After 71 years of being mailed to retirees, the Social Security paper check is being retired.
The U.S. Treasury Department has announced that beginning Sunday, anyone applying for Social Security, Veterans Affairs or other federal benefits must sign up to receive those benefits by electronic payment, mainly direct deposit to a financial institution account.
It's a move that will save taxpayers $1 billion over the next 10 years, according to the federal government.
Those savings were illustrated during a ceremony Tuesday when Rosie Rios, the treasurer of the United States, wrote a check to American taxpayers in that amount.
"More than 18 million baby boomers are expected to reach retirement age during the next five years, with 10,000 people a day becoming eligible for Social Security benefits," said Rios. "It costs 92 cents more to issue a payment by paper check than by direct deposit. We are retiring the Social Security paper check option in favor of electronic payments because it is the right thing to do for benefit recipients and American taxpayers alike."
About 11 million people nationwide already receive federal benefits by paper checks.
Those receiving Social Security paper checks will continue to receive them after Sunday but must switch over to the electronic payment option by March 1, 2013. At that time, all federal benefit paper checks will end.
In Pennsylvania, 810,000 baby boomers are expected to reach retirement age over the next five years.
Current federal benefit recipients in the state rely on 391,000 Social Security or Supplemental Security Income paper check payments each month, according to Walt Henderson, the director of the Treasury Department's Electronic Funds Transfer division.
He said that if everyone in Pennsylvania switched to electronic payment, approximately $4.3 million would be saved each year.
The push for electronic deposits is not new and a majority of Americans have already become accustomed to going paperless.
According to the 2010 Federal Reserve Payments Study, electronic payments now make up over three-quarters of all non-cash payments nationwide. There were 5.7 billion fewer checks written in 2009 than in 2006 -- a decline of 6.1 percent per year -- while electronic payments grew 9.3 percent during that same period. Among federal benefit recipients, about eight in 10 receive their Social Security or other federal benefit payment electronically, according to the Treasury.
"When you look at the cost savings, there's significant savings," Henderson said.
He said that those savings, combined with the increase in Americans who already use direct deposit for paychecks, signaled that the time had come for the switch.
The department said electronic payments, in addition to saving taxpayers' money, would help prevent theft and substitution costs.
Last year, more than 540,000 Social Security and Supplemental Security Income paper checks were reported lost or stolen and had to be replaced.
For those who haven't made the switch, the treasurer requires recipients to have an electronic account, usually a checking account, at financial institutions capable of receiving direct deposits.
Recipients without accounts or those who do not wish to open an account at a financial institution have the option of having a Direct Express Debit MasterCard issued instead.
The announcement comes on the heels of another cost-cutting move, the Social Security Administration announced this month: the suspending of mailings of annual Social Security statements. The statements gave workers estimates of future retirement benefits and a record of their yearly earnings.
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