Thank God Israel Bonds kicked BNY Mellon to the curb

My wife and I own a number of Israeli Bonds purchased over the course of many years (typically after annual High Holiday appeals). Many of these bonds are Original Issue Discount (OID) bonds. Dispensing with all the technical details, the general idea of an OID bond is that you get a 1099-OID statement every year showing how much you have to report to the IRS and pay taxes on as income, but you don’t actually get the money you’ve thus reported until the bond matures and you redeem it.

Until very recently, Israeli Bonds sold in the United States were administered by BNY Mellon. They’ve been the agents for some other stock I’ve owned, and they have been consistently difficult and unpleasant to deal with.

For the Israeli Bonds in particular, every year for as far back as I can remember, BNY Mellon has mailed out the 1099-OID’s for our bonds either right at the January 31 deadline set by federal law, or sometimes even later than January 31, in violation of the law. We couldn’t complete or file our taxes until the forms arrived, and it also made it much more difficult for us to apply for financial aid for our children’s school, since the application process includes submitting a copy of our tax return.

Also, every year the forms arrived from BNY Mellon in multiple mailings weeks apart, so we became accustomed to receiving some of them and then drumming our fingers for weeks waiting for the rest.

That’s exactly what happened this year. In mid-January, we received two 1099-OID’s; we were expecting a total of eight. We waited and waited, and the other six forms never showed up. Finally, today, February 16, I called BNY Mellon to ask where they were (note that the IRS instructions for missing W-2 and 1099 forms says you’re supposed to wait until February 15 to complain about missing forms).

The BNY Mellon agent with whom I spoke informed me that in fact I had received all of my 1099-OID’s already. It seems that this year, BNY Mellon decided, without any explanation or notification, to issue consolidated 1099-OID forms, issuing one per account rather than one for each bond. Since my wife and I have two separate bond accounts (because of another annoying BNY Mellon issue: they were unable to merge the accounts, despite the fact that they are owned by the same two people with the same two social security numbers), we received just two 1099-OID’s, not eight.

Now, don’t get me wrong… I think issuing consolidated 1099-OID’s is a great idea. But not only did they not tell anyone this is what they were doing, the 1099-OID’s they issued actually implied exactly the opposite. Here’s one of them:

(click for larger image)

(click for larger image)

At the top of the 1099-OID they’ve printed the description and maturity date of one bond. In the Description box of the 1099-OID they’ve printed the CUSIP of one bond. Nowhere on the 1099-OID or accompanying documents are any other bonds mentioned. And yet, in the value box of the 1099-OID, they’re reported the sum of the OID for six bonds. Let me be clear: not only is there no indication whatsoever that they’ve done this, there are seemingly clear signs that they have not. Signs which are completely, utterly wrong.

The stupidity of this is simply mind-boggling.

As of this year, the State of Israel has switched from BNY Mellon to Computershare to administer their bonds.

To the State of Israel: I’m sure I’m not the only one who has complained to you over the years about BNY Mellon’s terrible service. It’s about freakin’ time you found somebody else.

To Computershare: Welcome. Please do a better job than BNY Mellon.

To BNY Mellon: Get a clue about how to produce tax documents in the future that actually make sense. And don’t let the door hit you in the ass on the way out.