By Ken Berry, AccountingWeb.com
Do you have clients who still receive their Social Security checks in the mail? Mail carriers won’t be dropping them in your clients’ mailboxes in the near future. The government has announced it will no longer be issuing paper checks, so recipients will have to access their funds electronically. They’ll have until March 1, 2013, to make the switch.
This change already affects older baby boomers who recently retired. As of May 1, 2011, new retirees are required to choose one of two electronic payment methods. Approximately 80 percent of Social Security recipients currently receive their payments electronically.
A retiree making the switch can have Social Security payments deposited directly into a bank or credit union or loaded on a prepaid debit card. To use direct deposit, the routing transit number and account number for the bank or credit union must be provided. Clients can sign up at GoDirect.org. Alternatively, they can call the U.S. Treasury Electronic Payment Solution Center at (800) 333-1795 or ask about the direct deposit feature at a local banking institution.
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Social Security recipients who don’t choose an electronic payment option by March 1, 2013, will receive their payments via a Direct Express Debit MasterCard account. More than 1.5 million individuals have signed up for these prepaid debit cards since they first became available in 2008.
As with a bank account, fees may be charged for certain debit card transactions. For example, individuals may make purchases at retail locations, receive cash back with a purchase, and take one withdrawal per month at one of the in-network ATMs – which include Comerica Bank, Charter One, Privileged Status, Alliance One, PNC Bank, MasterCard ATM Alliance, and MoneyPass – completely free of charge. However, if someone makes more than one ATM withdrawal per month at an in-network ATM, it costs 90 cents per withdrawal. Additional fees, which can be as much as $3, also apply to withdrawals at out-of-network ATMs. Receiving a paper statement in the mail will cost another 75 cents per month.
By eliminating printing and postage costs for Social Security checks, the government expects to save $1 billion over the next ten years.