Washington ? The Treasury Department is working to switch millions of people who receive Social Security and other federal benefits from paper checks to e-payments.

While this will save paper, it will also save the government more than $300 million over the first five years and $125 million each following year. It costs $1 overall to cut and mail a check but 10 cents for a direct deposit. The Treasury issues more than 135 million benefit checks annually.

Beginning March 1, 2011, enrollees for Social Security, Supplemental Security Income, veterans, railroad retirement and federal civil servant retirement benefits will get money through electronic transfers. People already receiving checks will be shifted to all-electronic payments beginning March 1, 2013.

If an individual doesn’t want to receive payment by direct deposit, there’s the Treasury’s Direct Express debit card. Already, 1 million are getting their benefits via the card. By Sept. 30, federal employees will no longer be able to purchase paper savings bonds through payroll deductions. Issuance of paper bonds through payroll sales will stop for the private sector Jan. 1, 2011.

Yet about a quarter of all U.S. households are unbanked or underbanked, and those households are disproportionately low-income and/or minority, according to a study completed for the Federal Deposit Insurance Corp. Those with annual incomes of $30,000 or less account for at least 71 percent of unbanked households.

Many of these folks don’t trust financial institutions. They are a tough group to reach. So a notice inside an envelope with their checks won’t effectively communicate this change to them.

Treasury needs to renegotiate the debit card’s fee aspect. People get one free ATM withdrawal per deposit of federal funds with the card. Subsequent withdrawals cost 90 cents and don’t include surcharges. At the least, people ought to get up to three free ATM withdrawals.

Finally, many financial institutions are violating a federal rule by garnisheeing the accounts of people who receive electronic deposits of Social Security payments. These funds are supposed to be protected from creditors except under very limited conditions. To address this, Treasury has proposed creating anti-garnisheeing regulations.

This new rule needs to be put in place before millions of benefit recipients, many of whom are lower-income, can be weaned off checks.