Railroad Retirement Board
Electronic Payments For RRB
Beneficiaries Still Receiving Paper Checks
July 2010
Proposed Rules Would Mandate Electronic Payments For RRB Beneficiaries Still Receiving Paper Checks
Paper checks may be a thing of the past for
U.S. Railroad
Retirement Board (RRB) beneficiaries who still receive them,
under a recent initiative announced by the Department of the Treasury.
One part of
the Treasury initiative would eliminate the vast majority of paper checks for
federal benefit payments over the next 3 years. New recipients of federal
benefits would receive such payments by electronic means starting
The most
common form of electronic payment for railroad retirement, social security and veterans benefits
is through Direct Deposit, in which the amount is
automatically transferred to an individual’s bank account. The RRB currently
pays approximately 90 percent of its benefits by Direct Deposit, which is
greater than the government-wide average of about 85 percent.
However, a
significant number of beneficiaries who receive paper checks do not have bank
accounts. As a result, the new initiative will use Treasury’s Direct Express debit card
to pay these individuals. The amount of the government benefits will be loaded
onto the card, which can then be used like an ordinary debit card.
Currently,
individuals applying for federal benefits can obtain a waiver from electronic
payment by certifying that they do not have a bank account or that it would
otherwise impose a hardship. Under the Treasury proposal, agencies would still
be able to grant waivers, but in very limited cases. Examples include
payment to individuals living in foreign countries, certain disaster or military
situations, and non-recurring, one-time payments.
While it
only costs 10.5 cents to issue an electronic payment, it costs the government
$1.03 to issue a paper check. By shifting the 136 million federal benefit
checks issued in a year to electronic payment, the government will save about
$125 million in processing costs and more than 2 million pounds of paper.
In addition
to cost considerations, electronic payment has the added benefit of providing a
faster, more secure means of payment. Electronic payments are credited to the
recipient’s account the day the payment is due, and there is no opportunity for
the payment to be lost in the mail, stolen or forged. The debit cards, which
currently carry a MasterCard logo, also allow the holder to avoid paying fees
for check-cashing services. The primary benefit of these cards is that
recipients will be able to use them to purchase goods and services at the point
of sale or obtain cash through a nationwide network of automated teller machines.
Treasury
published proposed regulations to implement this initiative in the Federal
Register on
Public Affairs 312-751-4777
Posted: 07/13/10