Who Issues Checks for Social Security Benefits?

Your retirement nest egg

Since 1940, Social Security has been providing benefits to retirees and disabled workers. For those Social Security beneficiaries, the benefit checks appearing in the mailbox once a month became a familiar sight, and their point of origin was the U.S. Treasury Department.

Despite a transition to electronic funds transfer, millions of Social Security checks each month still are coming from the Treasury Department.

History

In 1934 during the Great Depression, it's estimated that fewer than half of the elderly in the U.S. had enough income to support themselves, according to the Social Security website. The shift of younger generations from farms to urban areas began eliminating the support offered by the multi-generational family. The purpose of the Social Security Act of 1935 was to pay retirement benefits to workers age 65 and older.

The first Social Security check was printed in January 1940 in the amount of $22.54, according to the Social Security website. The retirement check was issued to Ida May Fuller who had paid into Social Security for three years. Her total contribution to Social Security was $24.54, but since Fuller lived to be 100, she collected a total benefit of $22,888.92.

Treasury Department

Beginning with the first Social Security check issued in January 1940, the Treasury Department has been responsible for the printing operations. Even back in 1940, the Treasury Department was able to print 7,000 checks per hour, according to the Social Security website. The Treasury Department now uses computer systems and printers that are compatible with the Social Security Administration's requirements for benefit checks.

Electronic Funds Transfer

On April 26, 1996, President Bill Clinton signed The Omnibus Consolidated Rescissions and Appropriations Act of 1996. Along with various appropriations, the law required all benefits payable to new Social Security beneficiaries to be made through electronic funds transfer (EFT), direct deposit. The OCRAA also required that by Jan. 1, 1999 all federal payments, not only new benefits recipients, be made by EFT. This gave Social Security recipients just under three years to convert their paper checks to direct deposit. OCRAA stated that only the secretary of the treasury could grant a specific waiver to allow a physical check to be issued.

Hesitancy to Switch

According to the Treasury Department's Office of Legislative and Public Affairs, about 10.5 million Americans still receive their monthly Social Security and Supplemental Security Income (SSI) benefits by paper check. Even though a government survey shows that recipients understand that EFT is more reliable than paper coming through the mail, these Americans still have not switched to direct deposit.

Expert Insight

In speaking about natural disasters in 2009, David Lebryk, acting commissioner of Treasury's Financial Management Service said, "Paper checks can be delayed or even destroyed in natural disasters, causing...unnecessary hardship...Whether people experience a temporary disruption in mail service or an evacuation, the last thing they should have to worry about is how they'll get their Social Security money."

References

• Social Security Administration: SSA logo: link to Social Security Online home Historical Background and Development of Social Security
• Social Security Online: Social Security History
• Social Security Online: History of SSA During the Johnson Administration 1963-1968
• Social Security Online: Chronology 1990s
• Financial Management Service: U.S. Treasury Department Advises Social Security Check Recipients to Switch to Direct Deposit as Hurricane, Severe Weather Season Advances

Resources

• Social Security Online: How Do I Sign Up for Direct Deposit?