The current month of September may just be the last month during which the Social Security Administration (SSA) mails out benefits in the form of a paper check. This is due to a broader federal initiative aimed at modernizing all payments both to and from what is considered America’s bank account. The executive order titled, “Modernizing Payments To and From America’s Bank Account” was first issued from the office of the president on March 25th. The SSA later in July also posted an update on its blog explaining that it will no longer issue paper checks come September 30th in accordance with the executive order.
At present, the vast majority of over 99% of Social Security beneficiaries already receive their monthly benefit income electronically by means of direct deposit. However, the SSA has since been urging the remaining beneficiaries to make the switch with regards to their payment methods. Here is everything you need to know.
No more paper checks in the federal government
Moving towards a completely digitized payment system is long time coming in both the federal space, as well as in the world at large. Electronic payments do make for a more efficient method of transacting and the executive order cites a similar reasoning amongst its rationale for this change. According to what is stated in the executive order, the continued use of paper based payments such as checks or money orders “flowing into and out of the United States General Fund, which might be thought of as America’s bank account, imposes unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”
Another problem that is hoped to be reduced through this change is the matter of mail theft. “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),” as per the order.
In the SSA’s announcement regarding this upcoming change, the agency also cites speed and efficiency, enhanced security, and cost cutting as its reasoning for discontinuing the use of paper checks. The SSA further notes 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.”
This federal initiative will not only impact recipients of Social Security benefits, however. The executive order will be implemented across all payments to and from the federal space. This means that, for example, if a regular citizen is owing taxes, they will have to make that payment electronically as well.
What should beneficiaries do?
No action will be required from the vast majority of beneficiaries since they already are receiving their benefits electronically. For those who still receive paper checks, the SSA has stated that it is actively encouraging these beneficiaries to switch over their payment method to either a direct deposit or a Direct Express Card. If the beneficiary, or any other individual, is unable to make the switch, the executive order does allow for exceptions 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.
Additionally, following a meeting with Senator Elizabeth Warren, SSA Commissioner Frank J. Bisignano has also shared confirmation that the agency will continue to disburse paper checks to those who require it even after the executive order comes into effect on September 30th.