Financial Update (October-December 1998)
Federal Payments Go Electronic in 1999
ederal government payments will officially enter the electronic age on Jan. 2, 1999. That's when a new regulation will go into effect requiring that all federal payments other than tax refunds be made electronically.
Direct deposit of payments through electronic funds transfer (EFT) will improve service for Americans who receive government payments. Electronic payments have proved more secure than paper checks, and, in most cases, more convenient. In addition to these benefits, EFT payments will spell cost savings for the government — and, ultimately, for taxpayers.
Payments affected by the new regulation include Social Security, Veterans Administration and Railroad Retirement benefits, federal salaries and retiree benefits, and vendor payments.
Fairness for All
According to Treasury Under-secretary John D. Hawke Jr., the Treasury Department has given serious consideration to the feedback it received when it invited public comment on the proposed regulation; many of these comments urged broadening the options for waivers to allow individuals to continue to receive paper checks. In a June press release, Hawke said that "the final rule will emphasize . . . the importance of ensuring that recipients are not forced into choices that are not right for them."
The regulation includes an automatic waiver from the EFT requirement for a person who does not have an account at a financial institution. Payment recipients who later open accounts can then decide whether to sign up for electronic payments or continue receiving paper checks.
Some other payment recipients can opt to continue receiving paper checks: individuals for whom direct deposit would cost more than receiving checks or those with a physical or mental disability or a geographic, language or literacy barrier.
As part of this EFT initiative, Treasury is developing a low-cost electronic transfer account to be offered through federally insured financial institutions for direct deposit of federal payments. These accounts — which will be available to all payment recipients, even those who already have an existing account — will enable recipients to withdraw funds through ATMs and point-of-sale terminals using access cards.
Plans are also under way to link the delivery of federal payments to state electronic benefit transfer programs so that payment recipients can receive federal payments on the same card with state benefits such as food stamps.
Spreading the Word
Federal paying agencies such as the Social Security Administration will be required to notify all current check recipients of EFT options, including receiving payments through direct deposit, awaiting the availability of electronic transfer accounts or electing waivers that allow them to continue receiving checks. Treasury is working with these agencies to ensure that payment recipients have the information they need to choose the best payment option for their particular circumstances.
Treasury is also planning an extensive nationwide public education campaign that will involve consumer, community and other organizations as well as publications, media outreach and public service advertising.