Patelco Treasury Income Account - currently 4.25% APY

Patelco Treasury Income Account

Current rate

This is a revival of an archived thread.

To recap,

-$25K min to open.

-APR is based on the average discount rate of the previous 12 auctions for 6-month T Bills plus 60 basis points.

-Think of the account as a rolling 6 month CD. You can request an Intent to Withdraw letter that doesn't need to specify an amount, just a date 6 months in the future. When that date happens, you can take the funds or keep them in your Treasury Income Account and request another Intent to Withdraw in 6 months.

-You can also specify a recurring monthly withdrawal, as long as the amount is less than 1/6th of the total balance.

Anyone can join Patelco by joining the somewhat (entirely?) bogus "California Association of Older Americans." There's an option to join while you're applying for membership to the credit union.

Note: I don't have any personal experience with this account; I'm using information from the archived thread as well as an email I received from Patelco today. I would love to hear from others that actually use this account.

Update:

A Patelco supervisor confirms this account is NOT free from state income tax. Sorry for the misinformation, folks.

Full Details from the Patelco Membership Handbook

The dividend rate and APY are set at the beginning of each quarter and are based on the average of the previous 12 weeks’ auction yields of the six month U.S. Treasury Bill (the index) plus 0.60% (60 basis points). The Board can change the rate, yield and formula used to determine the rate at any time at their sole discretion. For current dividend rates and APYs, see the current Initial Account Disclosure, available at our branches and on our web site.

Dividends are credited and compounded quarterly on the first day following the end of a calendar quarter. A minimum balance of $25,000 is required to open the account.

You must notify us six months in advance if you want to withdraw funds from this account or to close it, or the withdrawal or closure will be subject to penalty. You have ten days after the date you schedule for a withdrawal to make the withdrawal without penalty. If you do not withdraw your funds within 10 days of the scheduled withdrawal date, you must give us a new six-months’ notice. Only one notice can be in effect at a time. Withdrawals without notice will result in the following penalties: (a) if funds are withdrawn within six days after you open the account or add to it or make a withdrawal from it, the penalty will be seven days’ dividends on the entire balance; (b) if funds are withdrawn after more than six days but prior to any noticed withdrawal date, the penalty will equal the dividends earned, up to six months dividends, on the amount withdrawn. The stated APY assumes dividends will remain in the account for at least six months. Earlier withdrawal will reduce earnings. Early withdrawal penalties are waived in certain circumstances (see Early Withdrawal Penalties; 8 Waiver of Penalties above).

You can schedule authorized monthly payments out of this account to you, either in the form of a check payable to you and mailed to you or a transfer to your Tiered Savings Account. The monthly payment cannot equal more than 1/6 of the balance in the account. You can change the amount of the monthly payment only twice a year.

You can pledge this account as security for a loan, provided that (a) the loan term does not exceed six months or the time remaining until a withdrawal date you have scheduled, and (b) the loan amount does not exceed the difference between the account balance and any payments you have scheduled. You cannot use this account for overdraft protection. We can discontinue this account at any time by giving you six months’ advance notice.

Umm...where does it say this is state tax-free?

lhendricks92 said: From the email I received today from Patelco:

"Thank you for your interest in our Treasury Income Account (TIA). Treasury Income Account is free from state taxes."I am a little leary of this statement. On their site they say * Rate is tied to the average of the previous 12 weeks' auction yields of the 6-Month U.S. Treasury Bill.

However, their current yield is 50bps higher than the average of the last 12 auctions. So "how" are they paying higher than the underlaying TBills. I would say it is because they are earning "higher" returns on this money elsewhere.

In all appearance, this looks like an account that is "indexed" to treasuries with a premium offset. I would like to hear from some current holders of this account who can verify that their tax forms from 2006 showed that was in fact a state tax exempt account.

We all know you don't always get true statements from CSRs.

i hope you guys are wrong, but you're making some good arguments.

anyone who actually has this account care to chime in on the state tax issue?

The only tax law I can think of that may deal with state taxability issues: I remember from investing in t-bills that a state cannot tax the proceeds of a federal money instrument. Same goes for federal savings bonds...state can't touch them taxwise.

Yes I also asked the patelco customer representative and this is not state tax free.
Here is the excerpt from my email with her

"The interest earned on this type of account is taxable by the state.
At the end of the year you will receive a 1099 INT, and have to claim
this interest on your taxes."

updated OP with more details from the Patelco Membership Handbook.

stfs said: On this issue though now I wonder if I only have that one day for withdrawal or once six months have past that I can withdraw the fund anytime after that. Hmm, I'll call next week and check unless someone knows the answer.

from the handbook:

"You have ten days after the date you schedule for a withdrawal to make the withdrawal without penalty. If you do not withdraw your funds within 10 days of the scheduled withdrawal date, you must give us a new six-months’ notice."

apr is 5.4% and apy is 5.51%. not sure where you're getting 5.38%.

lhendricks92 said: apr is 5.4% and apy is 5.51%. not sure where you're getting 5.38%.

LOL makes it even worse.. I assumed interest compounded daily as 5.38% compounded daily = an APY of 5.51... The fact they have to pay a rate of 2 basis points higher to get 5.51% APY means the interest componds monthly and is paid quaterly. That is part of the reason you need to be carefull when comparing accounts. The way interest is calculated can affect your yield 1-3 basis points a years.

Also not knocking this account. Just stating my own opinion as personally I dont think they account is that great because the lack of FDIC insurance, restritive requirements and written 6 month notice.

lhendricks92 said: All of the Fidelity offerings with rates higher than 5.35% (simple yield, yes, I realize the APY is higher) are not AAA rated, and they're all from the "College Loan Corporation." So, now I have to evaluate the College Loan Corporation to see if I want to invest $250K in their bonds. Hmmm, no thanks. Think I might want to go with a credit union with a sterling reputation and long history of sound financial management. This is just one example of why I might not want the hassles of buying individual securities simply for cash management.

Bonds are quoted as rate always as they dont compound. That is why I converted APY back to APR.

CFS is own by JP Morgan Chase and is backed by the full faith and credit of JP Morgan Chase nations 3 largest bank. So gee let me think about it like you put it who do I trust more "credit union with a sterling reputation and long history of sound financial management" or 3rd largest bank in America that is more than 500X larger. BTW CFS is paying 5.46%.

HEF is Home Education Foundation which is FL ST goverment Agency while FL St has no direct obligation no state has ever default on one of there agency bonds. This is no different that saying while USPO credit rating is lower than Federal Goverment there is almost no risk of Federal Goverment allow USPO to default going into BK and allowing there assets to be sold by BK court.

Patelco has been the largest privately-insured US credit union. CUNA News reported that Patelco has applied to re-join the NCUA Share Insurance Fund, probably to alleviate consumer ambivalence about the lack of a government guarantee on deposits.

lhendricks92 said: anybody know why this account still pays 5.51% even though Treasury rates have tanked?
Shows this rate as of Oct, 1st
Treasury Income Account & Treasury IRA*
Min. Balance APY* Rate Dividends Paid
$25,000.00 5.19% 5.09%

Patelco set to federally insure deposits starting Jan 1, 2008.

Now 2.59% APY

My HSA with Patelco is still 5.12%... Best rate around, I don't know how they can do it.