2.5 Costs 



PROBLEM: Costs for extensive systems revisions could be significant 

 and not warranted relative to benefits achieved under a direct-deposit 

 system. 



FINDINGS: No specific cost data was developed. 



CONCLUSION: A direct cost/benefit relationship cannot be precisely 

 determined with respect to the direct-deposit proposal, nor would it 

 be appropriate to attempt to develop such a relationship. (Some of 

 the benefits of the direct-deposit procedure are not quantifiable, 

 others would not be quantifiable without experience.) Receiving payment 

 at financial organizations under the power-of-attorney procedure is an 

 option that has been available to beneficiaries for many years (over 

 200,000 beneficiaries are now being paid that way). If the alternative 

 direct-deposit procedure is not adopted, presumably many more beneficiari< 

 will in the future, without restriction, elect to be paid under the 

 power-of-attorney procedure, conceivably up to the 15% of the (newly 

 entitled) beneficiaries that have expressed interest in being paid at 

 a financial organization. If so, over a period of time, nearly 4 million 

 beneficiaries would be receiving payment that way. All of the procedural 

 problems considered in this study are present whether beneficiaries are 

 paid under the power-of-attorney method or the direct-deposit method. 

 Under these circumstances, any systems changes (and related costs) are 

 for the purpose of improving the administration of beneficiary accounts 

 where payments are made under the historically acceptable method of paymei 

 at financial organizations, and are not directly attributable to the 

 direct-deposit procedure, which is simply an alternative to the pwwer- 

 of-attorney procedure. Any costs that are applicable to a direct-deposit 

 system are equally applicable to an efficient power-of-attorney system. 



Treasury has projected an estimated gross savings to the Government 

 of 11C per item handled under an electronic funds transfer direct-deposit 

 system. This estimate includes cost reductions of 10C per item in postag 

 and 1$ per item in operating costs — and allows for a retained cost of 

 1$ per item under an electronic fund transfer system. Potential recurrin 

 annual savings to the Government could amount to: 



3,000,000 participants (Immediate conversion) 



X 8 months = 24,000,000 X 11$ = $2,640,000 



10,800,000 participants (40% of total 27 million) 



X 8 months = 86,400,000 X 11$ = $9,504,000 



20,250,000 participants (75% of total 27 million) 



X 8 months = 162,000,000 X 11$ = $17,820,000 



J 



Note: The above does not include any SSI volume and provides for 4 mon 



mailings of "stuff er" advices. Also, the above does not take into accour 



any costs and savings elements in the operations of the Social Security 



Administration attributable to our electronic funds transfer direct-depoa 



system. 



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