Social Security Switching to Electronic Payments in 2013

The Treasury Department announced today that they will discontinue mailing out paper checks to beneficiaries receiving federal benefits (including Social Security) next year.

Once in effect, people who receive Social Security, veteran’s benefits, railroad pensions and federal disability payments will need to choose between direct deposit and a debit card to receive their benefits.

This switch is mandated by a Treasury rule issued in December 2010, with the main purpose of reducing the costs required to mail out paper checks.  However, this change will also help reduce fraud, as there will no longer be checks floating around for people to steal.

Note: If you are currently receiving your benefits electronically then this change will not affect you.

People who are receiving federal benefits by check will need to switch to electronic payment by March 2013.  You can choose to get your payments by direct deposit to a bank or credit union account or to a Direct Express® Debit MasterCard® card account.

If you choose the debit card option, then once you receive your debit card your benefits will be deposited directly to your card each month.  The debit card can be used at any retailer that accepts MasterCard, or cash can be withdrawn from any ATM.  There will not be any fees for using the debit card to make purchases, and beneficiaries can make one free ATM withdrawal each time a payment is registered to the card.  Additional withdrawals will cost 90 cents each, and the owner of the ATM may also impose fees.

Some of the benefits of receiving electronic payments include:

• Electronic payments are safer.  According to Walt Henderson, the director for the Treasury Department’s electronic funds transfer division, over 540,000 federal benefit checks were reported lost or stolen in 2010.  Having your benefits deposited directly into your bank account will eliminate the possibility that your check will be lost or stolen.
• Perhaps the biggest reason is how much money will be saved by switching to electronic payments.  This switch is expected to save the federal government approximately $120 million per year.  Social Security alone is expected to save $1 billion over the next 10 years!
• Other benefits include eliminating the need to go to the bank each month, or having to find/hire someone to go to the bank if you are unable to get there yourself.

As with any change, there are concerns as well.  One of the biggest concerns is that people who don’t have bank accounts will not transition to debit cards easily.  And of course, debit cards can be lost or stolen, which brings the chance of fraud back into the equation.  As a result AARP is requesting that some people be given exemptions from the requirement that they must switch to electronic payments.

Currently, there are a few exceptions.  For example, people who are age 90 or over will not be required to switch to electronic payments.   Other exceptions will be made in extreme, rare cases, such as if using a debit card would be a hardship for an individual.

The federal government is trying to educate people well in advance of the switch.  For more information about the upcoming change, the government has created a website, www.GoDirect.org and a toll-free phone number, 1-800-333-1795, people can call for assistance.