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FROM THE OFFICE OF PUBLIC AFFAIRS September 11, 1997RR-1922 REQUIRING ELECTRONIC PAYMENT FOR FEDERAL SALARIES, SOCIAL SECURITY, VETERANS AND OTHER BENEFITS The Department of the Treasury today announced aproposal to implement a new law that requires that all Federalpayments, except tax refunds, be made electronically beginningJanuary 2, 1999. This new initiative, required by the DebtCollection Improvement Act of 1996, was passed by Congress aspart of the Omnibus Consolidated Rescissions and AppropriationsAct of 1996, and will significantly improve the way that millionsof Americans who are entitled to government payments obtain theirfunds. This initiative is also known an "Electronic FundsTransfer" or "EFT ‘99."
Electronic payments are safer, faster, easier andless expensive than those made by paper check. Paper checks canbe lost, stolen, damaged or delayed. Each year, individuals,businesses and the government lose an estimated 65 milliondollars as a result of forgery, theft and counterfeiting ofgovernment checks. Problems with electronic payments can beresolved quickly; for example, a lost or stolen paper check cantake two weeks to replace, while an electronic transfer problemcan be traced and corrected within a single day. Electronicpayment will also save the Federal government as much as $100million a year in processing and postage costs. Treasury is ableto issue an electronic payment for less than 2 cents, comparedwith the average cost of 43 cents per paper check.
"Millions of Americans already know andenjoy the benefits of Direct Deposit," said Treasury UnderSecretary John D. Hawke Jr. "With this new law and thisproposed rule, we are encouraging millions of others to trade theuncertainty and potential risk of paper checks for the ease andassurance of electronic payment. For those recipients who do nothave an account at a financial institution, we have a mandate toprovide access to a low cost, safe account for the receipt ofelectronic payments. We are soliciting comments from the publicon this rulemaking as to the most effective means of providingsuch an account."
In this Notice of Proposed Rulemaking, theTreasury Department has proposed to waive the requirement incertain cases where it would create a financial hardship or whereexisting recipients would have other difficulties in complyingwith this new initiative. The law
also permits discretion for agencies to issuewaivers, such as in the case of certain one-time payments orforeign residency.
The Federal Government issues approximately 1billion payments each year to Federal employees, Federal retireesand government vendors, as well as recipients of tax refunds andFederal benefits such as Social Security, Supplemental SecurityIncome and Veterans’ benefits. The Department of theTreasury’s Financial Management Service disburses 850million of these payments, while most of the remainder are madeby the United States Department of Defense.
Since July 26, 1996, all new recipients ofFederal payments have been required to receive paymentselectronically, except those who have certified in writing thelack of an account at a financial institution. Today, 65 percentof Social Security payments and 56 percent of all payments issuedby the Treasury Department are made electronically. Most of thesepayments are delivered through Direct Deposit, which sends fundsdirectly into a recipients’ checking or savings account.
The Department of the Treasury will receivepublic comment on this proposed rule and on the design of theelectronic transfer account until December 16, 1997. Treasurywill also hold public hearings in Dallas, New York City andBaltimore, during the month of October. After the comment periodends, the Department will review and take into considerationthose comments before issuing a final rule. In addition, afterthe proposed design of the ETA account is released, Treasury willaccept and review public comment on that proposal.
More information about this proposed rule,including a copy of the proposed rule in its entirety, will beavailable to the public on the FMS/Treasury website at http://www.fms.treas.gov/eft/
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