An executive order from the office of the president will be coming into effect in the coming months and a small yet significant cohort of Social Security beneficiaries will be impacted by it.
According to a March 25th executive order titled “Modernizing Payments To and From America’s Bank Account”, the use of paper based payments such as mailed checks is to be phased out of the federal government. In lieu of paper based payments, all payments made to and from what is considered as “America’s bank account” are to be conducted electronically.
Whilst the vast majority of Social Security beneficiaries already receive their monthly benefits electronically, there still remains a cohort of around half a million vulnerable beneficiaries who receive their monthly benefit income by means of mailed paper check. As such, this change could prove to be tough to navigate for these individuals due to various factors. The Social Security Administration (SSA) has, however, shared that whilst it does hope to shift as many beneficiaries as possible over to electronic payment methods, it will also continue to disburse paper checks in special cases.
Here is everything you need to know about this upcoming change.
All federal payments are going digital soon
This shift towards digitization comes as no major surprise when considering the state of the world at large. In terms of payments and disbursements particularly, electronic payment methods such as direct deposits are a far more efficient and safer option. According to the executive order, the use of paper based payments “imposes unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”
The order further cites an increase in mail theft as another driving force behind this decision. “Mail theft complaints have increased substantially since the COVID-19 pandemic. Historically, Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer (EFT),” the order notes.
A July 14th blog post from the SSA also confirmed that the agency would be phasing out the use of paper checks for benefit payments, citing increased speed and efficiency, as well as enhanced security as reasons behind making this shift. The agency further notes that electronic payments are cost saving, and stated that, “according to the U.S. Department of the Treasury, issuing a paper check costs about 50 cents, whereas an EFT costs less than 15 cents. This shift could save the federal government millions of dollars annually.”
The executive order also notes that, “Maintaining the physical infrastructure and specialized technology for digitizing paper records cost the American taxpayer over $657 million in Fiscal Year 2024 alone.”
What should Social Security beneficiaries do?
For beneficiaries who are currently receiving their benefits as a mailed check, there are two options available to them when making the switch. They may receive their benefits by means of either Direct Deposit or Direct Express Card. According to a Social Security spokesperson who spoke with FOXBusiness, “Less than one percent of Social Security Administration currently receive paper checks. SSA is proactively contacting those beneficiaries to alert them about the change and the process to enroll in direct deposit or receive Direct Express cards. Where a beneficiary has no other means to receive payment, we will continue to issue paper checks.”
Since the announcement in July, the SSA has included a notice explaining the change and how to transition their payment with the mailed checks that are sent out. The agency also noted that their technicians will be available to assist the beneficiary with the transition if needed. The SSA also states that, “you can update your payment information anytime through your personal my Social Security account online. For more details and to learn how to enroll in direct deposit or obtain a Direct Express card, please visit www.ssa.gov/deposit/.”
Additionally, it is worth reiterating that the agency will be making exceptions under certain circumstances, for instance if the beneficiary is unbanked or does not have access to the internet.
The executive order also stipulates that exceptions can be made under the following circumstances:
(i) individuals who do not have access to banking services or electronic payment systems;
(ii) certain emergency payments where electronic disbursement would cause undue hardship, as contemplated in 31 C.F.R. Part 208;
(iii) national security- or law enforcement-related activities where non-EFT transactions are necessary or desirable; and
(iv) other circumstances as determined by the Secretary of the Treasury, as reflected in regulations or other guidance.