Starting next year, the check will no longer be in the mail for
millions of people who receive Social Security and other government
benefits.
The federal government, which issues 73
million payments a month, is phasing out paper checks for all benefit
programs, requiring people to get payments electronically, either
through direct deposit or a debit card for those without a bank account.
The
changes will affect people who get Social Security, veterans' benefits,
railroad pensions and federal disability payments. Tax refunds are
exempt, but the Internal Revenue Service encourages taxpayers to get
refunds electronically by processing those refunds faster than paper
checks.
About 90 percent of people who receive
federal benefits already get their payments electronically, the
Treasury Department says. New beneficiaries were required to get
payments electronically starting last year, and with a few exceptions,
the rest will have to make the switch by March 2013.
"It's
just that natural progression of moving to how people are used to
receiving their funds," said Walt Henderson, director of the Treasury
Department's electronic funds transfer division.
Henderson
said electronic payments are safer and more efficient than paper
checks; in 2010, more than 540,000 federal benefit checks were reported
lost or stolen. The switch will save the government about $120 million
a year. Social Security will save $1 billion over the next decade,
according to the Treasury Department.
"You think
of that paper check floating out there in the delivery system, with
personal information on it, it's much more susceptible to fraud versus
an electronic payment," Henderson said.
Advocates
for seniors say they understand the government's desire to cut costs
and take advantage of technologies that most workers already use. The
food stamp program switched from paper coupons to debit cards in 2004.
But they have raised concerns about requiring the switch for older retirees who may not be used to electronic payments.
"This
will affect some very frail elderly people who are living by
themselves, many of them, and doing well, but usually within the
context of that old paper check that they deposit in the bank," said
Web Phillips, a senior policy advisor for the National Committee to
Protect Social Security and Medicare.
"The change
has to be handled carefully and with a lot of sensitivity so that there
aren't people who lose track of a payment or don't understand that they
have a card that came in the mail that's the source of their payment,"
Phillips said. "That's our concern."
The switch
is mandated by a Treasury rule issued in December 2010. Since then, the
department has worked to educate the public. The government has created
a website, www.GoDirect.org and a toll-free phone number,
1-800-333-1795, people can call for assistance.
"Treasury
acknowledges they have a lot of education to do for people about how
these things work," said David Certner, legislative policy director for
AARP. "We're a bit concerned about how easy it's going to be to provide
education, particularly for some in this older population who are not
familiar with debit cards and don't have bank accounts."
Certner
said AARP wants the government to make it easier to get an exemption.
Under the Treasury rule, current beneficiaries who are 90 and older
won't be required to make the switch. People can get a waiver if using
a debit card would impose a hardship, but the Treasury Department says
those would be "extreme, rare circumstances."
These waivers are not well publicized on the government's website.
"There
are several million people who receive paper checks today," Certner
said. "Some of them do it because they have worked out arrangements for
them that work."
AARP also has concerns about
fees associated with the debit cards. The Direct Express cards are
issued by Comerica Bank, Treasury's financial agent. Each month,
benefit payments are added to the cards, which can be used to make
purchases or withdraw cash from ATMs.
There are
no fees for using the debit card to make purchases. They can be used at
any retailer that accepts MasterCard debit cards. If a card is lost or
stolen, the beneficiary is protected from unauthorized use as long as
the missing card is reported promptly.
Cardholders
can make one free ATM withdrawal each time a payment is registered in
the card. Subsequent withdrawals will cost 90 cents each, and all
withdrawals may be subject to fees by the owner of the ATM.
The
government's switch to electronic payments also comes with a side
effect: less business for the U.S. Postal Service, an agency that is
already facing big budget problems with the rise of email and
electronic bill paying.
The private sector has
been migrating to electronic payments for years, costing the Postal
Service millions of customers, said Alan Robinson, editor of the Postal
Journal, a trade publication.
"Normally, these
things happen one customer at a time," Robinson said. "In terms of
payments, this is probably one of the largest."