Beneficiaries of the Social Security program receive their monthly benefit income in various forms such as direct deposit, or mailed paper check. Following an executive order from the office of the president, however, beneficiaries who receive their benefits as a mailed paper check are now being encouraged to switch their payment method over to one that is electronic.
The executive order impacts not only the Social Security Administration, but is a broader government initiative that stipulates all transactions to and from the federal government be made electronically as of September 30th. The executive order cites inefficiency and increased mail theft as reasons behind why this decision was made.
As such, this change will impact less than one percent of the total beneficiaries in the Social Security program, however, this does still amount to at least half a million vulnerable individuals. Here is what you need to know.
All federal payments and disbursements go digital in October
The executive order titled “Modernizing Payments To and From America’s Bank Account” was issued from the office of the president on March 25th earlier this year. As per the order, the use of paper based payments such as a mailed checks is to be phased out from all federal transactions as of September 30th. According to the order, the continuous use of paper based payments “imposes unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”
Additionally, it is noted that “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).”
In a May press release, the Treasury also noted that, “Paper checks are increasingly the front door for fraud. Treasury is committed to raising awareness of the growing fraud risks associated with paper checks and providing Americans with the knowledge and tools to fight financial fraud and make informed financial decisions.”
Subsequently, the SSA also posted an update on July 14th confirming that the agency will no longer be issuing paper checks from September 30th. Over 99% of Social Security beneficiaries already receive their benefits electronically, however the agency is encouraging the remaining beneficiaries to make the switch. An insert explaining the change is being included with the benefit checks that are mailed out.
“We’re proactively sending notices to people who currently receive paper checks, to explain the upcoming change and highlight the benefits of switching to electronic payments. In addition, all benefit checks will include an insert explaining the steps a beneficiary can take to transition to electronic payments, and our technicians are ready to assist,” the SSA wrote in its update.
Will exceptions be made?
Whilst electronic payments are cost saving and efficient, making the switch can be difficult to navigate for the elderly, the unbanked, or those without access to electronic banking services. According to the Federal Deposit Insurance Corporation, “about 4.2% of of U.S. households lacked a bank or credit union account in 2023.” A Bankrate report also revealed that “one reason why some people are underbanked is because they believe they don’t earn enough to open an account.”
Subsequently, following a meeting between SSA Commissioner Frank Bisignano and Sen. Elizabeth Warren, it had been confirmed that the agency will continue to disburse paper checks to those who are unable to transition their payment methods. According to Sen. Warren’s July 23rd press release, “Commissioner Bisignano committed not to entirely remove the option for beneficiaries to receive paper checks, backtracking on the agency’s own recent announcement to “stop issuing” them.”
As such, in order to be considered eligible for a waiver, the beneficiary must meet any of the following requirements as outlined by the GoDirect Treasury program:
- They have a mental impairment that would make receiving payments electronically a hardship.
- They live in a remote area without the infrastructure to process electronic financial transactions.
- They are 90 years of age or older.