Social Security Starts Phasing Out Paper Checks for Direct Deposits and/or Prepaid Debit Cards
Posted Apr 28 2011 11:40pm
Starting My 1st anyone who applies can’t get checks anymore and there is a conversion time until March of 2013 to move everyone over to direct deposit. If you don’t have a checking account, there’s a prepaid debit card you can get instead. This new rule also requires bank to protect funds from creditors and some were co-mingled with other accounts, so it sounds like the best way to go is to keep one account for social security only if depositing funds from other areas or go get the debit card that is prepaid. California is doing the same thing with unemployment benefits.
We don’t have these same options with Medicare as it was the IT infrastructure the the government was never allowed to build and thus it costs more money to run with current outsourced agreements with insurers who do the IT work with claims.
After the paper is gone everything with Social Security will have a data trail so there’s a bank involved somewhere along the line. Social security states in 10 years this conversion will save a billion in expenses versus mailing checks. Social security also works with electronic medical records and has some pilot programs in place for exchanging information for disability claims.
Starting May 1, everyone who applies for Social Security or other federal government benefits will be required to arrange for direct deposit of their payments. The government plans to phase out paper checks entirely by 2013.
Now, about 85% of Social Security beneficiaries get payments through direct deposit, says Treasury assistant secretary Richard Gregg. But the government issues more than 120 million checks a year, at a cost of about $1 each, vs. 10 cents for an electronic payment, Gregg says. Treasury estimates that eliminating paper checks will save the government about $1 billion over 10 years.
Benefits that are delivered electronically are more difficult to protect from creditors. In general, banks are prohibited from freezing or garnishing accounts that contain Social Security or veterans' benefits. However, in the past, individuals could lose that protection if their benefits were commingled with other funds in their accounts.
Some seniors avoided this problem by receiving paper checks and keeping them out of their bank accounts. Seniors who sign up for benefits after April 30 won't have that option.
Under rules that take effect May 1, though, banks will be required to determine the amount of federal payments deposited in a customer's account and protect that money from creditors.