Days of paper checks ending for Social Security payments

On March 1, the monthly Social Security check, a staple of America's financial safety net since the '30s, will disappear.

Don't panic. It's not the result of some sort of bureaucratic sleight-of-hand fiscal cliffery.

It's just that, on March 1, the U.S. Treasury Department will stop issuing paper checks for Social Security and other federal benefit payments and disburse payments instead only in the form of direct deposits to bank or credit union accounts or debit cards.

The move from paper checks to electronic fund transfers is expected to create nary a ripple of concern among the vast majority of Social Security beneficiaries, because most already receive benefit payments as direct deposits.

Still, with the impending disappearance of paper checks, the Treasury Department is making a final, last-minute push to urge benefit recipients who haven't signed up for paperless alternatives to do so by March 1.

The move to paperless payments affects anybody who receives Social Security, Supplemental Security Income, Veterans Affairs, Railroad Retirement Board or Office of Personnel Management benefits, or black lung benefit payments from the Department of Labor. It's been in the works for several years, and most beneficiaries seem to be taking it in stride.

"We haven't had any phone calls about the switch," said Barry Gold, director of government relations for AARP Nevada. "And at the national level, we've had very few calls about it."

Maybe it's procrastination, although an Internet public educational campaign that kicked off more than a year ago - visit www.godirect.org - probably had something to do with it, too.

Anyway, Walt Henderson, director of the Treasury Department's Go Direct campaign, said about 94 percent of Social Security beneficiaries currently receive their monthly benefits in the form of direct deposits into bank and credit union accounts. But the remaining 6 percent equates to about 5 million checks nationwide, he added.

"We are encouraging them to switch over by March 1, 2013," he said.

Electronic benefit transfers are nothing new for federal benefit recipients. Henderson said the Treasury Department has been promoting direct deposit for more than 25 years.

"So people have been voluntarily signing up for direct deposit," he said. "But this specific direct deposit requirement we started in 2011."

In January 2011, the Treasury Department was issuing about
11 million paper checks to beneficiaries each month, Henderson noted, and "we have managed over the past two years to cut that down to 5 million."

Direct deposits are a tried and proven way of receiving your funds, he said, offering both convenience - consumers may access their funds immediately, rather than waiting for a check to clear - and security.

According to the Treasury Department, more than 540,000 Social Security and SSI checks were reported lost or stolen during the 2010 fiscal year, nearly 50,000 checks issued that same year were altered or fraudulently endorsed, and about 1.3 million people annually report having problems with paper checks.

For the past two years, new beneficiaries haven't had the option of receiving paper checks.

"Even now, when you apply for Social Security for the first time, you really don't have a choice," Henderson said. "You have to sign up for direct deposit to a bank or credit union account, or have something called a Direct Express card."

Henderson said it costs just more than $1 to issue a paper check, which "ultimately costs taxpayers," versus about 10 cents for an electronic payment.

"So there are significant savings," he said. "We estimate if we are able to convert all checks over to direct deposit, we will save a billion dollars over 10 years."

In Nevada, more than 20,000 paper Social Security checks and more than 7,000 paper SSI checks are issued each month, according to the Treasury Department, and eliminating paper checks would save more than $300,000 each month here alone.

Henderson said the "vast majority" of Social Security and SSI recipients will receive payments after March 1 in the form of direct deposits into bank or credit union accounts. However, those who don't have bank or credit union accounts - the Treasury Department estimates that about 4 million Social Security and SSI beneficiaries don't - will be issued a Direct Express card.

"It's a prepaid debit Mastercard and operates very similar to a bank account," Henderson said. Funds will be loaded onto the card each month, and the recipient then can use the card, like any other debit card, "to make purchases, pay bills and get cash."

"The debit cards are structured in a way that is very fee-friendly," he added. "There are no monthly fees and no application fees. They get one free ATM withdrawal (each month), and after that they're only 90 cents apiece. And they can always use the card to make purchases or pay bills."

According to the Treasury Department, a survey said 95 percent of Direct Express cardholders were satisfied with the card and 93 percent said they'd recommend the card to a friend or family member.

"(However) we always prefer it if the person has a bank or credit union account," Henderson said. "We believe that's the best way for them to get direct deposit."

Also, with many financial institutions charging consumers monthly service fees for checking or savings accounts that fall below a designated balance, benefit recipients might want to shop around.

"I know there's a lot of concern about fees," Henderson said. "But there are benefits sometimes with getting direct deposit, and you (might) get free checking or at least reduced (fees)."

A small, and very select, group of consumers even might be able to continue receiving paper checks after March 1. Henderson said the Treasury Department has received about 500 requests for waivers, citing, for example, a beneficiary's mental impairment or geographical issues that would make direct deposits difficult.

"So, if it's too difficult for a person to make the change from check to electronic payment, we allow for that," Henderson said. "But, again, the vast majority are choosing to make the switch.

"If the person doesn't switch by March 1, we're not going to cut payments off," he added. "But we'll be following up with them, probably more directly, about getting them to switch over."

"My feeling is that people will make the switch," Henderson said. "They may be nervous about it now, but once they experience that first monthly payment going to direct deposit and nothing (bad) happens, they kind of forget about it."

Contact reporter John Przybys at
jprzybys@reviewjournal.com or 702-383-0280.