2010-28853. Securities Held in Treasury Direct

AGENCY:

Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION:

Final rule.

SUMMARY:

Treasury is enhancing TreasuryDirect to permit automatic purchases of savings bonds through a payroll savings plan.

DATES:

Effective date: November 19, 2010.

ADDRESSES:

You can download this Final Rule at the following Internet addresses: http://www.publicdebt.treas.gov, http://www.gpo.gov, or http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Elisha Whipkey, Director, Division of Program Administration, Office of Retail Securities, Bureau of the Public Debt, at [phone] or [e-mail].

Susan Sharp, Attorney-Adviser, Ann Fowler, Attorney-Adviser, Dean Adams, Assistant Chief Counsel, Edward Gronseth, Deputy Chief Counsel, Office of the Chief Counsel, Bureau of the Public Debt, at [phone] or [e-mail].

SUPPLEMENTARY INFORMATION:

United States Savings Bonds are non-marketable Treasury securities which have been sold continuously since March 1935. Savings bonds were introduced as a means of encouraging broad public participation in government financing by making Treasury securities available in small denominations specially tailored to the small investor. Today, savings bonds continue to be an important savings and investment tool for individuals, and Treasury is committed to offering savings bonds to the public as efficiently as possible.

In order to reduce costs, enhance customer service, and minimize environmental impact, Treasury is discontinuing the issuance of definitive (paper) savings bonds through payroll savings plans. In order to provide a more efficient, electronic, automatic method for the purchase of savings bonds through payroll savings, Treasury is enhancing its TreasuryDirect system by adding a payroll savings function. TreasuryDirect is an online account system in which investors may hold and conduct transactions in eligible book-entry Treasury securities. The new payroll savings function will permit employees, through their employer or a financial institution, to credit funds on a recurring basis to purchase a payroll zero-percent certificate of indebtedness. When the payroll zero-percent certificate of indebtedness balance is sufficient, a savings bond will be automatically purchased in the amount, series, and registration previously selected by the employee.

Procedural Requirements

Executive Order 12866. This rule is not a significant regulatory action pursuant to Executive Order 12866.

Administrative Procedure Act (APA). Because this rule relates to United States securities, which are contracts between Treasury and the owner of the security, this rule falls within the contract exception to the APA, 5 U.S.C. 553(a)(2). As a result, the notice, public comment, and delayed effective date provisions of the APA are inapplicable to this rule.

Regulatory Flexibility Act. The provisions of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., do not apply to this rule because, pursuant to 5 U.S.C. 553(a)(2), it is not required to be issued with notice and opportunity for public comment.

Paperwork Reduction Act (PRA). There is no new collection of information contained in this final rule that would be subject to the PRA, 44 U.S.C. 3501 et seq. Under the PRA, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. The Office of Management and Budget already has approved all collections of information in 31 CFR Part 363 under OMB control number 1535-0138.

Congressional Review Act (CRA). This rule is not a major rule pursuant to the CRA, 5 U.S.C. 801 et seq., because it is a minor amendment that is expected to decrease costs for employers participating in a payroll savings plan; therefore, this rule is not expected to lead to any of the results listed in 5 U.S.C. 804(2). This rule may take immediate effect after we submit a copy of it to Congress and the Comptroller General.

List of Subjects in 31 CFR Part 363

• Bonds
• Electronic funds transfer
• Federal Reserve system
• Government securities
• Securities

Accordingly, for the reasons set out in the preamble, 31 CFR Chapter II, Subchapter B, is amended as follows:

PART 363—REGULATIONS GOVERNING SECURITIES HELD IN TREASURYDIRECT®

1. The authority citation for Part 363 continues to read as follows:

Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3102, et seq.; 31 U.S.C. 3121, et seq.

2. Amend § 363.6 by removing the definition of “ Certificate of indebtedness”.

3. In Part 363, revise all references to “certificate of indebtedness” to read “zero-percent certificate of indebtedness” wherever they appear.

4. In Part 363, revise all references to “certificates of indebtedness” to read “zero-percent certificates of indebtedness” wherever they appear.

5. Amend § 363.6 by adding definitions of “ Payroll Savings Plan,” “Payroll Zero-Percent Certificate of Indebtedness,” and “Zero-Percent Certificate of Indebtedness” in alphabetical order to read as follows:

§ 363.6

Definitions.

* * * * *

Payroll Savings Plan is a method for the purchase of savings bonds using periodic ACH credits from your employer or financial institution to purchase a payroll zero-percent certificate of indebtedness until a sufficient amount of payroll zero-percent certificate of indebtedness is accumulated to enable the purchase of a savings bond in an amount, series, and registration that you previously selected using functionality in your TreasuryDirect account. (See also the definition of payroll zero-percent certificate of indebtedness.)

Payroll Zero-Percent Certificate of Indebtedness is a restricted form of the zero-percent certificate of indebtedness that is held separately from the zero-percent certificate of indebtedness and used only for purchases made through the payroll savings plan. (See also the definition for zero-percent certificate of indebtedness.)

* * * * *

Zero-Percent Certificate of Indebtedness is a one-day, non-interest-bearing security that automatically matures and is rolled over each day until you request that it be redeemed.

6. Add § 363.30 to read as follows:

§ 363.30

What actions may Treasury take if funds used to purchase a security were credited or debited in error or through fraud?

(a) If Treasury sustains a loss because the funds used to purchase a security were debited from an account at a financial institution from which the TreasuryDirect account owner did not have the right to authorize such ACH debit entry, we reserve the right to redeem that security from the account and use the proceeds to reimburse Treasury for the loss. If such security has been transferred to another TreasuryDirect account, we reserve the right to reverse the transfer, redeem the security, and use the proceeds to reimburse Treasury for the loss. If such security has been redeemed or has matured and the proceeds paid to the account owner, we reserve the right to take any action that we deem appropriate, including redeeming other securities remaining in the account and using the proceeds to reimburse Treasury for the loss.

(b) If an employer or a third-party agent acting on behalf of one or more employers certifies, under penalty of perjury, that it has made an erroneous ACH credit entry to purchase a TreasuryDirect certificate of indebtedness, we reserve the right to redeem securities from the TreasuryDirect account to which the entry was made in the amount of the erroneous entry and return the funds. No action will be taken if the certification is not received by Treasury within 45 days of the erroneous entry. We will only return funds if the erroneous entry was made to an account that does not belong to the intended recipient, is a duplicate payment, is in an amount that is greater than was authorized by the recipient, or was made in error because the employee was not in a pay status. We reserve the right to refuse to return an entry. By requesting that Treasury correct an erroneous entry, the employer agrees to indemnify Treasury for any loss that Treasury may incur as a result of the correction of the error and agrees to provide such information and assistance as Treasury may require.

(c) If a financial institution, except a financial institution acting on behalf of an employer, makes an erroneous ACH credit entry to a TreasuryDirect® account and provides a certification as to the circumstances of the erroneous entry within 6 months of the entry date, we will notify the account owner of the erroneous ACH credit entry and attempt to resolve the issue. We reserve the right to place a hold on and to redeem securities from the TreasuryDirect® account to which the ACH credit entry was made in the amount of the erroneous credit entry and return the funds to the financial institution. The financial institution agrees to indemnify Treasury for any loss that Treasury may incur as a result of the correction of the error and agrees to provide information and assistance as Treasury may require.

7. Amend § 363.37 by revising paragraphs (b) and (c) and adding paragraph (d) to read as follows:

§ 363.37

How do I purchase and make payment for eligible Treasury securities through my TreasuryDirect® account?

* * * * *

(b) Payment for savings bonds and marketable Treasury securities. You can pay for eligible savings bonds and marketable Treasury securities by either a debit from your designated account at a United States financial institution using the ACH method, or by using the redemption proceeds of your zero-percent certificate of indebtedness. You can pay for savings bonds automatically using the redemption proceeds of your payroll zero-percent certificate of indebtedness through the payroll savings plan.

(c) Payment for zero-percent certificate of indebtedness. You can pay for a zero-percent certificate of indebtedness by:

(1) a credit from your financial institution or employer using the ACH method to your TreasuryDirect® account;

(2) a debit from your designated account at a financial institution using the ACH method, limited to $1000 or less per transaction; or

(3) using the proceeds of maturing securities held in your TreasuryDirect® account.

(d) Payment for a payroll zero-percent certificate of indebtedness. The only method available to purchase a payroll zero-percent certificate of indebtedness is to arrange for your employer or financial institution to send a credit by the ACH method to purchase a payroll zero-percent certificate of indebtedness in your TreasuryDirect® account.

8. Amend § 363.45 by revising paragraph (f) to read as follows:

§ 363.45

What are the rules for judicial and administrative actions involving securities held in TreasuryDirect®?

* * * * *

(f) Internal Revenue Service (IRS) levy. We will honor an IRS notice of levy under section 6331 of the Internal Revenue Code:

(1) Against the owner, as owner is defined in § 363.6 of this part, including a levy against the owner in the capacity of nominee, transferee, or alter ego;

(2) Against a secondary owner, if the secondary owner has the right to conduct transactions in a security at the date and time the notice of levy is delivered to Public Debt; or

(3) Against an owner's property to which a federal tax lien is attached.

* * * * *

9. Add §§ 363.59 and 363.60 to read as follows:

§ 363.59

What is a payroll savings plan?

A payroll savings plan is an automatic method of purchasing savings bonds. (See the definition in § 363.6.) You may open your payroll savings plan by selecting an amount, series, and registration for your savings bond purchases using functionality in your TreasuryDirect® account. Each bond purchase must be in a minimum amount of $25 with additional one-cent increments above that amount, up to a maximum amount of $5000, in any one transaction. The series may be either a Series EE or Series I savings bond. The registration may be any authorized form of registration for an electronic savings bond. You must also initiate a request to your employer or your financial institution to send credits on a recurring basis to your payroll savings plan through the ACH method to purchase a payroll zero-percent certificate of indebtedness. (See Subpart D for more information about a payroll zero-percent certificate of indebtedness.) When you have accumulated a sufficient amount of payroll zero-percent certificate of indebtedness to purchase a savings bond in the amount, series, and registration that you selected, the TreasuryDirect® system will automatically redeem your payroll zero-percent certificate of indebtedness and purchase your selected savings bond.

§ 363.60

How do I discontinue my participation in my payroll savings plan?

You may discontinue your participation in your payroll savings plan by arranging with your employer or financial institution to discontinue sending funds.

10. Revise the heading for Subpart D to read as follows:

Subpart D—Zero-Percent Certificate of Indebtedness

11. Add an undesignated center heading prior to § 363.130, to read as follows:

GENERAL

12. Amend § 363.131 by revising the first sentence and adding a fifth sentence to read as follows:

§ 363.131

What is a TreasuryDirect® zero-percent certificate of indebtedness?

A TreasuryDirect® zero-percent certificate of indebtedness is a non-interest-bearing security that is issued daily, with a one-day maturity, which automatically rolls over at maturity until you request redemption. * * * The payroll zero-percent certificate of indebtedness is a restricted form of the zero-percent certificate of indebtedness that is held separately from the zero-percent certificate of indebtedness and used only for purchases made through the payroll savings plan.

§ 363.143

[Removed]

13. Remove § 363.143.

§§ 363.138, 363.139, 363.140, 363.141, 363.142, 363.144, 363.145, 363.146

[Redesignated as §§ 363.141, 363.138, 363.142, 363.143, 363.144, 363.145, 363.139, and 363.140]

14. Redesignate §§ 363.138, 363.139, 363.140, 363.141, 363.142, 363.144, 363.145, 363.146 as §§ 363.141, 363.138, 363.142, 363.143, 363.144, 363.145, 363.139, and 363.140 respectively.

15. Add an undesignated center heading prior to § 363.141 to read as follows:

ZERO-PERCENT CERTIFICATE OF INDEBTEDNESS

16. Revise newly redesignated § 363.141 to read as follows:

§ 363.141

How do I purchase a zero-percent certificate of indebtedness?

(a) Primary and linked accounts. You may purchase a zero-percent certificate of indebtedness through one or more of the following four methods:

(1) Payroll deduction, in which your employer sends funds through the ACH method to your TreasuryDirect® account;

(2) deposit by your financial institution, in which your financial institution sends funds by the ACH method to your TreasuryDirect® account on a recurring or one-time basis;

(3) through the Buy Direct function of your TreasuryDirect® account, in which you direct us to debit funds from your financial institution account to purchase a zero-percent certificate of indebtedness. This method is limited to an amount no greater than $1000 per transaction. When you use the Buy Direct function to debit funds to purchase all or a portion of a zero-percent certificate of indebtedness, you will not be permitted to schedule a redemption to your financial institution from the zero-percent certificate of indebtedness within five business days after the settlement date of the debit entry; and

(4) by using the proceeds from the redemption of a savings bond, the proceeds of a maturing security, or an interest payment from a security to purchase a zero-percent certificate of indebtedness.

(b) Payroll savings plan. You may purchase a payroll zero-percent certificate of indebtedness for your payroll savings plan through payroll deduction, in which your employer sends funds through the ACH method to your TreasuryDirect® payroll savings plan, or through a credit using the ACH method by your financial institution, in which your financial institution sends funds by the ACH method to your TreasuryDirect® payroll savings plan.

17. Amend the heading of the newly redesignated § 363.144 by removing the phrase “for cash.”

19. Add an undesignated center heading after the newly redesignated § 363.145, to read as follows:

PAYROLL ZERO-PERCENT CERTIFICATE OF INDEBTEDNESS

20. Add §§ 363.146 through 363.148, to read as follows:

§ 363.146

Who may purchase a payroll zero-percent certificate of indebtedness?

Only an individual TreasuryDirect® account owner may purchase a payroll zero-percent certificate of indebtedness, only through his or her primary account, and only through the payroll savings plan.

§ 363.147

How do I purchase a payroll zero-percent certificate of indebtedness?

You may purchase a payroll zero-percent certificate of indebtedness through your TreasuryDirect® account using your payroll savings plan. (See §§ 363.59 and 363.60 for more information on opening a payroll savings plan.) The only method of purchase for a payroll zero-percent certificate of indebtedness is a credit of funds from your employer or financial institution using the ACH method. You cannot purchase a payroll zero-percent certificate of indebtedness by using a debit from your financial institution.

§ 363.148

Can I redeem all or a portion of my accumulated payroll zero-percent certificate of indebtedness?

You may redeem all or a portion of your accumulated payroll zero-percent certificate of indebtedness to any financial institution that is of record in your TreasuryDirect® account.

Richard L. Gregg,

Fiscal Assistant Secretary.