ELECTRONIC FUNDS TRANSFER (EFT ‘99)

I.          INTRODUCTION

The Department of Treasury’s Financial Management Service Division issued a regulation that implements provisions of the Debt Collection Improvement Act of 1996.  Under the regulation, effective January 2, 1999, all federal payments (other than tax refunds), except as waived by the Secretary of the Treasury, are required to be made by electronic funds transfer (EFT).

The regulation covers Social Security, Veterans and Railroad Retirement benefits; federal salaries and retirement benefits; and vendor payments.  The regulation provides that individuals receiving these types of federal payments are eligible to open an electronic transfer account (ETA).  Any federally-insured financial institution has the option to offer this account, subject to requirements that the U.S. Department of the Treasury has adopted.

The regulation also establishes the circumstances under which “waivers” by recipients are available.  Any individual is eligible for a waiver if the utilization of direct deposit will cost the recipient more than receiving a check.  In addition, waivers are provided for physical or mental disabilities and geographic, language or literacy barriers.  The waivers do not need to be affirmatively claimed as they are self-certifying, which means recipients choose whether or not to sign up for direct deposit of these federal benefits.

EFT ‘99 is designed to enable the government to derive significant savings while offering a safer, more secure and more convenient method of receiving federal government payments.

II.        PAYMENT OPTIONS

Payment recipients have a number of choices regarding the receipt of federal payments including the following:

  • Paper Check – Recipients may choose to continue to have a paper check sent to them.

  • Direct Deposit – Recipients may elect to have payments electronically transferred to an existing account with a financial institution of their choice.

  • Electronic Transaction Account (ETA) – An ETA is a basic account offered at reasonable cost and with consumer protections – available to all recipients at federally-insured financial institutions who elect to offer this type of account.

  • State Electronic Benefit Transfer – Some states may establish a system to allow recipients of state benefits to receive their payments electronically.  The final rule also authorizes the establishment of a federal/state EBT program that provides access to federal payments and state-administered benefits through a single delivery system which could utilize some form of “smart card.”

III.       WAIVERS

Waivers under the rule are self-certifying, which means that payment recipients are allowed to determine, in their sole discretion, whether or not to sign up for direct deposit of federal benefits.  Recipients choosing not to sign up for direct deposit, continue to receive paper checks.

The categories of waivers recognized are as follows:

  • Financial hardship – Any individual is eligible for a financial hardship waiver if the individual self-certifies that receiving direct deposit will cost him or her more than receiving a paper check.

  • Physical or mental disability – Any individual self-certifying that he or she has a disability, mental or physical, may be excused from direct deposit.

  • Geographic, language or literacy barrier – Recipients faced with any of these barriers are eligible to self-certify their eligibility for a waiver from the EFT requirements.

  • Automatic waiver – The requirement to receive payment by EFT is automatically waived for all individuals who do not have an account with a financial institution and who are eligible to open an ETA, until such date as the Secretary of the Treasury determines that the ETA is available.

  • Non-recurring payments – Waivers for payment by EFT are allowed where the agency does not expect to make more than one payment to the same recipient within a one-year period. (i.e., the payment is non-recurring, and the cost of making the payment via electronic funds transfer exceeds the cost of making the payment by check.)

V.        CONCLUSION

While EFT ‘99 is designed to encourage recipients to utilize direct deposit of federal government payments, the regulation has provided maximum flexibility for recipients who may feel burdened by the direct deposit program.

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