The government’s financing and accounting agency has proposed a rule that would reduce the number of federal payments written as paper checks.
Most people who receive benefits, like Social Security, Supplemental Security Income, veterans’ benefits, civil service retirement, military federal retirement or railroad retirement payments, get them via direct deposit. That’s because federal law generally requires it.
Since 1999, the Debt Collection Improvement Act mandated all payments the government makes, excluding tax payments, be delivered electronically unless waived by the treasury secretary. The law, colloquially referred to as EFT’99, was implemented as part of a broader push in the 1990s to reduce government costs.
Since then, the Treasury Department and others have tried to modernize their processes for their own convenience — and because several administrations and meetings of Congress have lambasted federal agencies for inefficiency.
Paper checks still exist as exceptions, but the department “believes that it is time to narrow the existing waivers,” according to a Federal Register memo written by the Treasury Department’s Bureau of the Fiscal Service. The document, set to publish Jan. 10, proposes new rules that would harden the electronic funds transfer requirement by limiting existing waivers or requiring agencies to get approval from the bureau before invoking them.
The new rules would give the Treasury the authority to deny an agency a waiver if granting it creates an “unusually large” amount of paper or non-electronic payments. They would also allow the Treasury to consider a payment untimely if an agency fails to make a payment by electronic funds transfer.
“A narrowing of the waivers should increase the percentage of payments made electronically and reduce the number of paper checks sent out each year,” the memo read.
The EFT mandate has sped along digitization, which is why the Treasury is proposing to strengthen it. By the end of 2021, 96% of the government’s payments disbursed by the Treasury were made electronically.
The Treasury estimated the average cost of issuing a paper check at 43 cents, while the average EFT payment costs less than 2 cents. This means electronic payments could save the federal government as much as $100 million a year in processing and postage.
The use of Treasury-sponsored debit cards has also grown, which has significantly cut down on the use of paper checks.
“The proposed changes reflect the reality that the use of electronic payments has expanded significantly since the waivers from the EFT mandate were first published in 1998 and also seek to take advantage of Treasury’s growing profile of electronic payment options, which are faster, less expensive, and safer than paper checks,” the memo read.
The Treasury is proposing these rules for feedback because it has observed examples of payments made via paper that could’ve been — and, arguably, should’ve been — made electronically, the memo added.
Examples of missed opportunities identified by the department include intragovernmental payments and vendor payments, many of which take place on a recurring basis.
Waiver requests are commonly granted for the “unbanked” or those experiencing hardship due to physical or mental disability, or geographic, language or literacy barriers. Exceptions would also be made in cases of military deployment, threats to national security or when EFT is impractical.
Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.