will earn interest from the date of issue at rates equivalent to 90 percent of 5-year Treasury security yields.  The new rates will continue to be announced on May 1 and November 1 of each year.
• Series EE bonds will now increase in value monthly, rather than every six months.
• A 3-month loss of interest will apply to bonds redeemed less than five years from date of issue.  This feature is designed to encourage owners to hold their bonds for the longer term.  It will not affect bonds held for five or more years.

The new terms will not apply to bonds with issue dates before May 1, 1997.

Employees may purchase multiple denominations, designate different owners/co-owners and beneficiaries for each bond and specify designated amounts or percentages for each account. 

For more information concerning Savings Bonds, the employee should contact their Agency Human Resources Office or click here for U. S. Savings Bonds form.