Thread: U.S. Phases Out Social Security Checks

DECEMBER 21, 2010, 5:27 P.M. ET.

Paper Losses: U.S. Phases Out Social Security Checks

By MAYA JACKSON RANDALL

WASHINGTON—Unless you are around 90 years old or older, don't expect to receive checks for Social Security and other government benefits in the mail too much longer.

The U.S. government is phasing out paper checks for these benefit programs, under a Treasury Department rule finalized Tuesday. The Treasury expects the shift to save Social Security $1 billion over the next 10 years.

The Treasury Department's rule, although slightly modified from a proposal it unveiled in June, requires electronic payments for government programs such as those providing Social Security payments and veterans' compensation and pension benefits.

Under the final plan, anyone applying for benefits on or after May 1, will receive their payments electronically. People who already receive paper checks will need to switch to direct deposit by March 1, 2013.

"Eight in 10 federal benefit recipients already use direct deposit, and now millions of additional retirees, veterans and other Americans will also receive their money in the safest, most reliable way—electronically," said Treasury Fiscal Assistant Secretary Richard Gregg. "This important change will provide significant savings to American taxpayers who will no longer incur the annual $120 million price tag associated with paper checks and will save Social Security $1 billion over the next 10 years."

In addition, the Treasury is touting its prepaid card, the Direct Express Debit MasterCard, for benefit recipients who don't choose direct deposit. More than 1.5 million beneficiaries have signed up for the card since it was introduced in 2008.

The Treasury says there are no sign-up fees, monthly fees or overdraft charges on the card, which is issued by Comerica Bank.

In the rule, Treasury said "the Direct Express card is structured in such a way that it may be used at no cost to the payment recipient, thus minimizing a beneficiary's risk of incurring a financial hardship to receive and use his or her benefits."

The government's new electronic-payment requirement has some exceptions. It has waived, for instance, for check-receiving recipients who are age 90 or older or approaching 90. Specifically, benefit recipients born before May 1, 1921, who would like to keep receiving paper checks will be able to do so under the final rule.

The rule notes that at least one consumer advocate had argued that older people don't understand electronic payments, yet another commenter said senior citizens face a greater hardship with paper checks if they are lost or misdirected through the mail.

While almost 80% of Social Security recipients who will turn 80 in 2011 receive their payments electronically, fewer than 72% of Social Security recipients who will turn 90 in 2011 receive their payments electronically, it said in the rule.

Consumer groups had voiced concern about identify theft and online privacy risks posed by electronic payments. But Treasury said electronic payments decrease risk of identity theft. Treasury also said federal agencies are restricted in how they may use personal information.

In addition, Treasury plans to issue a related rule early next year to protect benefit payments from garnishment after they are directly deposited into accounts.

Write to Maya Jackson Randall at Maya.Jackson-Randall@dowjones.com

http://online.wsj.com/article/SB1000142 ... tions_news