Treasury kicks off effort to go paperless with federal benefits

The Treasury Department is kicking off an initiative to move recipients of federal benefits away from paper payments to direct deposit by March 2013, the Obama administration announced Monday.

New enrollees receiving a range of benefits administered by the Social Security Administration, Veterans Affairs Department, Railroad Retirement Board and Office of Personnel Management will be required to receive payments beginning March 1, 2011, either through direct deposit into a bank account or through a Treasury-issued debit card. All existing check recipients will have to enroll to receive electronic payments by March 1, 2013.

Treasury announced the initiative in April, saying that moving all recipients of these benefits to electronic payments would save more than $300 million in the first five years. Currently, 85 percent of federal benefit recipients receive their payments electronically.

On Monday, Office of Management and Budget Director Peter R. Orszag said the shift to electronic payments will continue to save $120 million each year after the first five, and he painted the initiative as part of the administration's efforts to reduce wasteful spending in the federal government.

"This is a win-win for the American public, because it makes government more convenient and cost-effective," Orszag wrote on the OMB blog. "This is precisely the type of smart, streamlined improvement that this administration is committed to making across government to boost efficiency and modernize how we do business. And OMB is working with agencies across the government to bring more ideas like this one online in the months to come."

Orszag said not only will electronic payments be more convenient for many beneficiaries, they also will eliminate the risk that checks will be lost, stolen, altered, or fraudulently signed, which happens more than 500,000 times a year with paper checks.

"The benefits of electronic transactions are well-documented," the Treasury announcement stated. "Aside from the large cost savings, electronic transactions provide safety, convenience and control for payment recipients, taxpayers and savings bond holders."

The department pledged that the shift would be accompanied by strengthened protections for those who receive direct deposits. Treasury and the federal agencies that issue benefit payments have published a notice of proposed rule-making to ensure that federal benefit payments that are protected from garnishment remain safeguarded after being directly deposited into accounts.

Treasury also will issue a proposed rule reaffirming the long-standing policy that federal benefits must be deposited directly into an account in the name of the recipient and not into an account of a third party. The announcement stated that the rule will prevent entities such as payday lenders from establishing master accounts to receive payments on behalf of multiple beneficiaries. It will allow for direct deposit into master accounts established by reputable organizations such as nursing homes, as long as those organizations establish certain consumer protections.