Electric Benefits

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  • Mellody Hobson talks about the news that the government is making the switch to electronic payments for Social Security and disability checks.

    The government is requiring all beneficiaries of federal benefit payments to go electronic by March 1, 2013. That means you have just 4 days left to make sure you’ve made the switch.

    Why go with direct deposit now after so many years of paper checks?
    First and foremost, this is absolutely a cost-savings measure.  The Treasury estimates that moving from paper checks that are mailed out to electronic payments will save over $1 billion over the next ten years and $120 million in the first year alone. Of course, they also note other benefits of electronic payments, and safety is a big one. In 2011, more than 440,000 Social Security checks were reported lost or stolen, while $70 million worth of checks were fraudulently endorsed. They hope that electronic payments will help address this problem, though there are still issues around identity theft with this new law.  And lastly, they make the case that electronic payments are more convenient for most people.  You no longer need to visit a financial institution to cash or deposit a check. This may be particularly important for the elderly, disabled or those who lack transportation.

    Some seniors just aren’t comfortable with technology or don’t have a bank account. Are there any exceptions to this new law?
    This is an interesting mandate by the government because this new policy is based on the assumption that individuals, particularly seniors, are familiar with online banking and have Internet access. However, only 10 percent of seniors (65 years and older) said they preferred receiving financial information electronically and 45 percent of seniors do not even own a computer. This makes it more difficult for those who may just be starkly opposed to traditional banking and the millions who do not have Internet access to confirm online that their benefits were ever deposited. And even if they do have Internet access, some seniors may not be technologically savvy enough to bank online. With that said, there is NOT an option for those who simply do not want to make the switch. While exceptions do exist, they are very rare. They include an automatic waiver for those born on or before May 1, 1921 as well as some people living in remote areas where banks are few and far between, but you must apply for the waiver. That is also the case for recipients with a mental impairment where electronic payments would impose a hardship. I have heard that these waivers are difficult to obtain and only about 20 percent of people who wanted a waiver were actually given one.

    What if a senior who lives alone doesn’t watch the news or read the paper… How are they going to find out about the switch?
    Seniors have likely received notifications about the switch in the mail along with their paper checks, and may also have been notified through their national or local banks.  The Go Direct campaign being led by the US Department of Treasury began in 2005 with this initiative and has tried to get banks on board. Other partners include credit unions, social service agencies and community-based groups. I encourage loved ones of those receiving benefit payments to ask them if they have made the switch as well – just to be sure seniors are aware of this.

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