Kiplinger Today


Government Benefits Go Paperless

Someday soon, the phrase “the check is in the mail” may become a quaint anachronism, fading away like buggy whips and leisure suits. The paper check took a step closer to extinction today as the U.S. Department of Treasury issued a proposal that would eliminate the check as a way to receive Social Security and other monthly payments, such as Supplemental Security Income and Veterans and Railroad benefits.

Starting March 1, 2011, new recipients of government benefits would have only two choices of how to receive their monthly benefits: direct deposit to their bank account or electronic funds transfer through a prepaid debit card. Existing check recipients would have two additional years -- until March 1, 2013 -- to make the switch to direct deposit or debit card. There is a 60-day public-comment period before the final rule is published.

Currently, 85% of federal-benefit recipients receive their payments electronically. However, the government still mails 136 million benefit checks each year, and more than half a million of them are lost, stolen, altered or fraudulently signed.

The paperless-benefits program would expand the voluntary Direct Express program, which was launched in 2008. That’s how more than one million retirees and disabled individuals receive their monthly payments from the Social Security Administration. Recipients get a debit card in the mail when they start the program, and their benefits are automatically loaded to the card every month. Features include one free ATM withdrawal per federal-government deposit (plus 90 cents for additional withdrawals), unlimited point-of-sale usage and cash-back features, and consumer protections against lost or stolen cards or unauthorized transactions.

In addition to improving security for consumers, moving all recipients to electronic payments is expected to save about $300 million during the first five years, according to the Office of Management and Budget.

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