Tuesday, July 5, 2011

Electronic Banking and Social Security

The Social Security Adminsitration will no longer allow people to choose whether to have their benefits sent to them by paper check or deposited directly into their bank account.  For people that apply for Social Security or Supplemental Security Income benefits on or after May 1, 2011, SSA will pay benefits electronically.  People that are in pay status currently must transition to electronic benefit transmittal not later than March 1, 2013.  The alternative, a Direct Express® card will provide the vehicle to pay benefits. 

 SSA intends this move as a cost saving measure.  Cutting out the automated printing of checks with the costs of mailing with the substituted computer controlled transfer of funds will obviously save money.  There is a downside. 

With paper checks, the beneficiary has to go to the bank and cash or deposit the check.  It takes a voluntary act.  Without that voluntary act, I can see the estate of a deceased person getting hit with overpayments as post mortem bank transactions continue. 

In this information age, we have or at least could automate a significant portion of our banking. The regular ones that don't change -- mortgage, car payment, credit line payments, etc.  It is forseeable that an individual could pass on from this experience and have banking transactions continue until someone else notifies the bank, SSA, and the other interested parties that the beneficiary has passed on. 

Whether the agency has adequate safeguards to protect against what I perceive as inevitable overpayments remains to be seen.  The push towards automation and the desire to save scarce government resources (i.e. shrinking government payroll) should move forward with caution to we as the taxpayers do not trade one set of fiscal problems for another set of fiscal problems.

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