Full text of Federal Reserve Bank of New York Circulars : 5285. New Treasury Retirement Plan Bond

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FEDERAL RESERVE BANK
OF NEW YORK
Fiscal A g en t o f the U nited States
f Circular N o. 5 2 8 5 1
L January IS, 1963 J

New Treasury Retirement Plan Bond
To All Financial Institutions, and Others Concerned,
in the Second Federal Reserve D istrict:

The following statement was made public by the Treasury Department:
The Secretary o f the Treasury has announced the offering o f United States Retirement Plan Bonds
under the Self-E m ployed Individuals Tax Retirement A ct o f 1962.
A pplications fo r the bonds will be available at banks and other financial institutions during the week
o f January 21. Bonds bought during January will bear interest from January 1, 1963.
Like Series H savings bonds, the new bonds may be purchased at any Federal Reserve Bank or
Branch, or direct from the Office of the Treasurer o f the United States, the only authorized issuing agents.
Banks and other financial institutions will take applications fo r issue and redemption of these bonds, as they
do fo r Series II savings bonds, fo r transmittal to the issuing agents. Like savings bonds, the bonds will
bear interest from the first o f the month in which the authorized issuing agent receives paym ent fo r them.
The bonds w ill be sold at par in denominations o f $50, $100, $500, and $1,000, and will provide an invest­
ment yield of 3 % percent a year, compounded semiannually. Interest, together with the principal, will be
paid only upon redemption. The bonds will increase in redemption value at the end o f each half-year
period follow ing their issue date. In accordance with the law and regulations contained in Department
Circular No. 1-63, Public Debt Series, the bonds cannot be redeemed until their owners reach 5 9 % years
o f age, except upon the ow n er’s death or disability. Interest on the bonds stops five years after the death
o f the person in whose name they are registered.
The retirement bonds may only be registered in the names o f natural persons in single ownership or
beneficiary form . They may be purchased only in connection with bond purchase plans and pension and
profit-sharing plans as described in the 1962 A ct. The new retirement bonds must be registered in the name
o f the self-em ployed person or the employee fo r whom they are bought.
Bond purchase plans using the new retirement plan bonds and meeting the requirements o f the new
law will enjoy income tax advantages similar to those granted to pension and profit-sharing plans. Selfemployed persons can deduct from income subject to tax up to $1,250 annually fo r contributions to their
own retirement. W hen a self-em ployed person redeems his bond he becomes liable, fo r income tax purposes,
fo r the interest earned on the bond, and for the amount o f the deduction when the bond was purchased.
W hen an employee redeems his bonds he is subject to tax fo r the interest on the bonds and any amount
contributed by his employer.
Because the bonds represent a form of savings and have some features comparable to Series E and II
savings bonds, their sales will be reflected in savings bonds reports. No yearly sales goal will be set for
these bonds; nor will they be promoted within the fram ework o f special savings bond campaigns. H ow ­
ever, since savings bonds representatives work closely with banks and other financial institutions in p ro­
moting and servicing the savings bonds program , their assistance in this new area should materially aid
in the understanding o f the terms and conditions o f the retirement bonds.

Copies of Treasury Department Circular No. 1-63, Public Debt Series, referred to in the
statement above, will be sent later this week to all financial institutions in the Second Federal
Reserve District qualified to issue or pay United States Savings Bonds.
A summary of the terms and conditions of the new retirement bonds is printed on the reverse
side of this circular.




A lfred H a y e s ,

President.
( over)

SUMMARY OF TERMS AND CONDITIONS
OF
UNITED STATES RETIREMENT PLAN BOND
(F o r detailed inform ation on the terms and conditions, Treasury Department
Circular No. 1-63, Public Debt Series, should be consulted)

A.

Effective date:

J.

B.

Issuing and paying agencies:
Federal Reserve Banks and Branches or the
Office of the Treasurer of the United States.

C.

Denom inations:

K.

L.

E.

M.

Interest:
Interest accrues through increase in redemp­
tion value at beginning of each half-year
period, providing an investment yield of
3.75 percent, com pounded semiannually.

G.

H.

N.

O.

P.

Reissue:
Bonds will be reissued to add, eliminate, or
substitute a beneficiary.

Q.




R edeem ability prior to maturity at option
o f Treasury:
None.

Partial redem ption:
I f face value is greater than $50, and only
in amounts corresponding to authorized
denominations.

I.

Registration— eligible subscribers:
May be registered only in name of employee
or self-em ployed person fo r whom p u r­
chased, in single ownership and beneficiary
forms.

R edeem ability:
Not redeemable except in case o f death or
disability, until owner attains age 5914
years.

Incom e tax liability:
W hen self-em ployed person redeems bonds,
liability accrues fo r interest earned on bond
and fo r amount o f deduction taken fo r the
year of purchase. W hen employee redeems
bonds, liability accrues fo r interest on bonds
and fo r any amount contributed toward p u r­
chase price by employer.

Maturity date:
Interest ceases 5 years after death o f the in­
dividual in whose name bond is purchased.

F.

Incom e tax privileges:
Certain deduction for all or part o f p u r­
chase price of bonds for the taxable year of
purchase.

Issue date:
First day o f month in which payment is
received by an issuing agent.

Taxation:
Bonds are subject to estate, inheritance or
other excise taxes, whether Federal or State.

$50, $100, $500, $1,000.
D.

Safety:
Bonds will be reissued if lost, stolen, or
destroyed.

January 1, 1963.

N ontransference:
Bonds cannot be transferred, sold, or used
as collateral.
Annual lim itation:
Purchases in any one year up to $5,000 in
the name o f one owner.