The changing face of Social Security: From paper checks to direct deposits

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By: anonymous
on 21st Apr,2012

The social security benefit system has been a vital part of the US public welfare efforts.
The changing face of Social Security: From paper checks to direct deposits


The social security benefit system has been a vital part of the US public welfare efforts. As of March 2012, more than 8 million people are recipients of federally administered payments. The total amount paid out monthly on account on Social Security is a little over is a little over $4.5 million and the average monthly paycheck is for $518.

Traditionally, the monthly paychecks were posted to beneficiaries by the social security administration but from next year on, things are going to be a little different. The millions of people receiving social security and other government benefits will not find a check waiting for them in the mailbox. Instead, they will receive their benefit money either electronically via direct deposit or through a debit card for those who don't have a bank account.

What is the change all about?

Although a portion of social security beneficiaries already receive their monthly payments electronically, the US Treasury Department is aiming to switch the current system completely over to an electronic payment process by March 2012. New beneficiaries were already required to receive their payments electronically.

A senior official of the Treasury Department was quoted as saying that this was the ‘natural' step forward, especially since almost 93% of America's financial transactions were already carried out electronically. Moreover, he states that the electronic transfer method is safer and definitely more efficient for both parties involved.

What are the security implications?

The Treasury Department statistics show that more than 540,000 benefit checks went missing in transit or were reported to be lost in 2011 alone. The missing checks cost the federal government $120 million. Shifting over to the new electronic payment system will not only be able to save that $120 million but in the next 10 years it will also save $1 billion overall.

Moreover, the security benefit of adopting the electronic payment system doesn't end there. A paper check from the Social Security Administration contains a substantial amount of confidential personal data pertaining to the individual it is being sent to. Account number, the complete social security number, routing number, etc are all listed on the check. Therefore, a paper check is significantly more susceptible to fraud as compared to an electronic payment system.

What are the negative implications?

The benefit of this new system does come with its own set of unforeseen problems. Advocacy groups speaking on behalf of senior citizens have raised the concern that the new system might pose a problem for older retirees who are used to the old payment method. A senior federal policy advisor stated that although the new system has significant security advantages, it will negatively impact the ability of senior citizens to accept and utilize the electronic payment method.

Policy makers are trying to formulate criteria for wavering the need to shift to the new electronic payment system. The legislative policy director of the American Association of Retired Persons says that under the current rule of the Treasury Department, citizens who are 90 years of age or older won't be required to make the switch next year.

The shift will also affect the US Postal Service (USPS) which is currently responsible for delivering the paper checks via mail. USPS is already under a lot of budgetary stress since their business has taken a hard hit with the rise of email, electronic billing and clearing systems. The private sector has already made the shift to electronic payment mediums quit a while back and it had cost USPS millions of customers.

Switching over the system of Social Security benefit payments from paper checks to electronic medium does not come without its side effects. For the time being, the social, financial and economic impact of the switch from paper to electronic medium can only be anticipated as the nation waits for the change to come into effect.

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