How Pension Payment Cards Work for Government

Prepaid pension cards are an increasingly popular way of compensating retired employees. These act a lot like credit or debit cards, but with less expense and no personal bank accounts involved.

Here, Daniel Rose, public sector payment card services business development lead at Conduent, talks about how prepaid cards work for government retirement benefits.

Q: Let’s start with the similarities between public sector and private sector prepaid card programs. How are they the same?

A: Whether the employer is private sector or public sector, the program has to comply with prepaid card laws that apply to their state. Some states may view retirement benefits in the same way that payroll card statutes are interpreted. And retirees get access to the same benefits – immediate availability of funds, the ability to withdraw cash at ATMs or receive cash back with purchases, to make purchases or pay bills online, and much more. For the organization, whether public or private, prepaid cards reduce costs associated with check printing and mailing, eliminate the cost of stolen and lost checks and reduce administrative paperwork.

Q: What’s the biggest difference, then? How are government agencies different?

A: The process of securing a provider can be very different. In the public sector, most agencies must go through a public procurement process where providers respond to RFPs and are evaluated on their capabilities and pricing schedules. Those responses and pricing schedules are made available to the general public via a website or through the FOIA process. In the private sector, that information is less accessible.

Q: How do prepaid pension cards offer functionality beyond direct deposit?

A: Many government employees receive their pay by direct deposit into their savings or checking accounts. Currently, there are seven state pension card programs today that offer an employee an additional payment option.

A recently introduced feature for pension card programs offers additional benefits. A companion card is available for any retiree who is receiving his/her pension through direct deposit to a checking or savings account. A portion of those funds can be diverted to a companion card on a one-time or recurring basis. Up to five companion cards can be issued where a family member such as a student or caregiver might need a card to access those funds in designated amounts for different reasons.

Q: Are there differences based on the size of the agency?

A: Not many – but the more retirees an agency has, the larger the potential savings of implementing a payment card program.

Q: What types of public sector entities are already using pension card programs?

A: Name any agency or department, and there’s almost certainly one that disburses their pension benefits to retirees this way! Conduent operates pension card programs for public sector entities including state agencies in Oklahoma and Tennessee. The U.S. Department of Treasury also uses a prepaid card to disburse benefits for Social Security and Railroad Retirement programs.