Following an executive order issued during the first quarter of the year, the Social Security Administration (SSA) is currently encouraging all beneficiaries who still receive their benefits through mailed paper check to switch over their payment method to an electronic one. The March 25th executive order titled “Modernizing Payments To and From America’s Bank Account” was issued with the aim of optimizing all transactions and disbursements both to and from the federal government.
This is not the first attempt of its kind in the federal space. If you go back as far as 1991, you will find that the federal budget then too had a provision in it that required the federal government to discontinue use of paper checks as best it can by January 1999. As such, following the issuing of the executive order, the SSA in July posted an update on its blog confirming that the agency will also bring an end to the issuing of paper checks come September 30th.
Here is everything you need to know about this digital mandate, how to switch your payment method, and who qualifies for a waiver.
Goodbye paper checks
Digitization more often than not translates directly into efficiency which is why this executive order makes sense in the context of how the world at large transacts today. The executive order cites “unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies” as its rationale behind doing away with paper checks on such a large scale.
The SSA also cites similar reasons for no longer issuing paper checks, claiming that through this change, the agency aims to “improve efficiency, security, and ensure beneficiaries receive their monthly benefits promptly.” In addition to enhanced security and increased efficiency, the SSA also 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.”
How to switch Social Security payment methods
According to the SSA’s update, the beneficiaries who are currently receiving paper checks scan switch their payment methods to either a Direct Deposit of a Direct Express Card. If the beneficiary does not have a bank account, they will opt for a Direct Express Card which is a “prepaid debit card designed specifically for federal benefit payments.”
The agency has stated that when it mails out paper checks, it is currently including inserts explaining this change and the steps the beneficiary can take to change their payment method as it hopes to have as many beneficiaries transitioned as possible. The SSA also notes that their technicians are available for those who require assistance.
If you are a beneficiary who receives paper checks but would like to change your payment method, you can do so online through your my Social Security account.
Exceptions
Over 99% of Social Security recipients already receive their benefits through direct deposit. The remaining less than one percent of beneficiaries totals to around half a million individuals. This cohort is likely the most vulnerable of the total beneficiaries either due to advanced age or being unbanked and as such, transitioning payment methods may not be possible for them.
“A household is considered unbanked if no one in the household has a checking or savings account at a bank or credit union, according to the Federal Deposit Insurance Corporation. “In 2023, 4.2% of U.S. households—about 5.6 million households— were unbanked.”
As such, SSA Commissioner Frank Bisignano recently shared confirmation that exceptions will be made in cases where a digital payment method is deemed unfeasible. The Department of Treasury has also confirmed that a waiver will be granted in “rare circumstances”.
The Treasury states on its GoDirect website that to qualify for a waiver, at least one of the following three criteria must be met:
- The check recipient is an individual to whom electronic payments would impose a hardship due to a mental impairment.
- The check recipient lives in a remote geographic location lacking the infrastructure to support electronic financial transactions.
- The check recipient is age 90 or above.