TN 4 (03-92)

A. Introduction

1. Time Deposits

A time deposit is a  contract between an individual and a financial institution whereby the individual agrees to leave funds on deposit for a specified period (six months, two years, five years,etc.) and the financial institution agrees to pay interest at a specified rate for that period. Certificates of deposit (C.D.s) and savings certificates are common forms of time deposits.

2. Penalties for Early Withdrawal

Withdrawal of a time deposit before the specified period expires incurs a penalty, which usually is imposed against the principal. This penalty does not prevent the time deposit from being a resource, but does reduce its value as a resource.

3. Early Withdrawal Prohibited

On rare occasions, the terms of a time deposit will prohibit early withdrawal altogether.

B. Operating policy

1. Ownership

The assumptions regarding ownership of bank accounts (SI 01140.200 and SI 01140.205) apply to time deposits.

2. Early Withdrawal Prohibited

a. Principal

If the owner of a time deposit cannot under any circumstances withdraw it before it matures, it is not a resource. It becomes a resource (not income) on the date it matures, and may affect countable resources for the following month.

b. Interest

If the owner has no access to the interest before the deposit matures,accrued interest is not a resource and is income in the month the deposit matures (not before then).

3. Value as a Resource

The resource value of a time deposit at any given time is the amount the owner would receive upon withdrawing it at that time, excluding interest paid that month. Generally, this is:

• the amount originally deposited;

• plus accrued interest for all but the current month;

• minus any penalty specified on the certificate for early withdrawal.

C. Related policy — interest

See SI 00830.500 regarding the treatment of interest for income purposes.

D. Development and documentation

Verify the original amount deposited,interest accrued, and what penalty applies for early withdrawal. If the individual alleges that the deposit cannot be withdrawn prior to maturity under any circumstances, verify that.

Obtain this information from the individual's copies of account records to the extent possible. Contact the financial institution only to obtain information the individual's records do not provide.