The Social Security Administration is warning beneficiaries that those receiving their benefits via paper checks could see their payments disrupted as the agency implements a Trump administration deadline to wean the federal government off of paper checks by Sept. 30.
While 99% of SSA beneficiaries use direct deposit to get their benefits, over half a million people still get paper checks, according to agency data.
Now, SSA is trying to move those beneficiaries receiving paper checks to direct deposit or Direct Express, a prepaid debit card used to deliver federal benefits. It’s also pushing new applicants to digital payment options.
People that want checks will have to call the Treasury Department themselves and apply for a waiver. Those getting paper checks that do not get such a waiver by the end of September “may experience a disruption in timely payment delivery,” even if their waiver application is pending, according to an internal policy document dated July 2.
Asked for details about if people’s benefits would be stopped if they don’t get a waiver or switch to a digital payment option — and at what point this would happen — an SSA press official said that the agency is “working to assist all beneficiaries and recipients to move to electronic payment options.”
SSA plans to send direct mailings to people currently receiving checks, they said, referring Nextgov/FCW to the Department of Treasury for additional details such as an enforcement timeline. Treasury didn’t respond to requests for comment.
The policy could cause a flood of people coming to the agency with questions about missing checks, if some of the 521,644 people receiving such paper payments don’t file for a waiver before the end of September, said one SSA employee, who was not authorized to speak on the record.
SSA’s new policy also removes requirements for its field offices to keep a list of local financial institutions.
The changes follow a March executive order that set up a Sept. 30 deadline for Treasury to stop issuing paper checks and move payments to direct deposit; debit and credit cards; and digital wallets. It has limited exceptions, including for people without access to banking services.
Paper checks come with a cost to the government as well as the risk of fraud, which has been on the rise in recent years, even as the use of checks is on the decline. This is especially fueled by mail theft, where fraudsters take checks left in residential mailboxes, for example.
“Removing the paper check from the payment system will result in a cheaper, faster, and more secure payment system,” the American Bankers Association said in a public comment submitted to the Treasury Department last month.
The federal government has been trying to move away from checks since 2011, and requirements for federal payments like benefits or salaries to be made electronically are in statute already.
Still, the government could face challenges as it implements against a six month timeframe set up in the executive order.
There are just over eleven weeks until the end of September. And SSA isn’t the only agency that has to implement new requirements for thousands of paper check recipients: Last year, 7 million people received their tax refunds by paper checks or prepaid debit cards as opposed to direct deposit.
The policy changes will affect some more than others, including those without bank accounts.
Six percent of American adults were unbanked in 2023, according to the Federal Reserve, and that rate is higher among low-income adults, as well as younger people, Black and Hispanic adults, and people with disabilities.
Rural and tribal communities lacking internet access and far from bank branches may also especially feel the change, as will elderly beneficiaries.
“It is no exaggeration to state that the majority of our citizens receive critical payments by check,” the Coalition of Large Tribes, which represents over 50 tribes with large land bases, wrote in a comment to the Treasury last month.
“This transition presents significant challenges for Tribal communities,” they wrote, citing limited banking infrastructure and inadequate broadband access within Indian Country.
Options for unbanked people also aren’t without their flaws. The Consumer Financial Protection Bureau sued the administrator of Direct Express last year for “systematically failing” its 3.4 million cardholders with intentionally poor customer service and junk fees. CFPB dropped the lawsuit in April, and Treasury is moving to a new administrator.
The loss of thousands of SSA staff could affect the agency’s ability to implement, as could recent changes to how people can change their direct deposit information that experts say will push millions into field offices for help with more stringent identity verification requirements.
“There are serious implementation questions, especially given all the problems they’re having at SSA,” Nancy Altman, the president of advocacy group Social Security Works, told Nextgov/FCW.
Previously, people that insisted on paper checks would get them from SSA, and the Treasury Department would reach out to them proactively about the waiver.
The push to digital payments could especially slow processing for claims submitted online, the SSA employee told Nextgov/FCW.
SSA is directing employees to hold claims that don’t include direct deposit information for 30 days while the agency calls them and sends them a letter about direct deposit requirements before it sends them benefits via check if the applicant doesn’t contact SSA.
“We don’t have the personnel to call everyone, so most people will find out by letter,” the SSA employee said. “There is no doubt this will cause delays to a lot of people.”