The Payroll Savings Plan

In the minds of millions of Americans who grew up from the 1940's through the 1990's, savings bonds and payroll savings are synonymous. Many have never bought a bond in any other way. Certainly the objective of widespread individual ownership of government securities - with the resulting constructive influence on sound public debt management - couldn't have been achieved without this installment-plan, save-before-you-spend instrument of automatic thrift.

With the coming of World War II, the Payroll Savings Plan with its "everybody every payday" theme became a universal way of life in business, industry, government, and the military services - with massive drives enrolling millions of workers and supplying the major source of war bond sales.

In postwar years, payroll savings continued to be the backbone of the savings bond sales effort. Through the cooperation of thousands of companies operating and promoting the Plan, the endorsement of labor, and the enthusiastic participation of employees who found it the one sure way to accumulate reserves for the future, Payroll savings prospered.

Payroll savings began a long decline in the 1980's, as markets changed, and new financial products were created and began to be offered by employers. Products including 401(k) plans and employee stock option plans, both designed to help employees save for their futures as defined benefit retirement plans, gradually became the rule rather than the exception among large employers. These plans were more attractive to many employees, despite being less liquid.

In early 2003, Congress ended funding for the marketing of savings bonds, accelerating a previously slow decline for the payroll savings plan. The payroll savings plan will be discontinued on January 31, 2025.

Treasury phased out the issuance of paper savings bonds through traditional employer-sponsored payroll savings plans as of January 1, 2011, and through the tax time savings bonds program as of January 1, 2025. The elimination of paper savings bonds reduces the cost of the savings bond program.